Skysong Company began operations on January 1, 2016, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2016 and, because there was no beginning inventory, its ending inventory for 2016 of $37,300 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level.

Cost Retail Inventory, Jan. 1, 2017 $37,300 $60,100 Markdowns (net) 12,900 Markups (net) 22,100 Purchases (net) 128,800 178,800 Sales (net) 169,300. (The first number is cost the second is retail)

Determine the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method.

The notes are an important part of a company’s financial statements, giving valuable details that would clutter the tabular data presented in the statements. This case will help you learn to use a company’s inventory notes.

Target Corporation’s Fiscal 2015 Annual Report

Use the Target Corporation financial statements and related notes, and answer the following questions:

1. Which inventory costing method does Target use? How does Target value its inventories? See Note 12.
2. By using the cost of goods sold formula, you can compute net purchases, which are not reported in the Target financial statements. How much were Target’s inventory purchases during the year ended January 30, 2016?
3. Determine Target’s inventory turnover and days’ sales in inventory for the year ended January 30, 2016. (Round each ratio to one decimal place.) How do Target’s inventory turnover and days’ sales in inventory compare with Kohl’s Corporation’s for the year ended January 30, 2016? Explain.

Stoddard Contractors performs residential construction. Stoddard builds a house for the Nymans in Richardson, TX. In July, 2016, the Nymans notify Stoddard that cracks are appearing in the living room walls. Stoddard sends their construction manager to the Nymans’ home to investigate, and he confirms the existence of the cracks. He tells the Nymans the cracks are due to normal settlement of the home and that simple cosmetic repairs are all that is necessary. In August, 2016, Stoddard purchases a CGL policy from Iowa Casualty. In October, 2016, the Nymans notice the cracking is continuing and the cracks themselves are more severe. They hire an engineer to inspect, and the engineer concludes the cracking is due to an improperly constructed foundation. The Nymans send a demand letter to Stoddard claiming faulty construction and seek the cost to repair the foundation and the house. Stoddard asks Iowa Casualty to cover the claim. (answer in terms of the CGL policy)

Will Iowa Casualty cover the claim? Why or why not? Hint (1): No lawsuit has been filed so there is no Duty to Defend issue. Hint (2): None of the policy’s exclusions apply.

The Booth Company's sales are forecasted to double from $1,000 in 2016 to $2,000 in 2017. Here is the December 31, 2016, balance sheet:

Booth's fixed assets were used to only 50% of capacity during 2016, but its current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 7% and its payout ratio to be 65%. What is Booth's additional funds needed (AFN) for the coming year? Round your answer to the nearest dollar.

The following is the Summary of Aged Accounts Receivable List as at December 31, 2016Total ReceivablesCurrent(not overdue)Overdue 1-30 days Overdue 31-60 daysOverdue 61-90 daysOverdue > 90days$897,000$325,000$228,000$174,000$128,000$42,0001% is estimated to be uncollectable.5% is estimated to be uncollectable.10% is estimated to be uncollectable.15% is estimated to be uncollectable.20% is estimated to be uncollectable.On December 30, 2016, the company wrote off a total amount of $100,000 accounts receivable. On December 31, 2016, the unadjusted balance in the Allowance for doubtful accounts is a debit balance of $54,000.Assume the company uses the allowance account method for bad debts based on the Summary ofAged Accounts Receivable List. The company does not estimate the uncollectible percentage based on the total outstanding receivables. Rather, the company applies different percentages depending on the aging of Accounts Receivable, as shown in the Summary of Aged Accounts Receivable List. What should be the bad expense amount that should be reported on the income statement ended on December 31, 2016?

It’s September 2015 and American Barrick (AB) wants to hedge sales of 300,000 ounces of gold projected to be produced by its Eldorado mine over the 6 months December 2015 – May 2016. They expect to produce 50,000 ounces per month. Gold futures contracts are available, and to avoid the contracts’ delivery requirements, it will hedge using January 2016 – June 2016 gold futures (January for December sales, etc.). One futures contract is for 100 ounces, and initial margin requirements are 5060 per contract. Spot price for gold today is 1098, while futures prices today for these 6 contracts are 1101, 1102, 1103, 1104, 1105, and 1106, respectively.

a) How many contracts are needed for each month? Long or short?

b) What is the total margin requirement?

c) Consider December gold sales. Assuming the January contracts are offset (closed) when the futures price is 1110, and gold spot is 1111, what will AB receive net per ounce for the December sales?

Pirate Corporation purchased 80% of shares of Stanley, Inc. for $500,000 cash on January 1, 2016. The fair value of the noncontrolling interest was $70,000 on the acquisition-date. On January 1, 2016, Stanley’s net assets had a total carrying amount of $480,000. Equipment (six-year remaining life) was undervalued on the financial statements by $60,000. Any remining excess fair value over book value was attributed to a patent (four-year remaining life), but not recorded on its books. Stanley recorded net income of $90,000 in 2016 and $70,000 in 2017. Each year since the acquisition, Stanley has declared a $10,000 dividend. On January 1, 2018, Pirate’s Retained Earnings show a $300,000 balance. Selected account balances for the two companies from their separate operations were as follows:

                         Pirate      Stanley

2018 Revenues 500,000    300,000

2018 Expenses 300,000    150,000

a. Calculate the total Fair Value for the total acquisition

b. Calculate the annual amortization

c. What is the total consolidated net income for 2018?

Martha Ltd has a year ended 30th June. On 1st July 2015 the company, owned equipment that originally cost £650,000 and for which accumulated depreciation of £200,000 had been provided. On 4th October 2015 a piece of equipment, which was originally purchased for £95,000 on 1st October 2013, was sold for £18,000. It is the accounting policy of the company to depreciate equipment by 25% using the reducing balance method, charging a full year’s depreciation in the year of acquisition and none in the year of disposal. (In all calculations use figures to the nearest £) Required a. Write up the Equipment Cost Account, the Accumulated Depreciation of Equipment Account and the Disposals Account for the year ended 30th June 2016. b. State the effect the above matters will have on the profit of the company for the year ended 30th June 2016 and show how the entries for equipment would appear on the Balance Sheet as at 30th June 2016. c. Briefly discuss whether you would expect the net book value of the equipment to be the same as its market value.