GDP is the total market value of goods and services produced in a country in a year. Google the GDP's of three countries. Everyone should use different countries. Use one advanced economy, one developing country, and then a country on a different continent than the first two countries you found. What I want to know and you need to share is current (1) total gdp, (2) gdp per capita and (3) gdp growth rate for the last year. Explain what has been happening in the countries you chose. If you have heritage from another country, share the gdp numbers from your country.

Prepare summary journal entries to record the following transactions for a company in its first month of operations.

A. Raw materials purchased on account, $100,000.

B. Direct materials used in production, $42,000. Indirect materials used in production, $15,000.

C. Paid cash for factory payroll, $50,000. Of this total, $36,000 is for direct labor and $14,000 is for indirect labor.

D. Paid cash for other actual overhead costs, $8,250.

E. Applied overhead at the rate of 120% of direct labor cost.

F. Transferred cost of jobs completed to finished goods, $68,175.

G. Sold jobs on account for $97,000. The jobs had a cost of $68,175.

Prepare summary journal entries to record the following transactions for a company in its first month of operations.

1. Raw materials purchased on account, $86,000.
2. Direct materials used in production, $38,500. Indirect materials used in production, $23,000.
3. Paid cash for factory payroll, $50,000. Of this total, $38,000 is for direct labor and $12,000 is for indirect labor.
4. Paid cash for other actual overhead costs, $7,375.
5. Applied overhead at the rate of 125% of direct labor cost.
6. Transferred cost of jobs completed to finished goods, $62,600.
7. Sold jobs on account for $90,000 g(2). The jobs had a cost of $62,600 g(1).

During the first week of lockdown, you decided not to spend more than $30 on your food. You ate only hotdog with burger bread, and that also in a 1:1 combination, and nothing else. The prices of both these goods were $1 per unit. Find out the optimum amount of hotdog and burger bread you consumed that week. In the second week, due to lack of supply the price of hotdog increased to $2 while the price of burger bread did not change. How many hotdogs and burgers bread did you consume in the second week? Explain the income and substitution effects of this price change using a diagram

Inflation Issues

• Does the base basket used to create the CPI precisely reflect your individual choices? If the answer is no, do the inflation rates calculated using the CPI represent the changes in purchasing power that you actually experience?
• Do you substitute between goods as one becomes more expensive, i.e., would you buy more of a less expensive good if the price of your first choice rose significantly? If the answer is yes, does the CPI inflation rate represent the decrease in purchasing power that you actually experienced?
• Based on your answers to the above, does the choice of the market basket matter?

our accounts receivable clerk, Mitra Adams, to whom you pay a salary of $2,715 per month, has just purchased a new Acura. You decide to test the accuracy of the accounts receivable balance of $148,420 as shown in the ledger.

The following information is available for your first year in business.

Compute an estimate of the ending balance of accounts receivable from customers that should appear in the ledger and any apparent shortages. Assume that all sales are made on account.

Absorption and Variable Costing with Over- and Underapplied Overhead

Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing basis are as follows:

During the year, the company had the following activity:

Actual fixed overhead was $12,600 less than budgeted fixed overhead. Budgeted variable overhead was $5,700 less than the actual variable overhead. The company used an expected actual activity level of 10,600 direct labor hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.

Required:

1. Compute the unit cost using (a) absorption costing and (b) variable costing.

Feedback

The unit cost under absorption costing includes one more cost than under variable costing.

The unit cost under variable costing includes one less cost than under absorption costing.

2. Prepare an absorption-costing income statement. Round your answers to the nearest cent.

Feedback

Absorption costing assigns all manufacturing costs to each unit produced.

3. Prepare a variable-costing income statement. Round your answers to the nearest cent.

Feedback

Use a contribution margin format income statement that groups costs according to behavior (variable and fixed)

4. Reconcile the difference between the two income statements.
The absorption costing generates an income $more than variable co

Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 27,000 computer desks at a cost of $96 each and sold 12,000 of them to Schedule for $108 each. Schedule sold 8,000 of the desks to unaffiliated companies for $136 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $146 each. Both companies use perpetual inventory systems.

Required:
a. What amounts of cost of goods sold did Planner and Schedule record in 20X3?
Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 27,000 computer desks at a cost of $96 each and sold 12,000 of them to Schedule for $108 each. Schedule sold 8,000 of the desks to unaffiliated companies for $136 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $146 each. Both companies use perpetual inventory systems.

Required:
a. What amounts of cost of goods sold did Planner and Schedule record in 20X3?

b. What amount of cost of goods sold must be reported in the consolidated income statement for 20X3? (Do not round intermediate calculations.)

c. Prepare the worksheet consolidation entry or entries needed in preparing consolidated financial statements at December 31, 20X3, relating to the intercorporate sale of inventory. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

• Record the consolidation entry for the intercorporate sale of inventory.

d. Prepare the worksheet consolidation entry or entries needed in preparing consolidated financial statements at December 31, 20X4, relating to the intercorporate sale of inventory. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

• Record the consolidation entry for the intercorporate sale of inventory.

e. Prepare the worksheet consolidation entry or entries needed in preparing consolidated financial statements at December 31, 20X4, relating to the intercorporate sale of inventory if the sales were upstream. Assume that Schedule produced the computer desks at a cost of $96 each and sold 12,000 desks to Planner for $108 each in 20X3, with Planner selling 8,000 desks to unaffiliated companies in 20X3 and the remaining 4,000 in 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.)

• Record the consolidation entry for the intercorporate sale of inventory.

6. Cash flow

You are planning to set up a new business with a partner, KU Enterprises, on 1 June 2020. You will each own 50% of the business and you will both work in the business. You estimate that your first 6 months in business will be as follows:

1. Sales, all on credit, will be £20,000 for June increasing by £5000 per month each month. You are giving your customers one month’s credit to encourage them to buy from your new business, so they will pay one month after receipt of the goods.
2. You will buy £15,000 of goods on the 3^rd of June as inventory paying for it immediately out of the bank.
3. From June onwards you will buy inventory goods each month costing 30% of the sales revenue figures. Your creditor is giving you one month’s credit on these purchases.
4. You will rent a van with a deposit of £5000 paid on July 2^nd and 36 monthly payments of £500, which will start on 27^th August and be paid on the 27^th of each month after that.
5. You buy a five year lease on a property for £65,000 with an option to renew after 5 years.
6. Insurance of £2400 per annum will be paid in two six monthly instalments with the first payment on 1^st June.
7. Annual Business rates of £3600 will be paid by monthly by direct debit on 28^th of the month starting in June.
8. You and you partner will take drawings of £1500 each every month by cash.
9. You and your partner will put £25,000 capital investment each into a bank account for the business on 1 June to cover initial expenses.

You are required to:

1. Draw up a cash budget month by month for the first 6 months showing clearly the amount of bank balance or overdraft at the end of each month. Use the template Appendix C to complete your answer using this template and include it in your MS Word answer document.
2. Identify the months, if any, when the business will require additional funds.
3. What is the maximum amount that the business needs to avoid cash flow problems?
4. Suggest solutions to the business’s cash flow problems.  
5. What effect would an increase of material costs of 25% have on the cash flow.

Appendix C. Refers to Question 6

Complete your answer using this template and include it in your MS Word answer document.

WORLDCOM’S CREATIVE ACCOUNTING

In 1996 Betty Vinson landed a midlevel accounting position at WorldCom, a small long-distance telephone company in Jackson, Mississippi. During the next few years, the company grew very rapidly via acquisitions of companies such as Brooks Fiber, a high-speed telecom services company; Skytel, a leading paging firm; and UUNet, a major owner of Internet backbone. Two years after joining WorldCom, Vinson was promoted to a senior manager in the firm’s corporate accounting division, reporting to Buford Yates, Director of General Accounting. She and her staff of 10 compiled quarterly reports and analyzed company operating expenses and loss reserves. The reserves were set aside to cover specific kinds of expenses.

WorldCom’s profits grew rapidly until the middle of 2000 when the telecommunications industry entered a protracted slump. The company’s line costs, lease fees paid to other telephone companies to use portions of their networks, began to increase as a percentage of the firm’s revenue.

This ratio was closely watched by Wall Street as an indicator of the firm’s health. The company’s CEO, Bernard Ebbers, and CFO, Scott Sullivan, warned Wall Street that earrings for the second half of the year would fall below expectations. During the third quarter, due to the failure of some of its small customers, WorldCom was saddled $685 million in unpaid bills.

Vinson, Yates, and Troy Normand, the accountant in charge of monitoring the firm’s fix expenses, searched for ways to cover the shortfall in preparation of the release of the third-quarter report. They were able to locate $50 million that could be applied to the unpaid bills, but that was far cry from $685 million. In October Yates met with Vinson and Normand and told them that Sullivan and David Myers, the firm’s controller, directed him to take $828 million out of the reserve account designated to cover line cost and other items for the telecommunications unit and use it to cover other expenses. That would reduce reported expenses and increase earnings.

Vinson, Yates, and Normand were concerned that the adjustment was not approved accounting transaction. Accounting rules state that reserves can be established only if there is an expectation that a loss will occur in the unit where the reserve is established. The reserve can be depleted only if there is a good business reason for doing so. Because no business reason existed for dipping into the reserve account, Vinson and Normand told Yates that doing so was not following good accounting practices. Yates replied that he was not pleased with the action, but he was assured that this was a one-time transaction and would never happen again; thus, he had agreed to go along with the transfer. On that basis Vinson and Normand agreed to make the transfer.

The company’s third-quarter results were reported on October 26. On that day Vinson told Yates that she was planning to resign. Normand expressed similar inclinations. Ebbers got wind of the unrest in the accounting department and told Myers that the accountants will never again be placed in such an untenable position. Myers and Sullivan met with Vinson and Normand several days later. Sullivan explained that he was working on the firm’s financial problems. He appealed for them to stay until he was able to get things under control and then they could leave if they wanted to, but he needed them to right the ship.

Normand stated that he was concerned that he would be held liable for making the accounting changes. Sullivan told the two that nothing they had done was illegal and that he would resume all responsibility for their actions. He further stated that the profit projections for the coming quarter had been cut in half and an accounting manipulation would not be needed. Following the meeting, Vinson’s resolve to find another position weakened. She told her husband about the meeting and her concern over the accounting irregularities, and he urged her to quit. But she was the chief breadwinner of the family earning more than her husband’s $40,000 a year, and her job provided the family health insurance. She was also worried about finding a new position because she was a middle aged woman.

Vinson rationalized that because Sullivan was considered one of the top CFOs in the country and had approved the transaction, it must be all right. After talking to Normand about how difficult it would be to find another job, both decided to stay. During the first quarter of 2001, things got worse. There were no reserves to tap and the funds gap was $771 million.

Sullivan ordered that the amount of line costs be transferred from an operating expense account to a capital expense account. That moved them from a direct expense against income to a depreciable expense, thus increasing short-term “profitability”. Vinson was shocked with this directive. She knew that line costs were operating costs that could not legally be counted as a capital expense.

In fact, Yates had balked at the plan when Myers had told him about it, and Myers had told Sullivan that the transfer could not be justified when he was given the order. However Sullivan told Myers that the transfer was WorldCom’s only way out of it’s financial troubles. Vinson felt trapped. The threat to resign had already been used and she was afraid to quit her job before she had another one. Vinson, Normand, and Yates met to discuss the order but did not resolve the issue. Vinson decided to update her resume and begin looking for another job.

Vinson, Normand, and Yates finally went along with the order to transfer the expenses. To do so they had to decide which of five capital expense accounts to transfer the expenses to. Myers met with them during this process and they all expressed how unhappy they were with the transaction. But they felt they had to do it to save the company. Vinson executed the entries to transfer the $771 million, changing dates of numerous transactions in the computer. The same process took place during the following three quarters: $560 million for the second quarter, $743 million for the third quarter and $941 million for the fourth quarter. Early the next year, Vinson was promoted from senior manager to Director of Management Reporting, and Normand was promoted to Director of Legal Entity Accounting.   

Anwser these QUESTIONS

d. Who is ultimately responsible for the accounting regularities?

e. Who is legally responsible for the accounting irregularities?

f. Who is morally responsible for the accounting irregularities?