At year-end 2015, Wallace Landscaping’s total assets were $1.7 million and its accounts payable were $370,000. Sales, which in 2015 were $2.8 million, are expected to increase by 30% in 2016. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $395,000 in 2015, and retained earnings were $330,000. Wallace has arranged to sell $160,000 of new common stock in 2016 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2016. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 6%, and 60% of earnings will be paid out as dividends. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What was Wallace's total long-term debt in 2015? Round your answer to the nearest dollar. $ What were Wallace's total liabilities in 2015? Do not round intermediate calculations. Round your answer to the nearest dollar. $ How much new long-term debt financing will be needed in 2016? (Hint: AFN - New stock = New long-term debt.) Do not round intermediate calculations. Round your answer to the nearest dollar

On July 31, 2016, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

B. Reconcile the absorption costing income from operations of $1,489,250 with the variable costing income from operations previously determined.

Issued $300,000 face value bonds at 102.2.

Record the payment of semiannual bond interest for the bond issued on April 1

Record the amortization of the premium for the bond issued on April 1.

Recorded the adjusting entry for accrued interest and amortization of the bond premium for three months.

Closed the Bond Interest Expense account to the Income Summary account.

Reversed the adjusting entry made on December 31, 2016.

Record the entry for interest expenses paid on bonds, if the reversing entry was not recorded.

Coyote Ltd, a private company reporting under ASPE, reported the following for the years ended May 31, 2017, and 2016

Coyote Ltd.

Balance sheet May 31

Additional information

1. Profit for 2017 was $108,000

2. common shares were issued for $50,000

3. Land with a cost of $50,000 was sold at a loss of $20,000

4. Purchased land with a cost of $100,000 with a $55,000 down payment and financed the remainder with a mortgage note payable.

5. No equipment was sold during 2017

Instruction:

1. Prepare a cash flow statement for the year using the indirect method.

2. Is it unfavorable for a company to have a net cash outflow from financing activities?

3. Using horizontal analysis, calculate the percentage change between 2016 and 2017.

4. Using vertical analysis, calculate the percentage of the base amount for each year.

5. Based on your calculation in part (3) and (4), identify any significant changes from 2016 to 2017.

Question 2

Outline the situations where incomplete record techniques will be required to produce a set of            financial statements.

3 Marks

On 1 January 2016, P. Jones a sole trader owned a business, that had the following assets and liabilities:

         K

Motor vehicles             124,125

Accumulated depreciation on motor vehicles     21,030

Premises         450,000

Receivables 119,250

Allowances for receivables      2,100

Payables         96,000

Accruals         9,750 Inventory 33,400 Prepayments         780

Bank overdraft             11,415 Cash on hand        110

Term loan       210,000

You are required to:

Calculate the proprietor’s capital as at 1 January 2016.

7 Marks

In brief, outline your understanding of why the incomplete record technique used in part

               (i) will give the proprietors opening capital.

2 Marks

c) Despite being advised on the importance of maintaining proper books and records P. Jones failed to do so in the year to 31 December 2016. He is able to provide you with the following information:

         K

Opening receivables debit balance         119,250

Closing receivables debit balance          224,320

Closing receivables credit balance         1,560

Amounts received from customers         754,100

Discounts allowed to customers             12,450

Irrecoverable debts written off                2,970

Interest charged to receivables for slow payment              4,110

Based upon the information provided, you are required to calculate P. Jones’s credit sales for the        year to 31 December 2016. P. Jones is able to tell you that all goods are sold on credit.

8 Marks Total 20 Marks

Question 1

Describe what it means to capitalise an expenditure. What is the general rule for determining which costs are capitalized when property, plant and equipment is acquired?   

Question 2

Mangkuk Tingkat Inc. adopts a revaluation model for their property, plant and equipment measurement. They have two properties in Kuala Lumpur as shown below with their costs and fair value for the year ended.

The leasehold building was acquired in 2010 and has a 2 percent depreciation rate per annum.

On September 2017, Mangkuk Tingkat Inc. exchanged equipment with Paku Besi Co. Paku Besi paid Mangkuk Tingkat RM5,000 in cash for the exchange. The information on the exchange are as follows:

The exchange has commercial substance for both companies.   

Required:

a) Show the relevant journal entries to record the adjustments required on the revaluation for the year ended 31 December 2016 and 2017.   

b) Show the extract of Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2016 and 2017.   

c) Record the exchange for Mangkuk Tingkat Inc. and Paku Besi Co.

Ayayai Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows:

All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,010 of depreciation per month.

Other data:

The company’s cash balance on January 1, 2017, is expected to be $60,600. The company wants to maintain a minimum cash balance of $50,500.

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Sosa Company has provided the following budget information for the first quarter of 2016 Total sales $297,500 Budgeted purchases of direct materials 39,450 Budgeted direct labor cost 38,880 Budgeted manufacturing overhead costs: Variable manufacturing overhead 3,645 Depreciation 600 Insurance and property taxes 9,120 Budgeted selling and administrative expenses: Salaries expense 5,000 Rent expense 3,000 Insurance expense 1,200 Depreciation expense 100 Supplies expense 2,975 Additional data related to the first quarter of 2016 for Sosa Company: a. Capital expenditures include $36,000 for new manufacturing equipment to be purchased and paid in the first quarter. b. Cash receipts are 60% of sales in the quarter of the sale and 40% in the quarter following the sale. c. Direct materials purchases are paid 70% in the quarter purchased and 30% in the next quarter. d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred. e. Income tax expense for the first quarter is projected at $42,000 and is paid in the quarter incurred. f. Sosa Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter. g.The December 31,2015,balance in Cash is $14,000, in Accounts Receivable is $23,200, and in Accounts Payable is $10,500. 1.Prepare Sosa Company's schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2016. 2.Prepare Sosa Company's cash budget for the first quarter of 2016.

Wildhorse Ltd. purchased a new machine on April 4, 2014, at a cost of $152,000. The company estimated that the machine would have a residual value of $14,000. The machine is expected to be used for 9,200working hours during its four-year life. Actual machine usage was 1,300 hours in 2014; 2,000 hours in 2015; 2,500 hours in 2016; 1,800 hours in 2017; and 1,600hours in 2018. Wildhorse has a December 31 year end.

(a)

Calculate depreciation for the machine under each of the following methods: (Round expense per unit to 2 decimal places, e.g. 2.75 and final answers to 0 decimal places, e.g. 5,275.)

(1) Straight-line for 2014 through to 2018.

(2) Diminishing-balance using double the straight-line rate for 2014 through to 2018.

(3) Units-of-production for 2014 through to 2018.

The events listed below all took place on 15 june 2016. Provide the journal entry necessary to record each event in the accounts of company X for the year ended 30 June 2016. If no entry is required , indicate this and give reasons. In most cases, an assumption is not necessary. If you feel an assumption is necessary, however, state it.

1) A new general manager is hired at an annual salary of $160000.

2) Company X receives a bill for $200 from a newspaper for an advertisement to be run on 30 June 2016. Payment is not due for 60 days.

3) A loan is obtained from the bank for $20000, repayable in two years time.

4) A landscaper agrees to improve land owned by company X. The agreed price for the work is $700.

5) An order for $900 of merchandise is received from a customer along with a cash deposit of $300.

6) A $600 insurance premium for coverage over the period from 1 July 2016 to 30 June 2017 is paid in cash.

7) Company X places an order for the purchase of supplies with a cost price of $2000.

8) Borrowed $300000 from bank by giving the bank a 9-month, 10 percent interest-bearing note payable.

9) Performed $3000 of the services, the rest will be provided next month.

10) Received the telecommunication bill for $2000 and will be paid in early next month.

11) 1 June received rent in advance of $15000 for the period from 1 June to 1 November.