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Balance sheets for P Company and S Company on August 1, 2011, are as follows:

P Company S Company

Cash $ 165,500 $106,000

Receivables 366,000 126,000

Inventory 261,000 108,000

Investment in bonds 306,000 —0—

Investment in S Company stock 586,500 —0—

Plant and equipment (net) 573,000 320,000

Land 200,000 300,000

Total $2,458,000 $960,000

Accounts payable $ 174,000 $ 58,000

Accrued expenses 32,400 26,000

Bonds payable, 8% —0— 200,000

Common stock 1,500,000 460,000

Other contributed capital 260,000 60,000

Retained earnings 491,600 156,000

Total $2,458,000 $960,000

Required: Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on  August 1, 2011, taking into consideration the following:

1.  P Company acquired 90% of the outstanding common stock of S Company on August 1, 2011, for a cash payment of $586,500.

  1.  Included in the Investment in Bonds account are $40,000 par value of S Company bonds payable that were purchased at par by P Company in 2002. The bonds pay interest on April 30  and October 31. S Company has appropriately accrued interest expense on August 1, 2011;

P Company, however, inadvertently failed to accrue interest income on the S Company bonds.

3. Included in P Company receivables is a $35,000 cash advance to S Company that was mailed on August 1, 2011. S Company had not yet received the advance at the time of the preparation of its August 1, 2011, balance sheet.

4. Assume that any excess of book value over the value implied by purchase price is due to overvalued plant and equipment.

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According to the textbook, prospective managers should prepare satisfactory answers to a number of questions before going on an overseas assignment. List five of those questions and discuss the significance of each.

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The budget director of Outdoor Gourmet Grill Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for July 2010 is summarized as follows:

a. Estimated sales for July by sales territory:
Maine:
Backyard Chef………………………5000 units at $750 per unit
Master Chef…………………………1800 units at $1,500 per unit
Vermont:
Backyard Chef……………………..4200 units at $800 per unit
Master Chef………………………..1600 units at $1,600 per unit
New Hampshire:
Backyard Chef……………………..4600 units at $850 per unit
Master Chef………………………..1900 units at $1,700 per unit

b. Estimated inventories at July 1:
Direct materials: Finished products:
Grates…………………1000 units Backyard chef……..1400 units
Stainless steel………..1800 lbs Master Chef……….. 600 units
Burner subassemblies….500 units
Shelves……………….. 300 units

c. Desired inventories at July 31:
Direct materials: Finished products:
Grates………………… 800 units Backyard chef……..1600 units
Stainless steel……….. 2100 lbs Master Chef……….. 500 units
Burner subassemblies….550 units
Shelves……………….. 350 units

d. Direct materials used in production:
In manufacture of Backyard Chef:
Grates…………………….. 3 units per unit of product
Stainless steel……………. 20 lbs per unit of product
Burner subassemblies……. 2 units per unit of product
Shelves……………………. 5 units per unit of product
In manufacture of Master Chef:
Grates…………………….. 6 units per unit of product
Stainless steel……………. 45 lbs per unit of product
Burner subassemblies……. 4 units per unit of product
Shelves……………………. 6 units per unit of product

e. Anticipated purchase price for direct materials:
Grates………….. $20 per unit Burner subassemblies…… $105 per unit
Stainless steel…… $6 per lb Shelves…………………….$7 per unit

f. Direct labor requirements:
Backyard Chef:
Stamping Dept. 0.60 hr at $18 per hr
Forming Dept. 0.80 hr at $14 per hr
Assembly Dept. 1.50 hr at $12 per hr
Master Chef:
Stamping Dept. 0.80 hr at $18 per hr
Forming Dept. 1.50 hr at $14 per hr
Assembly Dept. 2.50 hr at $12 per hr

1. Prepare a sales budget for July.
2. Prepare a production budget for July.
3. Prepare a direct materials purchases budget for July.
4. Prepare a direct labor cost budget for July.

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The “public comment” period closes on an OSHA proposed regulation, and your business had filed a public comment against the proposed regulation explaining that the regulation would not fix the problem that OSHA was trying to remedy, that the regulation would cost more than the problem itself, and that the regulation was a tax, not a safety change. List two arguments available to your company that may succeed in overturning the regulation