Madhuri Ltd. gives you the following information for the year ended 31st March 2016: (a) Sales for the year totaled Rs.96,00,000. The company sells goods for cash only. (b) Cost of goods sold was 60% of sales. (c) Closing inventory was higher than opening inventory by Rs.43,000. (d) Trade creditors on 31st March 2016 exceeded those on 31st March 2015 by Rs.23,000. (e) Tax paid amounted to Rs.7,00,000. (f) Depreciation on fixed assets for the year was Rs.3,15,000 whereas other expenses totaled Rs.21,45,000. Outstanding expenses on 31st March 2015 and 31st March 2016 totaled Rs.82,000 and Rs.91,000 respectively. (g) New machinery and furniture costing Rs.10,27,500 in all were purchased. (h) A rights issue was made of 50,000 equity shares of Rs.10 each at a premium of Rs.3 per share. The entire money was received with applications. (i) Dividends totaling Rs. 4,00,000 were distributed among shareholders. (j) Cash in hand and at bank as of 31st March 2015 totaled Rs.2,13,800. You are required to prepare a cash flow statement using direct method.

Question # 3 — Production and Direct Materials Budgets
Walsh Company has budgeted the following unit sales for the first quarter of 2017:
Units
January 36,000
February 54,000
March 45,000

It takes two pounds of direct materials, which cost $6 per pound, to manufacture one unit of product. It is the company's policy to have a finished goods inventory on hand at the end of each month equal to 20% of next month's sales and to maintain a direct materials inventory at the end of the month equal to 30% of the next month's production needs. The inventory levels at December 31, 2016, were in accordance with company policy.

Instructions: Answer the following independent questions and show computations which support your answers.

1. What was the number of units in ending finished goods inventory at December 31, 2016?


2. Calculate the number of units that should be scheduled for production in the month of February.




3. What was the number of units in ending direct materials inventory at December 31, 2016?



4. What was the number of units and the dollar amount of direct materials purchases budgeted for the month of January?
 

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Abdul-Rahim Taysir

Consider a simple economy that produces two goods: pens and muffins. The following table shows the prices and quantities of the goods over a three-year period.

Use the information from the preceding table to fill in the following table.

From 2016 to 2017, nominal GDP decrease or increase , and real GDP decrease or increase

The inflation rate in 2017 was A- -25% B- 0.3%, C- 25%, D- 80%, E- 125%

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

A) Real GDP includes the value of exports, but nominal GDP does not.

B) Real GDP is not influenced by price changes, but nominal GDP is.

C) Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

Forecast the Pro forma Financial Statements for Company C using the % of Sales Method assuming: sales increase by $100,000 in 2017; the company must increase Fixed Assets to $200,000 to support the higher level of production; all new financing will come from additional debt, and the payout ratio, the effective tax rate, and the rate of interest on debt will remain unchanged from 2016. Based on two iterations, what do you forecast for the amount of debt and the D/E-ratio required to support this new growth?

On January 1, 2016, Acorn company acquired an 80% interest in Bengal company’s voting stock for $288,000. On that date Bengal had a $300,000 book value and the fair value of the non-controlling interest was $72,000. On January 1, 2017, Bengal acquired 80% of Canaris Company for $104,000 when Canaris had a $100,000 book value and the value of the non-controlling interest was $26,000. In each acquisition, the excess of fair value over book value was assigned to Tradename with a 30-year useful life. These companies reported the following financial information for the years 2016-2018:

Note: Assume that all companies use the equity method of accounting. Note: The solution to part II will include the amortization amounts calculated in Part I.

Required:

1. Calculate the annual amortization pertaining to Bengal and Canaris

b. Calculate the value of Acorn’s investment in Bengal at 12/31/2017.

From the following Account Balance and additional information, you are required to prepare for the year ended 30 June 2016. All figures exclude GST where relevant.

(a) Manufacturing Statement showing each element of cost;

(b) Income Statement.

Green Landscaping Inc. is preparing its budget for the first quarter of 2017. The next step in the budgeting process is to prepare a schedule of cash collections and a schedule of cash payments. The following information has been collected: All sales are on account and 60% is collected in the month of sale, 30% 1 month after the sale, and 10% two months after the sale. Actual sales revenues for November 2016 were $80,000 and December 2016 $90,000. Projected sales revenue for January 2017 $100,000, February 2017 $120,000, and March 2017 $140,000. Purchases of direct materials are made on account and 60% is paid in the month of purchase and 40% in the month following the purchase. Actual purchases of direct materials for December 2016 are $14,000. Projected purchases of direct materials for January 2017 $12,000, February 2017 $15,000, and March 2017 $18,000.

Instructions:
(a) Prepare a schedule of cash collections from sales by month for January, February, and March 2017.
(b) Determine the accounts receivable balance as of March 31, 2017.
(c) Prepare a schedule of cash payments for direct materials by month for January, February, and March 2017.
(d) Determine the accounts payable balance as of March 31, 2017.

The following items are documented in the audit working papers:

1. Sales transaction included in the year ended December 31, 2016, but evidence from the cut-off procedure suggests that the sale should be dated January 2, 2017 ($1,250,000).

2. Warranty expenses in the trial balance for the year to December 31, 2016, total $150,000; the provision for warranty claims as at December 31, 2015, was $100,000. Evaluation of correspondence suggests that an additional $200,000 in warranty claims could result from ongoing disputes with customers. No provision for these claims has been made. Management has made a warranty provision for 2016 of $120,000.

3. Severance expenses related to reorganization of head office administration were incorrectly charged to rental expenses ($578,920). 4. Management has not recorded an impairment for assets. A drought-induced recession has hurt property values in regional cities where seven branch offices are located. (Head office and two branch offices are located in the capital city.) Total land and buildings in the trial balance is $5.5 million.

Required: Independently evaluate each item above and:

i. State whether it is an error or a judgemental misstatement and justify your reasoning.

ii. State the account(s) which would be affected.

Portions of the financial statements for Myriad Products are provided below. MYRIAD PRODUCTS COMPANY Income Statement For the Year Ended December 31, 2016 ($ in millions) Sales $ 700 Cost of goods sold (245 ) Gross margin 455 Salaries expense $ 100 Depreciation expense 78 Patent amortization expense 5 Interest expense 18 Loss on sale of land 4 (205 ) Income before taxes 250 Income tax expense (125 ) Net Income $ 125 MYRIAD PRODUCTS COMPANY Selected Accounts from Comparative Balance Sheets December 31, 2016 and 2015 ($ in millions) Year 2016 2015 Change Cash $ 117 $ 110 $ 7 Accounts receivable 230 247 (17 ) Inventory 445 460 (15 ) Accounts payable 165 154 11 Salaries payable 85 96 (11 ) Interest payable 40 30 10 Income taxes payable 30 20 10 Required: Prepare the cash flows from operating activities section of the statement of cash flows for Myriad Products Company using the direct method. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)