How is the corona virus crisis expected to influence the capital stock of the US economy? Discuss your answers for the given scenarios below. Make sure to clarify the differences between the two scenarios:

-Case 1: We found a cure for the virus in July 2020 and we go back to our lives as of August 2020.

-Case 2: We found a cure for the virus in July 2021 and we go back to our lives as of August 2021.

QualSupport Corporation manufactures seats for automobiles, vans, trucks, and various recreational vehicles. The company has a number of plants around
the world, including the Denver Cover Plant, which makes seat covers. Ted Vosilo is the plant manager of the Denver Cover Plant but also serves as the
regional production manager for the company. His budget as the regional manager is charged to the Denver Cover Plant. Vosilo has just heard that QualSupport has received a bid from an outside vendor to supply the equivalent of the entire annual output of the Denver Cover Plant for $35 million. Vosilo was astonished at the low outside bid because the budget for the Denver Cover Plant’s operating costs for the upcoming year was set at $52 million. If this bid is accepted, the Denver Cover Plant will be
closed down.

The budget for Denver Cover’s operating costs for the coming year is presented below.

Denver Cover Plant
Annual Budget for Operating Costs
Materials $ 14,000,000
Labor:
Direct $ 13,100,000
Supervision 900,000
Indirect plant 4,000,000 18,000,000   
Overhead:
Depreciation—equipment 3,200,000
Depreciation—building 7,000,000   
Pension expense 5,000,000
Plant manager and staff 800,000
Corporate expenses* 4,000,000 20,000,000

Total budgeted costs $52,000,000

*Fixed corporate expenses allocated to plants and other operating units based on total budgeted wage and salary costs.

a. Due to Denver Cover’s commitment to using high-quality fabrics in all of its products, the Purchasing Department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders are canceled as a consequence of the plant closing, termination charges would amount to 20% of the cost of direct materials.

b. Approximately 400 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difficulty matching Denver Cover’s base pay of $18.80 per hour, which is the highest in the area. A clause in Denver Cover’s contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.5 million for the year.

c. Some employees would probably choose early retirement because Qual Support has an excellent pension plan. In fact, $3 million of the annual pension expense would continue whether Denver Cover is open or not.

d. Vosilo and his staff would not be affected by the closing of Denver Cover. They would still be responsible for administering three other area plants.

e. If the Denver Cover Plant were closed, the company would realize about $3.2 million salvage value for the equipment and building. If the plant remains open, there are no plans to make any significant investments in new equipment or buildings. The old equipment is adequate and should last indefinitely.

Required:

2. QualSupport Corporation plans to prepare a financial analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify:

a. The annual budgeted costs that are relevant to the decision regarding closing the plant.

Materials $
Labor:
Direct $
Supervision
Indirect plant
Differential pension cost
Total annual relevant costs $

b. The annual budgeted costs that are not relevant to the decision regarding closing the plant.

Depreciation—equipment $

Total annual continuing costs $

c. Any nonrecurring costs that would arise due to the closing of the plant.

Termination charges on canceled material orders $

Total nonrecurring costs $

3. Looking at the data you have prepared in (2) above,

a. Calculate the Net advantage (disadvantage) of closing the plant.

  First year Other Years
$   

Salvage value of equipment and building 3,200,000

Net advantage (disadvantage) of closing the plant

b. Should the plant be closed?

Yes___________

No ___________

On April 1, 2020, Larkspur Company sold 16,200 of its 12%, 15-year, $1,000 face value bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2021, Larkspur took advantage of favorable prices of its stock to extinguish 7,500 of the bonds by issuing 247,500 shares of its $10 par value common stock. At this time, the accrued interest was paid in cash. The company’s stock was selling for $32 per share on March 1, 2021.

Prepare the journal entries needed on the books of Larkspur Company to record the following. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Hundar Ltd is a Japanese car manufacturer. On 1 March 2020, Vicpark Ltd, an Australian African company, purchased 50 cars from Hundar Ltd. The terms of the contract are FOB shipping, with the invoice denominated in Japanese Yen. The order was completed on 25 May 2020, shipped from Nagoya Port (the largest port in Japan) on 1 June and received by Vicpark Ltd on 25 June 2020. The total cost of the cars was 70 million Yen. Vicpark Ltd’s reporting date is 30 June. Vicpark Ltd settled the payment on 31 July 2020. Selected exchange rates were:

Required:

Prepare all journal entries required by Vicpark Ltd (the Australian company) to record the above transactions. Narrations are not required but you must show all workings and round figures to the nearest dollar. (5 Marks, 4 marks for correct journal entries, 1 mark for your workings)

The human resources department needs to forecast the number of sexual harassement investigations for the entire company. The data for several months is supplied below. Be careful since the data is listed beginning with the most recent. The forecasting method to be used here is the 4 month weighted moving average adjusting for seasonality where the weights, starting with the most recent time period, are 0.4, 0.3, 0.2, 0.1. Again, you must find the seasonality factors for the data. Please round your forecast to the nearest whole number.

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:

During 2020, Abernethy reported net income of $122,500 while declaring and paying dividends of $15,000. During 2021, Abernethy reported net income of $159,250 while declaring and paying dividends of $49,000.

Assume that Chapman Company acquired Abernethy’s common stock for $698,050 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $123,900, its buildings were valued at $219,400, and its equipment was appraised at $254,500. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.

Exercise 23-15

Presented below are data taken from the records of Oriole Company.

Additional information:

Prepare a statement of cash flows for the year 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Exercise 9-24

Larkspur Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $37,700 would have been the same under either the conventional retail system or the LIFO retail system.

On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level.

Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.)

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Debit Credit Accounts payable $ 55,800 Accounts receivable $ 42,500 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 209,000 Cash and short-term investments 67,250 Common stock 250,000 Equipment (net) (5-year remaining life) 357,500 Inventory 136,000 Land 114,000 Long-term liabilities (mature 12/31/23) 168,500 Retained earnings, 1/1/20 414,650 Supplies 12,700 Totals $ 938,950 $ 938,950 During 2020, Abernethy reported net income of $104,500 while declaring and paying dividends of $13,000. During 2021, Abernethy reported net income of $137,750 while declaring and paying dividends of $34,000. Assume that Chapman Company acquired Abernethy’s common stock for $849,550 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $128,300, its buildings were valued at $274,600, and its equipment was appraised at $334,750. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.

Thomas Consulting received the September 30th bank statement with the following monthly activity:

On 9/30/2020, the cash account ledger balance was $41,773.

Deposits in transit were as follows;

• 9/28 $3,200
• 9/29 $2,461
• 9/30 $2,757

All checks posted in the ledger cleared the bank except for those totaling $10,205. Also, a $500 deposit from a customer was mistakenly recorded as a $50 debit to cash and credit to accounts receivable.  

Required:

1. Using excel, prepare a Bank Reconciliation for Thomas Consulting as of 9/30/2020. You can use any format, just be sure your adjusted/corrected cash balance reconciles. Don't submit a Bank Reconciliation that doesn't reconcile. Please format your numbers with the thousands separator and no decimals.
2. In the same excel file, use a new sheet to record any necessary journal entries to adjust the cash account.