Question 1
Problem 1: On 1/1/2011 ACME Company purchased 400 of the 2000 shares of AJAX Company for $100,000. At this time AJAX had assets with a book value of $300,000 and liabilities with a book value of $200,000. Included in the assets is a patent with a 10 year life. This patent has a fair market value of $80,000 but a book value of only $20,000. Any remaining excess is attributable to goodwill. The following events happened to AJAX in 2011,2012,2013 and 2014 2011 AJAX declared and paid a $4 per share dividend. In 2011 AJAX reported income of $40,000 and on 12/31/2011 its stock was selling for $265 per share 2012 AJAX declared and paid a $3 per share dividend. In 2012 AJAX reported a loss of $10,000 and on 12/31/2012 its stock was selling for $222 per share 2013 AJAX did not declare or pay any dividends. In 2013, AJAX reported a profits of $60,000 and on 12/31/2013 its stock was selling for $238 per share. On 2/1/2014 ACME sold its investment in AJAX for $248 per share Required: A) Prepare all the necessary journal entries for ACME in 2011, 2012, 2013 and 2014 regarding its investment in AJAX if ACME has no significant influence over AJAX. B) Prepare all the necessary journal entries for ACME in 2011, 2012, 2013 and 2014 regarding its investment in AJAX if ACME has significant influence over AJAX.
Question 2
Upon completing each ethics case, you will have submitted a reflection that contributed to your ethics case game points. To add to your understanding of the module readings in conjunction with the experience you've had in making ethical decisions in the game, this assignment presents questions for you to consider and to discuss so as to further incorporate the Relationship Lens into your professional life. Procedure 1.In the course Forum, post your response to three of the questions below. You can choose to complete your assignment in a word processing document and then copy and paste it into the Forum message for review by your peers. 2.Choose three of the following questions to address: a.What types of systems are needed to ensure that all individuals have access to the benefits of our community as well to bring health and effectiveness to an organization or the broader community? b.How do we ensure fair treatment, fair administration of rules, fair compensation, fair blame, and ensure due process to allow all opinions to be heard? c.How might the Relationship Lens be misused through abuse of power or personal hubris? Cite a recent example in the news. (If you don't know the meaning of hubris, look it up and include its definition as you answer this question.) d.How do you know when you are improperly using your personal power? How do you know when your life is out of balance? How do you bring it back into balance?
Question 3
6. Arrow Technology, Inc. (ATI) has total assets of $10 million and expected operating income (EBIT) of $2.5 million. If ATI uses debt in its capital structure, the cost of this debt will be 12 percent per annum. a. Complete the following table: Leverage Ratio (Debt/Total Assets) 0% 25% 50% Total assets ______ ______ ______ Debt (at 12% interest) ______ ______ ______ Equity ______ ______ ______ Total liabilities and equity ______ ______ ______ Expected operating income (EBIT) ______ ______ ______ Less: Interest (at 12%) ______ ______ ______ Earnings before tax ______ ______ ______ Less: Income tax at 40% ______ ______ ______ Earnings after tax ______ ______ ______ Return on equity ______ ______ ______ Effect of a 20% Decrease in EBIT to $2,000,000 Expected operating income (EBIT) ______ ______ ______ Less: Interest (at 12%) ______ ______ ______ Earnings before tax ______ ______ ______ Less: Income tax at 40% ______ ______ ______ Earnings after tax ______ ______ ______ Return on equity ______ ______ ______ Effect of a 20% Increase in EBIT to $3,000,000 Expected operating income (EBIT) ______ ______ ______ Less: Interest (at 12%) ______ ______ ______ Earnings before tax ______ ______ ______ Less: Income tax at 40% ______ ______ ______ Earnings after tax ______ ______ ______ Return on equity ______ ______ ______ b. Determine the percentage change in return on equity of a 20 percent decrease in expected EBIT from a base level of $2.5 million with a debt-to-total-assets ratio of i. 0% ii. 25% iii. 50% c. Determine the percentage change in return on equity of a 20 percent increase in expected EBIT from a base level of $2.5 million with a debt-to-total-assets ratio of i. 0% ii. 25% iii. 50% d. Which leverage ratio yields the highest expected return on equity? e. Which leverage ratio yields the highest variability (risk) in expected return on equity? f. What assumption was made about the cost of debt (i.e., interest rate) under the various capital structures (i.e., leverage ratios)? How realistic is this assumption?
Question 4
FIFO Process Costing Problem Bemidji Manufacturing produces laptop computers in three departments: assembly, testing and packaging. Prior to the start of the production process, all of the materials and component parts are placed into a ?kit.? Manufacturing begins when the assembly department receives a kit and begins putting the computer together. Therefore, all materials are added at the beginning of the work in the assembly department. Conversion costs are added evenly throughout the assembly process. Assume the Assembly Department of Bemidji Manufacturing began August with 800 units in its work-in-process inventory; assembly on these units was three-fourths complete at the beginning of the month. During the month of August, 3,000 units were started in the Assembly Department. At the end of the month, 300 of the units started were still in process; assembly on these units is two-thirds complete. The costs associated with production in assembly during the month of August were as follows: cost of units in beginning work in process inventory $228,000; costs of materials used in August $630,000; and cost of direct labor and manufacturing overhead for August $527,000. Required: 1. Determine the cost of goods completed and transferred out of the Assembly Department. 2. Determine the cost of the ending work-in-process inventory in the Assembly Department.
Question 5
Top of Form A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Tuesday is Answer debit Salaries Payable, $8,000; credit Cash, $8,000 debit Salary Expense, $8,000; credit Drawing, $8,000 debit Salary Expense, $8,000; credit Salaries Payable, $8,000 debit Drawing, $8,000; credit Cash, $8,000 2 points Question 2 Accrued expenses are ordinarily reported on the balance sheet as Answer assets liabilities fixed assets prepaid expenses 2 points Question 3 Accrued revenues would appear on the balance sheet as Answer assets liabilities capital prepaid expenses 2 points Question 4 Adjusting entries affect at least one Answer income statement account and one balance sheet account revenue and the drawing account asset and one owner's equity account revenue and one capital account 2 points Question 5 Adjusting entries are Answer the same as correcting entries needed to bring accounts up to date and match revenue and expense optional under generally accepted accounting principles rarely needed in large companies 2 points Question 6 As time passes, fixed assets other than land lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called Answer equipment allocation depreciation accumulation matching 2 points Question 7 Austin, Inc. made a Prepaid Rent payment of $2,800 on January 1st. The company?s monthly rent is $700. The amount of Prepaid Rent that would appear on the January 31 balance sheet after adjustment is: Answer $2,100 $700 $3,500 $1,400 2 points Question 8 By matching revenues and expenses in the same period in which they incur Answer net income or loss will always be underestimated. net income or loss will always be overestimated. net income or loss will be properly reported on the income statement net income or loss will not be determined. 2 points Question 9 Depreciation Expense and Accumulated Depreciation are classified, respectively, as Answer expense, contra asset asset, contra liability revenue, asset contra asset, expense 2 points Question 10 Generally accepted accounting principles requires that companies use the ____ of accounting. Answer cash basis deferral basis accrual basis account basis 2 points Question 11 Prepaid expenses are eventually expected to Answer become expenses when their future economic value expires. become revenues when services are performed. become expenses in the period when they are paid. become revenues when the liability is no longer owed. 2 points Question 12 The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed Answer historical cost contra asset book value market value 2 points Question 13 The entry to adjust for the cost of supplies used during the accounting period is Answer debit Supplies Expense; credit Supplies debit Owner Capital; credit Supplies debit Accounts Payable; credit Supplies debit Supplies; credit Owner Capital 2 points Question 14 Which of the following is considered to be unearned revenue? Answer Concert tickets sold for tonight?s performance. Concert tickets sold yesterday on credit. Concert tickets that were not sold for the current performance. Concert tickets sold for next month?s performance. 2 points Question 15 Which of the following is an example of an accrued expense? Answer Salary owed but not yet paid Fees received but not yet earned Supplies on hand A two-year premium paid on a fire insurance policy 2 points Question 16 Which of the following is an example of accrued revenue? Answer Swimming pool cleaning that has been paid for three months in advance. Swimming pool cleaning that has been provided but has not been billed or paid. An agreement has been signed for swimming pool cleaning for the next three months. Swimming pool cleaning that has been provided and paid on the same day. 2 points Question 17 Which of the accounting steps in the accounting process below would be completed last? Answer preparing the adjusted trial balance posting preparing the financial statements journalizing 2 points Question 18 When is the adjusted trial balance prepared? Answer Before adjusting journal entries are posted After adjusting journal entries are posted. After the adjusting journal entries are journalized Before the adjusting journal entries are journalized. 2 points Question 19 What is the purpose of the adjusted trial balance? Answer to verify that all of the adjusting entries have been posted to verify that the net income is correctly reported to verify that no adjusting journal entry has been omitted. to verify that the debits and credits balance 2 points Question 20 What is the proper adjusting entry at April 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $16,000, and unexpired amounts per analysis of policies, $6,000? Answer debit Insurance Expense, $6,000; credit Prepaid Insurance, $6,000 debit Insurance Expense, $16,000; credit Prepaid Insurance, $16,000 debit Prepaid Insurance, $10,000; credit Insurance Expense, $10,000 debit Insurance Expense, $10,000; credit Prepaid Insurance, $10,000 2 points Question 21 Using accrual accounting, revenue is recorded and reported only Answer when cash is received without regard to when the services are rendered when the services are rendered without regard to when cash is received when cash is received at the time services are rendered if cash is received after the services are rendered 2 points Question 22 Using accrual accounting, expenses are recorded and reported only Answer when they are incurred, whether or not cash is paid when they are incurred and paid at the same time if they are paid before they are incurred if they are paid after they are incurred 2 points Question 23 The net book value of a fixed asset is determined by Answer Original cost less accumulated depreciation Original cost less depreciation expense Original cost less accumulated depreciation plus depreciation expense Original cost plus accumulated depreciation 2 points Question 24 Which one of the following accounts below would likely be included in a deferral adjusting entry? Answer Interest Revenue Unearned Revenue Salaries Payable Accounts Receivable 2 points Question 25 The type of account and normal balance of Accumulated Depreciation is Answer asset, credit asset, debit contra asset, credit contra asset, debit
