Wednesday, 27 November 2019

Use the information below for Nuthatch Corporation to answer the question that follow.

Use the information below for Nuthatch Corporation to answer the question that follow.
Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business—September, October, and November—are $247,000, $310,000, and $410,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.
The cash collections expected in September from accounts receivable are estimated to be

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in

On January 1, 20X1, Popular Creek Corporation organized RoadTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 77,000. RoadTime’s December 31, 20X1, trial balance in SFr is as follows:

Debit Credit
  Cash SFr 8,800

  Accounts Receivable (net)
24,000

  Receivable from Popular Creek
6,900

  Inventory
27,000

  Plant & Equipment
109,000

  Accumulated Depreciation

SFr 10,900
  Accounts Payable


14,000
  Bonds Payable


53,500
  Common Stock


77,000
  Sales


154,300
  Cost of Goods Sold
73,000

  Depreciation Expense
10,900

  Operating Expense
33,500

  Dividends Paid
16,600

  



  Total SFr 309,700 SFr 309,700
  



Additional Information
1. The receivable from Popular Creek is denominated in Swiss francs. Its books show a $5,037 payable to RoadTime.


2. Purchases of inventory goods are made evenly during the year. Items in the ending inventory were purchased November 1.


3. Equipment is depreciated by the straight-line method with a 10-year life and no residual value. A full year’s depreciation is taken in the year of acquisition. The equipment was acquired on March 1.


4. The dividends were declared and paid on November 1.


5. Exchange rates were as follows:
   SFr $    
  January 1 1 = 0.80
  March 1 1 = 0.77
  November 1 1 = 0.74
  December 31 1 = 0.73
  20X1 average 1 = 0.75
6. The U.S. dollar is the functional currency.
  
Required:
a.
Prepare a schedule remeasuring the December 31, 20X1, trial balance from Swiss francs to dollars. (If no adjustment is needed, select 'No entry necessary'.)


ROADTIME COMPANY
Trial Balance Remeasurement Schedule
December 31, 20X1
U.S. Dollars
Cash
Accounts receivable (net)
Receivable from Popular Creek
Inventory
Plant and equipment
Cost of goods sold
Depreciation expense
Operating expense
Dividends paid
Total 0
Total debits $0
Accumulated depreciation
Accounts payable
Bonds payable
Common stock
Sales
Total $0
Total credits $0



On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian

On January 1, 20X5, Taft Company acquired all of the outstanding stock of Vikix, Inc., a Norwegian company, at a cost of $156,600. Vikix’s net assets on the date of acquisition were 700,000 kroner (NKr). On January 1, 20X5, the book and fair values of the Norwegian subsidiary’s identifiable assets and liabilities approximated their fair values except for property, plant, and equipment and patents acquired. The fair value of Vikix’s property, plant, and equipment exceeded its book value by $18,000. The remaining useful life of Vikix’s equipment at January 1, 20X5, was 10 years. The remainder of the differential was attributable to a patent having an estimated useful life of 5 years. Vikix’s trial balance on December 31, 20X5, in kroner, follows:
 

Debits Credits
  Cash NKr 152,000



  Accounts Receivable (net)
218,000



  Inventory
291,000



  Property, Plant & Equipment
605,000



  Accumulated Depreciation


NKr 159,000
  Accounts Payable



101,000
  Notes Payable



204,000
  Common Stock



460,000
  Retained Earnings



240,000
  Sales



736,000
  Cost of Goods Sold
415,000



  Operating Expenses
123,000



  Depreciation Expense
53,000



  Dividends Paid
43,000










  Total NKr 1,900,000
NKr 1,900,000








Additional Information:
1. Vikix uses the FIFO method for its inventory. The beginning inventory was acquired on December 31, 20X4, and ending inventory was acquired on December 15, 20X5. Purchases of NKr420,000 were made evenly throughout 20X5.
2. Vikix acquired all of its property, plant, and equipment on July 1, 20X3, and uses straight-line depreciation.
3. Vikix’s sales were made evenly throughout 20X5, and its operating expenses were incurred evenly throughout 20X5.
4. The dividends were declared and paid on July 1, 20X5.
5. Taft’s income from its own operations was $271,000 for 20X5, and its total stockholders’ equity on January 1, 20X5, was $3,500,000. Taft declared $170,000 of dividends during 20X5.
6. Exchange rates were as follows:

NKr
$
  July 1, 20X3 1 = 0.15
  December 30, 20X4 1 = 0.18
  January 1, 20X5 1 = 0.18
  July 1, 20X5 1 = 0.19
  December 15, 20X5 1 = 0.205
  December 31, 20X5 1 = 0.21
  Average for 20X5 1 = 0.20

Required:
a. Prepare a schedule translating the trial balance from Norwegian kroner into U.S. dollars. Assume the krone is the functional currency. (If no adjustment is needed, select 'no entry necessary'.)


VIKIX INC.
Trial Balance Translation
December 31, 20X5
Item Balance Dollars
Cash
Accounts Receivable (net)
Inventory
Property, Plant and Equipment
Cost of Goods Sold
Operating Expenses
Depreciation Expense
Dividends Paid
Total $0

Total Debits $0
Accumulated Depreciation
Accounts Payable
Notes Payable
Common Stock
Retained Earnings
Sales
Total $0
Total Credits $0
b. Assume that Taft uses the fully adjusted equity method. Record all journal entries that relate to its investment in the Norwegian subsidiary during 20X5. Provide the necessary documentation and support for the amounts in the journal entries, including a schedule of the translation adjustment related to the differential. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)


Income from Taft’s operations for 20X5, exclusive of income from the Norwegian subsidiary
Taft’s Net Income $0
Taft’s Consolidated Comprehensive Income $0
d.
Compute Taft’s total consolidated stockholders’ equity at December 31, 20X5.





Coastal Cabinets produces cabinets for new home builders. You have been called in to settle a dispute

Coastal Cabinets produces cabinets for new home builders. You have been called in to settle a dispute between Coastal Cabinets and Executive Homes, a builder of custom homes.
Executive Homes buys 20,000 units of a particular cabinet from Coastal Cabinets every year. It insists that Coastal keep a one-month inventory to accommodate fluctuations in Executive’s demand. Coastal does not want to keep any inventory and says that Executive Homes should buy components in advance and store them.
You determine that the inventory storage costs per unit are $50 at Coastal and $125 at Executive Homes.
Required:
How do you suggest the two companies settle their dispute?

To minimize costs in the supply chain, Coastal Cabinets should carry the inventory and the two firms could share the inventory savings through price discounts or other contractual agreements.

Coastal Cabinets should carry the inventory, but Executive Homes should cover all the inventory carrying costs.

There is no need for Coastal Cabinets to carry the inventory. Executive Homes should buy in advance.

After six months of study, much political arm wrestling, and some serious financial analysis, Dr. Martin Starr,


After six months of study, much political arm wrestling, and some serious financial analysis, Dr. Martin Starr, president of southwestern University, had reached a secision. To the delight of its students, and to the disappointment of its athletic boosters. SWU would not be relocating to a new football site but would expand the capacity at its on-compaus stadium.
Adding 21,000 seats, including dozens of luxury skyboxes, would not please everyone. The influential football coach, Billy Bob Taylor, had long argued the need for a first-class stadium, one with built-in domitory rooms and a palatial office appropriate for the coach of a future NCAA champion team. But the decision was made, and everyone, including the coach, would learn to live with it.
The job now was to get construction going immediately after the current season ended. This would allow exactly 270 days until the upcoming season opening game. The contractor, Hill Contruction (Bob Hill being an alumnus, of course), signed the contract. Bob Hill looked at the tasks his engineers had loutlined and looked President Starr in the eye. "I guarantee the team will be able to take the field on scheduled next year", he said with a sense of confidence. I sure hope so, replied Starr. The contract penalty of $10,000 per day for running late is nothing compared to what Coach Bill Bob Taylor will do to you if our opening game with Penn State is delayed or cancelled. Hill, Sweating slightly, did not respond. In football-crazy texas, Hill Construction would be mud if the 270-day targed were missed.
Back in his office, Hill again reviewed the data. (See Table 11.11 below and note that optimistic time estimates can be used as crash times.) He then gathered his foremen. "People, if we're not 75% sure we'll finish this stadium in less than 270 days, I want this project crashed! Give me the cost figures for a target date of 250 days, and also for 240 days. I want to be early, not just on time!"
Discussion Questions
3) Develop a forecasting model, justifying its selection over other techniques, and project attendance through 2017.
OptimisticMost Likel Most Pessimistic cost/Day Crash Predecessor Activity Description Bonding, insurance, tax structuring 20 30 $1,500 Foundation, concrete footings for boxes 20 65 80 $3,500 Upgrading skybox stadium seating 50 60 100 $4,000 Upgrading walkways, stairwells 50 100 $1,900 elevators Interior wiring, lathes Inspection approvals Plumbing Painting Hardware/AC/metal workings Tile/carpeting/windows Inspection Final detail work/cleanup 30 30 $9,500 $0 $2,500 $2,000 $2,000 $6,000 $0 $4,500 25 35 30 20 25 10 D, E 25 10 20 35 30 60 12 I, K 20 25 60 Table 3.6 Southwestern University Project

Value chain and classification of costs, a computer company. Dell Computer incurs the following costs:

Value chain and classification of costs, a computer company. Dell Computer incurs the following costs:
a.   Utility costs for the plant assembling the Latitude computer line of products
b.   Distribution costs for shipping the Latitude line of products to a retail chain
c.   Payment to David Newbury Designs for a design of the XPS 2-in-1 laptop
d.   Salary of computer scientist working on the next generation of servers
e.   Cost of Dell employees’ visit to a major customer to demonstrate Dell’s ability to interconnect with other computers
f.    Purchase of competitors’ products for testing against potential Dell products
g.   Payment to business magazine for running Dell advertisements
h.   Cost of cartridges purchased from outside supplier to be used with Dell printers
Required:
Classify each of the cost items (a–h) into one of the business functions of the value chain.
Why do managers consider direct costs to be more accurate than indirect costs?
Define variable cost and fixed cost. Give an example of each.

The following account balances were included in the trial balance of Twain Corporation at June 30, 2017.

The following account balances were included in the trial balance of Twain Corporation at June 30, 2017.
Sales revenue
$1,578,500
Depreciation expense (office furniture and equipment)
$7,250
Sales discounts
31,150
Property tax expense
7,320
Cost of goods sold
896,770
Bad debt expense (selling)
4,850
Salaries and wages expense (sales)
56,260
Maintenance and repairs expense (administration)
9,130
Sales commissions
97,600
Office expense
6,000
Travel expense (salespersons)
28,930
Sales returns and allowances
62,300
Delivery expense
21,400
Dividends received
38,000
Entertainment expense
14,820
Interest expense
18,000
Telephone and Internet expense (sales)
9,030
Income tax expense
102,000
Depreciation expense (sales equipment)
4,980
Depreciation understatement due to error—2014 (net of tax)
17,700
Maintenance and repairs expense (sales)
6,200
Dividends declared on preferred stock
9,000
Miscellaneous selling expenses
4,715
Dividends declared on common stock
37,000
Office supplies used
3,450



Telephone and Internet expense (administration)
2,820




The Retained Earnings account had a balance of $337,000 at July 1, 2016. There are 80,000 shares of common stock outstanding.
Using the multiple-step form, prepare an income statement for the year ended June 30, 2017. (Round earnings per share to 2 decimal places, e.g. 1.48.)
Prepare a retained earnings statement for the year ended June 30, 2017. (List items that increase adjusted retained earnings first.)
Using the single-step form, prepare an income statement for the year ended June 30, 2017. (Round earnings per share to 2 decimal places, e.g. 1.48.)
Prepare a retained earnings statement for the year ended June 30, 2017. (List items that increase adjusted retained earnings first.)

A parent company acquires its subsidiary by exchanging 45,000 shares of its Common Stock, with a market

A parent company acquires its subsidiary by exchanging 45,000 shares of its Common Stock, with a market value on the acquisition date of $25 per share, for all of the outstanding voting shares of the investee. a. What is the total fair value of the subsidiary on the acquisition date?
$Answer
b. Given the balance sheets of the parent and subsidiary in c. below, prepare the consolidation entry or entries on the date of acquisition.
Consolidation WorkSheet

Description Debit Credit
Answer[C][E][A][D][I] Common stock Answer Answer

APIC Answer Answer

AnswerEquity investmentCommon stockAPICRetained earnings Answer Answer

AnswerEquity investmentCommon stockAPICRetained earnings Answer Answer




c. Prepare the consolidated balance sheet on the date of acquisition.

Elimination Entries
Balance Sheet Parent Subsidiary
Dr Cr
Consolidated
Assets
Cash $405,000 $226,000



$Answer
Accounts receivable 1,280,000 348,000



Answer
Inventory 1,940,000 447,000



Answer
Equity investment 1,125,000

Answer Answer
Answer
Property, plant and equipment (PPE), net 9,332,000 952,000



Answer

$14,082,000 $1,973,000



$Answer
Liabilities and stockholders' equity
Accounts payable $627,000 $127,000



$Answer
Accrued liabilities 736,000 221,000



Answer
Long-term liabilities 3,000,000 500,000



Answer
Common stock 1,370,000 100,000
Answer Answer
Answer
APIC 3,325,000 125,000
Answer Answer
Answer
Retained earnings 5,024,000 900,000
Answer Answer
Answer

$14,082,000 $1,973,000
Answer Answer
$Answer

The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally

The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: Determine the specific citation for accounting for the following: A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes.
The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles.Required: Determine the specific citation for accounting for the following:allows such a derivative contract of a foreign currency exposure of an unrecognized firm commitment to be designated as a hedge.
The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles.Required: Determine the specific citation for accounting for the following:This Subtopic requires an entity to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.

Several years ago, a parent company acquired all of the outstanding common stock of its subsidiary for a

Several years ago, a parent company acquired all of the outstanding common stock of its subsidiary for a purchase price of $300,000. On the acquisition date, this purchase price was $100,000 more than the subsidiary’s book value of Stockholders’ Equity. The AAP was entirely attributable to Goodwill. Since the date of acquisition, the subsidiary has reported cumulative net income of $400,000 and paid $50,000 of dividends to its parent company.
Compute the balance of the Equity Investment account on the parent’s balance sheet assuming that the Goodwill asset has not declined in value subsequent to the date of acquisition.
$Answer

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