ACCT6003 Financial Accounting Processes – On 1 July 2012, ChiHerbal Ltd was incorporated and on the same day the company

ACCT6003 Financial Accounting Processes   Scenario 1 Financing Company Operations (20 marks) On 1 July 2012, ChiHerbal Ltd was incorporated and on the same day the company issued a prospectus inviting applications for 97 000 ordinary shares. These shares had an issue price of $11 per share, payable $5.50 on application, $2.80 on allotment and $1.35 on each of two calls to be made at intervals of 4 months after the date of allotment. By 31 July, the company received applications for 114 000 shares. On 3 August, the Board of directors allotted 97 000 ordinary shares to the applicants in proportion to the number of shares for which applications had been made. The directors decided to offset the surplus application money against the amount…

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Merton Shovel Corporation has decided to bid for a contract to supply shovels

Merton Shovel Corporation has decided to bid for a contract to supply shovels to the Honduran Army. The Honduran Army intends to buy 1,400 shovels per year for the next 3 years. To supply these shovels, Merton will have to acquire manufacturing equipment at a cost of $160,000. This equipment will be depreciated on a straight-line basis over its five-year lifetime. At the end of the third year, Merton can sell the equipment for exactly its book value ($64,000). Additional fixed costs will be $40,000 per year, and variable costs will be $4 per shovel. An additional investment of $23,400 in net working capital will be required when the project is initiated. This investment will be recovered at the end of…

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Huebert Company provided the following information for last year:

Huebert Company provided the following information for last year:
Beginning inventories:
Direct materials …………………….$ 52,700
Work in process ……………………. 25,000
Finished goods ……………………… 75,000
Ending inventories:
Direct materials …………………….$ 42,700
Work in process ……………………. 50,000
Finished goods …………………….. 140,000
During the year, direct materials purchases amounted to $270,000, direct labor cost was $304,000, and overhead cost was $506,000. During the year, 25,000 units were completed.

Required:
1. Calculate the total cost of direct materials used in production.
2. Calculate the cost of goods manufactured. Calculate the unit manufacturing cost.
3. Of the unit manufacturing cost calculated in Requirement 2, assume $11 is direct materials and $12 is direct labor. What is the prime cost per unit? Conversion cost per unit?

Aussie Ltd is an Australian company for which the Australian dollar is the functional

ACC567 Financial Accounting 2 Question 3 – Foreign currency transactions Aussie Ltd is an Australian company for which the Australian dollar is the functional and presentation currency. The company has entered into a number of foreign activities, and these include the following: (a) Aussie Ltd sold inventory to a customer in Hong Kong for HK$600,000. The order was received on 10 May 2016, with delivery made on 30 May 2016. Under the conditions of the contract, title to the goods passed to the customer on delivery. Payment in respect of these inventories was received on 19 July 2016. The following exchange rates are applicable: 10 May 2016:      A$1.00  = HK$7.30 30 May 2016:      A$1.00  = HK$8.20 30 June 2016:     A$1.00  = HK$8.60 19…

On 1 July 2015, Richmond Ltd acquired 40% of the share capital of Carlton Ltd

ACC567 Financial Accounting 2 Question 2 – Accounting for associates On 1 July 2015, Richmond Ltd acquired 40% of the share capital of Carlton Ltd, for $160,000. The equity of Carlton Ltd on that date was: Share capital $250,000 Retained earnings $95,000 All of the identifiable net assets of Carlton Ltd were recorded at fair value. The following information is provided for Carlton Ltd for the year ended 30 June 2017: $ Operating profit before tax 380,000 Income tax expense (114,000) Operating profit after tax 266,000 Retained earnings at 1 July 2016 257,000 Dividends paid (100,000) Retained earnings at 30 June 2017 423,000 Additional information: The closing inventory of Richmond Ltd included goods purchased from Carlton Ltd during the year for $6,000. Their…

On 1 July 2015, Sweets Ltd purchased 80% of the issued shares of Savoury Ltd

ACC567 Financial Accounting 2 Question 1 – Consolidation: Principles, accounting requirements, intra-group transactions and non-controlling interests On 1 July 2015, Sweets Ltd purchased 80% of the issued shares of Savoury Ltd for $890,000. At the date of acquisition, the equity of Savoury Ltd consisted of share capital and retained earnings of $500,000 and $425,000 respectively. At the date of acquisition, all assets of Savoury Ltd were recorded at fair value, except for inventory, that had a fair value which was $10,000 higher than its carrying amount. All of this inventory was on-sold to external parties by 30 June 2016. As at 30 June 2017, the following financial statements have been extracted from the financial records of Sweets Ltd and Savoury Ltd: Sweets Ltd…

On 1 July 2017, Fantastic Ltd entered into a lease agreement

Question 4 – Accounting for leases On 1 July 2017, Fantastic Ltd entered into a lease agreement with Green Power Ltd, agreeing to lease a truck from Green Power Ltd for three years. Details of the lease are as follows: Fair value of truck at inception of lease                           $188,995 Residual value at end of lease term                                $50,000 Residual value guaranteed by lessee                              $20,000 Annual payments (1st payment due on 30 June 2018)      $60,000 Interest rate implicit in the lease                                    6% The annual lease payments of $60,000 include reimbursement of insurance and maintenance costs of $5,000. The lease is cancellable, but cancellation will incur a monetary penalty equivalent to 2 years’ lease payments. The estimated useful life…

Consolidation: Principles, accounting requirements, intra-group transactions and non-controlling interests

ACC567 Financial Accounting 2 Question 1 – Consolidation: Principles, accounting requirements, intra-group transactions and non-controlling interests On 1 July 2015, Sweets Ltd purchased 80% of the issued shares of Savoury Ltd for $890,000. At the date of acquisition, the equity of Savoury Ltd consisted of share capital and retained earnings of $500,000 and $425,000 respectively. At the date of acquisition, all assets of Savoury Ltd were recorded at fair value, except for inventory, that had a fair value which was $10,000 higher than its carrying amount. All of this inventory was on-sold to external parties by 30 June 2016. As at 30 June 2017, the following financial statements have been extracted from the financial records of Sweets Ltd and Savoury Ltd: Sweets Ltd…

On December 31, 2011, Pen Corporation purchased 80 percent of the stock of Sut Company at book

On December 31, 2011, Pen Corporation purchased 80 percent of the stock of Sut Company at book value. The data reported on their separate balance sheets immediately after the acquisition follow. At December 31, 2011, Pen Corporation owes Sut $10,000 on accounts payable. (All amounts are in thousands.) Pen Sut Assets Cash 64 36 Accounts receivable-net 90 68 Inventories 286 112 Land 400 Building-net 760 350 Net Income 1600 566 Liabilities and Stockholders’ Equity Accounts payable 80 66 Common stock, $20 par 920 300 Retained earnings 600 200 1600 566   REQUIRED 1. Prepare a consolidated balance sheet for Pen Corporation and Subsidiary at December 31, 2011. 2. Compute consolidated net income for 2012 assuming that Pen Corporation reported separate income…

US Bright produces a list of the activities performed at Cravings for cakes

Assessment Task (Activity Based Costing) US Bright produces a list of the activities performed at Cravings for cakes and their annual costs. In addition, Bright identifies an activity driver for each activity and the annual quantity of each activity driver. A partial list of activity costs and quantities of activity drivers is shown below: Cravings for Cakes list of Activities Activity Activity Cost ($) Activity Driver Annual Quantity of Activity driver Prepare Annual Accounts 5000 None Available Process receivables 15000 No. of Invoices 5000 Invoices Process payables 25000 No. of purchase orders 2500 Purchase orders Program production 28000 No. of production schedules 1000 schedules Process Sales order 40000 No. of sales orders 4000 sales orders Dispatch sales order 30000 No. of…

The Lotus Corporation signs a lease agreement dated January 1, 2010

The Lotus Corporation signs a lease agreement dated January 1, 2010 that provides for it to lease equipment from Dragon Company beginning January 1, 2010. The lease terms, provisions, and related events are as follows: The lease is non-cancellable and has a term of five years. The annual rentals are $83,222.92, payable at the end of each year, and provide Dragon with a 12% annual rate of return on its net investment. The Lotus Corporation agrees to pay all executory costs at the end of each year. In 2010, these were insurance, $3,760; property taxes, $5,440. In 2011: insurance, $3,100; property taxes, $5,330. There is no renewal or bargain purchase option. Lotus estimates that the equipment has a fair value of…

The Sax Company signs a lease agreement dated January 1, 2010 that provides for it to lease computers

The Sax Company signs a lease agreement dated January 1, 2010 that provides for it to lease computers from the Appleton Company beginning January 1, 2010. The lease terms, provisions, and related events are as follows: The lease term is five years. The lease is noncancelable and requires equal rental payments to be made at the end of each year. The computers have an estimated life of five years, a fair value of $300,000, and a zero estimated residual value. Sax Company agrees to pay all executory costs. The lease contains no renewal or bargain purchase option. The annual payment is set by Appleton at $83,222.92 to earn a rate of return of 12% on its net investment. The Sax Company…