On 1 June2020, Purchase Limited enters into a firm commitment Supply Limited to buy USD 100,000 of inventory. On 1 July 2020, the Purchase Limited enters into a hedging arrangement which meets the hedge accounting criteria stipulated by the accounting standards (Australian Accounting Standards Board (AASB) 9). Purchase Limited has designated the firm commitment hedging arrangement as a fair value hedge. On 1 August 2020, Supply Limited transfers the inventory to Purchase Limited, and on that date, the Purchase Limited makes the payment. The spot and forward rates are as follows. Date Spot rate in AUD Forward rate in AUD 1 June 2020 0.19 0.2 30 June 2020 0.2 0.25 1 August 2020 0.3 0.3 Required: a) Explain at least two determinants of determining an effectiveness of a hedge instrument against a he

ue

2. What is your subject?

dge 5 Marks b) Provide journal entries to account for the hedged item (firm commitment to buy inventory) 8 Marks i. On 1 June 2020 ii. On 30 June 2020 iii. On 1 August 2020 c) Provide journal entries to account for the hedge instrument (forward contract) 7 Marks i. On 1 June 2020 ii. On 30 June 2020 iii. On 1 August 2020

Complete the required tasks utilizing excel and label everything. All work must be shown to receive credit. A 20% late penalty will be assessed for each 24 hours submitted late. Below is the activity (purchases and Sales) for inventory held by Random Creations for the month of January, 2020: Beginning Inventory: January 1, 2020 80 Units @ $50 per unit Total $ 4,000 Purchases: January 18, 2020 40 Units @ $51 per unit Total $ 2,040 January 28, 2020 40 Units at $52 per unit Total $ 2,080 Sales: January 12, 2020 Sold 30 Units January 22, 2020 Sold 30 Units January 31, 2020 Sold 45 Units Using the information above, answer the following:

a) Compute the January 31, 2020 Ending Inventory and Cost of Goods Sold assuming Random Creations uses FIFO

b) Compute the January 31, 2020 Ending Inventory and Cost of Goods Sold assuming Random Creations uses LIFO and the Perpetual System

c) Compute the January 31, 2020 Ending Inventory and Cost of Goods Sold assuming Random Creations uses LIFO and the Periodic System

d) Compute the January 31, 2020 Ending Inventory and Cost of Goods Sold assuming Random Creations uses Average Cost and the Perpetual System REMEMBER ALL WORK MUST BE SHOWN TO RECEIVE CREDIT

Exercise 10-4 a-b (Video)

Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.

Fixed overhead costs per month are Supervision $4,100, Depreciation $2,000, and Property Taxes $500. The company believes it will normally operate in a range of 7,100–12,800 direct labor hours per month.

Assume that in July 2020, Myers Company incurs the following manufacturing overhead costs.

(a) Prepare a flexible budget performance report, assuming that the company worked 10,900 direct labor hours during the month. (List variable costs before fixed costs.)

Hillside Furniture Company makes outdoor furniture from recycled products, including plastics and wood by-products. Its three furniture products are gliders, chairs with footstools, and tables. The products appeal primarily to cost-conscious consumers and those who value the recycling of materials. The company wholesales its products to retailers and various mass merchandisers. Because of the seasonal nature of the products, most orders are manufactured during the winter months for delivery in the early spring. Michael Cain, founder and owner, is dismayed that sales for two of the products are tracking below budget. The following chart shows pertinent year-to-date data regarding the company’s products. Certain that the shortfall was caused by a lack of effort by the sales force, Michael has suggested to Lisa Boyle, the sales manager, that the company announce two contests to correct this situation before it deteriorates. The first contest is a trip to Hawaii awarded to the top salesperson if incremental glider sales are attained to close the budget shortfall. The second contest is a golf weekend, complete with a new set of golf clubs, awarded to the top salesperson if incremental sales of chairs with footstools are attained to close the budget shortfall. The Hawaiian vacation would cost $16,500 and the golf trip would cost $12,500. Glider Chair with Footstool Table Actual Budget Actual Budget Actual Budget Number of units 2,600 4,000 6,900 8,000 3,500 3,300 Average sales price $80.00 $85.00 $61.00 $65.00 $24.00 $25.00 Variable costs Direct labor: Hours 2.50 2.25 3.25 3.00 0.60 0.50 Cost/hour $11.00 $10.00 $9.50 $9.25 $9.00 $9.00 Direct material $16.00 $15.00 $11.00 $10.00 $6.00 $5.00 Sales commission $15.00 $15.00 $10.00 $10.00 $5.00 $5.50 Promotional activity costs: Hawaiian vacation = $16,500 Golfing trip = $12,500 Explain whether either contest is desirable or not. Supplement your analysis by determining the total contribution margin for Gliders and for Table-and-Chair sets under each of the following assumptions: actual sales volume at actual selling price, actual resource usage, and actual costs,

Given your risk tolerance, and your need to diversify, explain how the Selected Realized Returns (1926–2013) page 269 and the Effects of Portfolio Risk for Average Stocks will impact your future investment decisions and why

Selected Realized Returns, 1926-2013:

                                        Average Return             Standard Deviation

Small-Company Stocks           16.9%                                32.3%

Large Company stocks             12.1                                    20.2

Long term corporate bonds        6.3                                     8.4

Long-term government bonds     5.9                                     9.8

US Treasury Bills                         3.5                                    3.1

The company would like to buy a machine for 20 mil. USD. Machine would be depreciated for 3 years using 3-years MACRS method. Company has following options:

Loan: maturity 3 years, monthly payment, interest 6 % p.a., equal annuity payment
Leasing: leasing coefficient 1.3; advanced payment 30 %; maturity 3 years; monthly payment Corporate tax rate is 19 %.

Which type of financing is better for us? PS: please use Excel to calculate it and share the formula please.

Many publicly listed companies include some segment information in their annual report. Usually this information can found in their forms 10-K under Item 6: Selected Financial Data and Item 7: Management's Discussion and Analysis. Please pick any company of your choice, find their most recent form 10-K on the internet and summarize the type of segment data they publish. Also provide us with the most important findings you discovered when reading the segment information of your company.

CASE STUDY: Excavation Buckets Design and Manufacture

Peter Border is a qualified mechanical engineer who graduated from the QTech University two years ago. Peter works for Trueblood, a small mechanical design and manufacturing company. Owner and founder of the company is William Trueblood.

William qualified as a mechanical tradesman and saw the opportunity to build a business based on designing and manufacturing complex parts for large earthmoving equipment. The business was founded 35 years ago and today employs 55 people. Trueblood Enterprises currently has three professional engineers, Rohan Petronis (25 years of experience), Claude Weatherly (15 years of experience), and Peter. Claude is in charge of the manufacturing area while Rohan and Peter comprise the design and analysis division.

Two months ago, Trueblood Enterprises were contracted by Cranbrook Excavators to design and manufacture an excavation buckets for a range of large excavators and draglines that the company manufactures. Cranbrook Excavators is a large company with total worldwide sales of about $2 billion (Australian). Trueblood Enterprises was elated to gain the contract as they had been trying for several years to secure a contract with Cranbrook Excavators. It is hoped that this initial contract will lead to further large contracts between the two companies.

Design of the excavation buckets was undertaken by Rohan and Peter. The designed part was extremely difficult to analyse and eventually they adopted a design which they considered was adequate and safe, but with which they were not entirely happy. The design was done manually without modern 3D modelling and simulation tools. They would have liked to have had more time to carry out further analysis work, but the production area needed to get the parts into production in order to meet the timelines associated with the contract. The first batch of parts (10) has now been manufactured and delivered and Cranbrook Enterprises has expressed their pleasure at the way in which the contract has been fulfilled to date. The contract calls for the manufacture of a further 100 parts over the next 18 months.

The contract price for the parts is $22 000 each, and Trueblood Enterprises currently estimates that the total cost of design and manufacture will be $18 500 each.

Although busy with other work since the finalisation of the design for the excavation buckets, Peter has continued to ponder how the analysis of the part could be improved. Last night he had a sudden flash of inspiration and two hours’ calculation this morning has provided a much improved understanding of the stress distribution which is likely to occur in the bucket design. On reviewing the new analysis, Peter becomes concerned that the existing design may create the possibility of fatigue failure in the longer term. Further analysis leads him to the conclusion that the premature failure of the existing units is a distinct possibility, although failure is unlikely to occur until 15,000 hours, though this needs to be further validated. The original contract specification asked for a minimum fatigue life of 20,000 hours. Peter also does a quick estimate of the likely cost of using an improved design in manufacturing and estimates that the cost per part will rise to $20 500.

Peter discusses his findings with Rohan. Initially Rohan is reluctant to take any action whatsoever, as he considers it would reflect poorly on the design and analysis division, and particularly on his inherent leadership of that area based on his extended years of experience. When Peter presses the issue and threatens to go directly to William Trueblood, Rohan agrees to set up a meeting between William, Peter and himself.

At the meeting, Peter presents his findings and recommends that the new design be adopted for production, and that the parts already manufactured and supplied be recalled from Cranbrook Excavators. Predictably, William Trueblood gets very upset and irate. He asks if the parts that have already been supplied are in danger of imminent failure and Rohan says no. William Trueblood states that his decision is that the current parts will not be recalled and the production process will continue to manufacture the existing design and not the new design. He says that the existing part is "safe enough" and the company cannot afford to increase the cost of production. He also says that he is extremely disappointed with the performance of Rohan and Peter, and that the design and analysis division needs to "get its act together or the company will have to consider closing this division and outsourcing its design work". He also says that if Rohan or Peter so much as blink an eyelid out of place in the future they will be sacked from the company!

- Identify and discuss the management, contractual and ethical issues involved in this case. What courses of action would be appropriate for Peter to follow (starting immediately)?

- The answer should be no more than 3000 words. This is merely a guide and there is no penalty associated with this word count. The final section of the main body of the report should clearly identify the courses of action that Peter should follow. This section will be a major section of the report on which technical content will be judged. The conclusions reached and action recommended, however, will need to be supported by the arguments presented in the previous sections of the report. This final section should be between 200 and 250 words in length.

- Your report should have a formal format with title page, executive summary, contents page and references. The report should be word processed

Harry and Ron formed Granger Company on January 1, 2013. Each contributed $200,000 in exchange for 10,000 shares of Common Stock with a par value of $1. The following are transactions for the month of January, the first month of operations.

Company acquired 400 acres of land in South Dakota at a cost of $500 per acre, paying in full.

Company established a line of credit with Dakota National Bank in the amount of $500,000 using the land as collateral.

Purchased supplies for $3,500 cash

Paid for January’s equipment rental, cash $50,000.

Sold timber from the land for $75,000.

Signed a 1 year lease on a 2,000 sq. ft. office, paying $2,800 for the month.

Sold large rocks to a landscaping customer, receiving half of the $15,000 in cash.

Paid $3,000 for fuel and oil used in the equipment.

Sold excess topsoil to a developer, 20 dump truck loads at $100 per load, cash.

Paid employees for the month, $12,000.

ABC Sign Company installed no trespassing signs and company signage at a cost of $1,500.

Received and paid invoice for insurance premiums for months of January-March, $15,000

Received invoice for 2,300 for fuel and oil used in the equipment.

On the last day of the month purchased 2 pickup trucks from a local dealer for $25,000 each, Dakota National Bank provided the loan with a rate of 2.49%, 12 months.

Signed contract to purchase an additional 250 acres of land at a cost of $600 per acre.

Accounts Listing:

Cash                      Accounts Receivable                                       Prepaid Insurance                            Trucks

Land                      Accounts Payable                                             Line of Credit Payable                    Note Payable

Common Stock Additional Paid in Capital                              Revenue                                              Advertising Exp

Supplies Exp       Equipment Rental Exp                                    Office Lease Exp                               Fuel/Oil Exp

Insurance Exp    Wages Exp

Requirements:

Provide a journal entry for each transaction or state “no journal entry required”

Harry and Ron formed Granger Company on January 1, 2013. Each contributed $200,000 in exchange for 10,000 shares of Common Stock with a par value of $1. The following are transactions for the month of January, the first month of operations.

Company acquired 400 acres of land in South Dakota at a cost of $500 per acre, paying in full.

Company established a line of credit with Dakota National Bank in the amount of $500,000 using the land as collateral.

Purchased supplies for $3,500 cash

Paid for January’s equipment rental, cash $50,000.

Sold timber from the land for $75,000.

Signed a 1 year lease on a 2,000 sq. ft. office, paying $2,800 for the month.

Sold large rocks to a landscaping customer, receiving half of the $15,000 in cash.

Paid $3,000 for fuel and oil used in the equipment.

Sold excess topsoil to a developer, 20 dump truck loads at $100 per load, cash.

Paid employees for the month, $12,000.

ABC Sign Company installed no trespassing signs and company signage at a cost of $1,500.

Received and paid invoice for insurance premiums for months of January-March, $15,000

Received invoice for 2,300 for fuel and oil used in the equipment.

On the last day of the month purchased 2 pickup trucks from a local dealer for $25,000 each, Dakota National Bank provided the loan with a rate of 2.49%, 12 months.

Signed contract to purchase an additional 250 acres of land at a cost of $600 per acre.

Accounts Listing:

Cash                      Accounts Receivable                                       Prepaid Insurance                            Trucks

Land                      Accounts Payable                                             Line of Credit Payable                    Note Payable

Common Stock Additional Paid in Capital                              Revenue                                              Advertising Exp

Supplies Exp       Equipment Rental Exp                                    Office Lease Exp                               Fuel/Oil Exp

Insurance Exp    Wages Exp

Prepare the Income Statement for the month of January, using proper form, calculate EPS.