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Question 2: 14% points:
The following information is available for Flip Company:
Beginning inventory 600 units at $5 First purchase 900 units at $6 Second purchase 500 units at $7.25
Assume that Flip uses a periodic inventory system and that there are 700 units left at the end of the month. (Round all final answers to the nearest dollar.)
a. Compute the cost of goods available for sale.
b. Compute the value of ending inventory and Cost of Good Sold under the
(1) LIFO method.
(2) FIFO method.
(3) Average-cost method
Assume that LR, Inc., the lessor, paid $5,600 for an automobile that has a fair value of $5,600 and an estimated economic life of five years.
LR, Inc. leases the automobile to LE, Inc. for a fixed noncancelable term of 5 years beginning January 1, 2013, with rentals of $1232 due at the beginning of each year.
The following additional information is also available:
Ø Residual value of the automobile at the end of the lease is expected to be zero and LE, Inc. makes no related guarantee.
Ø LE, Inc. pays the normal expenses of maintenance and taxes which are not part of the lease payments.
Ø LE, Inc. depreciates its own automobiles on a straight-line basis.
Ø LE, Inc. has an incremental borrowing rate of 5% per year and this is the implicit interest rate assumed in the lease.
Ø LR, Inc. expects to receive all the lease payments from LE, Inc. and has no material cost uncertainties.
Assuming a present value of 4.545455 where applicable, prepare for the lessor and lessee:
§ Journal entries for year 2013 and 2014.
§ A lease amortization table to be used by the lessor and lessee for 2013 & 2014.
§ Balance Sheet presentation for 2013 for lessor and lessee.
Glibler, Inc., on January 1, 2013, initiated a noncontributory defined benefit pension plan for its employees. An actuarial consulting firm has indicated that the present value of the projected benefit obligation on January 1, 2013 was $1,760,000, prior service cost on that date was $1,260,000 and the company has set aside assets valued at $500,000 for the plan on the same date. The following information related to the plan is also available:
Employers Contribution at year end $ 500,000
Benefits paid at year end 4,00,000
Accumulated Benefit Obligation at year end 13,00,000
Service Cost 1,50,000
Prior Service Cost Amortization Period 10.5 years
Discount Rate 10%
Expected Asset Return Rate 10%
1) Compute the components of pension expense for 2013
2) Compute the Other Comprehensive Income adjustment for 2013.
3) Prepare the pension journal entries required for 2013.
4) Develop the plan status as of December 31, 2013 showing the PBO, Plan Assets, over/under funded status, unamortized prior service cost and the (accrued)/prepaid recorded on the books.
Please ensure that you attach an assignment submission sheet to your hard copy only. Late submissions draw a penalty of 5% per day (this includes weekends) of the value of the assessment (1 mark in this case) up to a maximum of fourteen (14) days. After that date, your assessment may not be accepted unless prior and special consideration has been granted.This is NOT a report but it is expected that your submission will be in an appropriate format. There is a word limit applied but you should ensure that each question is appropriately answered. Where references are used, ensure they are recognised (refer to student handbook or your lecturer if
Part B (Minimum 500 words) (6 marks)
Choose a Manufacturing Company listed in the Australian Stock Market (ASX 200).
Discuss the following:
1. Nature of Business
2. If there are, mention and discuss two (2) subsidiaries of the chosen company.
3. Compare the latest Net Profit After Tax (NPAT) for two years and make some
comments whether to invest or not. Explain why yes or not.
4. What kinds of shares are being issued?
5. Who is the external auditor? What is the role of the external auditor?
Accounting for Share Issue
Regardless of the advice you have given (Part A), the owners have decided to go “public” and issue an ‘IPO” They issue 30 million shares ($2.00), of which the payment on application is to $0.80 per share (closes 18th April 2013), $0.50 four weeks after allocation (allocation is 12th May 2013) and the remaining amount to be paid on 30th June 2013. The IPO attracts requests for 30.4 million shares. In this case, it exceeds the allowable number of shares and the directors decide to apply the “first-come, first-served” approach and return the excess back to the unlucky applicants
Journalise the events (including dates and notations). Assume that all monies were received on 18th April (applications). Use the proper journal for your answers.
Sources of Finance
Part A (minimum 500 words) (6 marks)
The last few years have been difficult economically but the owners of Johnsons P/L, a medium-sized manufacturer of quality dining furniture is keen to grow the business. They have seen an increase in demand for their products from overseas and feel that they will need to increase their operation in order to continue to meet this demand. They are currently looking at a number of options to finance this expansion such as through debt and through equity raising (meaning they will need to “go public”). They have determined that they need to raise $60 million. Giving consideration to the various options, you have been requested to advise the owners of Johnsons what the various options are, outlining the positives and negatives of each.
Required: Write a report (should be extensive) to the owners detailing ALL the different options and considerations that you feel the owners should consider raising
the $60 million.
7. Sanders Company has two production departments: Fabricating and Finishing. Beginning inventories are: Work in Process—Fabricating, $6,030; Work in Process—Finishing, $4,100; and Finished Goods, $5,600. During the month the following transactions occurred:
1 Purchased $40,000 of raw materials on account.
2 Incurred $65,000 of factory labor. Wages are unpaid.
3 Incurred $50,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4 Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000.
5 Used factory labor for Finishing, $52,000 and Fabricating, $13,000.
6 Applied $45,000 of overhead based on machine hours used in each department. The Finishing Department used twice as many machine hours as did Fabricating.
Journalize the transactions for the month. (15 min.)
6. Klinger Company estimates that annual manufacturing overhead costs will be $4,200,000 for 2012. The actual overhead costs at the end of 2012 are $4,360,000. Activity base information for 2012 follows:
Activity Base Estimated Actual
Direct Labor Cost $3,000,000 $3,150,000
Direct Labor Hours 2,00,000 2,12,000
Machine Hours 1,50,000 1,52,000
(a) Compute the predetermined overhead rate for each activity base.
(b) Compute the amount of overhead applied in 2012 for each activity base.
(c) Compute the amount of under- or overapplied overhead for 2012 for each activity base. (15 min.)
COGS and COGM
5. Glavine Corporation incurred the following costs while manufacturing its product.
Materials used in product $120,000
Depreciation on plant 60,000
Property taxes on store 7,500
Labor costs of assembly-line workers 1,10,000
Factory supplies used 23,000
Work-in-process inventory was $22,000 at January 1 and $15,500 at December 31. Finished goods inventory was $65,000 at January 1 and $50,600 at December 31.
(a) Compute cost of goods manufactured.
(b) Compute cost of goods sold. (10 min.)
Show your work.
2. Santos Company had the following transactions pertaining to short-term investments in equity securities.
Jan. 1 Purchased 1,500 shares of Quinn Company stock for $9,250 cash plus brokerage fees of $300.
June 1 Received cash dividends of $.30 per share on Quinn Company stock.
Sept. 15 Sold 400 shares of Quinn Company stock for $2,500 less brokerage fees of $100.
Dec. 1 Received cash dividends of $.75 per share on Quinn Company stock.
(a) Journalize the transactions.
(b) Indicate the income statement effects of the transactions.
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