1. Cornerstone Exercise 6-25
   Effects of Inventory Costing Methods

   Filimonov Inc. has the following information related to purchases and sales of one of its inventory items:

   Date	Description	Units Purchased at Cost	Units Sold at Retail
   June 1	Beginning Inventory	200 units @ $10 = $2,000
   9	Purchase 1	300 units @ $12 = $3,600
   14	Sale 1		400 units @ $25
   22	Purchase 2	250 units @ $14 = $3,500
   29	Sale 2		225 units @ $25

   Required:

   1. In a period of rising prices, which inventory costing method produces the highest amount for ending inventory?
   

   2. In a period of rising prices, which inventory costing method produces the highest net income?
   

   3. In a period of rising prices, which inventory costing method produces the lowest payment for income taxes?
   

   4. In a period of rising prices, which inventory method generally produces the most realistic amount for cost of goods sold?
   

   5. In a period of rising prices, which inventory method generally produces the most realistic amount for inventory?
   

   6. Would your answer to the previous question change if inventory prices were decreasing during the period?

Rachel Corporation was started in 2015 with a cash investment of $20,000. You are presented with the following accounts for Rachel (in thousands):

Prepare a multiple-step income statement for both 2016 and 2015.

Prepare a classified balance sheet for both 2016 and 2015.

Was there a dividend paid in 2016? If so, what was the amount of the dividend?

For the most recent year, prepare the cash flow identity for Rachel Corporation.

For the most recent year, prepare the statement of cash flows for Rachel Corporation.

What conclusions might be drawn from what you have compiled?

Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated’s investment activities during the last quarter of 2018 and the first month of 2019. The only securities held by Amalgamated at October 1 were $30 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1 at face value and held in Amalgamated’s trading portfolio. The company’s fiscal year ends on December 31. 2018 Oct. 18 Purchased 2 million preferred shares of Millwork Ventures Company for $58 million. 31 Received semiannual interest of $1.5 million from the Kansas Abstractors bonds. Nov. 1 Purchased 10% bonds of Holistic Entertainment Enterprises at their $18 million face value, to be held until they mature in 2025. Semiannual interest is payable April 30 and October 31. 1 Sold the Kansas Abstractors bonds for $28 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously. Dec. 1 Purchased 12% bonds of Household Plastics Corporation at their $60 million face value, to be held until they mature in 2028. Semiannual interest is payable May 31 and November 30. 20 Purchased U. S. Treasury bonds for $5.6 million as trading securities, hoping to earn profits on short-term differences in prices. 21 Purchased 4 million common shares of NXS Corporation for $44 million, planning to earn profits from dividends or gains if prevailing market conditions encourage sale. 23 Sold the Treasury bonds for $5.7 million. 29 Received cash dividends of $3 million from the Millwork Ventures Company preferred shares. 31 Recorded any necessary adjusting entry(s) and closing entries relating to the investments. The market price of the Millwork Ventures Company preferred stock was $27.50 per share and $11.50 per share for the NXS Corporation common. The fair values of the bond investments were $58.7 million for Household Plastics Corporation and $16.7 million for Holistic Entertainment Enterprises. 2019 Jan. 7 Sold the NXS Corporation common shares for $43 million. Required: Prepare the appropriate journal entry for each transaction or event. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).) Record the purchase of 2 million preferred shares of Millwork Ventures Company for $58 million. Record the receipt of semiannual interest of $1.5 million from the Kansas Abstractors bonds. Record the purchase of 10% bonds of Holistic Entertainment Enterprises at their $18 million face value. ..... Record the entry to adjust to fair value on the date of sale of the Kansas Abstractor bonds. ..... Record the sale of the investment in Kansas Abstractors bonds. ..... Record the purchase of 12% bonds of Household Plastics Corporation at their $60 million face value. ..... Record the purchase of U.S. Treasury bonds for $5.6 million. ..... Record the purchase of 4 million common shares of NXS Corporation for $44 million. Record the entry to adjust to fair value on the date of sale of the U.S. Treasury bonds. Record the sale of the Treasury bonds for $5.7 million. Record the receipt of cash dividends of $3 million from the Millwork Ventures Company preferred shares. Record the accrued interest. Record the entry to adjust to fair value for the Millwork Ventures preferred stock. Record the entry to adjust to fair value for the NXS Corporation common shares. Record the entry to adjust to fair value on the date of sale of the NXS Corporation common shares Record the sale of the NXS Corporation common shares for $43 million.

Use the following information for the remaining problems.

First, construct an income statement and two balance sheets. Enter all answers as whole dollar numbers with no $ or commas (e.g. 20000). 2015 Sales = $60,000 2015 COGS = $25,000 2015 SG&A Expense = $10,000 2015 Depreciation Expense = $5,000 2015 Interest Expense = $3,000 Average Tax Rate = 30% Dividend Payout Ratio = 55% 2015 Current Assets = $24,000 and 2016 Current Assets = $27,000 2015 Net Working Capital = $5,000 Change in Net Working Capital = $1,000 2015 Total Fixed Assets = $100,000 2015 Accumulated Depreciation = $20,000 2015 Net Capital Spending = $12,000 2015 Long-term Debt = $40,000 2015 Common Stock = $22,000 2015 Cash Flow to Creditors = $1,000

What is the 2015 net income?

What is the 2015 Accumulated retained earnings?

What is 2016 Accumulated Retained Earnings?

What is 2015 Cash Flow to Shareholders?

What is the 2016 long term debt?

What is 2015 free cash flow?

Is there not enough information to answer the question.. That is my problem.

9. A project requires a $219,000 investment in equipment. The equipment is expected to worth $128,000 when the project ends in 7 years. Operating savings are expected to be $12,000 in the first year and are expected to increase 5% per year for the life of the project. The CCA rate is 30%, the firm's discount rate is 13%, and the company’s tax rate is 22%. What amount would you use for salvage value in your NPV calculation? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

10. A company had net fixed assets of $6.5 million on December 31, 2018 and $11 million on December 31, 2019. For 2019, the company’s depreciation expense was $750,000 and its cash flow from operations was $20 million. During 2019, the company’s net working capital declined by $1.25 million. What was the firm's net capital spending? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 23,000 machine-hours and produced 17,000 units. The company had originally planned to work 25,000 machine-hours during March.

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

1. Based on your understanding of the IS-LM model, graphically illustrate and explain what effect a monetary expansion will have on output, the interest rate, and investment.
2. Increases in the budget deficit are believed to cause reductions in investment. Based on your understanding of the IS-LM model, will a fiscal policy action that causes a reduction in the budget deficit cause an increase in investment? Explain.
3. First, briefly explain what is meant by the policy mix. Second, explain what effect different policy mixes might have on the level of output, investment, and the interest rate.
4. Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in government spending and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.
5. Use the IS-LM model to answer this question. Suppose there is a simultaneous increase in taxes and reduction in the money supply. Explain what effect this particular policy mix will have on output and the interest rate. Based on your analysis, do we know with certainty what effect this policy mix will have on investment? Explain.

4.   The firm planned to sell 40,000 units at a price of 14 TL per unit in the master budget. The firm actually sold 38,000 units. The firm planned to produce 42,000 units in the master budget but the firm actually produced 40,000 units. In master budget, each unit requires 0.6 direct labor hours and direct labor cost per hour is 7 TL. (14 Points)

a.   Calculate sales revenue, direct materials, direct labor, and variable manufacturing overhead activity variances and indicate whether the variances are favorable (F) or unfavorable (U). (First you have to complete missing values in the table)

b.   Calculate revenue variance. Indicate whether the variance is favorable (F) or unfavorable (U).

c.   Calculate direct materials, direct labor, and variable manufacturing overhead spending variances and indicate whether the variances are favorable (F) or unfavorable (U).

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 22,000 machine-hours and produced 16,000 units. The company had originally planned to work 24,000 machine-hours during March.

2. Calculate the spending variances for March.