The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection fi rms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection.

Cost data for the most recent year of operations for Evergreen are shown below:

Administrative cost	$400,000
Operating costs—trucks	1,280,000
Other collection costs	320,000

Data on customers for the most recent year are:

	Households	Businesses
Number of customers	12,000	3,000
Waste collected (tons)	4,000	12,000

The City Council of Imperial Falls is considering allowing other private waste haulers to collect waste from businesses, but not from households. Service to businesses from other waste collection firms would not be subject to price regulation. Based on information from neighboring cities, the price that other private waste collection firms will charge is estimated to be$0.04 per pound (= $80 per ton).

Evergreen’s CEO has approached the city council with a proposal to change the way costs are allocated to households and businesses, which will result in different rates for households and businesses. She proposes that administrative costs and truck operating costs be allocated based on the number of customers and the other collection costs be allocated based on pounds collected. The total costs allocated to households would then be divided by the estimated number of pounds collected from households to determine the cost of collection. The rate would then be 20 percent above the cost. The rate for businesses would be determined using the same calculation.

Required
As a staff member to one of the council members, would you support the proposal to change the way costs are allocated? Explain.

The City of Imperial Falls contracts with Evergreen Waste Collection to provide solid waste collection to households and businesses. Until recently, Evergreen had an exclusive franchise to provide this service in Imperial Falls, which meant that other waste collection fi rms could not operate legally in the city. The price per pound of waste collected was regulated at 20 percent above the average total cost of collection.

Cost data for the most recent year of operations for Evergreen are shown below:

Data on customers for the most recent year are:

The City Council of Imperial Falls is considering allowing other private waste haulers to collect waste from businesses, but not from households. Service to businesses from other waste collection firms would not be subject to price regulation. Based on information from neighboring cities, the price that other private waste collection firms will charge is estimated to be$0.04 per pound (= $80 per ton).

Evergreen’s CEO has approached the city council with a proposal to change the way costs are allocated to households and businesses, which will result in different rates for households and businesses. She proposes that administrative costs and truck operating costs be allocated based on the number of customers and the other collection costs be allocated based on pounds collected. The total costs allocated to households would then be divided by the estimated number of pounds collected from households to determine the cost of collection. The rate would then be 20 percent above the cost. The rate for businesses would be determined using the same calculation.

Required
Based on cost data from the most recent year, what is the price per pound charged by Evergreen for waste collection under the current system (the same rate for both types of customers)?

a. Which of the following businesses collects sales tax from customers: a wholesaler, a retailer, or both? b. What is the term for goods that a retailer buys from a wholesaler or a manufacturer to resell?

Assume that you work for this council member. Draft a paper advising her about possible approaches the city council might take. Consider these points:

Would citizens support passing such a law? Would police support enforcement? Might the law be challenged in court? Explain your answers.

In 2018, the Marion Company purchased land containing a mineral mine for $\$ 1,600,000$. Additional costs of $\$ 600,000$ were incurred to develop the mine. Geologists estimated that 400,000 tons of ore would be extracted. After the ore is removed, the land will have a resale value of $\$ 100,000$.

To aid in the extraction. Marion built various structures and small storage buildings on the site at a cost of $\$ 150,000$. These structures have a useful life of 10 years. The structures cannot be moved after the ore has been removed and will be left at the site. In addition, new equipment costing $\$ 80,000$ was purchased and installed at the site. Marion does not plan to move the equipment to another site, but estimates that it can be sold at auction for $\$ 4,000$ after the mining project is completed.

In $2018,50,000$ tons of ore were extracted and sold. In 2019 , the estimate of total tons of ore in the mine was revised from 400,000 to 487,500 . During $2019,80,000$ tons were extracted.

Required:

1. Compute depletion and depreciation of the mine and the mining facilities and equipment for 2018 and 2019 . Marion uses the units-of-production method to determine depreciation on mining facilities and equipment.
2. Compute the book value of the mineral mine, structures, and equipment as of December $31,2019$.

Argentina Partners is concerned about the possible effects of inflation on its operations. Currently, the company sells 60,000 units for $30 per unit. The variable production costs are$15, and fixed costs amount to $700,000. Production engineers have advised management that they expect unit labor costs to rise by 15% and unit materials costs to rise by 10% in the coming year. Of the$15 variable costs, 50% are from labor and 25% are from materials. Variable overhead costs are expected to increase by 20%. Sales prices cannot increase more than 10%. It is also expected that fixed costs will rise by 5% as a result of increased taxes and other miscellaneous fixed charges.

The company wishes to maintain the same level of profi t in real dollar terms. It is expected that to accomplish this objective, profi ts must increase by 6% during the year.

Required
If the volume of sales were to remain at 60,000 units, what price increase would be required to attain the 6 percent increase in profits?

Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton.

On January 1, 2010, Hamilton sold $1,000,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 9 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2012. Both companies utilize the straight-line method of amortization. Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. a. December 31, 2012. b. December 31, 2013. c. December 31, 2014.

Biondi Industries is a manufacturer of chemicals for various purposes. One of the processes used by Biondi produces HTP$-3$, a chemical used in hot tubs and swimming pools; PST$-4$, a chemical used in pesticides; and RJ$-5$, a product that is sold to fertilizer manufacturers. Biondi uses the net-realizable value method to allocate joint production costs. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Biondi Industries uses FIFO (first-in, first-out) in valuing its finished-goods inventories.

Data regarding Biondi's operations for the month of October are as follows. During this month, Biondi incurred joint production costs of $\$ 1,700,000$ in the manufacture of HTP$-3$, PST$-4$, and RJ$-5$.

$$\begin{array}{lccc} & \textbf{ HTP–3 } & \textbf{ PST–4 } & \textbf{ RJ–5 } \\ \text{ Finished goods inventory in gallons (October 1) } & 18,000 & 52,000 & 3,000 \\ \text{ October sales in gallons } & 650,000 & 325,000 & 150,000 \\ \text{ October production in gallons } & 700,000 & 350,000 & 170,000 \\ \text{ Additional processing costs } & \$ 874,000 & \$ 816,000 & \$ 60,000 \\ \text{ Final sales value per gallon } & \$ 4.00 & \$ 6.00 & \$ 5.00 \end{array}$$

$1.$ Determine Biondi Industries' allocation of joint production costs for the month of October. (Carry calculation of relative proportions to four decimal places.)

$2.$ Determine the dollar values of the finished-goods inventories for HTP$-3$, PST$-4$, and RJ$-5$ as of October $31$. (Round the cost per gallon to the nearest cent.)

$3.$ Suppose Biondi Industries has a new opportunity to sell PST $-4$ at the split-off point for $\$ 3.80$ per gallon. Prepare an analysis showing whether the company should sell PST$-4$ at the split-off point or continue to process this product further.

During a recent review, ABC Corporation discovered that it has a serious internal control problem. It is estimated that the impact associated with this problem is $1 million and that the likelihood is currently 5$ 25,000 and reduce likelihood to 2%; procedure B would cost $30,000 and reduce likelihood to 1$ If both procedures were implemented, likelihood would be reduced to 0.1%.

b. Compute the revised estimate of expected loss if procedure A were implemented, if procedure B were implemented, and if both procedures were implemented.

In a recent 10-K report, United Parcel Service states it “is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry, and a global leader in supply chain management.” The following note and data were reported:

Note 1—Summary of Accounting Policies

Impairment of Long-Lived Assets

. . . we review long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. . . .

Required:

1. Reconstruct the journal entry for the disposal of property and equipment during the year.

2. Compute the amount of property and equipment that United Parcel wrote off as impaired during the year. ( Hint: Set up T-accounts.)

The partnership of Wingler, Norris, Rodgers, and Guthrie was created several years ago as a local architectural firm. Several partners have recently undergone personal financial problems and have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:

When the liquidation commenced, liquidation expenses of $16,000 were anticipated as being necessaryto dispose of all property.

Part A
Prepare a predistribution plan for this partnership.

Part B
The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:

1. Collected 80 percent of the total accounts receivable with the rest judged to be uncollectible.
2. Sold the land, building, and equipment for$150,000.
3. Distributed safe payments of cash.
4. Learned that Guthrie, who has become personally insolvent, will make no further contributions.
5. Paid all liabilities.
6. Sold all inventory for $71,000.
7. Distributed safe payments of cash again.
8. Paid actual liquidation expenses of$11,000 only.
9. Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.

Prepare journal entries to record these liquidation transactions.

Snap Company issues $10\%$, five-year bonds, on January $1$ of this year, with a par value of $\$100,000$ and semiannual interest payments. Use the following bond amortization table and prepare journal entries to record (a) the issuance of bonds on January $1, (b)$ the first interest payment on June $30$, and $(c)$ the second interest payment on December $31$.

Astro Corporation was started with the issue of 2,000 shares of $5 par stock for cash on January 1, 2016. The stock was issued at a market price of$12 per share. During 2016, the company earned $31,000 in cash revenues and paid$17,000 for cash expenses. Also, a $2,000 cash dividend was paid to the stockholders.

Required

Prepare an income statement, statement of changes in stockholders' equity, balance sheet, and statement of cash flows for Astro Corporation's 2016 fiscal year.

A condensed income statement for the Electronics Division of Gihbli Industries Inc. for the year ended December 31 is as follows:

$$\begin{array}{lr} \text { Sales } & \$ 1,575,000 \\ \text { Cost of goods sold } & \underline{\hspace{15pt}891,000} \\ \text { Gross profit } & \$ \hspace{10pt}684,000 \\ \text { Operating expenses } & \underline{\hspace{15pt}558,000} \\ \text { Income from operations } & \underline{\underline{\$ \hspace{10pt}126,000}} \\ \text { Invested assets } & \$ 1,050,000 \end{array}$$

Assume that the Electronics Division received no charges from service departments.

The president of Gihbli Industries Inc. has indicated that the division’s return on a $1,050,000 investment must be increased to at least 20% by the end of the next year if operations are to continue. The division manager is considering the following three proposals:

Proposal 1: Transfer equipment with a book value of$300,000 to other divisions at no gain or loss and lease similar equipment. The annual lease payments would be less than the amount of depreciation expense on the old equipment by $31,400. This decrease in expense would be included as part of the cost of goods sold. Sales would remain unchanged.

Proposal 2: Reduce invested assets by discontinuing a product line. This action would eliminate sales of$180,000, reduce cost of goods sold by $119,550, and reduce operating expenses by$60,000. Assets of $112,500 would be transferred to other divisions at no gain or loss.

Proposal 3: Purchase new and more efficient machinery and thereby reduce the cost of goods sold by$189,000 after considering the effects of depreciation expense on the new equipment. Sales would remain unchanged, and the old machinery, which has no remaining book value, would be scrapped at no gain or loss. The new machinery would increase invested assets by $918,750 for the year.

Instructions

1. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for the Electronics Division for the past year. Round percentages and the investment turnover to one decimal place.
2. Prepare condensed estimated income statements and compute the invested assets for each proposal.
3. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment for each proposal. Round percentages and the investment turnover to one decimal place.
4. Which of the three proposals would meet the required 20% return on investment?
5. If the Electronics Division were in an industry where the profit margin could not be increased, how much would the investment turnover have to increase to meet the president’s required 20% return on investment? Round to one decimal place.