40. What was the balance in Accumulated Depreciation on December 31, 20x2 if Max company used the S/L method?

A. $140,000

B. $280,000

C. $420,000

D. $560,000

Show your calculation in detail.

41. What was the balance in Accumulated Depreciation on December 31, 20x2 if Max company used the DDB method?

A. $300,000

B. $600,000

C. $780,000

D. None of the above

Show your calculation in detail.

Roane Company has entered into two lease agreements. In each case

the cash equivalent purchase price of the asset acquired is known, the interest rate is 6%, and you wish to find the number of required lease payments.

Lease A covers office equipment which could be purchased for $70,000. Roane Company has, however, chosen to lease the equipment for $11,000 per year, payable at start of each of the next ___ years.

Lease A _____ years

Lease B applies to a machine which can be purchased for $66,000. Roane Company has chosen to lease the machine for $10,000 per year. Payments are due at the end of each year.

   Lease B _____ years

1. Scopus Team Ltd is a treadmill specialist currently reviewing its product lines, accessories and the prospect of outsourcing few of them. As a part of this process, the CEO of the firm has appointed you as a consultant and you have chosen their treadmill product line for the possibility of outsourcing.

The company sells 22,000 of treadmills annually of two models (ZR & SQ) and their factories are located in Kent and Hull respectively. The Hull Division is their flagship unit that showcases the company’s investment in the Clean & Environment-friendly Fuel source as the division is completely run by bio-energy. The accountant of the company has provided the following information relating to the production and distribution costs of one unit of the various models of the treadmill:

An external supplier has offered to supply the same quality of ZR & SQ for £150 and £200 respectively. However, if the company accepts the offer, the following information should be taken into consideration:

1. 85% of material costs and 80% of labour costs will be saved if external supplier’s offers are accepted. The company would be able to save all variable manufacturing overhead
2. More warehouse spaces will be required in Kent for £15,000 per month in order to stock the products delivered from the external supplier; however, Hull Division has spare storage capacity for ZR series if required.
3. All of the fixed selling and administrative costs and 35% of the fixed manufacturing overhead costs are allocated costs (common costs).
4. Production supervisor’s job will be terminated. Her salary represents 25% of the fixed manufacturing cost. The rest of the fixed manufacturing overhead costs (i.e. excluding allocated costs and production supervisor’s salary) is the depreciation of machines. The external supplier has promised to pay 75% of the resale value of the machines if their offer is accepted.
5. Since customers’ order and delivery of the treadmills to customers will be responsibility of the Scopus, the company will continue paying 80% of the variable selling and administrative costs.

Required:

1. As a management consultant, prepare a report for the CEO that may help her to resolve the issue. In your report, you should apply an appropriate management accounting technique, concept(s) and/or theory. You must show detailed computation and elaborate concepts and theory that are important to manager since she does not have any background in management accounting.
2. Identify irrelevant costs and/or revenues in the above calculation and explain why they are irrelevant.                   
3. What would be the maximum price acceptable to Scopus to justify outsourcing their production from the external supplier? Show your computation
4. Would you change your decision if the external supplier delivers directly to customer and no additional storage capacity required for the Kent Division? Show necessary computation that support your argument.
5. Critically evaluate what additional qualitative factors the company should consider in deciding whether to make or buy the product from outside suppliers.
6. What additional information you might seek from the company accountant to make a better decision? Discuss your information requirements and their importance in this context.

Larkspur offers an MP3 download (seven-single medley) as a premium for every 6 candy bar wrappers presented by customers together with $2.65. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each download code to the company is $2.40. In addition, it costs 50 cents to distribute each code. The results of the premium plan for the years 2020 and 2021 are as follows. (All purchases and sales are for cash.)

Part 1

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

Prepare the journal entries that should be made in 2020 and 2021 to record the transactions related to the premium plan of the Larkspur. (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. 1,525.)

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Part 2

Partially correct answer iconYour answer is partially correct.

Indicate the amounts for each accounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2020 and 2021.

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Prompt In your email back to the client, you must address the critical elements listed below. The codes shown in brackets indicate the course outcome to which each critical element is aligned. When responding to your new clients’ email, make sure to address all of their questions and concerns. This will help support the critical elements below.

I. Identify what additional documents the clients need to provide in order for you to do their taxes. [ACC-330-01]

II. Identify applicable deductions and credits available for the clients. [ACC-330-01]

III. Differentiate types of income and expenditures. [ACC-330-01]

IV. Explain how you utilized the IRS website for staying current in the identification and application of appropriate tax codes and laws. [ACC-330-01]

EMAIL FROM CUSTOMER

From: Freida C. Butler To: Jane Doe, Accountant Cc: Daniel B. Butler Date: January 20, 2016 My name is Freida C. Butler, and my husband and I were referred to you by our good friend Jackie Lynn. We would like for you to prepare our tax return this year. My husband works for WJJJ, Inc. and I work at a real estate company, Corbin Realty. I am not considered a subcontractor for them. Many of my friends are contractors for them and receive a 1099, but I do not. I believe I receive a W2—does that sound like the right form? We have three children who live with us. They were each in school at some point this past year. So you need to know which of them were enrolled in school last year or for how long? Will I get any tax breaks for them being in school? We also had income from some investments. We received interest and dividends from a few places. Can you tell me if those are reported on a 1099 form? If so, I may have to request this from my bank. We own our home and paid the typical homeowner’s expenses. What expenses will you need from us relating to our home? Are there any other questions you have for us, such as other deductions we can take? Just curious: this tax "stuff" is so much information to remember. How do you ever stay on top of all of these tax rules? I have always wondered that! Are you the best in the business? I look forward to hearing from you. Please let us know what other information

Bellows Home Inspection is a private business that provides home inspection . It has been in business for years and Ethan , the owner , is proud of their strong internal control system .

The business is showing a loss for the first time in five years . The business is very cyclical : the large majority of its sales occur when a home is purchased , so it is affected by the real estate market . It gets most of its business through Bellows Realty , a real estate broker company held by Ethan and his mother . Bellows Realty will directly purchase the home inspection from Bellows Home Inspection on behalf of its clients .

Bellows recently acquired a competitor , Home Guards Inc. To complete the purchase , it has received a significant loan from the bank . The bank will be a new user of Bellow's financial statements .

The accounting manager , however , has indicated that it has been difficult to integrate the operations of Home Guards because its internal controls over financial reporting were pretty much non - existent at the time of the acquisition .

Required : Identify four key audit issues in this company , and explain how these will affect your audit risk , using the audit risk model .

Pick 3 and answer

If you were evaluating an investment opportunity, which technique would you use and why?

When evaluating investments, you can get data from engineering, marketing, and sometimes accounting. Do you think any of these organizations have internal biases? If so, as a member of the finance department, how would you deal with them?

You have just discovered that your boss favors payback in evaluating investments. Should you try to talk him out of it or should you go along with his/her desires?

You are comptroller for your company. The CEO is a savvy individual with great instincts for the business. She strongly favors an investment that is only marginally acceptable at best. She has asked you to put together a justification for it. What will you do?

Last year your company financed its investments by selling shares of common stock. This year the plan is to use debt. The after-tax cost of debt is 5%, the cost of equity is 12% and the weighted average cost of capital is 9.5%. The first investment for this year is an expansion project. What cost of capital will you use and why?

1. Samira, a business law student, went to a well-known clothes shop to buy a pure (natural) silk shirt. She specifically told the shop-owner that she is allergic (sensitive) to (unnatural) silk and that she wants only natural silk. The shop owner then sold Samira a shirt telling her it is 100% natural and pure silk. A week after wearing the shirt Samira suffered from extreme allergic condition. Advise Samira as to her options.

2. Nora, the CEO of a company, was on a business trip for six days. During that time Jamal, who is Nora’s office manager, sold five tons of potato that were about to perish (expire) in the company’s warehouse for 75 % of their market price. When Nora returned she asked Jamal to compensate the company for the losses incurred by selling at that price. Can Nora do that? Why?

3. Khalid and Jasim had formed a Limited Partnership in which Jasim was a limited partner, while Khalid was a general partner. Each of them contributed 4 million AED to the capital. The Partnership suffered losses amounting to 10 million AED. What is the extent of Khalid’s liability for the losses? Why?

How far should our government (G) go in order to try to “make whole” the workers losing wage income starting March,2020?  Should our G try to transfer money to these workers? Yes? WHY? How much? A. One quarter of their lost income? B. One third? C. One half? D. ALL OF IT???????? E. Do you see any potential problems with D???? What might they be? 6. Okay. One could argue that D may be a little extreme…. You have to form your own opinion….. IS NOW THE TIME IN OUR COUNTRY’S HISTORY FOR US TO CHANGE OUR CURRENT SYSTEM OF INCOME DISTRIBUTION AND WEALTH DISTRIBUTION? IF SO, just in general terms, what should we do? Why?

On 1 July 2019, Vajra Ltd was incorporated and offered 2,500,000 ordinary shares to the public at an issue price of $4.00 per share, with $1.50 payable on application, and $1.50 upon allotment (due within one month of allotment) and $1.00 payable on another call to be made at a later date.

The issue is underwritten at a commission of $42,000.

By 31 July 2019, applications had been received for 2,450,000 shares. On 12 August 2019, shares were allotted, and the underwriter forwarded the application and allotment money due on the 50,000 shares less their commission. All remaining allotment money was received by 12 September 2019. On 30 September 2019, Vajra Ltd paid the legal costs (for company formation) of $6,200 and share issue cost of $4,600.

On 20 January 2020, the call was made, with money due by 29 February 2020. By 29 February 2020, all call money was received except for holders of 35,000 shares who failed to meet the call. On 31 March 2020, the shares on which call money was not received were forfeited.

On 9 April 2020, the forfeited shares were auctioned for $3.70 as fully paid. Share re-issue costs amounting to $8,500 were paid. The constitution provides for any surplus on resale, after satisfaction of unpaid instalments and any costs, to be returned to shareholders whose shares were forfeited. The refunds were made on 5 May 2020.

Required: Prepare the journal entries to record the transactions of Vajra Ltd up to and including that which took place on 30 June 2020. Show all relevant dates, narrations and workings.