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CH21 (11.) Comparative Balance Sheets For 2018 And 2017 And A Statement Of Income

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CH21 (11.) Comparative balance sheets for 2018 and 2017 and a statement of income for 2018 are given below for Metagrobolize Industries. Additional information from the accounting records of Metagrobolize also is provided. METAGROBOLIZE INDUSTRIES Comparative Balance Sheets December 31, 2018 and 2017 ($ in 000s) 2018 2017 Assets Cash $ 540 $ 285 Accounts receivable 670 350 Inventory 820 430 Land 600 570 Building 900 900 Less: Accumulated depreciation (250 ) (220) Equipment 3,300 3,110 Less: Accumulated depreciation (481 ) (440 ) Patent 1,600 1,800 $ 7,699 $ 6,785 Liabilities Accounts payable $ 920 $ 720 Accrued expenses payable 310 250 Lease liability—land 130 0 Shareholders’ Equity Common stock 3,640 3,500 Paid-in capital—excess of par 550 460 Retained earnings 2,149 1,855 $ 7,699 $ 6,785 METAGROBOLIZE INDUSTRIES Income Statement For the Year Ended December 31, 2018 ($ in 000s) Revenues Sales revenue $ 3,152 Gain on sale of land 70 $ 3,222 Expenses Cost of goods sold $ 1,120 Depreciation expense—building 30 Depreciation expense—equipment 608 Loss on sale of equipment 25 Amortization of patent 200 Operating expenses 350 2,333 Net income $ 889 Additional information from the accounting records: Annual payments of $20,000 on the finance lease liability are paid each January 1, beginning in 2018. During 2018, equipment with a cost of $630,000 (90% depreciated) was sold. The statement of shareholders’ equity reveals reductions of $230,000 and $365,000 for stock dividends and cash dividends, respectively. Required: Prepare the statement of cash flows of Metagrobolize for the year ended December 31, 2018. Present cash flows from operating activities by the direct method.

Exercise 8-8 The Marigold Company Manufactures 1,144 Units Of A Part That Could

Exercise 8-8 The Marigold Company manufactures 1,144 units of a part that could be purchased from an outside supplier for $13 each. Marigold’s costs to manufacture each part are as follows: Direct materials $2 Direct labor 3 Variable manufacturing overhead 4 Fixed manufacturing overhead 8   Total $17 All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (a) Calculate relevant cost to make. Relevent cost to make $ per unit (b) Should Marigold continue to manufacture the part? NoYes (c) Calculate net cost to buy if Marigold leases the manufacturing facilities to another company for $6,286 per year. Net cost to buy $ (d) Would your answer change if Marigold could lease the manufacturing facilities to another company for $6,286 per year? NoYes

List The Audit Procedures And Actions That You Can Take Now Take In Respect

List the Audit procedures and actions that you can take now take in respect of the above

The Adjusted Trial Balance Of ABC Ltd At 30 June 2010 Showed The Following

The adjusted trial balance of ABC Ltd at 30 June 2010 showed the following non-current assets: Land (at fair value) $234,000 Building (at fair value) 145,000 Trucks (at cost) 118,000 Accumulated depreciation (trucks) (26,500) The land and building were purchased on 31 October 2009. The land cost $240,000 and the building cost $150,000. As ABC Ltd’s owner decided to measure these assets using the revaluation model, the land and building were both revalued to its fair values on 30 June 2010. No revision to the building depreciation rate was considered necessary. It is depreciated at 15% per annum on the reducing balance. Details of trucks owned by ABC at 30 June 2010 were as follows: Truck Date acquired Cost Accumulated depreciation Estimated useful life Estimated residual value 1 31/12/08 $57,000 $10,500 7 years $8,000 2 30/06/08 $61,000 $16,000 7 years   $5,000 The trucks are depreciated using the straight-line method. The tax rate is 30%. Transactions and events for the year ended 30 June 2011 were as follows: 30/09/10 Extensive repairs were carried out on truck 2 at a cash cost of $7,000. ABC Ltd expected these repairs to extend truck 2 useful life by 3 years and to increase truck 2’s estimated residual value to $9,000. 31/03/11 Truck 1 was traded in on a new truck (Truck 3) that cost $47,000. A trade-in of $24,000 was allowed for Truck 1 and the balance was paid in cash. An additional $5,000 was paid to register Truck 3 and install interior shelving. Truck 3’s useful life and residual value were estimated at 6 years and $4,000. 30/06/11 The land’s fair value was assessed at $242,000. The building’s fair value was assessed at $115,000. Required (Show all workings) Prepare general journal entries to record the above events, and depreciation for the year ended 30 June 2011. Narrations are not required. Financial accounting.

Garr Co. Issued $4,239,000 Of 12%, 5-year Convertible Bonds On December 1, 2017 For

Garr Co. issued $4,239,000 of 12%, 5-year convertible bonds on December 1, 2017 for $4,256,910 plus accrued interest. The bonds were dated April 1, 2017 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight-line basis. Garr Co. has a fiscal year end of September 30. On October 1, 2018, $2,119,500 of these bonds were converted into 30,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion. (a) Prepare the entry to record the interest expense at April 1, 2018. Assume that interest payable was credited when the bonds were issued. Date Account Titles and Explanation Debit Credit Apr. 1, 2018 b- prepare the entry to record the interest expense at April 1, 2018. Assume that interest payable was credited when the bonds were issued. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,725.)

The Company, Neuralink, Is No Longer Allowed To Outsource Their Chips From China. They’re

The company, Neuralink, is no longer allowed to outsource their chips from china. They’re looking into three different options for getting their chips. The 3 options are: (1) using fully automated equipment to manufacture chips; (2) to produce in-house in the US; and (3) outsourcing from other companies such as Google, Qualcomm, and Intel. Option 1: The cost of self-running equipment is 250 million dollars with a salvage value of 12.5 million dollars after 6 years. The company selling this equipment desires 15% interest annually on the price of the machine. Option 2: The cost of equipment totals into 32.5 million dollars at the start of the first year. Which will have a salvage value of 3 million dollars at the end of 6 years. After a recent area 51 raid, the company acquired a team of Area 51 aliens with an annual demand of $500,000. The operational costs and software maintenance is $700,000 annually. As the years go by, an inflation of 16% will demand increasing prices for these values Option 3: Outsourcing from other companies, will cost 40 dollars per chip, with a yearly demand of 72,500 chips. However, the cost of chips will increase by 5% each year over the next 6 years. What is the best option?

Exercise 15-9 Financial Ratios For Assessing Profitability And Managing Debt [LO15-4, LO15-5] The Financial

Exercise 15-9 Financial Ratios for Assessing Profitability and Managing Debt [LO15-4, LO15-5] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 21,000 Accounts receivable, net 180,000 Merchandise inventory 340,000 Prepaid expenses 9,000 Total current assets 550,000 Property and equipment, net 870,000 Total assets $ 1,420,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities $ 290,000 Bonds payable, 10% 360,000 Total liabilities 650,000 Stockholders’ equity: Common stock, $5 par value $ 170,000 Retained earnings 600,000 Total stockholders’ equity 770,000 Total liabilities and stockholders’ equity $ 1,420,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $ 2,200,000 Cost of goods sold 1,210,000 Gross margin 990,000 Selling and administrative expenses 610,000 Net operating income 380,000 Interest expense 36,000 Net income before taxes 344,000 Income taxes (30%) 103,200 Net income $ 240,800 Account balances at the beginning of the year were: accounts receivable, $180,000; and inventory, $360,000. All sales were on account. Assets at the beginning of the year totaled $1,020,000, and the stockholders’ equity totaled $655,000. Required: Compute the following: (For Requirements 1 to 4, enter your percentage answers rounded to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity. 5. Was financial leverage positive or negative for the year?

Exercise 15-10 Financial Ratios For Assessing Market Performance [LO15-6] The Financial Statements For Castile

Exercise 15-10 Financial Ratios for Assessing Market Performance [LO15-6] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 19,000 Accounts receivable, net 200,000 Merchandise inventory 380,000 Prepaid expenses 11,000 Total current assets 610,000 Property and equipment, net 830,000 Total assets $ 1,440,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities $ 220,000 Bonds payable, 9% 380,000 Total liabilities 600,000 Stockholders’ equity: Common stock, $5 par value $ 170,000 Retained earnings 670,000 Total stockholders’ equity 840,000 Total liabilities and stockholders’ equity $ 1,440,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $ 2,300,000 Cost of goods sold 1,210,000 Gross margin 1,090,000 Selling and administrative expenses 590,000 Net operating income 500,000 Interest expense 34,200 Net income before taxes 465,800 Income taxes (30%) 139,740 Net income $ 326,060 Account balances at the beginning of the year were: accounts receivable, $150,000; and inventory, $280,000. All sales were on account. Assume that Castile Products, Inc., paid dividends of $3.25 per share during the year. Also assume that the company’s common stock had a market price of $70 at the end of the year and there was no change in the number of outstanding shares of common stock during the year. Required: Compute financial ratios as follows: 1. Earnings per share. (Round your answer to 2 decimal places.) 2. Dividend payout ratio. (Round your intermediate calculations to 2 decimal places. Round your percentage final answer to 2 decimal places.) 3. Dividend yield ratio. (Round your percentage answer to 2 decimal places.) 4. Price-earnings ratio. (Round your intermediate calculations and final answer to 2 decimal places.) 5. Book value per share. (Round your answer to 2 decimal places.)

Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4] The Financial Statements For Castile Products,

Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 23,000 Accounts receivable, net 200,000 Merchandise inventory 330,000 Prepaid expenses 8,000 Total current assets 561,000 Property and equipment, net 870,000 Total assets $ 1,431,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities $ 300,000 Bonds payable, 11% 350,000 Total liabilities 650,000 Stockholders’ equity: Common stock, $10 par value $ 120,000 Retained earnings 661,000 Total stockholders’ equity 781,000 Total liabilities and stockholders’ equity $ 1,431,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales $ 3,510,000 Cost of goods sold 1,395,000 Gross margin 2,115,000 Selling and administrative expenses 580,000 Net operating income 1,535,000 Interest expense 38,500 Net income before taxes 1,496,500 Income taxes (30%) 448,950 Net income $ 1,047,550 Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $290,000. All sales were on account. Required: Compute the following financial data and ratios: 1. Working capital. 2. Current ratio. (Round your answer to 1 decimal place.) 3. Acid-test ratio. (Round your answer to 2 decimal places.) 4. Debt-to-equity ratio. (Round your answer to 2 decimal places.) 5. Times interest earned ratio. (Round your answer to 2 decimal places.) 6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.) 7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.) 8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)

CHAPTER 19 (6.) On January 1, 2018, Adams-Meneke Corporation Granted 15 Million Incentive Stock

CHAPTER 19 (6.) On January 1, 2018, Adams-Meneke Corporation granted 15 million incentive stock options to division managers, each permitting holders to purchase one share of the company’s $1 par common shares within the next six years, but not before December 31, 2020 (the vesting date). The exercise price is the market price of the shares on the date of grant, currently $52 per share. The fair value of the options, estimated by an appropriate option pricing model, is $4 per option. Management’s policy is to estimate forfeitures. No forfeitures are anticipated. Ignore taxes. Required: 1. Determine the total compensation cost pertaining to the options on January 1, 2018. 2. Prepare the appropriate journal entry to record compensation expense on December 31, 2018. 3. Unexpected turnover during 2019 caused an estimate of the forfeiture of 5% of the stock options. Determine the adjusted compensation cost, and prepare the appropriate journal entry(s) on December 31, 2019 and 2020.

CHAPTER 19 (8.) The Alford Group Had 150,000 Shares Of Common Stock Outstanding At

CHAPTER 19 (8.) The Alford Group had 150,000 shares of common stock outstanding at January 1, 2018. The following activities affected common shares during the year. There are no potential common shares outstanding.    2018 Feb. 28 Purchased 3,000 shares of treasury stock. Oct. 31 Sold the treasury shares purchased on February 28. Nov. 30 Issued 12,000 new shares. Dec. 31 Net income for 2018 is $1,639,000. 2019 Jan. 15 Declared and issued a 2-for-1 stock split. Dec. 31 Net income for 2019 is $1,639,000. Required: 1. Determine the 2018 EPS. 2. Determine the 2019 EPS. 3. At what amount will the 2018 EPS be presented in the 2019 comparative financial statements?

Carol’s Dress Shop Produces High Quality Formal Dresses. In January 2019 They Produced 17,000

Carol’s Dress Shop produces high quality formal dresses. In January 2019 they produced 17,000 dresses. For the month of January, the following standard and actual cost data are available. The normal monthly capacity of the company is 30,000 direct labor hours. All material purchased in January was used in January production. Standard per Dress Actual Direct materials 5.0 yards @ $8.00 per yard $660,000 for 80,000 yards Direct labor 1.5 hours @ $15.00 per hour $384,000 for 24,000 hours Overhead hours @ $5.50 per hour (fixed $3.40; variable $2.10) $110,000 fixed overhead $52,000 variable overhead Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs are $102,000 per month and budgeted variable overhead costs are $63,000 per month. Required Calculate the direct materials price variance for January. Label the variance as favorable or unfavorable. Calculate the direct materials quantity variance for January. Label the variance as favorable or unfavorable. Calculate the direct labor rate variance for January. Label the variance as favorable or unfavorable. Calculate the direct labor efficiency variance for January. Label the variance as favorable or unfavorable. Calculate the variable overhead spending variance for January. Label the variance as favorable or unfavorable. Calculate the variable overhead efficiency variance for January. Label the variance as favorable or unfavorable. Calculate the fixed overhead spending variance for January. Label the variance as favorable or unfavorable. Calculate the fixed overhead production volume variance for January. Label the variance as favorable or unfavorable.

CHAPTER 19 (10.) Pastner Brands Is A Calendar-year Firm With Operations In Several Countries.

CHAPTER 19 (10.) Pastner Brands is a calendar-year firm with operations in several countries. As part of its executive compensation plan, at January 1, 2018, the company issued 320,000 executive stock options permitting executives to buy 320,000 shares of Pastner stock for $44 per share. One-fourth of the options vest in each of the next four years beginning at December 31, 2018 (graded vesting). Pastner elects to separate the total award into four groups (or tranches) according to the year in which they vest and measures the compensation cost for each vesting date as a separate award. The fair value of each tranche is estimated at January 1, 2018, as follows: Vesting Date Amount Vesting Fair Value per Option Dec. 31, 2018 25 % $ 4.50 Dec. 31, 2019 25 % $ 5.00 Dec. 31, 2020 25 % $ 5.40 Dec. 31, 2021 25 % $ 6.00 Required: 1. Determine the compensation expense related to the options to be recorded each year 2018–2021, assuming Pastner allocates the compensation cost for each of the four groups (tranches) separately.

CH 18 (15.) Part A In Late 2017, The Nicklaus Corporation Was Formed. The

CH 18 (15.) Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2018, 3,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 1,000,000 shares of preferred stock are issued at $20 per share. Required: 1. Prepare journal entries to record these transactions. 2. Prepare the shareholders’ equity section of the Nicklaus balance sheet as of March 31, 2018. (Assume net income for the first quarter 2018 was $1,550,000.)

CH18 (15.) Part B During 2018, The Nicklaus Corporation Participated In Three Treasury Stock

CH18 (15.) Part B During 2018, the Nicklaus Corporation participated in three treasury stock transactions: On June 30, 2018, the corporation reacquires 280,000 shares for the treasury at a price of $12 per share. On July 31, 2018, 40,000 treasury shares are reissued at $15 per share. On September 30, 2018, 40,000 treasury shares are reissued at $10 per share. Required: 1. Prepare journal entries to record these transactions. 2. Prepare the Nicklaus Corporation shareholders’ equity section as it would appear in a balance sheet prepared at September 30, 2018. (Assume net income for the second and third quarter was $3,050,000.)

CH18 (15.) Part C On October 1, 2018, Nicklaus Corporation Receives Permission To Replace

CH18 (15.) Part C On October 1, 2018, Nicklaus Corporation receives permission to replace its $1 par value common stock (5,000,000 shares authorized, 3,000,000 shares issued, and 2,800,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation. On November 1, 2018, the Nicklaus Corporation declares a $0.14 per share cash dividend on common stock and a $0.31 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2018, to shareholders of record on November 15, 2018. On December 2, 2018, the Nicklaus Corporation declares a 2% stock dividend payable on December 28, 2018, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 112,000 (0.02 × 5,600,000) additional shares being issued to shareholders. Required: 1. Prepare journal entries to record the declaration and payment of these stock and cash dividends. 2. Prepare the December 31, 2018, shareholders’ equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,550,000.) 3. Prepare a statement of shareholders’ equity for Nicklaus Corporation for 2018.

CH16 (7.) At The End Of 2017, Payne Industries Had A Deferred Tax Asset

CH16 (7.) At the end of 2017, Payne Industries had a deferred tax asset account with a balance of $34 million attributable to a temporary book–tax difference of $85 million in a liability for estimated expenses. At the end of 2018, the temporary difference is $80 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2018 is $185 million and the tax rate is 40%. Required: 2. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized.   

CH16 (8.) Allmond Corporation, Organized On January 3, 2018, Had Pretax Accounting Income Of

CH16 (8.) Allmond Corporation, organized on January 3, 2018, had pretax accounting income of $17 million and taxable income of $28 million for the year ended December 31, 2018. The 2018 tax rate is 30%. The only difference between accounting income and taxable income is estimated product warranty costs. Expected payments and scheduled tax rates (based on recent tax legislation) are as follows: 2019 $ 4 million 25 % 2020 2 million 25 % 2021 2 million 25 % 2022 3 million 20 % Required: 1. Determine the amounts necessary to record Allmond’s income taxes for 2018 and prepare the appropriate journal entry.

Alsup Consulting Sometimes Performs Services For Which It Receives Payment At The Conclusion Of

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017–2020 are as follows: Service Revenue Collections Pretax Accounting Income 2017 $ 624,000 $ 599,000 $ 160,000 2018 720,000 730,000 225,000 2019 685,000 660,000 195,000 2020 670,000 690,000 175,000 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%. (Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017–2020.) Required: 1. Prepare the appropriate journal entry to record Alsup’s 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes.

CH16 (14.) Tru Developers, Inc., Sells Plots Of Land For Industrial Development. Tru Recognizes

CH16 (14.) Tru Developers, Inc., sells plots of land for industrial development. Tru recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, Tru took the position that it could recognize the income for tax purposes when the installments are collected. Income that Tru recognized for financial reporting purposes in 2018 for plots in this category was $70 million. The company expected to collect 60% of each sale in 2019 and 40% in 2020. This amount over the next two years is as follows: 2019 $ 42 million 2020 28 million $ 70 million Tru’s pretax accounting income for 2018 was $100 million. In its income statement, Tru reported interest income of $15 million, unrelated to the land sales, for which the company’s position is that the interest is not taxable. Accordingly, the interest was not reported on the tax return. There are no differences between accounting income and taxable income other than those described above. The enacted tax rate is 40 percent. Management believes the tax position taken on the land sales has a greater than 50% chance of being upheld based on its technical merits, but the position taken on the interest has a less than 50% chance of being upheld. It is further believed that the following likelihood percentages apply to the tax treatment of the land sales ($ in millions): Amount Qualifying for Installment Sales Treatment Percentage Likelihood of Tax Treatment Being Sustained $ 70 20 % 60 20 % 50 20 % 40 20 % 30 20 % Required: 4. Prepare the journal entry to record income taxes in 2018 assuming full recognition of the tax benefits in the financial statements of both differences between pretax accounting income and taxable income.

CH21 (10.) Listed Below Are Transactions That Might Be Reported As Investing And/or Financing

CH21 (10.) Listed below are transactions that might be reported as investing and/or financing activities on a statement of cash flows. Possible reporting classifications of those transactions are provided also. Required: Indicate the reporting classification of each transaction by entering the appropriate classification code. (The first item is provided as an example.) Classifications I Investing activity (cash inflow) – I Investing activity (cash outflow) F Financing activity (cash inflow) – F Financing activity (cash outflow) N Noncash investing and financing activity X Not reported as an investing and/or a financing activity

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