Love Your Pet, Inc. (LPI) is a pet food company located in rural Quebec. LPI has been operating for years as a distributor of pet food but in the last year has begun to manufacture raw dog food. In the current year, LPI has been certified by the Canadian Association of Raw Pet Food Manufacturers, (CARPFM). This organization believes that companion animals benefit greatly from a diet more closely related to their hereditary and biological makeup. Certification was completed in the third quarter. Sales of raw dog food literally doubled in the fourth quarter.
Prices have been on the rise for raw meat used in production. Dog food is primarily made from the organs of cattle, lamb, duck, or, in some cases, bison. LPI purchases its raw materials only from other companies that have received CARPFM certification. Accordingly, there are a limited number of suppliers that can provide raw materials as needed. Raw materials for manufacturing either raw dog food or dry dog food are turned over quickly to reduce spoilage. Raw foods are freeze dried immediately once produced. Dry dog food is immediately packaged. Both freeze dried and packaged raw food has a shelf life of one year if the product is unopened.
To meet CARPFM standards, LPI has made a significant investment in equipment, financed in part through an increased term loan plus a line of credit from its bank. The bank has tied the maximum line of credit amounts to 50% of inventory and 70% of accounts receivable.
You have been hired as the new controller for LPI. Your boss, Stuart Mack, needs guidance on proper treatment of several accounting issues, since the new arrangements with the bank will now necessitate an audit. LPI has not needed assurance on its financial statements in the past, and simply had a Notice to Reader prepared to assist with tax return preparation. LPI will be preparing its statements in accordance with IFRS.
Facts to note:
• Under specific identification, periodic and perpetual always give the same result because the cost of each specific item sold is identified. Therefore, the same inventory amount is shown for both.
• Average cost yields different results under the periodic and perpetual methods because the numbers of items and their costs are averaged together differently under a moving average (perpetual) than under a historical tabulation of purchases (periodic).
• FIFO always yields the same result under both periodic and perpetual methods.
1. LPI sells bags of dry dog and cat food in its retail stores throughout Canada. Customers can collect stamps on an LPI frequent buyer card, and for every 10 similar bags purchased, LPI will provide an 11th bag for free. The price of a bag of dog food ranges between $15.00 and $70.00, depending on the size of the bag. This program has been in operation for the past two years. LPI has been tracking the extent of redemptions, and to date the program has attracted roughly 60% of customers who buy packaged dry food. This program is ignored in the accounting system the product “given out for free” is simply expensed in the period it is distributed as part of cost of goods sold.
2. LPI has an agreement with a large farm in Quebec that gives LPI a rebate of 10% on purchases of raw meat as long as volume reaches a certain level. Volumes have been met, and in fact are increasing in every quarter since the agreement was signed. This rebate is paid to LPI in the quarter following purchases. LPI has always recorded this discount as a credit to cost of goods sold in the quarter received.
3. With the exception of direct materials and direct labour, all costs of operating the manufacturing operation are expensed in the period incurred.
4. LPI is a distributor of dry food for other suppliers. Recently, a manufacturer in the United States began a recall of several significant batches of its dry pet food products due to possible contamination with salmonella. There have been U.S. reports of some older small breed dogs dying after allegedly consuming this brand of dog food. The manufacturer has since gone out of business. Unfortunately, this product line had previously made up 20% of LPI’s dry dog food sales. LPI had four months of inventory on hand, only some of which were from the recalled batches. However, all products from this supplier have been removed from the shelves and are essentially unsaleable because of concerns over pet health.
5. LPI has always used FIFO for all types of inventory, but Stuart is wondering if LPI should switch to the average cost method. A number of competitors use this method and he has asked you what the impact might be on gross margin and the current ratio as a result of the switch.
6. One of Stuart’s friends, Carly Jetson, the owner of a local boutique holistic health store, has started a holistic line of rabbit food. LPI does not currently manufacture or sell rabbit food so Stuart has allowed Carly to have free shelf space for her product. Stuart pays Carly 80% of the retail price when the food sells.
Required:
Prepare a memo to Stuart in which you identify and analyze the accounting implications of each of these issues. Include a clear conclusion for the accounting treatment that should be adopted.
In: Accounting
An intensifying oil price war between Saudi Arabia and Russia has
created “very painful” market conditions for the world’s largest
crude oil producers. International benchmark Brent crude traded at
$32.97 Thursday, down almost 8%, while U.S. West Texas Intermediate
(WTI) stood at $30.40, around 7.8% lower. Oil prices have almost
halved since the start of the year.
Last week, Saudi Arabia failed to secure Moscow’s support for
deeper output cuts at a meeting of the Organization of the
Petroleum Exporting Countries and its allies, known as OPEC plus.
OPEC had proposed to deepen cuts by 1.5 million barrels per day and
Russia was asked to cut an extra 300,000 bpd.
“There was no point in cutting until after everyone understood how
sharply demand could fall. We cannot fight a falling demand
situation when there is no clarity about where the bottom (of
demand) is,” Pavel Sorokin, the Russia’s deputy energy minister,
said.
“It is very easy to get caught in a circle when, by cutting once,
you get into an even worse situation: oil prices would shortly
bounce back before falling again as demand continued to
fall.”
Cooperation between two (Saudi Arabia and Russia) of the world’s
three largest oil producers — the third is the United States —
appears to be at an end.
2How a Saudi-Russian Standoff Sent Oil Markets Into a Frenzy. 9th
March 2020. New York Times
Russia to OPEC - deeper oil cuts won't work. 12th March 2020.
Reuter
The losers — and even bigger losers — of an oil price war between
Saudi Arabia and Russia. 12th March 2020. CNBC
a) With aid of diagram, explain how the fall in crude oil demand
affect the output of OPEC plus members.
b) Discuss why Russia refuse to follow Saudi Arabia’s proposal to
cut crude oil production with aid of diagram.
In: Economics
Joan is an 85 y/o female recovering from a right total hip replacement. Her injury occurred when she tripped over a scatter rug in her living room and fractured her hip. She lives alone in a private home and anxiously tells you she is afraid of falling again, not being able to call for help and ‘dying alone on the floor’.
Her problems include decreased strength in both lower extremities (BLE) and some pain and stiffness in both hands which limits how long she manages her walker. She also has difficulty preparing her meals due to decreased standing tolerance. She enjoys painting, reading and participating in her book club
Joan is an 85 y/o female recovering from a right total hip replacement. Her injury occurred when she tripped over a scatter rug in her living room and fractured her hip. She lives alone in a private home and anxiously tells you she is afraid of falling again, not being able to call for help and ‘dying alone on the floor’. Her problems include decreased strength in both lower extremities (BLE) and some pain and stiffness in both hands which limits how long she manages her walker. She also has difficulty preparing her meals due to decreased standing tolerance. She enjoys painting, reading and participating in her book club.
In: Nursing
A gunman-in-training is practicing his shooting at the range. He holds his gun at the same height as his target that is 50 m away. He shoots the bullet with a horizontal velocity of 100m/s and an initial upwards velocity of 2 m/s. a) How much time would it take for the bullet hit the target? b) How far above or below the target does the bullet hit? (Don't forget to mention above or below) c) What upward velocity should he shoot at if he wants to his directly at the target, assuming he shoots the bullet with the same horizontal speed? d) For the last exercise of his training, the gunman-in-training has to shoot a falling target. The target is dropped from rest 50 m horizontally, at a height of 25 m above his gun. If he shoots strictly horizontally, how long after the target is dropped should he pull the trigger? Use the following to help you answer this question. (i) You should already know how long it takes for the bullet to reach target’s horizontal position from a previous part of the problem.
Determine how far the bullet would fall during this time. (ii) Then you want to determine the total vertical displacement the target has to travel to be at the same place as the bullet. (iii) Now determine how long it would take for the target to travel that total vertical displacement. (iv) Finally, determine how long after the target is dropped should the gunman-in-training pull the trigger. (e) *BONUS* The gunman-in-training is simply too impatient to wait that long. Instead, he wants to pull the trigger once the target gets dropped. At what upwards velocity should he shoot with, while keeping the same horizontal velocity, in order to hit the target as it is falling? (You’re on your own for this one, but you can follow the same type of logic.)
In: Physics
Phase One: Alarm Reaction (reactions/results occur within
minutes and hours--people can die within this stage if the stressor
is extreme)
Phase Two: Stage of Resistance (when you still feel the
physiological response in your body over a period of days, weeks
and months, even years if you keep reliving the event)
Phase Three: Stage of Exhaustion (death occurs after long-time
exposure to the stress... often times you don't even feel
physiological signs anymore because your body is used to it)
1. Several months ago you witnessed a person falling from a building and still can’t sleep at night. You grind your teeth during the day. You can still feel your heart racing.
2.You suffer a stroke a year after retiring from your 30 year stressful job as an air traffic controller.
3. A deer runs in front of your car and you stop in the nick of time.
4. A child is burned over half of his body and although doctors try valiantly to save him, he dies five hours after his arrival to the hospital.
5. You have been in drama club for two years. Each time you think about going on stage, you get all sorts of physiological reactions as your stomach churns, your muscles get tight and you get headaches.
6. After caring for his ailing wife for over eight years, a man dies of a heart attack a month after his wife’s passing.
7. A man dies in his yard of heat stroke after shoveling a trench in 90 degree heat.
8. Your current college load of biology, history and English 101 are taking its toll on you. You have difficulty falling asleep and you get frequent headaches. You can't seem to shake this darn cold that you caught.
In: Psychology
Please provide specific Excel functions =NPV(…), =IRR(…), =AVERAGE(…), =YIELD(…) whenever applicable.
Given the following information for Bajor Co.:
Debt: Bajor’s long-term debt capital consists of bonds with 6.250 percent coupon rate (semiannual coupon payments), 9 years time-to-maturity, and current price of 106.61 percent of its par value (i.e., price = 106.61 relative to full amount redemption par of 100).
Preferred stock: Bajor has not issued any preferred stocks.
Common stock (equity):
Taxes: The applicable federal-plus-state corporate tax rate for Bajor is 25.7 percent.
Capital weight: Bajor’s “Market Cap” amounts to $18.23 billion, and “Total Debt” amounts to $14.44 billion. You can use such data to estimate the capital weights for equity and debt, respectively (We and Wd).
Time constraint: For any investment projects, Bajor are required by her investors to recover its initial cost within no more than 6 years.
Q1: What is Bajor’s pretax cost of debt Rd, cost of equity Re, and WACC, respectively? (Hint: For the best estimate of cost of equity Re, you must apply both CAPM and Dividend Growth Model and then average the two estimates.)
In: Finance
Please provide specific Excel functions =NPV(…), =IRR(…), =AVERAGE(…), =YIELD(…) etc......
Given the following information for Bajor Co.:
Debt: Bajor’s long-term debt capital consists of bonds with 6.250 percent coupon rate (semiannual coupon payments), 9 years time-to-maturity, and current price of 106.61 percent of its par value (i.e., price = 106.61 relative to full amount redemption par of 100).
Preferred stock: Bajor has not issued any preferred stocks.
Common stock (equity):
Taxes: The applicable federal-plus-state corporate tax rate for Bajor is 25.7 percent.
Capital weight: Bajor’s “Market Cap” amounts to $18.23 billion, and “Total Debt” amounts to $14.44 billion. You can use such data to estimate the capital weights for equity and debt, respectively (We and Wd).
Time constraint: For any investment projects, Bajor are required by her investors to recover its initial cost within no more than 6 years.
Q1: What is Bajor’s pretax cost of debt Rd, cost of equity Re, and WACC, respectively? (Hint: For the best estimate of cost of equity Re, you must apply both CAPM and Dividend Growth Model and then average the two estimates.)
In: Finance
Gap Inc.'s Sales, Cost of Goods Sold, and Gross Profit
The consolidated balance sheets of Gap Inc. included merchandise inventory in the amount of $1,619 as of January 30, 2016 (the end of fiscal year 2015) and $1,637 as of January 31, 2015 (the end of fiscal year 2014). Net sales were $14,531 and $14,658 at the end of fiscal years 2015 and 2014, respectively. Cost of goods sold and occupancy expenses were $9,271 and $8,799 at the end of fiscal years 2015 and 2014, respectively. All amounts are from Gap Inc.’s 2015 Form 10-K.
Required:
1. Gap Inc. does not include accounts
receivable on its balance sheet, most likely due to
2. Identify and analyze the transaction to record sales during the year ended January 30, 2016.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank or enter "0". If the effect is
negative, use the minus sign.
Enter amounts in millions of dollars. For example, 12,400,000,000
would be entered as 12,400.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
3. Gap Inc. sets forth net sales but not gross
sales on its income statement. What type(s) of deduction(s) would
be made from gross sales to arrive at the amount of net sales
reported?
4. Reconstruct the Cost of Goods Sold section of Gap Inc.'s 2015 income statement. Enter amounts in millions of dollars. For example, 12,400,000,000 would be entered as 12,400.
| Gap Inc. | |
| Cost of Goods Sold | |
| For the Year 2015 | |
| $ | |
| $ | |
| $ | |
5. Calculate the gross profit ratios for Gap Inc. for 2015 and 2014. If required, round the percentage to one decimal place.
| Gap's 2015 gross profit ratio: | % |
| Gap's 2014 gross profit ratio: | % |
Is the company's performance improving?
In: Accounting
21. Oil shocks, the shift from manufacturing to service jobs, and the use of new technologies are reasons for ___ unemployment.
A permanent B structural C cyclical D frictional
22. In a country where both the labor force participation rate and the unemployment rate are very low, which of the following answers explains why this may be the case?
A a large percentage of the population is employed B a large percentage of the population consist of children
C a large percentage of the population is unemployed D a large percentage of the population is aging and thus has retired
23. A real price is:
A an increase in the average level of the price of a good B the average number of times a dollar is spent on final goods and services in a year
C a price that has been corrected for inflation D a decrease in the average level of the price of a good
24. When the U.S government borrows, it sells:
A treasury bonds B federal paper C federal paper, treasury bonds, and government stocks D government stocks
25. The most basic U.S. employment law stipulates that an employee may quit and employer may fire at any time and for any reason is called:
A the Equal Employment Opportunity Act B the employee privacy law C affirmative action D the employment at will doctrine
26. Which of the following can drive long run economic growth in the Solow model?
A human capital B real capital C technological knowledge D physical capital
27. The consumer price index measures the:
A average price of a basket of goods and services bought by all families in the country B average price of a basket of goods and services bought by a typical consumer
C total price of a basket of goods and services bought by all families in the country D total price of a basket of goods and services bought by a typical consumer
28. The social benefits of research and development are equal to the private benefits.
True or False
29. The quantity theory of money predicts that if the money supply doubles, the price level will also double.
True or False
30. When it occurs at the industry level, Joseph Schumpeter's "creative destruction" results in:
A cyclical unemployment B Structural unemployment C frictional unemployment D underemployment
In: Economics
ADHD? OR JUST YOUNGEST IN THE CLASS?
A study1 indicates that the youngest children in a
school grade are more likely to be diagnosed with
attention-deficit/hyperactivity disorder (ADHD) than their older
peers in the same grade. The study involved 937,943children between
6 and 12 years old in British Columbia, Canada. The cutoff date for
entering school in any year in British Columbia is December
31st, so in any given class, those born late in the year
are almost a year younger than those born early in the year. Is it
possible that the younger students are being over-diagnosed with
ADHD?
Boys: ADHD or Just Young?
The table below shows the number of boys diagnosed with ADHD based
on the quarter of the year in which they were born, as well as the
proportion of boys born during that quarter.
| Birth Date | ADHD Diagnoses | Proportion of Births |
|---|---|---|
| Jan-Mar | 6880 | 0.244 |
| Apr-Jun | 7982 | 0.258 |
| Jul-Sep | 9161 | 0.257 |
| Oct-Dec | 8945 | 0.241 |
Table 1 ADHD diagnoses and birth date for boys
1Morrow, R., et al., “Influence of relative age on
diagnosis and treatment of attention-deficit/hyperactivity disorder
in children,” Canadian Medical Association Journal, April
17, 2012; 184(7): 755–762.
(a) What is the total number of boys diagnosed with ADHD in the
sample?
Total number of boys = _____________________
(b) For the null hypothesis, use the overall proportion of
births in a quarter to give the null proportion for that quarter.
Compute the expected number of ADHD diagnoses for each quarter
under this hypothesis.
Round your answers to one decimal place.
Jan-Mar = _____________
Apr-Jun = _____________
Jul-Sep = _____________
Oct-Dec = _____________
(c) Compute the χ2-statistic.
Round your answer to one decimal place.
χ2 = _____________
(d) Give the degrees of freedom and find the
p-value.
Enter the exact answer for the degrees of freedom, and round your
answer for the p-value to three decimal places.
df= _____________
p-value = _____________
(e) State the conclusion of the test.
There is very strong evidence that ADHD diagnoses are related to relative age.
There is some evidence that ADHD diagnoses are related to relative age.
ADHD diagnoses do not seem to be related to relative age in school.
(f) For which group of children does ADHD appear to be diagnosed more frequently than we would expect? Select the group that provides the greatest indication of this.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
(g) For which group of children does ADHD appear to be diagnosed less frequently than we would expect? Select the group that provides the greatest indication of this.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
In: Statistics and Probability