Oshimbala Foods Ltd is a fast food company that operates many outlets across the country. The reporting period of Oshimbala Foods Ltd ends on 31 October. Oshimbala Foods Ltd is not registered as a VAT vendor.

MATTER 1

On 1 November 2014 Oshimbala Foods Ltd purchased equipment with an invoice price of N$ 273 600 under a lease agreement. The lease payments will consist of equal annual instilments over a period of 4 years, payable in arrears. The interest rate applicable on this lease agreement is 8% per year. All payments due have been paid on time each year. The equipment is depreciated on the straight line basis over 5 years with no residual value.

Required:

Disclose the long term borrowings note applicable to the lease liability in the Statement of Financial Position of Oshimbala Foods Ltd on 31 October 2016 in accordance with International Financial Reporting Standards. Note: Round disclosed amounts to the nearest Dollar.

MATTER 2

On 1 January 2016 Oshimbala Foods Ltd signed a 3-year rental agreement on a new outlet to be opened in Maruua Mall. The business was able to negotiate a very good deal on this 3-year rental agreement. For the first year of the agreement, Oshimbala Foods Ltd will not have to pay any rent on the outlet. In the second year of the contract, the business will pay N$ 2 500 rental per month and in the third (last) year of the agreement Oshimbala Foods Ltd will pay N$ 5 000 per month. The accountant of Oshimbala Foods Ltd did not recognize any entries in the accounting records of the business for the period ended 31 October 2016 since no payments had to be made during the first year of the agreement.

Required:

a) Explain whether the accountant of Oshimbala Foods Ltd was correct in not recording any journal entries on the rental agreement for the period ended 31 October 2016 in accordance with International Financial Reporting Standards.

b) Provide the journal entry (if any) to appropriately account for the rental agreement in the accounting records of Oshimbala Foods Ltd for the reporting period ended 31 October 2016.

(Total 30 MARKS)

On 1 July 2015, Richard Ltd acquired all the issued shares of Elizabeth Ltd. The following information relates to the inter entity transactions that have occurred between Richard and Elizabeth to June 2017.

Inter entity Transactions

(a) Richard Ltd sells certain raw materials to Elizabeth Ltd to be used in its manufacturing process.

At 1 July 2016, Elizabeth Ltd held inventory sold to it by Richard Ltd in the previous year at a profit of $600. During the 2016–17 year, Richard Ltd sold inventory to Elizabeth Ltd in the current year for $21 000. None of this was on hand at 30 June 2017.

(b) Elizabeth Ltd also sells items of inventory to Richard Ltd. During the 2016–17 year, Elizabeth Ltd sold goods to Richard Ltd for $4500. At 30 June 2017, inventory which had been sold to Richard Ltd at a profit of $300 was still on hand in Richard Ltd’s inventory.

(c) On 1 July 2016, Elizabeth Ltd sold an item of plant to Richard Ltd for $15 000. This plant had a carrying amount in the records of Elizabeth Ltd of $14 000 at time of sale. This type of plant is depreciated at 10% p.a. on cost.

(d) On 1 January 2016, Richard Ltd sold an item of inventory to Elizabeth Ltd for $18 000. The inventory had cost Richard Ltd $16 000. This item was classified by Elizabeth Ltd as plant. Plant of this type is depreciated by Elizabeth Ltd at 20% p.a.

(e) On 1 March 2017, Elizabeth Ltd sold an item of plant to Richard Ltd. Whereas Elizabeth Ltd classified this as plant, Richard Ltd classified it as inventory. The sales price was $9000 which included a profit to Elizabeth Ltd of $1500. Richard Ltd sold this to another entity on 31 March for $9900.

(f) The tax rate is 30%.

Required:

Prepare consolidation journal entries required at June 30 2017 to eliminate the effects of inter entity transactions between Richard and Elizabeth. Note: BCVR and preacquisition entries are NOT required for this question.

Some recent financial statements for Smolira Golf, Inc., follow. SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 3,251 $ 3,407 Accounts payable $ 2,143 $ 2,580 Accounts receivable 4,777 5,801 Notes payable 1,740 2,096 Inventory 12,438 13,802 Other 88 105 Total $ 20,466 $ 23,010 Total $ 3,971 $ 4,781 Long-term debt $ 13,600 $ 16,360 Owners’ equity Common stock and paid-in surplus $ 37,000 $ 37,000 Fixed assets Accumulated retained earnings 15,644 38,966 Net plant and equipment $ 49,749 $ 74,097 Total $ 52,644 $ 75,966 Total assets $ 70,215 $ 97,107 Total liabilities and owners’ equity $ 70,215 $ 97,107 SMOLIRA GOLF, INC. 2016 Income Statement Sales $ 186,970 Cost of goods sold 126,003 Depreciation 5,353 EBIT $ 55,614 Interest paid 1,450 Taxable income $ 54,164 Taxes 18,957 Net income $ 35,207 Dividends $ 11,885 Retained earnings 23,322 Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.) 2015 2016 Short-term solvency ratios a. Current ratio times times b. Quick ratio times times c. Cash ratio times times Asset utilization ratios d. Total asset turnover times e. Inventory turnover times f. Receivables turnover times Long-term solvency ratios g. Total debt ratio times times h. Debt−equity ratio times times i. Equity multiplier times times j. Times interest earned ratio times k. Cash coverage ratio times Profitability ratios l. Profit margin % m. Return on assets % n. Return on equity %

Retail Inventory Method

Turner Corporation uses the retail inventory method. The following information relates to 2016:

Required:

1. Compute the cost of the ending inventory under each of the following cost flow assumptions: FIFO. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

2. Compute the cost of the ending inventory under each of the following cost flow assumptions: Average cost. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

3. Compute the cost of the ending inventory under each of the following cost flow assumptions: LIFO. Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

4. Compute the cost of the ending inventory under each of the following cost flow assumptions: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places. If required, round to the nearest dollar.

A summary of cash flows for Ousel Travel Service for the year ended November 30, 2016, follows. The cash balance as of December 1, 2015, was $203,000.

Prepare a statement of cash flows for Ousel Travel Service for the year ended November 30, 2016. Refer to the cash receipts and cash payments information given in the instructions and to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) and the word “Deduct” will automatically appear if they are required. Enter amounts that represent cash outflows as negative numbers using a minus sign.

Accounting Major

The data in the enclosed spreadsheet comes from the Texas Higher Education Coordinating Board and the Texas Department of Labor. It represents the total wages earned by major, during the 4^th quarter after graduation. http://www.txhighereddata.org/reports/performance/ctcasalf/gainful.cfm

What was the mean 4^th quarter wages for 2016 grads in your major:_____________

What was the median 4^th quarter wages for 2016 grads in your major:_____________

What percent of 2016 graduates in your major were employed in the 4^th quarter?_______

What are some limitations to the THECB wage report that might impact interpretation of wage data? Should you use the mean or median to provide the best estimate of annual wages for graduates in this major? Explain your answer:

Based on #4, calculate an estimation of annual wage for this major, one year out from graduation:_______________________

Go to O-NET (https://www.onetonline.org/). This site is run by the US Department of Labor. The Department of Labor uses actual wage date to create an overview of expected wages and job availability. Search for an occupation related to your major under “Occupation Quick Search”.

Occupation Researched:__________________

What are related occupations:___________________________________________

Percentage of respondents working in field with a Bachelor’s degree:_____________

Percentage of respondents working in field with a Master’s degree:_____________

What is the median wage in 2017 (nationally)_________________

What is the median wage in 2017 (Texas only) ___________________

What is the projected job growth (2016-2026) nationally for occupation?___________________

What is the projected job growth (2016-2026) in Texas for this occupation? _______________

One the State Wage Data tab, select the “Employment Concentration Tab”. Where are people in this occupation most concentrated?________________

How does the median annual wage in Texas compare to the THECB wage calculated in #5?

What factors might account for the differences in wages between the O-NET Texas data and the THECB data?

Based on these data, what is your best estimate of your wages the first year after graduation? Justify your answer:

How has this research affirmed or changed your career plans?

FINANCIAL STATEMENTS

The Davidson Corporation's balance sheet and income statement are provided here.

1. Construct the statement of stockholders' equity for December 31, 2016. No common stock was issued during 2016. Write out all your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest share or dollar.

   	Common Stock		Retained	Total Stockholders'
   	Shares	Amount	Earnings	Equity
   Balances, 12/31/15		$	$	$
   2016 Net income
   Cash dividends
   Addition to RE
   Balances, 12/31/16		$	$	$

   Enter your answers for parts b-d in millions. For example, an answer of $25,000,000 should be entered as 25.

2. How much money has been reinvested in the firm over the years? Round your answer to the nearest hundredth of million, if necessary.
   
   $   million
   
3. At the present time, how large a check could be written without it bouncing? Round your answer to the nearest hundredth of million, if necessary.
   
   $   million
   
4. How much money must be paid to current creditors within the next year? Round your answer to the nearest hundredth of million, if necessary.
   
   $   million

SCANDI HOME FURNISHINGS, INC.

Income Statements

                                              2014                   2015                             2016

Net Sales                                      $1,300,000           $1,500,000                         $1,800,000     

Cost of Goods Sold                      780,000                     900,000                      1,260,000       

Gross Profit                               520,000                600,000                              540,000

Marketing                                    130,000                    150,000                              200,000

General & Administrative          150,000                 150,000                             200,000

Depreciation                                  40,000                  53,000                                  60,000

EBIT                                          200,000                    247,000                           80,000

Interest                                                      45,000                   57,000                           70,000

Earnings Before Taxes              155,000                     190,000                           10,000

Income Taxes (40%)                    62,000                         76,000                             4,000

Net Income                                $93,000               $114,000                               $6,000

SCANDI HOME FURNISHINGS, INC.    

Balance Sheets

                                                         2014                                 2015                             2016

Cash                                            $50,000                       $40,000                        $10,000

Accounts Receivables                200,000                       260,000                            360,000

Inventories                                  450,000                       500,000                        600,000

Total Current Assets                 700,000                       800,000                         970,000

Fixed Assets                               300,000                       400,000                        500,000

Total Assets                       $1,000,000              $1,200,000                         $1,470,000

Accounts Payable                     $180,000                 $240,000                     $260,000   

Bank Loan                                    90,000                           90,000                        184,000

Total Current Liabilities           270,000                       330,000                        444,000

Long-Term Debt                        300,000                       400,000                        550,000

Common Stock                           350,000                       350,000                        350,000

Retained Earnings                       80,000                         120,000                        126,000

Total Liab. & Equity            $1,000,000                         $1,200,000    $1,470,000

Kaj should be interested in knowing whether Scandi has been building or burning cash. Compare the cash build, cash burn, and the net cash build/burn positions (and their rates) for 2015 and 2016. What, if any, changes have occurred?

Creditors, as well as management, are also concerned about the ability of the venture to meet its debt obligations (and interest) as they come due and the relative size of equity investments to debt levels. Calculate ratios in each of these areas for 2014-2016. Interpret your results and explain what has happened to Scandi.

Kaj and the venture investors are also interested in how efficiently Scandi is able to convert their equity investment, as well as the venture’s total assets, into sales. Calculate several ratios that combine data from the income statements and balance sheets and compare what has happened from 2014-2016.

Some recent financial statements for Smolira Golf, Inc., follow.

Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.)

Some recent financial statements for Smolira Golf, Inc., follow.

Find the following financial ratios for Smolira Golf (use year-end figures rather than average values where appropriate): (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profitability ratios as a percent.)