Davis Skaros has recently been promoted to production manager

Scenario: Davis Skaros has recently been promoted to production manager. He has just started to receive various managerial reports, including the production cost report you prepared. It showed his department had 2,000 equivalent units in ending inventory. His department has had a history of not keeping enough inventory on hand to meet demand. He has come to you, very angry, and wants to know why you credited him with only 2,000 units when he knows he had at least twice that many on hand.

Prepare a maximum 600-word informal memo and explain to Mr. Skaros why his production cost report showed only 2,000 equivalent units in ending inventory. Using a professional tone, explain to him clearly why your report is accurate.

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Marie LeBlanc is considering adding drilling rigs to her fleet of workover rigs

Marie LeBlanc is considering adding drilling rigs to her fleet of workover rigs. The drilling rigs are significantly more expensive and will require Ms. LeBlanc to consider raising additional capital. She has decided on a mix of debt and equity to raise the necessary capital. As her CFO, how would you explain to her what the weighted average cost of capital is and how it is calculated?

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Grain Company used the periodic inventory system for purchase & sales

Grain Company used the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the net method is used.

Grain Company purchased on account $2,800 of merchandise from Dakota Company on May 2, 2016.

Grain Company returned, to Dakota Company, $300 of this merchandise on May 3, 2016.

Freight charges related to this transaction of $150 were paid by Dakota Company.

Prepare Grain Company’s compound General Journal entry (without explanation) for the payment for merchandise on May 15.

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Aussie Ltd is an Australian subsidiary company of Meranti Ltd

Question 1 (25 Marks)

Aussie Ltd is an Australian subsidiary company of Meranti Ltd. Meranti Ltd manufactures furniture manufactures high quality furniture at a much lower cost and export it to Aussie Ltd. Aussie Ltd has been very successful and enjoyed huge sales volume. This has drastically affected the Australian furniture manufacturers and had threatened the local employment market.

In the current income year, the Australian Government imposed a high import duty on the annual sales of all imported furniture by Aussie Ltd that is sold in Australia (assume that this import duty did not previously exist). The import duty that was imposed affected the sales of furniture by Aussie Ltd. Aussie Ltd immediately spent $2 million in advertising campaign in the Australian media to attack the import duty, demanding it to be repealed. The company also sought the Australian public to petition the parliament in this regard, to preserve the freedom of choice so that they could enjoy high quality furniture at low cost. The amount of advertising amounted to eight times of the company’s normal advertising expenditure. Resulting from the drop in furniture sales, Aussie Ltd had to pay a $1 million redundancy payment to 50 of its employees.

Required

Discuss the tax implications for Aussie Ltd.

You are required to cite the relevant case law, tax rulings and legislations.

.

Question 2 (10 marks)

James proposed to purchase a block of five flats he intended to rent to tenants. Before the purchase he contracted with a building inspector to assess the building and advise what expenditure would be required. The inspector advised that $20,000 would be required for plumbing, roofing and painting.

The building was purchased on 1 September 2016. The plumbing, roofing and painting work was finished and the first tenant commenced on 1 October 2016.Shortly after the first tenants moved in, a section of the upstairs floor collapsed and James was advised the building was infested with termites and it would be necessary to spend $50,000 to have the ceiling/flooring replaced. James decided to use steel and specially treated timber material to ensure there were no further problems. The work was completed on 1 February 2017. James paid $2,000 to a pest control company to treat the remaining parts of the building as a preventive measure against termite infestation.

Required :

Advise James on the tax implications of the expenses incurred.

You are required to cite the relevant case laws and legislations.

Rationale

This assessment task covers Topics 2 to 12 and has been designed to ensure that you are engaging with the subject content on a regular basis and to assess your ability to:

gather and integrate your knowledge on the Australian taxation system;
describe and access the Australian regulatory taxation system;
interpret legislation to compute taxable income and allowable deductions to determine taxation liabilities;
investigate in depth the cases, rulings and legislation that are fundamental to taxation law;
demonstrate your ability to apply that knowledge to a hypothetical, practical situation;
exercise critical and reflective judgment;
demonstrate your ability to conduct research using provided materials as well as other legal resources; and
develop your written skills

Question 1

Question 1 requires you to identify issues relating to the principles of taxation on deductible expenses of the taxpayer. You are then required to identify and apply the relevant legal principles and critically evaluate them.

Question 2

Question 2 requires you to address the principles related to both general and statutory deductions. This question is designed to test your understanding of the principles relating to capital expenses and deductions.

Requirements

Your answers to both the Problem Solving Questions in this Assessment task must be fully referenced. Referencing is the acknowledgement of information sources in your work; it is the appropriate way to give credit to the original owner of an idea, piece of writing or creative work. You will be required to use the APA style of referencing and guidelines for using this style can be found on the CSU Referencing website at https://student.csu.edu.au/study/referencing-at-csu.

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Growing Real Fast Company (GRF) is expected to have a 25 percent

1. Growing Real Fast Company (GRF) is expected to have a 25 percent growth rate for the next four years (affecting D1, D2, D3, and D4). Beginning in year five, the growth rate is expected to drop to 3.5 percent per year and last indefinitely. If GRF just paid a $8.00 dividend and the appropriate discount rate is 19.3 percent, then what is the value of a share of GRF?

2. You own some bonds issued by Another Failing Airline Inc. (AFA). When AFA issued the bonds it was in good financial health and was able to get a coupon rate of 6.6%. The bonds pay coupons annually, and have exactly 10 years remaining until maturity. Each bond has a face value of $1000.

Due to the recent increase in operating costs, most notably fuel prices, AFA is no longer able to pay the coupon payments on its bonds. At a creditors meeting, bond holders agreed to forgive the next 3 interest payments (starting with the payment due one year from today). This means that the next interest payment on the bonds will be made 4 years from today. After that, interest payments will be made annually until maturity. Given the risk of AFA and its recent credit downgrade to CC, the required return on these bonds is now 17.3%.

What is the fair price of one AFA bond? Enter your answer to the nearest cent.

3. Which of the following statements is FALSE?

A. If the forecasted growth rate in Earnings per Share (EPS) decreases, this leads to a decrease in share price valuation.

B. The growth rate in EPS is a function of the Dividend Payout Ratio (DPR), amongst other things.

C. Required return on equity is usually less than that for debt for any given firm.

D. The dividend growth model is used for share valuation purposes.

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Mrs. Yang is considering buying a share of stock in a firm

1. Mrs. Yang is considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of Php 7.50. You forecast that there is a 30% chance that the stock will sell for Php 15.00 at the end of one year. The alternative expectation is that there is a 70% chance that the stock will sell for Php 5.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?

2. Mr. Lee is considering buying a share of stock in a firm that has the following two possible payoffs with the corresponding probability of occurring. The stock has a purchase price of Php 25.00. You forecast that there is a 40% chance that the stock will sell for Php 35.00 at the end of one year. The alternative expectation is that there is a 60% chance that the stock will sell for Php 15.00 at the end of one year. What is the expected percentage return on this stock, and what is the return variance?

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On November 21, 2016, a fire at Hodge Company’s warehouse caused

On November 21, 2016, a fire at Hodge Company’s warehouse caused severe damage to its entire inventory of Product Tex. Hodge estimates that all usable damaged goods can be sold for $16,000. The following information was available from the records of Hodge’s periodic inventory system:

Inventory, November 1$120,000   Net purchases from November 1, to the date of the fire 144,000   Net sales from November 1, to the date of the fire 224,000

Based on recent history, Hodge’s gross profit ratio on Product Tex is 30% of net sales.

Required: Calculate the estimated loss on the inventory from the fire, using the gross profit method.

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Royal Gorge Company uses the gross profit method to estimate ending

Royal Gorge Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of October was $60,300. The following information for the month of November was available from company records:

Purchases$128,000   Freight-in 4,800   Sales 270,000   Sales returns 8,500   Purchases returns 7,500

In addition, the controller is aware of $8,500 of inventory that was stolen during November from one of the company’s warehouses.

Required: Calculate the estimated inventory at the end of November, assuming a gross profit ratio of 40%.

Calculate the estimated inventory at the end of November, assuming a markup on cost of 100%. make into two different tables

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Campbell Corporation uses the retail method to value its inventory

Campbell Corporation uses the retail method to value its inventory. The following information is available for the year 2016:

CostRetail  Merchandise inventory, January 1, 2016$390,000 $320,000   Purchases 587,000  980,000   Freight-in 28,000      Net markups    40,000   Net markdowns    6,000   Net sales    1,000,000

Required: Determine the December 31, 2016, inventory that approximates average cost, lower of cost and net realizable value.

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A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2016

A fire destroyed a warehouse of the Goren Group, Inc., on May 4, 2016. Accounting records on that date indicated the following:

Merchandise inventory, January 1, 2016$1,920,000   Purchases to date 5,820,000   Freight-in 420,000   Sales to date 8,400,000

The gross profit ratio has averaged 20% of sales for the past four years.

Required: Use the gross profit method to estimate the cost of the inventory destroyed in the fire.

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