The comparative balance sheets for 2021 and 2020 and the
statement of income for 2021 are given below for Dux Company.
Additional information from Dux's accounting records is provided
also.
| DUX COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) |
||||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Cash | $ | 78 | $ | 33 | ||||
| Accounts receivable | 53 | 65 | ||||||
| Less: Allowance for uncollectible accounts | (6 | ) | (5 | ) | ||||
| Dividends receivable | 3 | 2 | ||||||
| Inventory | 65 | 60 | ||||||
| Long-term investment | 40 | 36 | ||||||
| Land | 70 | 50 | ||||||
| Buildings and equipment | 277 | 280 | ||||||
| Less: Accumulated depreciation | (45 | ) | (70 | ) | ||||
| $ | 535 | $ | 451 | |||||
| Liabilities | ||||||||
| Accounts payable | $ | 34 | $ | 56 | ||||
| Salaries payable | 4 | 9 | ||||||
| Interest payable | 9 | 3 | ||||||
| Income tax payable | 3 | 6 | ||||||
| Notes payable | 20 | 0 | ||||||
| Bonds payable | 110 | 85 | ||||||
| Less: Discount on bonds | (3 | ) | (4 | ) | ||||
| Shareholders' Equity | ||||||||
| Common stock | 210 | 200 | ||||||
| Paid-in capital—excess of par | 24 | 20 | ||||||
| Retained earnings | 132 | 76 | ||||||
| Less: Treasury stock | (8 | ) | 0 | |||||
| $ | 535 | $ | 451 | |||||
| DUX COMPANY Income Statement For the Year Ended December 31, 2021 ($ in thousands) |
||||||
| Revenues | ||||||
| Sales revenue | $ | 330 | ||||
| Dividend revenue | 3 | $ | 333 | |||
| Expenses | ||||||
| Cost of goods sold | 185 | |||||
| Salaries expense | 24 | |||||
| Depreciation expense | 5 | |||||
| Bad debt expense | 1 | |||||
| Interest expense | 10 | |||||
| Loss on sale of building | 3 | |||||
| Income tax expense | 24 | 252 | ||||
| Net income | $ | 81 | ||||
Additional information from the accounting records:
Required:
Prepare the statement of cash flows of Dux Company for the year
ended December 31, 2021. Present cash flows from operating
activities by the direct method.
In: Accounting
|
You are an executive in a large healthcare company with five lines of business. There are no economies of scope (this will be discussed in a future module). Those lines of business order services (accounting, information technology, and warehousing) from three "service divisions" of the company. You are given the following information for the revenues, direct costs (e.g., costs of production), and capital (e.g., value of the property, plant, and equipment) associated with these five lines of business, as well as the total variable costs from the three 'internal services' divisions. (You are ignoring fixed corporate overhead costs which will not change with a change in the size of the company.) All dollar amounts are in millions of dollars.
As an executive in this company you are concerned with the following: (1) the businesses have little incentive to reduce their request for services from the three service divisions; (2) the service divisions are unable to tie their requested budgets to the value of their services; and (3) some of the businesses may have low returns on capital and should be sold off. To initially address these issues you are imposing an internal pricing system, where each of the three service divisions charges the businesses for the services provided. The expected percentage allocation of the variable costs from each to service division to each business are given in the matrix below. Notice that the sum of any allocations from a service division sum to 1.0.
Use this information to allocate the service divsions' variable costs to the five businesses. Recalculate the return on capital for each of the five businesses. You will enter this information, to three decimal places, in Moodle. Suppose that the market rate of return for similarly risky investments is 14 percent. If you took the approach of Goizueta at Coca-Cola, which businesses should be sold? |
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In: Accounting
Runner Interiors, an interior design company, has experienced a
drop in business due to an increase in interest rates and a
corresponding slowdown in remodeling projects. To stimulate
business, the company is considering exhibiting at the Middleton
Home and Garden Expo. The exhibit will cost the company $14,990 for
space. At the show, Runner Interiors will present a slide show on a
laptop, pass out brochures that were printed previously (the
company printed more than needed), and show its portfolio of
previous jobs.
The company estimates that revenue will increase by $40,020 over
the next year as a result of the exhibit. For the previous year,
profit was as follows:
| Revenue | $213,151 | ||||
| Less: | |||||
| Design supplies | $17,922 | ||||
| Salary of Samantha Spade (owner) | 81,323 | ||||
| Salary of Kim Bridesdale (full-time employee) | 55,550 | ||||
| Rent | 18,912 | ||||
| Utilities | 6,810 | ||||
| Depreciation of office equipment | 3,660 | ||||
| Printing of advertising materials | 871 | ||||
| Advertising in Middleton Journal | 2,740 | ||||
| Travel expenses other than depreciation of autos | 3,140 | ||||
| Depreciation of company cars | 10,330 | 201,258 | |||
| Net income | $11,893 | ||||
Calculate the impact of the exhibit on company profit.
(Round intermediate calculations to 4 decimal places,
e.g. 0.3215 and final answer to 0 decimal places, e.g.
125.)
Company profit will Increase or Decrease? By____________
Should the company exhibit at the home show?
The company Should or Should not? exhibit at the home show.
In: Accounting
Page Interiors, an interior design company, has experienced a
drop in business due to an increase in interest rates and a
corresponding slowdown in remodeling projects. To stimulate
business, the company is considering exhibiting at the Middleton
Home and Garden Expo. The exhibit will cost the company $14,910 for
space. At the show, Page Interiors will present a slide show on a
laptop, pass out brochures that were printed previously (the
company printed more than needed), and show its portfolio of
previous jobs.
The company estimates that revenue will increase by $40,330 over
the next year as a result of the exhibit. For the previous year,
profit was as follows:
| Revenue | $212,366 | ||||
| Less: | |||||
| Design supplies | $18,080 | ||||
| Salary of Samantha Spade (owner) | 81,427 | ||||
| Salary of Kim Bridesdale (full-time employee) | 55,659 | ||||
| Rent | 19,035 | ||||
| Utilities | 6,870 | ||||
| Depreciation of office equipment | 3,780 | ||||
| Printing of advertising materials | 799 | ||||
| Advertising in Middleton Journal | 2,780 | ||||
| Travel expenses other than depreciation of autos | 2,950 | ||||
| Depreciation of company cars | 10,630 | 202,010 | |||
| Net income | $10,356 | ||||
Assume that design supplies and travel other than depreciation are
variable costs.
Calculate the impact of the exhibit on company profit.
(Round intermediate calculations to 4 decimal places,
e.g. 0.3215 and final answer to 0 decimal places, e.g.
125.)
| Company profit will select an option increasedecrease by enter a dollar amount |
Should the company exhibit at the home show?
| The company select an option shouldshould not exhibit at the home show. |
In: Accounting
Long-term Contracts
Koolman Construction Company began work on a contract in 2017. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows:
| 2017 | 2018 | |
| Costs incurred during the year | $ 600,000 | $ 700,000 |
| Estimated costs to complete, December 31 | $1,400,000 | $1,200,000 |
| Billings during the year | $500,000 | $850,000 |
| Collections during the year | $400,000 | $800,000 |
Required:
1. Compute the gross profit or loss recognized in 2017 and 2018.
| KOOLMAN CONSTRUCTION COMPANY | ||
| Gross Profit / Loss | ||
| 2017 and 2018 | ||
| 2017 | 2018 | |
| Construction costs incurred to date | $ | $ |
| Estimated costs to complete | $ | $ |
| Total estimated costs | $ | $ |
| Percentage completed | % | % |
| Revenue to date | $ | $ |
| Revenue recognized in current year | $ | $ |
| Costs incurred in current year | ||
| Profit (loss) recognized | $ | $ |
2. Prepare the appropriate sections of the income statement for each year.
| KOOLMAN CONSTRUCTION COMPANY | ||
| Partial Income Statement | ||
| For the Years Ended December 31, 2017 and 2018 | ||
| 2017 | 2018 | |
| Construction revenue | $ | $ |
| Construction expense | ||
| Gross profit (loss) | $ | $ |
Prepare the appropriate sections of the ending balance sheet for the year 2017.
| KOOLMAN CONSTRUCTION COMPANY | ||
| Partial Balance Sheet | ||
| December 31, 2017 | ||
| Current Assets: | ||
| Accounts receivable | $ | |
| Inventory: | ||
| Construction in progress | $ | |
| Less: Partial billings | ||
| Costs and recognized profit not yet billed | ||
Prepare the appropriate sections of the ending balance sheet for 2018.
| KOOLMAN CONSTRUCTION COMPANY | ||
| Partial Balance Sheet | ||
| December 31, 2018 | ||
| Current Assets: | ||
| Accounts receivable | $ | |
| Inventory: | ||
| Construction in progress | $ | |
| Less: Partial billings | ||
| Costs and recognized profit not yet billed | ||
In: Accounting
Long-term Contracts
Koolman Construction Company began work on a contract in 2017. The contract price is $3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows:
2017 2018
Costs incurred during the year $ 600,000 $ 700,000
Estimated costs to complete, December 31 $1,400,000
$1,200,000
Billings during the year $500,000 $850,000
Collections during the year $400,000 $800,000
Required:
1. Compute the gross profit or loss recognized in 2017 and 2018.
KOOLMAN CONSTRUCTION COMPANY
Gross Profit / Loss
2017 and 2018
2017
2018
Construction costs incurred to date $_______ $ _______
Estimated costs to complete $ ________ $ ________
Total estimated costs $ _________ $ __________
Percentage completed %_________ %________
Revenue to date $_________ $ __________
Revenue recognized in current year $_______ $ _________
Costs incurred in current year __________
__________
Profit (loss) recognized $________ $ _________
2. Prepare the appropriate sections of the income statement for each year.
KOOLMAN CONSTRUCTION COMPANY
Partial Income Statement
For the Years Ended December 31, 2017 and 2018
2017
2018
Construction revenue $ ________ $_____________
Construction expense __________
____________
Gross profit (loss) $___________
$____________
Prepare the appropriate sections of the ending balance sheet for the year 2017.
KOOLMAN CONSTRUCTION COMPANY
Partial Balance Sheet
December 31, 2017
Current Assets:
Accounts receivable: $__________
Inventory:
Construction in progress $___________
Less: Partial billings $_____________
Costs and recognized profit not yet billed
$__________
Prepare the appropriate sections of the ending balance sheet for 2018.
KOOLMAN CONSTRUCTION COMPANY
Partial Balance Sheet
December 31, 2018
Current Assets:
Accounts receivable: $________________
Inventory:
Construction in progress $____________
Less: Partial billings _________________
Costs and recognized profit not yet billed ______________
In: Accounting
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:
| Case | |||||||||
| 1 | 2 | 3 | 4 | ||||||
| Alpha Division: | |||||||||
| Capacity in units | 51,000 | 286,000 | 109,000 | 192,000 | |||||
| Number of units now being sold
to outside customers |
51,000 | 286,000 | 85,000 | 192,000 | |||||
| Selling price per unit to
outside customers |
$ | 100 | $ | 42 | $ | 66 | $ | 48 | |
| Variable costs per unit | $ | 63 | $ | 20 | $ | 43 | $ | 32 | |
| Fixed costs per unit (based
on capacity) |
$ | 24 | $ | 8 | $ | 23 | $ | 9 | |
| Beta Division: | |||||||||
| Number of units needed annually | 9,400 | 70,000 | 18,000 | 64,000 | |||||
| Purchase price now being paid
to an outside supplier |
$ | 92 | $ | 41 | $ | 66 | * | — | |
*Before any purchase discount.
Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.
Required:
1. Refer to case 1 shown above. Alpha Division can avoid $5 per unit in commissions on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $4 per unit in shipping costs on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be?
d. Assume Alpha Division offers to sell 70,000 units to Beta Division for $40 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?
3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 5% price discount from the outside supplier.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
d. Assume Beta Division offers to purchase 18,000 units from Alpha Division at $57.70 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?
4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 64,000 units of a different product from the one Alpha Division is producing now. The new product would require $27 per unit in variable costs and would require that Alpha Division cut back production of its present product by 32,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?
In: Accounting
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:
| Case | |||||||||
| 1 | 2 | 3 | 4 | ||||||
| Alpha Division: | |||||||||
| Capacity in units | 57,000 | 303,000 | 102,000 | 203,000 | |||||
| Number of units now being sold to outside customers |
57,000 | 303,000 | 77,000 | 203,000 | |||||
| Selling price per unit to outside customers |
$ | 98 | $ | 43 | $ | 70 | $ | 45 | |
| Variable costs per unit | $ | 63 | $ | 20 | $ | 47 | $ | 32 | |
| Fixed costs per unit (based on capacity) |
$ | 24 | $ | 10 | $ | 26 | $ | 6 | |
| Beta Division: | |||||||||
| Number of units needed annually | 9,700 | 65,000 | 21,000 | 58,000 | |||||
| Purchase price now being paid to an outside supplier |
$ | 91 | $ | 40 | $ | 70 | * | — | |
*Before any purchase discount.
Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.
Required:
1. Refer to case 1 shown above. Alpha Division can avoid $4 per unit in commissions on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $6 per unit in shipping costs on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be?
d. Assume Alpha Division offers to sell 65,000 units to Beta Division for $39 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?
3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 5% price discount from the outside supplier.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
d. Assume Beta Division offers to purchase 21,000 units from Alpha Division at $61.50 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?
4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 58,000 units of a different product from the one Alpha Division is producing now. The new product would require $27 per unit in variable costs and would require that Alpha Division cut back production of its present product by 29,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?
In: Finance
Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:
| Case | |||||||||
| 1 | 2 | 3 | 4 | ||||||
| Alpha Division: | |||||||||
| Capacity in units | 56,000 | 318,000 | 102,000 | 208,000 | |||||
| Number of units now being sold to outside customers |
56,000 | 318,000 | 79,000 | 208,000 | |||||
| Selling price per unit to outside customers |
$ | 96 | $ | 41 | $ | 64 | $ | 46 | |
| Variable costs per unit | $ | 59 | $ | 20 | $ | 40 | $ | 32 | |
| Fixed costs per unit (based on capacity) |
$ | 23 | $ | 10 | $ | 21 | $ | 8 | |
| Beta Division: | |||||||||
| Number of units needed annually | 10,000 | 68,000 | 18,000 | 56,000 | |||||
| Purchase price now being paid to an outside supplier |
$ | 87 | $ | 40 | $ | 64 | * | — | |
*Before any purchase discount.
Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated.
Required:
1. Refer to case 1 shown above. Alpha Division can avoid $6 per unit in commissions on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 per unit in shipping costs on any sales to Beta Division.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be?
d. Assume Alpha Division offers to sell 68,000 units to Beta Division for $39 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?
3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 6% price discount from the outside supplier.
a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?
b. What is the highest acceptable transfer price from the perspective of the Beta Division?
c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?
d. Assume Beta Division offers to purchase 18,000 units from Alpha Division at $55.16 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?
4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 56,000 units of a different product from the one Alpha Division is producing now. The new product would require $27 per unit in variable costs and would require that Alpha Division cut back production of its present product by 28,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?
In: Accounting
| DR. (RM) | CR. (RM) | |
| Account receivables | 109,658 | |
| Buildings | 1,372,680 | |
| Cash | 1,314,264 | |
| Cost of goods sold | 856,152 | |
| Equipment | 504,000 | |
| Patent | 60,276 | |
| Income tax expense | 60,340 | |
| Inventory | 551,950 | |
| Land | 766,800 | |
| Maintenance and repair expenses | 11,953 | |
| Office expense | 14,086 | |
| Prepaid insurance | 48,000 | |
| Property tax expense | 1,680 | |
| Salaries and wages expenses | 25,334 | |
| Sales returns and allowance | 1,176 | |
| Accounts payable | 36,936 | |
| Accumulated depreciation - buildings | 137,268 | |
| Accumulated depreciation - equipment | 252,000 | |
| Deferred tax liability | 21,600 | |
| Gain on revaluation of properties | 29,640 | |
| Gain on sale land | 109,560 | |
| Gain on translation of foreign operations | 5,880 | |
| Notes payable | 194,400 | |
| Rent revenue | 57,600 | |
| Retained earnings | 912,720 | |
| Revaluation reserve | 560,640 | |
| Translation of foreign operations reserve | 263,160 | |
| Sales revenue | 2,238,180 | |
| Share Capital | 878,765 | |
| 5,698,349 | 5,698,349 |
Above is an Unadjusted Trial Balance of Jasa Tading Bhd at 31 December 2019.
Additional information:
⦁ An unpaid salaries and wages as at 31 December 2019
is RM18,000.
⦁ A tenant of an office space has not yet pay a rental
for December 2019 amounting RM3,000.
⦁ The company returned defect merchandise bought from
supplier and was refunded RM3,500 in cash. The company use
perpetual inventory system and this transaction has not yet been
recorded.
⦁ The company received RM35,000 in cash from a customer
on 30 December 2019 and recorded as sales revenue. However the
company only managed to supply the merchandise on 3 January
2020.
⦁ Payment for a one-year insurance coverage was made on
1 July 2019.
⦁ Annual depreciation for building and equipment are
based on straight line depreciation basis over a period of 50 years
and 10 years respectively with no scrap value.
⦁ 30% of the notes payable is due next year. The note
payable interest rate is 8% per annum.
REQUIRED : ⦁ Prepare a Statement of Profit or Loss and Other Comprehensive Income for Jasa Tading Bhd for the year ended 31 December 2019 according to MFRS 101 Presentation of Financial Statement.
In: Accounting