1. Discontinued Operations

In the codification, locate the requirements for exit or disposal cost obligations. Indicate the codification reference that addresses initial measurement of these costs. Write up a one paragraph summary of the requirements. This should paraphrase the requirements and not be a copy and paste job. In the codification, locate the requirements for the disclosure requirements related to discontinued operations. List these requirements.

2. Related Party Transactions

In the codification, locate the requirements for related party disclosures. Indicate the codification reference that addresses these disclosures. Write up a one paragraph summary of the requirements. This should paraphrase the requirements and not be a copy and paste job.

Fabulous Finds sold $17,790 of merchandise in 20Y5, with the cost of the merchandise totaling $2,250. Fabulous Finds had the following expenses: sales salaries, $2,100; office salaries, $3,000; advertising expense, $1,200; office supplies, $700; office utilities, $1,400; depreciation on store equipment, $1,070; depreciation on office equipment, $1,800; delivery expense, $950; and insurance expense, $1,200. The company also had interest revenue of $2,200 and investment expense of $900. Prepare the company’s income statement for the fiscal year ended March 31.

The Abdulla Company purchased a building that cost AED 520,000. The building was estimated to have 20,000 salvage value and 5 years of life.

Required:

a) (1.5 Marks) Determine depreciation for year 1 and year 2 and record the journal entry using the following methods:

      Sum of the years digits method

      Straight line method

b) (0.5 Mark) What is the monthly depreciation for each method?

Formula:

- Sum of the years digits = Step 1 Calculate the Sum of the years digits

Step 2 Use the fraction of each year to determine depreciation.

- Straight line method = Cost – salvage / years of useful life

Give an example that illustrates that when a person’s opportunity cost goes up that the person will be financially better off. Use a numerical example in illustrating your point.

On July 1, Andrew Company purchased equipment at a cost of $150,000 that has a depreciable cost of $120,000 and an estimated useful life of 3 years or 60,000 hours.

Required:

Using straight-line depreciation, prepare the journal entry to record depreciation expense for (a) the first year, (b) the second year, and (c) the last year on December 31. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

Use your knowledge of the interaction between production and cost to advise a person wishing to start a firm regarding optimal levels of operation and advise him/her on what to check if the firm sees signs of trouble as it continues to grow. The answer should NOT be less than eight pages of A4 paper and not more than 15 pages of A4 paper. You are also required to use relevant diagrams and equations to support your answers.

3. Cost of Units Completed and in Process

The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production.

a. Based on the above data, determine the different costs listed below.

If required, round your interim calculations to two decimal places.

b. Did the production costs change from the preceding period?

c. Assuming that the direct materials cost per unit did not change from the preceding period, did the conversion costs per equivalent unit increase, decrease, or remain the same for the current period?

4. Process Costing for a Service Company

Madison Electric Company uses a fossil fuel (coal) plant for generating electricity. The facility can generate 900 megawatts (million watts) per hour. The plant operates 600 hours during March. Electricity is used as it is generated; thus, there are no inventories at the beginning or end of the period. The March conversion and fuel costs are as follows:

Madison also has a wind farm that can generate 100 megawatts per hour. The wind farm receives sufficient wind to run 300 hours for March. The March conversion costs for the wind farm (mostly depreciation) are as follows:

a. Determine the cost per megawatt hour (MWh) for the fossil fuel plant and the wind farm to identify the lowest cost facility in March.

b. Why are equivalent units of production not needed in determining the cost per megawatt hour (MWh) for generating electricity?

c. What advantage does the fossil fuel plant have over the wind farm? Which of the following is true.

1. Fossil fuel is easily available.
2. Fossil fuel plant has a cost advantage over wind farm.
3. The wind farm is subject to the presence of wind and thus, not reliable.
4. The fossil fuel plant can be turned on and off on a schedule, while the wind farm is subject to the varieties of nature.

Building a competitive advantage based on a superior cost position is likely to be attractive when three conditions are met. Explain the three conditions.

Azu Company Limited is divided into four (4) cost centers.

That is A, B, as production departments and Human Resource & Repairs as service departments The actual cost of a period is as follows

                                                A                     B                     HR            Repairs

                                                GHS                GHS                 GHS           GHS

Indirect materials                  35                     150                  -                       25

Maintenance wages               160                   250                  300                  325

Other overheads as follows:

                                                                        GHS

Supervision                                                     1500

Power                                                              1800

Rent                                                                300

Repairs of plants                                             1200

Depreciation of plants                                                850

Depreciation of building                                 720

The following information is available in respect of the departments:

                                                            A                     B                     HR            Repairs

Area occupied in square feet              1500              1100                900                        500

Number of employees                              20              15                    10                        5

Value of plant £                                  6000               4500                3000                        1500

HZ Power                                              10000               9000             6000                        5000

Required

1. Prepare an overhead analysis sheet by the most reasonable approach and estimate the overhead cost incurred in each cost center   

2. Department A & B are production departments whereas HR & Repairs are there to service these production departments. Assume these two service departments do not render any service to each other. Using equitable and fair as appropriate as possible re-apportion the HR & Repairs overheads to the production departments   

Diesel: At an activity volume of 60,000 units per year, the unit cost of production of this part is calculated as follows:

An outside supplier offered to sell Carthage Inc. this electrical component at only $ 10 per unit. One-third of the specific fixed manufacturing overhead is made up of foremen's wages and other costs that can be eliminated if the part is purchased. The other two thirds of the specific fixed indirect manufacturing costs consist of the depreciation of the equipment used, which has no resale value. The decision to purchase the part in question from an outside supplier would have no effect on the company's common overhead, and the space currently used for this production could be rented at $ 80,000 per year.

1.a In addition to the quantitative analysis ($), the company must take into account what qualitative consideration.

a. The quality of the component in the event of purchase

b. the reliability of the supplier in terms of compliance with the specifics of the product and delivery.

c. the change in supplier prices during the next periods

d. All the foregoing

1.b Should Carthage Inc. Purchase the Part from the External Supplier? Yes or No.

1.c How much would increase or decrease the company's profits if it decided to buy the component rather than make it itself.
a. profits will decrease by $ 80,000.           b. profits will increase by $ 80,000.            c. profits will increase by $ 25,000. d. profits will decrease by $ 25,000.

1.d The relevant unit cost of production is :

a. 6,75 $            b. 10,25 $         c. 8,25 $            d. 7,25 $