On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life.
Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively.
What was the amount of the gain or loss on the sale of equipment reported by Republic on its pre-consolidation income statement in 2020?
a. $-0-
b. $ 5,000 gain
c. $20,000 loss
d. $35,000 gain
In: Accounting
Facts:
On April 1, 2020, Bert's Baseball Company purchased equipment for $66,000. The company expected the equipment to last four years or 6,000 hours, with an estimated salvage value of $6,000 at the end of the useful life. The equipment was used 1,000 hours during 2020.
1. What amount of depreciation expense will Bert's Baseball Company record in 2020 using the straight-line method of depreciation?
2. What amount of depreciation expense will Bert's Baseball Company record in 2020 using the units-of-activity method of depreciation?
3. In your opinion, is it ethical for a company to change depreciation methods for the sole purpose of maximizing profitability (increasing net income)? Why or why not? Explain.
In: Accounting
Jen and Larry’s Frozen Yogurt Company
In 2019, Jennifer (Jen) Liu and Larry Mestas founded Jean and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. Jen and Larry began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated to be $1.2 million in 2020.
Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Administrative expenses, including Jen and Larry’s salary and expenses for an accountant and two other administrative staff, were estimated at $180,000 in 2020. Marketing expenses, largely in the form of behind-the-counter workers, in-store posters, and advertising in local newspapers, were projected to be $200,000 in 2020.
An investment in bricks and mortar was necessary to make and sell the yogurt. Initial specialty equipment and the renovation of an old warehouse building in lower downtown (known as LoDo) occurred at the beginning of 2019. Additional equipment needed to make the amount of yogurt forecasted to be sold in 2020 was purchased at the beginning of 2020. As a result, depreciation expenses were expected to be $50,000 in 2020. Interest expenses were estimated at $15,000 in 2020. The average tax rate was expected to be 25% of taxable income.
How many cups of frozen yogurt would have to be sold for the firm to reach its projected revenues of $1.2 million?
Calculate the dollar amount of EBDAT if Jen and Larry’s Frozen Yogurt Company achieves the forecasted $1.2 million in sales for 2020. What would EBDAT be as a percent of revenues?
In: Finance
Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):
| 2019 | 2020 | ||||||
| Sales | $ | 16,500 | $ | 20,500 | |||
| Materials inspection | 350 | 65 | |||||
| In-process (production) inspection | 165 | 130 | |||||
| Finished product inspection | 300 | 75 | |||||
| Preventive equipment maintenance | 25 | 65 | |||||
| Scrap (net) | 550 | 350 | |||||
| Warranty repairs | 750 | 500 | |||||
| Product design engineering | 155 | 320 | |||||
| Vendor certification | 15 | 65 | |||||
| Direct costs of returned goods | 325 | 85 | |||||
| Training of factory workers | 45 | 145 | |||||
| Product testing—equipment maintenance | 65 | 65 | |||||
| Product testing labor | 260 | 95 | |||||
| Field repairs | 75 | 45 | |||||
| Rework before shipment | 290 | 205 | |||||
| Product-liability settlement | 410 | 65 | |||||
| Emergency repair and maintenance | 250 | 80 | |||||
Required:
1. Classify the cost items in the table into cost-of-quality (COQ) categories.
2. Calculate the ratio of each COQ category to revenues in each of the 2 years.
3. Calculate the percentage change in each COQ category and total COQ and comment on the results:
a. Percentage change in total COQ as a percentage of sales, from 2019 to 2020;
b. Total COQ in 2020 expressed as a percentage of 2019 sales dollars;
c. Percentage change in total prevention costs, 2019 to 2020;
d. Percentage change in total appraisal costs, 2019 to 2020;
e. Percentage change in total internal failure costs, 2019 to 2020;
f. Percentage change in total external failure costs, 2019 to 2020.
In: Accounting
Part 1 -- Bonds:
REQUIRED:
Part 2 -- Installment note:
REQUIRED:
In: Accounting
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In: Accounting
PROBLEM 5: FOREIGN CURRENCY (20 MARKS TOTAL)
Use the information here for answering questions 1 to 3 on this page.
On 1 April 2020, Winton Ltd, an Australian entity, places an order for GBP £200,000 of inventory with Austen plc, a UK supplier. On the same date, Winton Ltd enters into a forward exchange contract with the bank to buy GBP £200,000, to be settled on 31 July 2020. The goods are shipped FOB London on 1 May 2020 and are paid for on 31 July 2020. Winton Ltd has a reporting date of 30 June.
The following exchange rates are applicable.
Spot
rate
Forward rate for 31/7/20
1 April 2020
A$1 = 0.63
GBP
A$1 = 0.61 GBP
1 May 2020
A$1 = 0.67
GBP
A$1 = 0.64 GBP
30 June 2020 A$1 = 0.62
GBP
A$1 = 0.60 GBP
31 July 2020 A$1 =
0.59
GBP
A$1 = 0.59 GBP
Q1: Complete the table showing the movement and the change in value of the hedged item
Type text or numbers as appropriate in the following table. Enter numbers as numerals only. Use a negative symbol '-' in front of your number where appropriate to indicate a loss. Enter a 0 if you do not need to enter data in that field.
Q2: Complete the table showing the movement and the change in value of the hedging instrument
Type text or numbers as appropriate in the following table. Enter numbers as numerals only. Use a negative symbol '-' in front of your number where appropriate to indicate a loss or a liability. Enter a 0 if you do not need to enter data in that field.
Q3: Provide the journal entries for Winton Ltd to reflect the above transactions
In: Accounting
Question 1.Obaapa Fashions Ltd has budgeted to sell 100,000 pieces of face masks for April 2020. At the end of March 2020, the company had 20,000 pieces of face mask in inventory and would like to have an inventory of 30,000 pieces of face masks at the end of April. Each piece of face mask requires 2 square meters of treated fabric, the primary raw material. Inventory of the treated fabric at the beginning of April is 5,000 square meters. It is expected that each square meter of the treated fabric will cost GHS3. Assuming the sales budget is met, and the desired ending inventory of the face mask is achieved, how many square meters of the treated fabric need to be purchased in April 2020, in order to have an ending inventory of 8,000 square meters of the treated fabric? What will be the cost of purchases for April 2020? (show all workings clearly).
Question 2.
Ewuarbena & Co Manufacturing Ltd have budgeted to sell these quantities of its products, Chocomix, for the coming months in 2020: January – 160,000 sachets; February – 240,000 sachets; March – 200,000 sachets; April – 400,000 sachets; and May – 150,000 sachets. The company expects to sell each sachet for GHS20. The company has decided that to avoid losing customers arising from production hold-ups it would like to maintain a finished goods inventory in the future equal to one-fifth of the following month's budgeted sales. At the beginning of January 2020, the company had finished goods inventory of 10,000 sachets. What is total budgeted sales and production for the 2020 1st quarter ended (January – March 2020)? (show all workings clearly)
In: Accounting
Major Communications Ltd., a publicly traded company that specializes in data capture, has been in operation for several years. On October 1, 2019, it had 10 million common shares authorized and 1,570,000 shares issued at an average value of $27 per share. As well, there were 1 million preferred shares authorized, with 220,000 of them issued at $14 per share. During the fiscal year ended September 30, 2020, the company generated net income after taxes of $25,380,000 and other comprehensive loss of $4,550,000. On October 1, 2019, the balance in Retained Earnings was $19,760,000 and the balance in Accumulated Other Comprehensive Income was $940,000. The preferred shares pay an annual dividend of $1.30. During the fiscal year 2020, the following transactions affected shareholders’ equity:
1. On November 1, 2019, 390,000 new common shares were issued at $29 per share.
2. On March 15, 2020, a 5% common stock dividend on the outstanding shares was declared and distributed when the market price was $42 per share.
3. On September 1, 2020, a dividend of $5.35 per common share was declared. The date of record was September 15, 2020, with the date of payment being October 5, 2020.
4. The preferred dividend for the year was declared and paid.
Prepare the statement of changes in shareholders’ equity as at September 30, 2020. (If an amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).)
Prepare the shareholders’ equity section of the statement of financial position as at September 30, 2020. (Enter negative answers using either a negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).)
In: Accounting
The following information was obtained from the accounting records and financial statements of Palmer Inc.
|
Assets |
2019 |
2020 |
∆ |
|
Cash |
$ 280,000 |
315,000 |
35,000 |
|
Accounts receivable |
720,000 |
755,000 |
35,000 |
|
Inventory |
855,000 |
800,000 |
(55,000) |
|
Capital assets |
1,720,000 |
1,930,000 |
210,000 |
|
Accumulated depreciation |
(580,000) |
(550,000) |
30,000 |
|
Net capital assets |
1,140,000 |
1,380,000 |
240,000 |
|
Total |
2,995,000 |
3,250,000 |
|
|
Liabilities and Stockholders’ equity |
|||
|
Accounts payable |
445,000 |
360,000 |
(85,000) |
|
Interest payable |
60,000 |
75,000 |
15,000 |
|
Income taxes payable |
40,000 |
50,000 |
10,000 |
|
Bonds payable |
800,000 |
900,000 |
100,000 |
|
Common stocks |
1,200,000 |
1,350,000 |
150,000 |
|
Retained earnings |
450,000 |
515,000 |
65,000 |
|
Total |
2,995,000 |
3,250,000 |
|
|
Income Statement 2020 |
|||
|
Sales |
$ 3,200,000 |
||
|
Cost of goods sold |
(2,100,000) |
||
|
Gross profit |
1,100,000 |
||
|
Depreciation expenses |
(105,000) |
||
|
Operating expenses |
(655,000) |
||
|
Interest expenses |
(35,000) |
||
|
Income tax expenses |
(55,000) |
||
|
Loss on retirement of bonds payable |
(10,000) |
||
|
Loss on disposal of capital assets |
(20,000) |
||
|
Net income |
220,000 |
Additional information:
Required:
In: Accounting