Outback Outfitters is a manufacturer of recreational equipment. It has been experiencing an average growth rate of 20% in sales over the past 5 years. It is August 31 and the financial controller has just prepared the company’s budgeted income statement for next year. The company has no sales force of its own and outsourcing its selling and marketing functions to an independent sales agents. The commission paid to the agent is 12% on sales for all the different products the company sold. The statement follows:（answer question d，e，f and g）

When the financial controller handed the statement to the CEO, the CEO informed the controller that the sales agent demanded an increase in the commission rate to 16% next year to cover the increasing expenses in marketing and selling the products of Outback Outfitters.

The CEO concerns that the sales agent might ask for further increase in the commission rate in the future and would like to set up its own sales team. He asks the help of the financial controller and he gathers the following information for setting up the sales team:

Commission rate to own sales team 8%

Required:

a. Prepare a contribution margin income statement for next year at the 16% commission rate.

b. Calculate the contribution margin ratio and break-even in dollar sales for next year assuming:

(1) Commission rate remains at 12%.

(2) Commission rate is increased to 16%.

c. Determine the volume of sales under 16% commission rate that would be required to generate the same net operating income under the 12% commission rate. Compute the margin of safety percentage under 16% commission rate.

d. Calculate the contribution margin ratio, break-even dollar sales and margin of safety if the company employs its own sales team.

e. Determine the volume of sales at which the net operating income would be equal regardless of whether the company sells through agents at 16% commission rate or employs its own sales team.

f. What is meant by the term operating leverage? Calculate the degree of operating leverage that the company would expect to have for next year assuming the company (1) sells through agents at 16% commission rate and (2) employs its own sales team.

g. Based on the data in (a) through (f) above, make a recommendation as to whether the company should continue to use sales agent (at 16% commission rate) or employ its own sales team. Give reasons for your answer.

(a) Explain how you determine to fit either multiplicative or additive
decomposition model to a time series data.
(b) The following table gives quarterly sales figures of a well-known brand of
designer bag in a shop in City center in the last two years.
Year 201
7

201
8

201
9

Quarte
r
1 2 3 4 1 2 3 4 1 2 3 4
Sales 10 15 25 34 18 19 33 38 14 27 29 46
You have been requested by the shop owner to forecast sales for 2020 (ignore
the lockdown). Le t us suppose you have decided to use multiple
decomposition method to carry out the forecast, and not use any statistical
software.
(i) Compute appropriate four-period moving averages for these data.
(ii) Compute centered moving averages for the data.
(iii) Calculate sn t x ir t values for the data.
(iv) Calculate estimates of the seasonal factors of the quarterly sales data.
(v) Compute the deseasonalized observations.
(vi) Assuming that a linear trend TR t = describes the deseasonalized
observations, with computed least squares point estimates of to be
18.02 and 1.09, respectively, compute forecasts for the 2020 quarters.

Near the end of 2019, the management of Dimsdale Sports Co., a merchandising company, prepared the following estimated balance sheet for December 31, 2019. DIMSDALE SPORTS COMPANY Estimated Balance Sheet December 31, 2019 Assets

Cash $ 35,500 D

Accounts receivable 520,000 D

Inventory 90,000 D

Total current assets $ 645,500 CR

Equipment 612,000 D

Less: Accumulated depreciation 76,500 D

Equipment, net 535,500 CR

Total assets $ 1,181,000 CR

Liabilities and Equity

Accounts payable $ 355,000 D

Bank loan payable 14,000 D

Taxes payable (due 3/15/2020) 90,000 D

Total liabilities $ 459,000 CR

Common stock 470,500 D

Retained earnings 251,500 D

Total stockholders’ equity 722,000 CR

Total liabilities and equity $ 1,181,000 CR

To prepare a master budget for January, February, and March of 2020, management gathers the following information.

a.The company’s single product is purchased for $20 per unit and resold for $56 per unit. The expected inventory level of 4,500 units on December 31, 2019, is more than management’s desired level, which is 20% of the next month’s expected sales (in units). Expected sales are January, 7,250 units; February, 9,250 units; March, 10,750 units; and April, 10,500 units.

b. Cash sales and credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 57% is collected in the first month after the month of sale and 43% in the second month after the month of sale. For the December 31, 2019, accounts receivable balance, $130,000 is collected in January 2020 and the remaining $390,000 is collected in February 2020.

c.Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the month of purchase. For the December 31, 2019, accounts payable balance, $65,000 is paid in January 2020 and the remaining $290,000 is paid in February 2020.

d. Sales commissions equal to 20% of sales are paid each month. Sales salaries (excluding commissions) are $90,000 per year.

e. General and administrative salaries are $144,000 per year. Maintenance expense equals $1,900 per month and is paid in cash.

f. Equipment reported in the December 31, 2019, balance sheet was purchased in January 2019. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $38,400; February, $93,600; and March, $24,000. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full month’s depreciation is taken for the month in which equipment is purchased.

g. The company plans to buy land at the end of March at a cost of $140,000, which will be paid with cash on the last day of the month.

h. The company has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $42,000 at the end of each month.

i. The income tax rate for the company is 43%. Income taxes on the first quarter’s income will not be paid until April 15.

Required: Prepare a master budget for each of the first three months of 2020; include the following component budgets.

1. Monthly sales budgets.

2. Monthly merchandise purchases budgets.

3. Monthly selling expense budgets.

4. Monthly general and administrative expense budgets.

5. Monthly capital expenditures budgets.

6. Monthly cash budgets.

7. Budgeted income statement for the entire first quarter (not for each month).
8. Budgeted balance sheet as of March 31, 2020.

Please prepare a general journal AND General Ledger that include account explanations.

Q1- Ali, Betty, Carmel, Devaki and Eli are enthusiast stamp collectors and want to start an
online business that buys and sells historical collector-item stamps from around the world.
They decide to set up a company to do this. All four agree to put in $5,000 each to buy
shares in the company. Ali and Betty are assigned to put in an application to ASIC to register
a company called ‘Stamps R Us Pty Ltd’. Carmel is to look into getting a web design company
to design a website and get a quote. She visits Software Designs Pty Ltd in Parramatta CBD
and the salesman spends some time showing her various web design packages. Carmel is
very impressed with the ‘Super Delux’ package but is a little concerned about the $15,000
cost. The salesman informs her, however, that they currently have a 30 per cent sale on that
package, but that it finishes at 5 pm that day. Carmel excitedly calls Ali from the store, who
has been the driving force behind creating the business, to get his thoughts. He says ‘Yes.
Let’s do it’. Carmel signs the contract on behalf of both Stamps R Us and Ali, then and there.
Eli is assigned to investigate buying some stamps that the new company can have as stock
when it first launches. He visits his local stamp dealer, Charlie, of Charlie’s Stamps Pty Ltd,
who is very keen to get Eli’s business. Charlie tells Eli that if the new business buys stamps
from him worth over $10,000, he will give Eli a rare 1901 Australian Federation stamp, now
worth around $2,000 as a personal gift to show his appreciation. Eli is excited about this. He
contacts the group at their next meeting and they agree to buy $11,000 worth of stamps.
However, he doesn’t mention the personal gift. He goes ahead and buys the stamps and
receives the Federation stamp.
The following week, Ali and Betty’s application is successful and the company is registered.
All five become directors. However, at their first board meeting, Betty, Devaki and Eli are
unhappy about the cost of the website package and refuse to accept the contract, saying
the basic package would have been more than sufficient.
Advise the parties of their respective legal rights and liabilities.

Swifty Company purchased equipment for $1008000 on January 1, 2020, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $43000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2022 will be

Rooey Ltd, the retailer of Zara clothing, is preparing its end of year financial statements at 31 December 2020. The balance sheet shows only two non-current assets, buildings and equipment. After depreciation entries were completed for the year ending 31 December 2020, the accumulated depreciation of its non-current assets were as follows:

                                                                                                       $

                                 Buildings                                                 24,200,000

                                 Accumulated Depreciation                     (5,000,000)

                                 Equipment                                                7,000,000

                                 Accumulated Depreciation                      (3,800,000)

The company applies the revaluation model to buildings and the cost model to equipment. At 31 December 2020, the following values relating to the assets have been determined:

Required:

1. Prepare the necessary general journal entries in relation to the equipment for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required).

2. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required).

3. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2021 and justify in accordance with appropriate accounting standards. Assume the depreciation for the year is $1,000,000 and the fair value of the buildings at 31 December 2021 was $25,000,000. Show all workings (narrations are not required).

Cheyenne Inc. had the following balance sheet at December 31, 2019.

During 2020, the following occurred.

Prepare a statement of cash flows for 2020

Prepare an unclassified balance sheet as it would appear at December 31, 2020. (List Assets in order of liquidity.)

Compute two cash flow ratios

1. Complete the pension worksheet using the information provided below:

2020 records of Lexxus Company provided the following data related to its noncontributory defined benefit pension plan.

ACCOUNT BALANCES (‘000s)    Jan. 1, 2020                Activity (‘000s)                                              2020

Projected Benefit Obligation $300 cr                                    Service cost                                                     $ 50

Plan Assets                             170 dr                                    Contributions                                                  110

Accumulated OCI – PSC            40 dr                                    Actual return on plan assets                                 8

Accumulated OCI - G/L            25 dr                                    Amortization of PSC                                          4

Remaining Service Life              10 years                               Pension benefits paid to retirees                       124

OTHER                                                         

Expected rate of return on plan assets            6%

Discount/Settlement rate                                8%

2. Perform the corridor test of OCI-Gains/Losses. Show your work here:
3. Provide the end of year journal entry based on worksheet amounts.
4. Explain the difference between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.

Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Estimated Costs to Complete Costs Incurred During Year (As of the End of the Year) Situation 2018 2019 2020 2018 2019 2020 1 1,630 2,520 1,290 3,810 1,290 — 2 1,630 1,290 2,920 3,810 2,920 — 3 1,630 2,520 2,640 3,810 2,540 — 4 630 3,130 1,260 4,410 940 — 5 630 3,130 2,210 4,410 2,540 — 6 630 3,130 3,100 5,855 2,870 — Required: Complete the following table. (Do not round intermediate calculations. Enter answers in dollars. Round your final answers to the nearest whole dollar. Negative amounts should be indicated by a minus sign.)