Question 2 (15 marks, 5 marks for each part) a. Roger has invented a new household device that would earn him $10,000 per annum for the next 10 years. Given an interest rate of 8% per year, would Roger be willing to sell his invention today for $100,000? b. Debra wins $200,000 in a lottery. She takes only $20,000 in cash and invests the balance at a rate of interest of 10% pa with the understanding that she will receive 160 equal monthly payments with the first one to be made in 2 years. Find the size of the payments. c. An investment firm A pays 10% interest per annum, compounded on a quarterly basis. To remain competitive, the investment manager…

University of Saskatchewan Edwards School of Business Department of Accounting Case Project – Winter 2018 Comm 433 – Section 02 Scenic View Winery Case   You have just come back from your meeting with Hector and Sophia Perez, owners of Scenic View Winery, and are organizing your notes. As the new accountant for the winery, the meeting was to bring you up to speed with the company’s history, organization structure and upcoming events/challenges.   Scenic View Winery is a family owned and run winery that has been in operation since the 1950’s when Hector’s parents moved into the Okanogan Valley and purchased their first grape orchard. Over the years, the winery has been successful in developing its special brands of chardonnay…

Ms Jennie Smiles is the major shareholder and chief executive officer of Celebrations Pty Ltd, a small business which provides organisation services and supplies for parties, wedding receptions and other happy occasions. Due to the relatively small size of the business Jennie is unable to justify a computerised accounting system thus all accounting is completed manually by ABC Accounting. Celebrations Pty Ltd uses a perpetual inventory system, noting the cost of all inventory sold is 65% of the sales (GST exclusive) price. It is now the end of February 2018 and Jennie requests ABC Accounting to complete all necessary accounting to enable the preparation of a trial balance as at 28 February 2018. As the ABC Accounting accountant assigned to Celebrations Pty…

(a) Total fixed indirect manufacturing cost is £92,000 per year. (b) Direct labour costs over each of the three years were £10 per unit. (c) Direct material costs over each of the three years were £13 per unit. (d) Variable expenses which vary in direct ratio to production were £7 per unit. (e) Sales were: Year 1: 2,600 units; Year 2: 3,500 units; Year 3: 3,200 units. The selling price remained constant at £85 per unit. (f) Production is at the rate of: Year 1: 3,500 units; Year 2: 3,800 units; Year 3: 3,650 units. (g) Other overheads are as follows: • Distribution expenses £24,000 for each year • Administrative expenses £89,000 for each year (h) Interest expense: Year 1: £1,100;…

  Question 2: Schedules of cost of goods manufactured and sold; income statement (10 Marks)   The following data refer to Flintoff Fashions for the current year: Sales revenue                                                      $570 000 Work in process inventory, 31 December      18 000 Work in process inventory, 1 January             24 000 Selling and administrative expenses                              90 000 Income tax expense                                            54 000 Purchases of raw materials                               108 000 Raw material inventory, 31 December            15 000 Raw material inventory, 1 January                  24 000 Direct labour                                                         120 000 Electricity: plant                                                    24 000 Depreciation: plant and equipment                 36 000 Finished goods inventory, 31 December       30 000 Finished goods inventory, 1 January              12 000…

1. Stock valuation (20 marks) Mylex Inc has just released an improved version of its popular sporting product and the world is beating a path to its door. As a result, the firm projects growth of 20% per year for the next four ears. Competition in the product market is expected to drive down profit margins, and hence th sustainable growth rate will fall to 5% after four years. The most recent (i e. year 0) earnings w per share. The firm has a dividend payout ratio of 25% and its discount rates 10%. i) What is the value of the stock price today? (10 marks) ii) What is the expected stock price four years from now? (6 marks) iii) If…

Problem 3-38 (LO 3-4, 3-6) On January 1, Prine, Inc., acquired 100 percent of Lydia Company’s common stock for a fair value of $130,869,000 in cash and stock. Lydia’s assets and liabilities equaled their fair values except for its equipment, which was undervalued by $690,000 and had a 10-year remaining life. Prine specializes in media distribution and viewed its acquisition of Lydia as a strategic move into content ownership and creation. Prine expected both cost and revenue synergies from controlling Lydia’s artistic content (a large library of classic movies) and its sports programming specialty video operation. Accordingly, Prine allocated Lydia’s assets and liabilities (including $55,551,000 of goodwill) to a newly formed operating segment appropriately designated as a reporting unit. The fair…

On 1 July 2015 Kruger Ltd privately issues $1 million in six-year debentures, which pay interest each six months at a coupon rate of 6 per cent per annum. At the time of issuing the securities, the market requires a rate of return of 4 per cent. Consistent with the requirements of AASB9, the debentures are accounted for using the effective interest method. Required (a)  Determine the fair value of the debentures at the time of issue (which will also be their issue price). (b) Provide the journal entries at: (i)         1 July 2015 (ii)        31 December 2015 (iii)       30 June 2016.   Sun City Limited commences construction of a multi-purpose water park on 1 July 2014 for Pretoria Limited. Sun…

All workings, when appropriate, must be shown to substantiate your answers. Question 1 [20 marks]   Topic 1: Consolidation: Principles and accounting requirements   On 1 July 2017, Patience Ltd acquired all the issued shares of Silence Ltd for a cash consideration of $1,000,000. At that date, the financial statements of Silence Ltd showed the following information.   Share capital                             650,000 General reserve                         20,000 Retained earnings                      250,000   All the assets and liabilities of Silence Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50,000 below its fair value with a related accumulated depreciation of $80,000. Silence Ltd accounted for all its property, plant and equipment in its own…