Accounting for Business Combinations: Assignment Success Str

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Accounting for Business Combinations: Assignment Success Str

19. Askland Clinic uses client-visits as its measure of activity. During October, the c

Askland Clinic uses client-visits as its measure of activity. During October, the clinic budgeted for 3,100 client-visits, but its actual level of activity was 3,130 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for October:



Data used in budgeting:



 



Actual results for October:



 



The activity variance for personnel expenses in October would be closest to:s

20. Almost Over the Line? The accounting firm of Glofry and Tammar (G&T) has been asked to arrange...

Almost Over the Line? The accounting firm of Glofry and Tammar (G&T) has been asked to arrange for a $2 million loan for Tang Enterprises by its client Ted Hoover at Hoover Company. Hoover Company is involved in a number of different business operations and has a net worth of $20 million. A senior partner at G&T instructed Henry Morgan, a G&T accountant, to make sure that the loan was secured by collateral. Tang forwarded ownership shares from a foreign company as collateral for the loan. Upon investigation, it was determined that these shares were worthless. Tang Enterprises then sent prime bank guarantees that—had a fair value of $5 million. Upon the receipt of the guarantees, Glofry and Tammar arranged for the transfer of the money to Tang. A month after the money had been transferred to Tang, Ted Hoover asked G&T for a letter to certify the authenticity of the bank guarantees so that they could be sold. What should the accounting firm of Glofry and Tammar do under these circumstances?

21. The Trial Balance of XYZ Ltd.

The Trial Balance of XYZ Ltd. for the year ending 31st March, XXXX             , as under:-

Trial Balance of XYZ Ltd. as on 31st March, .XXXX

You are required to prepare a Profit & Loss Account for the year ending 31st March, XXXX and the Balance Sheet on that date after taken into Account following adjustments:

1.      The method of valuation of Closing Stock has been charged & this resulted in reduction of the value of the closing stock to Rs. 1,90,000. This has not been adjusted.

2.      Closing Stock also includes goods worth Rs. 20,000, which cannot be marketed.

3.      Provide Depreciation at @10% on the original cost of all fixed assets.

4.      Moter Vehicles account represents two old vehicles standing in the books at Rs. 5,000 each (original cost Rs. 15,000 each) & a new vehicle purchased on 1st January, XXXX for Rs. 20,000. One of the old vehicles was sold for Rs. 4,000 & amount was credited to Sales Account.

5.      The Company has contracted for the construction of a building at Rs. 1,50,000 which is still incomplete.

6.      Provide Rs. 1,00,000 towards taxation liability for the current year.

7.      Sundry Creditors include Rs. 2,000, which had already been paid.

8.      Dividend is proposed for the year at 20%.

9.      Debtors outstanding for more than six months: Rs. 40,000. .

10.  Cash Balance includes a Cheque for Rs. 10,000 returned by the banker for want of balance in the account.

22. The budget director of Royal Furniture Company requests estimates of sales, production, and other...

The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February 2016 is summarized as follows:

a. Estimated sales of King and Prince chairs for February by sales territory:

23. What is the nature of the authoritative guidance for advertising costs for entertainment companies?

What is the nature of the authoritative guidance for advertising costs for entertainment companies?

24. (Comprehensive Income Disclosure) Assume the same information as E17-9 and that Steffi Graf Inc....

(Comprehensive Income Disclosure) Assume the same information as E17-9 and that Steffi Graf Inc. reports net income in 2013 of $120,000 and in 2014 of $140,000. Total holding gains (including any realized holding gain or loss) total $40,000.

Instructions

(a) Prepare a statement of comprehensive income for 2013 starting with net income.

 (b) Prepare a statement of comprehensive income for 2014 starting with net income.

25. PROBLEM 8–26 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10] The following data relate...

BLEM 8–26 Completing a Master Budget [LO2, LO4, LO7, LO8, LO9, LO10]

The following data relate to the operations of Picanuy Corporation, a wholesale distributor of consumer goods:

a.       The gross margin is 30% of sales. (In other words, cost of goods sold is 70% of sales.)

b.       Actual and budgeted sales data are as follows:

c.        Sales are 40% for cash and 60% on credit. Credit sales are collected in the month following sale. The accounts receivable at December 31 are the result of December credit sales.

d.       Each month’s ending inventory should equal 20% of the following month’s budgeted cost of goods sold.

e.        One-quarter of a month’s inventory purchases is paid for in the month of purchase; the other three-quarters is paid for in the following month. The accounts payable at December 31 are the result of December purchases of inventory.

f.        Monthly expenses are as follows: commissions, $12,000; rent, $1,800; other expenses (exclud- ing depreciation), 8% of sales. Assume that these expenses are paid monthly. Depreciation is

$2,400 for the quarter and includes depreciation on new assets acquired during the quarter.

g.        Equipment will be acquired for cash: $3,000 in January and $8,000 in February.

h.       Management would like to maintain a minimum cash balance of $5,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $50,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that inter- est is not compounded. The company would, as far as it is able, repay the loan plus accumu- lated interest at the end of the quarter.

Required:

Using the data above:

26. Knickknack, Inc., manufactures two products: odds and ends. The firm uses a single, plantwide...

Knickknack, Inc., manufactures two products: odds and ends. The firm uses a single, plantwide over- head rate based on direct-labor hours. Production and product-costing data are as follows:

*Calculation of predetermined overhead rate:

Predetermined overhead rate:

Budgeted manufacturing overhead Budgeted direct-labor hours

         $3,264, 000         (1, 000)(4)        (5, 000)(6)

$96 per direct-labor hour

Knickknack, Inc., prices its products at 120 percent of cost, which yields target prices of $796.80 for odds and $1,195.20 for ends. Recently, however, Knickknack has been challenged in the market for ends by a European competitor, Bricabrac Corporation. A new entrant in this market, Bricabrac has been sell- ing ends for $880 each. Knickknack’s president is puzzled by Bricabrac’s ability to sell ends at such a low cost. She has asked you (the controller) to look into the matter. You have decided that Knickknack’s traditional, volume-based product-costing system may be causing cost distortion between the firm’s two products. Ends are a high-volume, relatively simple product. Odds, on the other hand, are quite complex and exhibit a much lower volume. As a result, you have begun work on an activity-based costing system.

Required:

1.      Let each of the overhead categories in the budget represent an activity cost pool. Categorize each in terms of the type of activity (e.g., unit-level activity).

2.      The following cost drivers have been identified for the four activity cost pools.

You have gathered the following additional information:

•      Each odd requires 8 machine hours, whereas each end requires 2 machine hours.

•      Odds are manufactured in production runs of 25 units each. Ends are manufactured in 125 unit batches.

•      Three-quarters of the engineering activity, as measured in terms of change orders, is related to odds.

•      The plant has 3,840 square feet of space, 80 percent of which is used in the production of odds. For each activity cost pool, compute a pool rate.

3.      Determine the unit cost, for each activity cost pool, for odds and ends.

4.      Compute the new product cost per unit for odds and ends, using the ABC system.

5.      Using the same pricing policy as in the past, compute prices for odds and ends. Use the product costs determined by the ABC system.

6.      Show that the ABC system fully assigns the total budgeted manufacturing overhead costs of

$3,264,000.

7.      Show how Knickknack’s traditional, volume-based costing system distorted its product costs. (Use Exhibit 5–10 for guidance.)

27. C.F. Wong holds a well-diversified portfolio of high-quality, large-cap shares. The current value...

C.F. Wong holds a well-diversified portfolio of high-quality, large-cap shares. The current value of Wong’s portfolio is $475 000, but he is concerned that the market is heading for a big fall (perhaps as much as 10%) over the next three to six months. He doesn’t want to sell all his shares because he feels they all have good long-term potential and should perform nicely once share prices have bottomed out. As a result, he decides to look into the possibility of using index options to hedge his portfolio. Assume that the ASX 200 currently stands at 2910 points and among the many put options available on this index are two that have caught his eye: (1) a six month put with a strike price of 2890 that is trading at 26, and (2) a six-month put with a 2830 strike price that is quoted at 12.

a. How many ASX 200 puts would Wong have to buy to protect his $475 000 share portfolio? How much would it cost him to buy the necessary number of 2890 puts? How much would it cost to buy the 2830 puts?

b. Now, considering the performance of both the put options and the Wong portfolio, determine how much net profit (or loss) Wong will earn from each of these put hedges if both the market (as measured by the ASX 200) and the Wong portfolio fall by 10% over the next six months? What if the market and the Wong portfolio fall by only 5%? What if they go up by 10%?

c. Do you think Wong should set up the put hedge and, if so, using which put option? Explain.

Q

28. What is the relationship between cost flows in the accounts and the flow of physical products...

Why are certain costs referred to as period costs? What are the major types of period costs incurred by a manufacturer?

Explain why the income statement of a manufacturing company differs from the income statement of a merchandising company.

What is the general content of a statement of cost of goods manufactured? What is its relationship to the income statement?

What is the relationship between cost flows in the accounts and the flow of physical products through a factory?

29. Accounting 102

At the end of April, Cavy Company had completed Job 766 & 765. Job 766 is for 675 units and Job 765 is for 900 units.



Job direct materials direct labor machine hours

756 5,670 3,500 27

766 8,900 4,755 44



job 756 produced 152 units & job 766 consisted of 250 units

Assuming that the predetermined overhead rate is applied by using machine hours at a rate of $200 per hour, determine the (a) balance on the job costs sheets for each job, (b) the cost per unit at the end of April.

30. Quo Co. rented a building to Hava Fast Food. Each month Quo receives a fixed rental amount plus a...

Quo Co. rented a building to Hava Fast Food. Each month Quo receives a fixed rental amount plus a variable rental amount based on Hava’s sales for that month. As sales increase so does the variable rental amount, but at a reduced rate. Which of the following curves reflects the monthly rentals under the agreement?

1. I


2. II


3. III


4. IV

31. The partners agree that loan balances should be closed to capital accounts and that remaining cash...

Installment liquidation

The partnership of Gary, Henry, Ian, and Joseph is preparing to liquidate. Profit and loss sharing ratios are shown in the summarized balance sheet at December 31, 2011, as follows:

REQUIRED

1. The partners anticipate an installment liquidation. Prepare a cash distribution plan as of January 1, 2012, that includes a $50,000 contingency fund to help the partners predict when they will be included in cash distributions.

2. During January 2012, the inventories are sold for $100,000, the other liabilities are paid, and $50,000 is set aside for contingencies. The partners agree that loan balances should be closed to capital accounts and that remaining cash (less the contingency fund) should be distributed to partners. How much cash should each partner receive?

32.