How should governments report their capital projects and debt service activities in their government-wide statements?

Ch 6. Questions for Review and Discussion

6. How should governments report their capital projects and debt service activities in their government-wide statements?

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(Case-It Co) The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010

PR 6-1A The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010:

Cash $37,700 Sales Returns and Allowances $37,800
Accounts Receivable 111,600 Sale Discounts 19,800
Merchandise Inventory 180,000 Cost of Merchandise Sold 1,926,000
Office Supplies 5,000 Sales Salaries Expense 378,000
Prepaid Ins. 12,000 Advertising Expense 50,900
Office Equipment 115,200 Depreciation Exp - Store Equip 8,300
Accumulated Depreciation - Office Equip 49,500 Misc Selling Expense 2,000
Store Equipment 311,500 Office Salaries Expense 73,800
Accumulated Depreciation - Store Equip 87,500 Rent Expense 39,900
A/P 48,600 Insurance Expense 22,950
Salaries Payable 3,600 Depreciation Expense - Office Equip 16,200
Note Payable (final payment due 2025) 54,000 Office Supplies Expense 1,650
Gina Hennessy, Capital 454,800 Misc Admin Exp 1,900
Gina Hennessy, Drawing 45,000 Interest Expense 4,400
Sales 2,703,600

1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $8,000
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account form balance sheets differ.

Click here for the solution: The following selected accounts and their current balances appear in the ledger of Case-It Co. for the fiscal year ended November 30, 2010

(ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)

ACC 560 Week 6 Assignment

E9-3 Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.

Department Quarter 1 Quarter 2 Quarter 3 Quarter 4
Auditing 2,200 1,600 2,000 2,400
Tax 3,000 2,400 2,000 2,500
Consulting 1,500 1,500 1,500 1,500
Average hourly billing rates are: auditing $80, tax $90, and consulting $100.

Instructions
Prepare the service revenue (sales) budget for 2008 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

Click here for the solution: (ACC 560 Week 6) Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year (2008)

The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede

Problem 3.15 The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede:

ACTIVITY DURATION (WEEKS) PRECEDES
A (START) 1 B,C
B 1 E
C 4 F
E 2 F
F(END) 2 -

a) Draw an AON diagram of the project, including activity durations.
c) What is the project duration (in weeks)?
d) What is the slack (in weeks) associated with any and all noncritical paths through the project?


Click here for the solution: The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede

Companies can gain efficiencies by implementing effective monitoring of their internal control processes

5-42 (Monitoring Activities) Companies can gain efficiencies by implementing effective monitoring of their internal control processes.

Required:
a. Explain the importance of monitoring and provide examples of monitoring.
b. Identify the important monitoring procedures that a company might use in assessing its controls over revenue recognition and costs that might be utilized in each of the following situations:
• A convenience store such as a 7-Eleven
• A chain restaurant such as Olive Garden
• A manufacturing division making rubberized containers for the consumer market
c. Can the auditor focus the assessment of internal control on testing the effectiveness of the company’s monitoring? Discuss and support your conclusion. Discuss, for example, the level of comfort the auditor can get about the effectiveness of other controls by testing the effectiveness of monitoring controls.


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Erika and Kitty who are twins just received $30,000 each for their 25th birthday

5-30 (Reaching a financial goal) Erika and Kitty who are twins just received $30,000 each for their 25th birthday. They both have aspirations to become millionaires. Each plans to make a $5,000 annual contribution to their “retirement fund”, on her birthday, beginning a year from today. Erika opened an account with Safety first bond fund, a mutual fund that invest in high quality bonds, whose investors have earned 6% per year in the past. Kitty invested in the new issue BIO-tech fund, which invest in small, newly issued bio-tech stocks and whose investors have earned an average 20% per year in the fund’s relatively short history.

a. If the two women’s funds earn the same returns in the future as in the past, how old will each be when they become millionaires?
b. How large will Erika’s annual contributions have to be for her to become a millionaire at the same age as Kitty, assuming their expected returns are realized?
c. Is it rational or irrational for Erika to invest in the bond fund rather than in stocks and why?


Click here for the solution: Erika and Kitty who are twins just received $30,000 each for their 25th birthday

Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders

Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders. When that happens are the executives' gains dollar-for-dollar losses to stockholders or can investors lose more or less than the amounts by which the executives profit? Explain thoroughly.


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On June 30, 2013, Stephans Company showed the following data on the equity section of their balance sheet

MULTIPLE CHOICE / TRUE OR FALSE

1. On June 30, 2013, Stephans Company showed the following data on the equity section of their balance sheet:
Stockholders' equity
Common stock, $1 par 100,000 shares authorized $40,000
40,000 shares issued
Paid-in capital in excess of par 260,000
Retained earnings 940,000
Total stockholder's equity $1,240,000

On July 1, 2013, Stephans distributed a 5% stock dividend. The market value of the stock at that time was $13 per share. Following this transaction, what would be the new number of shares issued shown on the balance sheet? (Points : 1)

2. Stock sold for amounts in excess of par value results in a gain reported on the income statement. (Points : 1)

3. The account to be debited when a stock dividend is declared and distributed on the same date would be: (Points : 1)

4. A corporation must record a gain on sale for the sale of treasury stock at an amount greater than its purchase price. (Points : 1)

5. If preferred stock is non-cumulative, then the company does NOT need to pay dividends that were passed in previous years. (Points : 1)

6. Please refer to the following information for Petra Sales Company:
Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
Paid-in capital in excess of par: $1,600,000
Retained earnings: $2,440,000
Treasury stock: 20,000 shares purchased at $12 per share

If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, the total equity of the company will go down by $70,000. (Points : 1)

7. Occidental Produce Company has 40,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $0.01 par value; the preferred stock is 4% non-cumulative, with $100 par value. On October 15, 2014, the company declares a total dividend payment of $40,000. What is the total amount of dividends that will be paid to the common shareholders? (Points : 1)

8. Which of the following describes the term outstanding stock? (Points : 1)

9. A corporation is a separate legal entity formed under the laws of a particular state. (Points : 1)

10. All forms and classes of stock carry voting rights. (Points : 1)


Click here for the solution: On June 30, 2013, Stephans Company showed the following data on the equity section of their balance sheet

Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales

P 6. Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales. DMI’s basic package of services includes the design of a mailing piece (either a Direct Mailer or a Store Mailer), creation and maintenance of marketing databases containing information about the client’s target group, and a production process that prints a promotional piece and prepares it for mailing. In its marketing strategies, DMI targets working women ages 25 to 54 who are married with children and who have an annual household income in excess of $50,000. DMI has adopted activity-based management, and its controller is in the process of developing an ABC system. The controller has identified the following primary activities of the
company:

Use database of customers Accounting
Service sales Mailer assembly
Deliver mailers to post office Process orders
Supplies storage Purchase supplies
Client follow-up Design mailer
Database research trends Building maintenance
Schedule order processing Processing cleanup
Personnel Mailer rework

Required
1. Identify the activities that do not add value to DMI’s services.
2. Assist the controller’s analysis by grouping the value-adding activities into the activity areas of the value chain shown in Figure 22-1.
3. State whether each non-value-adding activity is necessary or unnecessary. Suggest how each unnecessary activity could be reduced or eliminated.


Click here for the solution: Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales

The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012

Problem 6-1A Multiple-Step Income Statement and Report-Form of Balance Sheet

The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012:

AND SO ON

Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report form and account-form balance sheets differ.

Check: 1. Net Income: $775,000

Click here for the solution: The following selected accounts and their current balances appear in the ledger of Carpet Land Co. for the fiscal year ended October 31, 2012

Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority

Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority. They filed suit against the utility, arguing, among other things, that the utility had breached the UCC implied warranty of merchantability when it sold them contaminated water. The utility moved to dismiss their complaint, arguing that since water was not “goods,” the UCC did not apply. Should the Galls’ complaint be dismissed?

Click here for the solution: Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority

In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn

In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn, which was owned by his parents. Schumacher claims that his parents induced him to leave his previous job and to make the move by orally agreeing to provide him a job managing the inn for life and to leave the business and a large parcel of land to him when his first parent died. Schumacher was given free reign in managing the inn and was allowed to retain all profits of the business but was not given any salary or wage. While he was operating the inn, Schumacher used his own funds to build a home for his family on his parents’ land, install a well, buy equipment for the business, and develop various marketing tools for the business. In the fall of 1998, Schumacher suspected that his parents were about to sell the inn and the adjoining property. He brought suit for a restraining order to prevent them from doing so, claiming breach of contract and unjust enrichment, among other claims. In October 1998, the parents notified Schumacher that his employment at the inn and his right to possess the adjoining property were terminated. The parents moved for summary judgment. The trial court held that Schumacher’s oral contract claim was invalid because the contract needed to be in writing under applicable Minnesota law. However, does Schumacher have a valid claim for unjust enrichment?

Click here for the solution: In 1994, Schumacher and his wife and their two daughters moved to Finland, Minnesota, to operate a bar and restaurant called the Trestle Inn

You have two assets and must calculate their values today based on their different payment streams and appropriate required returns

E6–6 You have two assets and must calculate their values today based on their different payment streams and appropriate required returns. Asset 1 has a required return of 15% and will produce a stream of $500 at the end of each year indefinitely. Asset 2 has a required return of 10% and will produce an end-of-year cash flow of $1,200 in the first year, $1,500 in the second year, and $850 in its third and final year.

Click here for the solution: You have two assets and must calculate their values today based on their different payment streams and appropriate required returns

The empirical evidence reveals that very few firms change their standard prices and standard quantities during the fiscal year

P 12–6: Changing Standards

The empirical evidence reveals that very few firms change their standard prices and standard quantities during the fiscal year. Most firms have the following policy, “We set our standards before the fiscal year begins and we NEVER, NEVER change them during the year (except when we have to).”

Required:
a. Evaluate the “never change” policy. Does it make any sense? Why would firms adopt such a policy?
b. When would you expect firms to change their standards during the fiscal year?

Click here for the solution: The empirical evidence reveals that very few firms change their standard prices and standard quantities during the fiscal year

Ben and Jerry organize their new entity as an LLC on May 16th of the year 1

Problem 2-1 Ben and Jerry organize their new entity as an LLC on May 16th of the year 1. What is the default tax classification for this entity? Are there any alternative classification(s) available? If so, how do Ben and Jerry elect one of these alternate classification(s) and what are the tax consequences of doing so?

Click here for the solution: Ben and Jerry organize their new entity as an LLC on May 16th of the year 1