The Income Statement of Adom Enterprise for the year ended 31stMarch,2020as prepared by an Accounts Assistant indicated a net profit of GHS 148,080. Though, the cash book on 31stMarch, 2020 showed a balance at bank to be GHS 13,460. Your attention is however drawn to the following:

i) Cheques from customers totalling GHS 14,940which were recorded in the cash book on March 25,2020 were not credited by the bank until April2, 2020. ii)Cheques issued on March 13, 2020totallingGHS 22,260in favour of suppliers were not paid by the bank until after the end of the year (that is after March31,2020

)iii) On 22 February2020, the bank paid an amount of GHS 10,800with respect to a standing order from Adom Enterprise for rent of business premises for the three months to April 30, 2020but unfortunately, no entry for this payment had been made in the cash book. Additionally, no provision of this outstanding rent had been made in the income statement for the period.

iv) On March31, a customer known as Mr. Kwarteng had paid GHS 7,020 into Adom Enterprise bank account through a standing order to his bankers in full settlement of a debit balance of GHS 7,200in Adom Enterprise sale ledger, but no entry had been made in the books.

v) On 30thMarch 2020, a cheque for GHS 1,440 was received from a customer in settlement of sales invoice for the same amount. The cheques were lodged into Adom Enterprise bank account. Both sale of goods and the cheque were entered in Adom Enterprise’s books. However, on 31stMarch 2020, the customer returned the goods and instructed her bankers not to pay the cheque (This instruction was carried out the same day) but no entries in respect of these latter developments have been made in Adom Enterprise’s books. The cost of these goods amounting to GHS 960 were not actually included in the closing inventories.

vi) Cheques received from two customers:Madam Adwoa Nyarkoa GHS2,150 and Papa Kwame Ayisi of GHS 1,520 were recorded at the wrong side of the cash book

.vii) A cheque for GHS 2,520 from an insurance company in settlement of claim for fire damage to inventory had been paid into the bank and credited by the bank on 21stMarch 2020, but an estimated amount of GHS 2,400had been entered in Adom Enterprise’s income statement.

viii) During a review of the financial records, it was discovered that the receipts side of the cash book was overstated by GHS 1,480. This has not been corrected.

Required:

a) Prepare a statement on March31,2020, clearly indicating the cash book balance.

)b) Prepare the bank reconciliation statement for Adom Enterprise

)c) Prepare a statement of corrected net profit of Adom Enterprise on 31stMarch, 2020

The financial statements for XYZ Inc. are shown below.

Income Statement and other info:

2020 2019

Year-end stock price 60 50

# of shares 5600 3600

XYZ Inc. Income Statement

2020 2019

Sales 900,000 960,000 850,000

COGS 640,000 610,000

Gross Profit 320,000 240,000

Operating costs (excluding depreciation) 70,000 50000 60,000

EDITDA 180,000 270,000 180,000

Depreciation 15,000 20,000 18,000

EBIT 165,000 250,000 162,000

Interest Expense 100,000 100000 100,000

EBT 65,000 150,000 62,000

Taxes 19,500 25,000 5,000

Net Income 45,500 125,000 57,000

Common Dividends 4,550 6000 3000

Addition to Retained Earnings 40,950 119,000 54,000

Balance Sheet

Assets 2018 2017 2020 2019

Cash and Cash Equivalents 40,000 30,000 66,000 128,000

Short term Investments 4,500 8,500 10,500 9000

Accounts Receivable 166,000 190,000 164,000 242,950

Inventories 80,000 70,000 100,000 80,000

Total current assets 290,500 298,500 340,500 459,950

Net Fixed Assets 115,000 90,000 115,000 90,000

Total Assets 405,500 388,500 455,500 549,950

Liabilities and Equity 2017 2016 2020 2,019

Accounts Payable 17,000 14,500 17,000 12,500

Accruals 18,500 14,000 18,500 13,000

Notes Payable 11,000 4,000 11,000 4,000

Total Current Liabilities 46,500 32,500 46,500 29,500

Long term debt 133,000 186,950 133,000 186,950

Total Liabilities 179,500 219,450 179,500 216,450

Common Stock 146,000 130,000 126,000 132,000

Retained Earnings 80,000 39,050 150,000 201,000

Total Common Equity 226,000 169,050 276,000 333,000

Total Liabilities and Equity 405,500 388,500 455,500 549,450

a. Find all of the ratios below:

2020 IA

Liquidity Ratios 3.5

Current Ratio 2

Quick Ratio

Asset Management Ratios

Inventory Turnover 25.39

Days Sales Outstanding 55.08

Total Assets Turnover 2.7

Debt Ratios

Debt Ratio 35%

TIE Ratio 6.5

Debt to Equity Ratio

Profitability Ratios

Profit Margin 12%

Return on Assets 13.50%

Return on Equity 15%

Market Ratios

EPS N/A

P/E ratio 14.78

b. Write a synopsis on how this company compares with the industry in each section of ratios.

c. Perform a DuPont analysis for XYZ Inc.

ROE = PM * TA Turnover * Equity Multiplier

2020

2019

d. Explain the results in part c.

Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $544,200 in cash. Lowly's book value at that date was reported as $775,000 and the fair value of the noncontrolling interest was assessed at $362,800. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2018, Lowly acquired a 20 percent interest in Mighty. The price of $346,000 was equivalent to 20 percent of Mighty's book and fair value.

Neither company has paid dividends since these acquisitions occurred. On January 1, 2018, Lowly's book value was $1,017,000, a figure that rises to $1,061,500 (common stock of $300,000 and retained earnings of $761,500) by year-end. Mighty's book value was $1.73 million at the beginning of 2018 and $1.83 million (common stock of $1 million and retained earnings of $830,000) at December 31, 2018. No intra-entity transactions have occurred and no additional stock has been sold. Each company applies the initial value method in accounting for the individual investments.

1. Prepare worksheet entries which are required to consolidate these two companies for 2018?

2. What is the net income attributable to the noncontrolling interest for this year?

Prepare entries under cost and equity methods, and prepare a memorandum.  

PH.4 (LO 2) Writing Wellman Company acquired 30% of the outstanding common stock of Grinwold Inc. on January 1, 2022, by paying $1,800,000 for 60,000 shares. Grinwold declared and paid a $0.50 per share cash dividend on June 30 and again on December 31, 2022. Grinwold reported a net income of $800,000 for the year.

a. Total dividend revenue for 2022 $60,000
b. Revenue from stock investments $240,000

Instructions

a. Prepare the journal entries for Wellman Company for 2022, assuming Wellman cannot exercise significant influence over Grinwold. (Use the cost method.)
b. Prepare the journal entries for Wellman Company for 2022, assuming Wellman can exercise significant influence over Grinwold. (Use the equity method.)
c. The board of directors of Wellman Company is confused about the differences between the cost and equity methods. Prepare a memorandum for the board that explains each method and shows in tabular form the account balances under each method at December 31, 2022.

Paul D. Kimmel. Accounting: Tools for Business Decision Making, 7th Edition (p. H-18).

Your solution should be in good form with amounts clearly labeled and should use appropriate account titles.

Consider each of the transactions below. All of the expenditures were made in cash.

1. The Edison Company spent $12,000 during the year for experimental purposes in connection with the development of a new product.
2. On September 1, 2011, Tristar signed a $40,000 noninterest-bearing note to purchase equipment. The $40,000 payment is due on September 1, 2012. Assume that 8% is a reasonable interest rate. The present value factor of $1: n-1, i=8% is 0.92593
3. The Mayer Company, plaintiff, paid $12,000 in legal fees in November, in connection with a successful infringement suit on its patent.
4. The Johnson Company traded its old machine with an original cost of $7,400 and a book value of $3,000 plus cash of $8,000 for a new one that had a fair value of $10,000.
5. On September 1, 2011, Tristar Company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $200,000 in cash for the property. According to appraisals, the land had a fair market value of $125,000 and the building had a fair market value of $85,000. Please record the acquisition of the land and the building.

Sparrow Pharmaceuticals is the maker of several popular drugs used to treat high blood pressure and arthritis. Over time, the company has developed a positive relationship with many of the patients who use its medications through a quarterly newsletter that offers the latest information on new medical research findings and general health and fitness articles. The company just has been acquired by a group of investors who also own Soothing Waters Hot Tubs and Spas. The marketing director for Soothing Waters would like to use Sparrow’s mailing list for a direct-mail promotion.
Can the answer please be provided in detail 400 words or more thank you so much

Ethics Questions:

What should Sparrow Pharmaceuticals do?

Do you think it is ethical to use customer information across multiple divisions of the same company? Explain.

To which marketing management philosophy do you think the marketing director for Soothing Waters subscribes? Explain.

Does the AMA Statement of Ethics address the use of the customer information by multiple divisions of the same company? Go to http://www.marketingpower.com and review the statement. Then write a brief paragraph on how the AMA Statement of Ethics relates to Sparrow Pharmaceuticals’ dilemma.

Sinary Maju Sdn. Bhd. is a manufacturing company that produces plastic ware product. This company operates a variances accounting system. Each unit of the product has the following standard requirements:

Annual budgeted fixed overhead are RM864,000. Budgeted production of plastic ware product is 1,800 units.

The following actual data was recorded at the end of the May 2020:

Manufacturing overhead is charge on the basis of direct labour hours.

Required:

Compute the following variances for May 2020 and indicate whether each is favourable (F) or unfavourable (UF):

(a)       Direct material price.

(

(b)       Direct material usage.

(c)        Direct labour rate.

(d)        Direct labour efficiency.

(e)       Variable overhead expenditure.

(f)         Variable overhead efficiency.

(g)        Fixed overhead efficiency.

(h)        Briefly explain TWO (2) possible causes of the direct labour rate variance that you have calculated above.

Question1:

The following are account balances of Gadgets Com Pty, Ltd., a company selling gadgets, at the end of financial year 2020

Required:

1. Prepare a classified Income Statement
2. Prepare a classified Balance Sheet
3. Incorporating the additional information below, calculate the Gross Profit Margin (GPM) and the Profit Margin (PM) ratios for GadgetsCom and provide your comment on the company’s profitability and efficiency.

Additional Information

The manager was pleased with the increased sales revenue in the current year. Last year’s ratios are GPM 55% and PM 23%. The following are ratio formula used by the company:

Gama-Smith, a pharmaceutical company, develops new drugs for COVID-19 with other pharmaceutical companies that have the appropriate production facilities.

When Gama-Smith acquires a stake in a development project, it makes an initial payment to the other pharmaceutical company. It then makes a series of further stage payments until the drug development is complete and it has been approved by the relevant authorities. In the financial statements for the year ended 30 June 2019, Gama-Smith has treated the different stakes in the development projects as separate intangible assets because of the anticipated future economic benefits related to Gama-Smith’s ownership of the drug rights. However, in the year to 30 June 2020, the directors of Gama-Smith decided that all such intangible assets were to be expensed as research and development costs as they were unsure as to whether the payments should have been initially recognised as intangible assets. This write off was to be treated as a change in an accounting estimate

a) Explain the difference between ‘research’ and ‘development’ in the context of AASB 138 Intangible Assets without examples

b) Discuss the implications for Gama-Smith’s financial statements for both the years ended 30 June 2019 and 2020 if the recognition criteria in AASB 138 for an intangible asset were met as regards the stakes in the development projects above. Your answer should also briefly consider the implications if the recognition criteria were not met.