Aug 29, 2021 | Uncategorized
PowerSwitch, Inc., designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected PowerSwitch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.
?oI didn’t know mud could smell so bad,?? Paul says. ?oWhat should I be looking for??? ?oDon’t worry about beginning inventory numbers,?? responds Stephen, ?owe’ll get them from last year’s annual report. We need first quarter cost data.??
?oI was working on the first quarter results just before the storm hit,?? Paul says. ?oLook, my report’s still in my desk drawer. All I can make out is that for the first quarter, material purchases were $476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were $505,000; $245,000; and $1,425,000; respectively. Wait! Cost of goods available for sale was $1,340,000.??
?oGreat,?? says Stephen. ?oI remember that sales for the period were approximately $1,700,000. Given our gross profit of 30%, that’s all you should need.??
Paul is not sure about that, but decides to see what he can do with this information. The beginning inventory numbers are
?? Direct materials, $113,000
?? Work in process, $229,000
?? Finished goods, $154,000
He remembers a schedule he learned in college that may help him get started.
Requirements
1. Exhibit 16 11 resembles the schedule Paul has in mind. Use it to determine the ending inventories of direct materials, work in process, and finished goods.
2. Itemize a list of the book value of inventory lost.
Aug 29, 2021 | Uncategorized
Selected account balances for the year ended December 31 are provided below for Superior Company:
Selling and administrative salaries$110,000
Insurance, factory $8,000
Utilities, factory $45,000
Purchases of raw materials$290,000
Indirect labor $60,000
Direct labor ?
Advertising expense $80,000
Cleaning supplies, factory $7,000
Sales commissions $50,000
Rent, factory building$120.000
Maintenance, factory $30,000
Inventory balances at the beginning and end of the year were as follows:
?
The total manufacturing costs for the year were $660,000; the goods available for sale totaled $740,000 and the cost of goods sold totaled $660,000.
Required:
1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the companys income statement for the year.
2. Assume that the dollar amounts given above are for the equivalent of 40,000units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for rent on the factory building.
3. Assume that in the following year the company expects to produce 50,000 units. What average cost per unit and total cost would you expect to be incurred for direct material for rent on the factory building? (Assume that direct materials are a variable cost and that rent is a fixed cost).
4. As the manager in charge of production costs, explain to the president the reason for any difference in average cost per unit between (2) and (3) above.
Aug 29, 2021 | Uncategorized
Special Alloys Corporation manufactures a variety of specialized metal products for industrial use. Most of the revenues are generated by large contracts with companies that have government defense contracts. The company also develops and markets parts to the major automobile companies. It employs many metallurgists and skilled technicians because most of its products are made from highly sophisticated alloys.
The company recently signed two large contracts; as a result, the workload of Wayne Washburn, the general manager, has become overwhelming. To relieve some of this overload, Mark Johnson was transferred from the Research Planning Department to the general manager’s office. Johnson, who has been senior metallurgist and supervisor in the Research Planning Department, was given the title assistant to the general manager.
Washburn assigned several responsibilities to Johnson in their first meeting. Johnson will oversee the testing of new alloys in the product planning department and be given the authority to make decisions as to the use of these alloys in product development; he will also be responsible for maintaining the production schedules for one of the new contracts. In addition to these duties, he will be required to meet with the supervisors of the production departments regularly to consult with them about production problems they may be experiencing. Washburn expects to be able to manage the company much more efficiently with Johnson’s help.
Required:
1. Positions within organizations are often described as having (a) line authority or (b) staff authority. Describe what is meant by these two terms.
2. Of the responsibilities assigned to Mark Johnson as assistant to the general manager, which tasks have line authority and which have staff authority?
3. Identify and discuss the conflicts Mark Johnson may experience in the production departments as a result of his new responsibilities.
Aug 29, 2021 | Uncategorized
Steve Joyce, controller for Prather Industries, was reviewing production cost reports for the year. One amount in these reports continued to bother him—advertising. During the year, the company had instituted an expensive advertising campaign to sell some of its slower moving products. It was still too early to tell whether the advertising campaign was successful.
There had been much internal debate as how to report advertising cost. The vice president of finance argued that advertising costs should be reported as a cost of production, just like direct materials and direct labor. He therefore recommended that this cost be identified as manufacturing overhead and reported as part of inventory costs until sold. Others disagreed. Joyce believed that this cost should be reported as an expense of the current period, based on the conservatism principle. Others argued that it should be reported as Prepaid Advertising and reported as a current asset.
The president finally had to decide the issue. He argued that these costs should be reported as inventory. His arguments were practical ones. He noted that the company was experiencing financial difficulty and expensing this amount in the current period might jeopardize a planned bond offering. Also, by reporting the advertising costs as inventory rather than as prepaid advertising, less attention would be directed to it by the financial community.
Instructions
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues involved in this situation?
(c) What would you do if you were Steve Joyce?
Aug 29, 2021 | Uncategorized
Suppose that you have been given a summer job at Fairwings Avionics, a company that manufactures sophisticated radar sets for commercial aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its tremendous growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs:
1. The cost of the memory chips used in a radar set.
2. Factory heating costs.
3. Factory equipment maintenance costs.
4. Training costs for new administrative employees.
5. The cost of the solder that is used in assembling the radar sets.
6. The travel costs of the company’s salespersons.
7. Wages and salaries of factory security personnel.
8. The cost of air conditioning executive offices.
9. Wages and salaries in the department that handles billing customers.
10. Depreciation on the equipment in the fitness room used by factory workers.
11. Telephone expenses incurred by factory management.
12. The costs of shipping completed radar sets to customers.
13. The wages of the workers who assemble the radar sets.
14. The president’s salary.
15. Health insurance premiums for factory personnel.
Required:
Classify the above costs as either product (inventoriable) costs or period (noninventoriable) costs for purposes of preparing the financial statements for the bank.
Aug 29, 2021 | Uncategorized
Swift Company was organized on March 1 of the current year. After five months of start up losses, management had expected to earn a profit during August. Management was disappointed, however, when the income statement for August also showed a loss. Augusts income statement follows.:
?
After seeing the $12,000 loss for August, Swifts president stated, I was sure wed be profitable within six months, but our six months are up and this loss for August is even worse than Julys. I think its time to start looking for someone to but out the companys assets f we dont within a few moths there wont be any assets to sell. By the way, I dont see any reason to look for a new controller. Well just limp along with Sam for the time being.
The companys controller resigned a month ago. Sam, a new assistant in the controllers office, prepared the income statement above. Sam has had little experience in manufacturing operations. Additional information about the company follows:
a. Some 60% of the utilities cost and 75% of the insurance apply to factory operations. The remaining amounts apply to selling and administrative activities.
b. Inventory balances at the beginning and end of August were:
?
c. Only 80% of the rent on facilities applies to factory operations the remainder applies to selling and administrative activities. The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets.
Required:
1. As one step in gathering data for a recommendation to the president, prepare a schedule of cot of goods manufactured for August.
2. As a second step, prepare a new income statement for August.
3. Based on your statements prepared in (1) and (2) above, would you recommend that the company look for a buyer?
Aug 29, 2021 | Uncategorized
The Bedron Company is a closely held investment service group that has been quite successful over the past five years, consistently providing most members of the top management group with 50 percent bonuses. In addition, both the chief financial officer and the chief executive officer have received 100 percent bonuses. Bedron expects this trend to continue.
Recently, Bedron’s top management group, which holds 35 percent of the outstanding shares of common stock, has learned that a major corporation is interested in acquiring Bedron. The other corporation’s initial offer is attractive and is several dollars per share higher than Bedron’s current share price. One member of management told a group of employees under him about the potential offer. He suggested that they might want to purchase more Bedron stock at the current price in anticipation of the takeover offer.
Required:
Do you think that the employees should take the action suggested by their boss? Suppose the action is prohibited by Bedron’s code of ethics. Now suppose that it is not prohibited by Bedron’s code of ethics. Is the action acceptable in that case?
Aug 29, 2021 | Uncategorized
The Dorilane Company specializes in producing a set of wood patio furniture consisting of a table and four chairs. The set enjoys great popularity, and the company has ample orders to keep production going at its full capacity of 2,000 sets per year. Annual cost data at full capacity follow:
Factory labor, direct$118,000
Advertising $50,000
Factory supervision $40,000
Property taxes, factory building $3,000
Sales commissions $80,000
Insurance, factory $2,500
Depreciation, office equipment $4,000
Lease cost, factory equipment $12,000
Indirect materials, factory $6,000
Depreciation, factory building $10,000
General office supplies (billing) $3,000
General office salaries $60,000
Direct materials used (wood, bolts, etc) $94,000
Utilities, factory $20,000
Required:
1. Prepare an answer sheet with the column headings shown below. Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. As examples, this has been done already for the first two items in the list above. Note that each cost item is classified in two ways; first, as variable or fixed with respect to the number of units produced and sold; and second, as a selling and administrative cost or a product cost. If the item is a product cost, it should also be classified as either direct or indirect as shown.)
2. Total the dollar amounts in each of the columns in (1) above. Compute the average product cost of one patio set.
3. Assume that production drops to only 1,000 sets annually. Would you expect the average product cost of one set to increase, decrease, or remain unchanged? Explain. No computations are necessary.
4. Refer to the original data. The presidents brother in law has considered making himself a patio set and has priced the necessary materials at a building supply store. The brother in law has asked the president if he could purchase a patio set from the Dorilane Company at cost, and the president agreed to let him do so.
a. Would you expect any disagreement between the two men over the price the brother in law should pay? Explain. What price does the president probably have in mind the brother in law?
b. Since the company is operating at full capacity, what cost term used in the chapter might be justification for the president to charge the full, regular price to the brother in law and still be selling at cost?
Aug 29, 2021 | Uncategorized
The following calendar year information is taken from the December 31, 2009, adjusted trial balance and other records of Dahlia Company.
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . $ 19,125
Depreciation expense—Office equipment . . . . . . . 8,750
Depreciation expense—Selling equipment . . . . . . . 10,000
Depreciation expense—Factory equipment . . . . . . . 32,500
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . 122,500
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . 15,750
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,250
Inventories
Raw materials, December 31, 2008 . . . . . . . . . . . . 177,500
Raw materials, December 31, 2009 . . . . . . . . . . . . 168,125
Goods in process, December 31, 2008 . . . . . . . . . 15,875
Goods in process, December 31, 2009 . . . . . . . . . 14,000
Finished goods, December 31, 2008 . . . . . . . . . . . 164,375
Finished goods, December 31, 2009 . . . . . . . . . . . 129,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 650,750
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Miscellaneous production costs . . . . . . . . . . . . . . . . 8,500
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . 100,875
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 872,500
Rent expense—Office space . . . . . . . . . . . . . . . . . . 21,125
Rent expense—Selling space . . . . . . . . . . . . . . . . . . 25,750
Rent expense—Factory building . . . . . . . . . . . . . . . 79,750
Maintenance expense—Factory equipment . . . . . . 27,875
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,275,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,500
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . 286,250
Required
1. Each team member is to be responsible for computing one of the following amounts. You are not to duplicate your teammates’ work. Get any necessary amounts from teammates. Each member is to explain the computation to the team in preparation for reporting to class.
a. Materials used.
b. Factory overhead.
c. Total manufacturing costs.
d. Total cost of goods in process.
e. Cost of goods manufactured.
2. Check your cost of goods manufactured with the instructor. If it is correct, proceed to part (3).
3. Each team member is to be responsible for computing one of the following amounts. You are not to duplicate your teammates’ work. Get any necessary amounts from teammates. Each member is to explain the computation to the team in preparation for reporting to class.
a. Net sales.
b. Cost of goods sold.
c. Gross profit.
d. Total operating expenses.
e. Net income or loss before taxes.
Aug 29, 2021 | Uncategorized
The following cost and inventory data are taken from the accounting records of Mason Company for the year just completed:
Costs incurred:???Direct labor cost…………………………? $70,000
??Purchases of raw materials ……………..?$118,000
??Indirect labor……………………………? $30,000
??Maintenance, factory equipment………..? $6,000??
Advertising expense……………………..? $90,000
??Insurance, factory equipment……………? $8,000
??Sales salaries…………………………….? $50,000??
Rent, factory facilities…………………..? $20,000??
Supplies………………………………….? $4,200
??Depreciation, office equipment………….? $3,000
?? Depreciation, factory equipment…………? $19,000
???Beginning of the year ?End of the year
??Inventories;????
Raw materials……………………$7,000 $15,000
Work in proces……………………s$10,000 $5,000
Finished goods……………………$20,000 $35,000
Required:
1. Prepare a schedule of cost of goods manufactured in good form.
2. Prepare the cost of goods sold section of Mason Company
Aug 29, 2021 | Uncategorized
The following describes the job responsibilities of two employees of Barney Manufacturing. Joan Dennison, Cost Accounting Manager. Joan is responsible for measuring and collecting costs associated with the manufacture of the garden hose product line. She is also responsible for preparing periodic reports that compare the actual costs with planned costs. These reports are provided to the production line managers and the plant manager. Joan helps to explain and interpret the reports.
Steven Swasey, Production Manager. Steven is responsible for the manufacture of the high quality garden hose. He supervises the line workers, helps to develop the production schedule, and is responsible for seeing that production quotas are met. He is also held accountable for controlling manufacturing costs.
Required:
Identify Joan and Steven as line or staff and explain your reasons.
Aug 29, 2021 | Uncategorized
Each of the following scenarios requires the use of accounting information to carry out one or more of the three managerial objectives: planning, control (including performance evaluation), or decision making.
a. Laboratory Manager: An HMO approached me recently and offered us its entire range of blood tests. It provided a price list revealing the amount it is willing to pay for each test. In many cases, the prices are below what we normally charge. I need to know the costs of the individual tests to assess the feasibility of accepting its offer and perhaps suggest some price adjustments on some of the tests.
b. Operating Manager: This report indicates that we have 30 percent more defects than originally targeted. An investigation into the cause has revealed the problem. We were using a lower quality material than expected, and the waste has been higher than normal. By switching to the quality level originally specified, we can reduce the defects to the planned level.
c. Divisional Manager: Our market share has increased because of higher quality products. Current projections indicate that we should sell 25 percent more units than last year. I want a projection of the effect that this increase in sales will have on profits. I also want to know our expected cash receipts and cash expenditures on a month by month basis. I have a feeling that some short term borrowing may be necessary.
d. Plant Manager: Foreign competitors are producing goods with lower costs and delivering them more rapidly than we can to customers in our markets. We need to decrease the cycle time and increase the efficiency of our manufacturing process. There are two proposals that should help us accomplish these goals, both of which involve investing in computer aided manufacturing. I need to know the future cash flows associated with each system and the effect each system has on unit costs and cycle time.
e. Manager: At the last board meeting, we established an objective of earning a 25 percent return on sales. I need to know how many units of our product we need to sell to meet this objective. Once I have the estimated sales in units, we need to outline a promotional campaign that will take us where we want to be. However, in order to compute the targeted sales in units, I need to know the expected unit price and a lot of cost information.
f. Manager: Perhaps the Harrison Medical Clinic should not offer a full range of medical services. Some services seem to be having a difficult time showing any kind of profit. I am particularly concerned about the mental health service. It has not shown a profit since the clinic opened. I want to know what costs can be avoided if I drop the service. I also want some assessment of the impact on the other services we offer.
Some of our patients may choose this clinic because we offer a full range of services.
Required:
Select the managerial accounting objective(s) that are applicable for each scenario: planning, controlling, or decision making.
Aug 29, 2021 | Uncategorized
Five to six times a year, Kicker puts on tent sales in various cities throughout Oklahoma and the surrounding states. The tent sales are designed to show Kicker customers new products, engender enthusiasm about those products, and sell soon to be out of date products at greatly reduced prices. Each tent sale lasts one day and requires parking lot space to set up the Kicker semitrailer; a couple of show cars; a deejay playing music; and a tent to sell Kicker merchandise, distribute brochures, and so on.
Last year, the Austin tent sale was held in a far corner of the parking lot outside the city exhibition hall where the automotive show was in progress. Because most customers were interested more in the new model cars than in the refurbishment of their current cars, foot traffic was low. In addition, customers did not want to carry speakers and amplifiers all the way back to where they had originally parked. Total direct costs for this tent sale were $14,300. Direct costs included gasoline and fuel for three pickup trucks and the semitrailer; wages and per diem for the five Kicker personnel who traveled to the show; rent on the parking lot space; and depreciation on the semitrailer, pickups, tent, tables (in tent), sound equipment; and the like. Revenue was $20,000. Cost of goods sold for the speakers was $7,000.
Required:
1. How do you suppose Kicker accounts for the costs of the tent sales? What income statement items are affected by the tent sales?
2. What was the profit (loss) from the Austin tent sale? What do you think Kicker might do to make it more profitable in the future?
Aug 29, 2021 | Uncategorized
Following is a list of cost items described in the chapter as well as a list of brief descriptive settings for each item.
Cost terms:
a. Opportunity cost
b. Period cost
c. Product cost
d. Direct labor cost
e. Selling cost
f. Conversion cost
g. Prime cost
h. Direct materials cost
i. Manufacturing overhead cost
j. Administrative cost
Settings:
1. Marcus Armstrong, manager of Timmins Optical, estimated that the cost of plastic, wages of the technician producing the lenses, and overhead totaled $30 per pair of single vision lenses.
2. Linda was having a hard time deciding whether to return to school. She was concerned about the salary she would have to give up for the next four years.
3. Randy Harris is the finished goods warehouse manager for a medium sized manufacturing firm. He is paid a salary of $90,000 per year. As he studied the financial statements prepared by the local certified public accounting firm, he wondered how his salary was treated.
4. Jamie Young is in charge of the legal department at company headquarters. Her salary is $95,000 per year. She reports to the chief executive officer.
5. All factory costs that are not classified as direct materials or direct labor.
6. The new product required machining, assembly, and painting. The design engineer asked the accounting department to estimate the labor cost of each of the three operations. The engineer supplied the estimated labor hours for each operation.
7. After obtaining the estimate of direct labor cost, the design engineer estimated the cost of the materials that would be used for the new product.
8. The design engineer totaled the costs of materials and direct labor for the new product.
9. The design engineer also estimated the cost of converting the raw materials into its final form.
10. The auditor for a soft drink bottling plant pointed out that the depreciation on the delivery trucks had been incorrectly assigned to product cost (through overhead).
Accordingly, the depreciation charge was reallocated on the income statement.
Required:
Match the items with the settings. More than one cost classification may be associated with each setting; however, select the setting that seems to fit the item best. When you are done, each cost term will be used just once.
Aug 29, 2021 | Uncategorized
Four different corporations, Aries, Germini, Leo, and Pisces, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of stockholders’ equity, are summarized as follows:
On the basis of the above data and the following additional information for the year, determine the net income (or loss) of each company for the year.
Aries: No additional capital stock was issued and no dividends were paid.
Gemini: No additional capital stock was issued, but dividends of $40,000 were paid.
Leo: Additional capital stock of $90,000 was issued, but no dividends were paid.
Pisces: Additional capital stock of $90,000 was issued and dividends of $40,000 were paid.
Aug 29, 2021 | Uncategorized
Fred Austin is employed by White Company where he assembles a component part for one of the company’s products. Fred is paid $12 per hour for regular time, and he is paid time and a half (i.e., $18 per hour) for all work in excess of 40 hours per week.
Required:
1. Assume that during a given week Fred is idle for two hours due to machine breakdowns and that he is idle for four more hours due to material shortages. No overtime is recorded for the week. Allocate Fred’s wages for the week between direct labor cost and manufacturing overhead cost.
2. Assume that during a following week Fred works a total of 50 hours. He has no idle time for the week. Allocate Fred’s wages for the week between direct labor cost and manufacturing overhead cost.
3. Fred’s company provides an attractive package of fringe benefits for its employees. This package includes a retirement program and a health insurance program. Explain two ways that the company could handle the costs of its direct laborers’ fringe benefits in its cost records.
Aug 29, 2021 | Uncategorized
Gazca Company specializes in manufacturing motorcycle helmets. The company has enough orders to keep the factory production at 1,000 motorcycle helmets per month. Gazca’s monthly manufacturing cost and other expense data are as follows.
Maintenance costs on factory building $ 1,500
Factory manager’s salary ………………….…….. 4,000
Advertising for helmets ……………….………… 8,000
Sales commissions ………………………………. 5,000
Depreciation on factory building ……………….…. 700
Rent on factory equipment ………………………. 6,000
Insurance on factory building ………………..….. 3,000
Raw materials (plastic, polystyrene, etc.) ……… 20,000
Utility costs for factory …………………………… 800
Supplies for general office …………………..……. 200
Wages for assembly line workers …………..…. 54,000
Depreciation on office equipment ………………… 500
Miscellaneous materials (glue, thread, etc.) …… 2,000
Instructions
(a) Prepare an answer sheet with the following column headings.
Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one motorcycle helmet.
Aug 29, 2021 | Uncategorized
Given the following selected account balances of Spalding Company, prepare its manufacturing statement for the year ended on December 31, 2009. Include a listing of the individual overhead account balances in this statement.
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,363,000
Raw materials inventory, Dec. 31, 2008 . . . . . . . . . 40,000
Goods in process inventory, Dec. 31, 2008 . . . . . . . 53,600
Finished goods inventory, Dec. 31, 2008 . . . . . . . . . 60,400
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 181,900
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,000
Factory computer supplies used . . . . . . . . . . . . . . . 15,700
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Repairs—Factory equipment . . . . . . . . . . . . . . . . . . 7,250
Rent cost of factory building . . . . . . . . . . . . . . . . . . 56,000
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . 92,000
General and administrative expenses . . . . . . . . . . . . 140,000
Raw materials inventory, Dec. 31, 2009 . . . . . . . . . . 44,000
Goods in process inventory, Dec. 31, 2009 . . . . . . . . 41,200
Finished goods inventory, Dec. 31, 2009 . . . . . . . . . 66,200
Aug 29, 2021 | Uncategorized
Harry Whipple, owner of an inkjet printer, has agreed to allow Mary and Natalie, two friends who are pursuing master’s degrees, to print several papers for their graduate courses. However, he has imposed two conditions. First, they must supply their own paper. Second, they must pay Harry a fair amount for the usage of the ink cartridge. Harry’s printer takes two types of cartridges, a black one and a color one that contains the inks necessary to print in color. Black replacement cartridges cost $25.50 each and print approximately 850 pages. The color cartridge replacement cost $31 and prints approximately 310 color pages. One ream of paper costs $2.50 and contains 500 sheets. Mary’s printing requirements are for 500 pages, while Natalie’s are for 1,000 pages.
Required:
1. Assuming that both women write papers using text only (i.e., black ink), what is the total amount owed to Harry by Mary? By Natalie?
2. What is the total cost of printing (ink and paper) for Mary? For Natalie?
3. Now suppose that Natalie illustrates her writing with many large colorful pie charts and pictures and that about 20 percent of her total printing is primarily color. Mary uses no color illustrations. What is the total amount owed to Harry by Natalie? What is the total cost of printing (ink and paper) for Natalie?
Aug 29, 2021 | Uncategorized
Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May:
Direct labor cost ……………………………………….$10,500
Purchases of raw materials ……………………………. .15,000
Supplies used ………………………………………………675
Factory insurance ………………………………………….350
Commissions paid ………………………………………. 2,500
Factory supervision ………………………………………2,225
Advertising …………………………………………………800
Material handling …………………………………………3,750
Materials inventory, May 1 ………………………………3,475
Work in process inventory, May 1 ……………………..12,500
Finished goods inventory, May 1 ………………………..6,685
Materials inventory, May 31 ……………………………..9,500
Work in process inventory, May 31 ……………………14,250
Finished goods inventory, May 31 ………………………4,250
Required:
1. Prepare a statement of cost of goods manufactured.
2. Prepare a statement of cost of goods sold.
Aug 29, 2021 | Uncategorized
Hector P. Wastrel, a careless employee, left some combustible materials near an open flame in Salter Company’s plant. The resulting explosion and fire destroyed the entire plant and administrative offices. Justin Quick, the company’s controller, and Constance True heart, the operations manager, were able to save only a few bits of information as they escaped from the roaring blaze. What a disaster, cried Justin. And the worst part is that we have no records to use in filing an insurance claim.
I know, replied Constance, I was in the plant when the explosion occurred and I managed to grab only this brief summary sheet that contains information on one or two or our costs. It says that our direct labor cost this year has totaled $180,000 and that we have purchased $290,000 in raw materials. But I’m afraid that doesn’t help much; the rest of our records are just ashes. Well, not completely, said Justin. I was working on the year to date income statement when the explosion knocked me out of my chair. I instinctively held onto the page I was working on, and from what I can make out, our sales to date this year have totaled $1,200,000 and our gross margin rate has been 40% of sales. Also, I can see that our goods available for sale to customers has totaled $810,000 at cost. Maybe we’re not so bad off after all, exclaimed Constance. My sheet says that prime cost has totaled $410,000 so far this year and that manufacturing overhead is 70% of conversion cost. Now if we just had some information on our beginning inventories. Hey look at this, cried Justin. It’s a copy of last year’s annual report, and it shows what our inventories were when this year started. Let’s see, raw materials were $18,000, work in process was $65,000, and finished goods were $45,000.
Super, yelled Constance, let’s go to work. To file an insurance claim, the company must determine the amount of cost in its inventories as of the date of the fire. You may assume that all materials used in production during the year were direct materials.
Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods inventory accounts as of the date of the fire.
Aug 29, 2021 | Uncategorized
Hummer Company uses manufacturing cells to produce its products (a cell is a manufacturing unit dedicated to the production of subassemblies or products). One manufacturing cell produces small motors for lawn mowers. Suppose that the motor manufacturing cell is the cost object. Assume that all or a portion of the following costs must be assigned to the cell.
a. Salary of cell supervisor
b. Power to heat and cool the plant in which the cell is located
c. Materials used to produce the motors
d. Maintenance for the cell’s equipment (provided by the maintenance department)
e. Labor used to produce motors
f. Cafeteria that services the plant’s employees
g. Depreciation on the plant
h. Depreciation on equipment used to produce the motors
i. Ordering costs for materials used in production
j. Engineering support (provided by the engineering department)
k. Cost of maintaining the plant and grounds
l. Cost of the plant’s personnel office
m. Property tax on the plant and land
Required:
Classify each of the costs as a direct cost or an indirect cost to the motor manufacturing cell.
Aug 29, 2021 | Uncategorized
I was sure that when our battery hit the market it would be an instant success, said Roger Strong, founder and president of Solar Technology, Inc., but just look at the gusher of red ink for the first quarter. Its obvious that were better scientists that we are businesspeople. The data to which Roger was referring follow:
?
At this rate well be out of business within a year said Cindy Zhang, the companys accountant. But Ive double checked these figures, so I know theyre right. Solar Technology was organized at the beginning of the current year to produce and market a revolutionary new solar battery. The companys accounting system was set up be Margie Wallace, an experience accountant who recently left the company to do independent consulting work. The statement above was prepared by Zhang, her assistant.
We may not last a year if the insurance company doesnt pay the $226,000 it owes us for the 8,000 batteries lost in the warehouse fire last week, said Roger. The insurance adjuster says out claim, and it will stand up in any court. On April 3, just after the end of the first quarter, the companys finished goods storage area was swept by fire and all 8,000 unsold batteries were destroyed. (These batteries were part of the 40,000 units completed during the first quarter). The companys insurance policy states that the company will be reimbursed for the cost of any finished batteries destroyed or stolen. Zhang has determined this cost as follows:
Total costs for the quarter/ Batteries produced during the quarter = $1,130,000/ 40,000units = $28.25 per unit
8,000 batteries x $ 28.25 per unit = $225,000
The following additional information is available on the companys activities during the quarter ended Marc 31:
a. Inventories at the beginning and end of the quarter were as follows:
?
b. Eighty percent of the rental cost for facilities and 90% of the utilities cost relate to manufacturing operations. The remaining amounts relate to selling and administrative activates.
Required:
1. What conceptual errors, if any, were made in preparing the income statement above?
2. Prepare a schedule of cost of goods manufactured for the first quarter. 3. Prepare a corrected income statement for the first quarter. Your statement should shoe in detail how the cost of goods sold is computed.
4. Do you agree that the insurance company owes Solar Technology, Inc. $226,000? Explain your answer.
Aug 29, 2021 | Uncategorized
Indicate whether the following statements are true or false.
1. Managerial accountants explain and report manufacturing and nonmanufacturing costs, determine cost behaviors, and perform C V P analysis, but are not involved in the budget process.
2. Financial accounting reports pertain to subunits of the business and are very detailed.
3. Managerial accounting reports must follow GAAP and are audited by CPAs.
4. Managers’ activities and responsibilities can be classified into three broad functions: planning, directing, and controlling.
5. As a result of the Sarbanes Oxley Act of 2002 (SOX), top managers must certify that the company maintains an adequate system of internal control.
6. Management accountants follow a code of ethics developed by the Institute of Management Accountants.
Aug 29, 2021 | Uncategorized
Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, had arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong friends. They grew up together in a small town and attended the same university. Leroy was a competent, successful accountant but currently was experiencing some personal financial difficulties. The problems were created by some investments that had turned sour, leaving him with a $15,000 personal loan to pay off—just at the time that his oldest son was scheduled to enter college.
Jean, on the other hand, was struggling to establish a successful advertising business. She had recently acquired the rights to open a branch office of a large regional advertising firm headquartered in Atlanta, Georgia. During her first two years, she had managed to build a small, profitable practice; however, the chance to gain a significant foothold in the Charlotte advertising community hinged on the success of winning a bid to represent the state of North Carolina in a major campaign to attract new industry and tourism. The meeting she had scheduled with Leroy concerned the bid she planned to submit.
Jean: Leroy, I’m at a critical point in my business venture. If I can win the bid for the state’s advertising dollars, I’ll be set. Winning the bid will bring $600,000 to $700,000 of revenues into the firm. On top of that, I estimate that the publicity will bring another $200,000 to $300,000 of new business.
Leroy: I understand. My boss is anxious to win that business as well. It would mean a huge increase in profits for my firm. It’s a competitive business, though. As new as you are, I doubt that you’ll have much chance of winning.
Jean: You may be wrong. You’re forgetting two very important considerations. First, I have the backing of all the resources and talent of a regional firm. Second, I have some political connections. Last year, I was hired to run the publicity side of the governor’s campaign. He was impressed with my work and would like me to have this business. I am confident that the proposals I submit will be very competitive. My only concern is to submit a bid that beats your firm. If I come in with a lower bid and good proposals, the governor can see to it that I get the work.
Leroy: Sounds promising. If you do win, however, there will be a lot of upset people. After all, they are going to claim that the business should have been given to local advertisers, not to some out of state firm. Given the size of your office, you’ll have to get support from Atlanta. You could take a lot of heat.
Jean: True. But I am the owner of the branch office. That fact alone should blunt most of the criticism. Who can argue that I’m not a local? Listen, with your help, I think I can win this bid. Furthermore, if I do win it, you can reap some direct benefits. With that kind of business, I can afford to hire an accountant, and I’ll make it worthwhile for you to transfer jobs. I can offer you an up front bonus of $15,000. On top of that, I’ll increase your annual salary by 20 percent. That should solve most of your financial difficulties. After all, we have been friends since day one—and what are friends for?
Leroy: Jean, my wife would be ecstatic if I were able to improve our financial position as quickly as this opportunity affords. I certainly hope that you win the bid. What kind of help can I provide?
Jean: Simple. To win, all I have to do is beat the bid of your firm. Before I submit my bid, I would like you to review it. With the financial skills you have, it should be easy for you to spot any excessive costs that I may have included. Or perhaps I included the wrong kind of costs. By cutting excessive costs and eliminating costs that may not be directly related to the project, my bid should be competitive enough to meet or beat your firm’s bid.
Required:
1. What would you do if you were Leroy? Fully explain the reasons for your choice. What do you suppose the code of conduct for Leroy’s company would say about this situation?
2. What is the likely outcome if Leroy agrees to review the bid? Is there much risk to him personally if he reviews the bid? Should the degree of risk have any bearing on his decision?
Aug 29, 2021 | Uncategorized
Jenna Suarez, the controller for Arben Company, has faced the following situations in the past two weeks:
a. Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially assembled or to buy individual parts and assemble them at the Arben factory.
b. The president of Arben reminded Jenna that the stockholders’ meeting was coming up, and he needed her to prepare a PowerPoint ® presentation showing the income statement and balance sheet information for last year.
c. Ellen Johnson, vice president of sales, has decided to expand the sales offices for next year. She sent Jenna the information on next year’s rent and depreciation information for budgeting purposes.
d. Jenna’s assistant, Mike, received the information from Ellen on depreciation and added it to depreciation expenses and accumulated depreciation on office equipment.
e. Jenna compared the budgeted spending on materials used in production with the actual spending on materials used in production. Materials spending was significantly higher than expected. She set up a meeting to discuss this outcome with Ben Heald so that he could explain it.
Required:
Determine whether each request is relatively more managerial accounting oriented or financial accounting oriented.
Aug 29, 2021 | Uncategorized
Juan Gomez was the fastest rising star of a small CPA firm in West Palm Beach. Most of his clients traveled in stratospheric circles of wealth, and Juan knew that fitting in with this crowd was essential to his career. Although he made good money, it wasn’t enough to live that kind of lifestyle. Meanwhile, Juan had become friends with one of his clients, Tony Russo. Knowing Russo’s books inside and out, and being on close terms with him, Juan asked Tony for a personal loan. Juan was sure he’d be able to pay it back when he got his next bonus, but things stretched out, and additional loans were made. Two years later, Tony’s company hit some losses, and the numbers were looking grim. Tony reminded Juan that it would not look good for his career if his CPA firm knew Juan had borrowed from a client, and so Juan changed a few numbers and signed off on clean financials for Tony’s firm. This went on for three years, until one morning when Juan got a call. Russo had died; his sons had gone through the books, and the whole scheme came out. Juan did some prison time and lost his license, but he was repentant, and made an instructional video for accounting students to warn them of the temptations they may encounter in the real world of business.
Requirements
1. Although the protagonist of this story worked in public accounting, please refer to the Statement of Ethical Professional Practice in Exhibit 16 3 and discuss which of those issues are reflected in this case.
2. Could Juan have extricated himself from his situation? How?
Aug 29, 2021 | Uncategorized
Kabana Company, a manufacturer of stereo systems, started its production in October 2012. For the preceding 3 years Kabana had been a retailer of stereo systems. After a thorough survey of stereo system markets, Kabana decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Factory janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.
Instructions
(a) Prepare an answer sheet with the following column headings.
Assuming that Kabana manufactures, on average, 1,300 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one stereo system.
Aug 29, 2021 | Uncategorized
Kirsoff Company makes eBook readers. The company had the following amounts at the beginning of 2011: Cash, $660,000; Raw Materials Inventory, $51,000; Work in Process Inventory, $18,000; Finished Goods Inventory, $43,000; Common Stock, $583,000; and Retained Earnings, $189,000. Kirsoff experienced the following accounting events during 2011. Other than the adjusting entries for depreciation, assume that all transactions are cash transactions.
1. Paid $23,000 of research and development costs.
2. Paid $47,000 for raw materials that will be used to make eBook readers.
3. Placed $83,000 of the raw materials cost into the process of manufacturing eBook readers.
4. Paid $60,000 for salaries of selling and administrative employees.
5. Paid $91,000 for wages of production workers.
6. Paid $90,000 to purchase equipment used in selling and administrative offices.
7. Recognized depreciation on the office equipment. The equipment was acquired on January, 1, 2011. It has a $10,000 salvage value and a five year life. The amount of depreciation is computed as [(Cost salvage) A? useful life]. Specifically, ($90,000 $10,000) A? 5 = $16,000.
8. Paid $165,000 to purchase manufacturing equipment.
9. Recognized depreciation on the manufacturing equipment. The equipment was acquired on January 1, 2011. It has a $25,000 salvage value and a seven year life. The amount of depreciation is computed as [(Cost salvage) A? useful life]. Specifically, ($165,000 $25,000) A? 7 = $20,000.
10. Paid $45,000 for rent and utility costs on the manufacturing facility.
11. Paid $70,000 for inventory holding expenses for completed eBook readers (rental of warehouse space, salaries of warehouse personnel, and other general storage cost).
12. Completed and transferred eBook readers that had total cost of $240,000 from work in process inventory to finished goods.
13. Sold 1,000 eBook readers for $420,000.
14. It cost Kirsoff $220,000 to make the eBook readers sold in Event 13.
Required
a. Show how these events affect the balance sheet, income statement, and statement of cash flows by recording them in a horizontal financial statements model.
b. Explain why Kirsoff’s recognition of cost of goods sold had no impact on cash flow.
c. Prepare a schedule of cost of goods manufactured and sold, a formal income statement, and a balance sheet for the year.
d. Distinguish between the product costs and the upstream costs that Kirsoff incurred.
e. The company president believes that Kirsoff could save money by buying the inventory that it currently makes. The warehouse manager said that would not be a good idea because the purchase price of $230 per unit was above the $220 average cost per unit of making the product. Assuming the purchased inventory would be available on demand, explain how the company could be correct and why the production manager could be biased in his assessment of the option to buy the inventory.
Aug 29, 2021 | Uncategorized
Laworld Inc. manufactures small camping tents. Last year, 200,000 tents were made and sold for $60 each. Each tent includes the following costs:
Direct materials …………………..$18
Direct labor ………………………..12
Manufacturing overhead ………….16
The only selling expenses were a commission of $2 per unit sold and advertising totaling $100,000. Administrative expenses, all fixed, equaled $300,000. There were no beginning or ending finished goods inventories. There were no beginning or ending work in process inventories.
Required:
1. Calculate the product cost for one tent. Calculate the total product cost for last year.
2. Prepare an income statement for external users. Did you need to prepare a supporting statement of cost of goods manufactured? Explain.
3. Suppose 200,000 tents were produced (and 200,000 sold) but that the company had a beginning finished goods inventory of 10,000 tents produced in the prior year at $40 per unit. The company follows a first in, first out policy for its inventory (meaning that the units produced first are sold first for purposes of cost flow). What effect does this have on the income statement? Show the new statement.
Aug 29, 2021 | Uncategorized
Listed below are a number of costs that are incurred in connection with a company’s quality control system.
a.?Product?k.?Net cost of scrap??b.?Product recalls.?l.?Depreciation of test equipment.??c. ?Rework labor and overhead.?m.?Returns and allowances arising from poor quality.??d.?Quality circles.?n.?Disposal of defective products.??e.?Downtime caused by defects.?o.?Technical support to suppliers??f.?Cost of field servicing?p.?Systems development??g.?Inspection of goods.?q.?Warranty replacements.??h.?Quality engineering.?r.?Field testing at customer site.??i.?Warranty repairs?s.?Product design??j.?Statistical process control.????Required:
1. Classify each of the costs above into one of the following categories: prevention cost, appraisal cost, internal failure cost, or external failure cost.
2. Which of the costs in (1) above are incurred in an effort to keep poor quality of conformance from occurring? Which of the costs in (1) above are incurred because poor quality of conformance has occurred?
Aug 29, 2021 | Uncategorized
Weighted average method, spoilage. Chipcity is a fast growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. Chipcity uses the weighted average method of process costing.
Summary data for September 2008 are:
1. For each cost category, compute equivalent units. Show physical units in the first column of your schedule.
2. Summarize total costs to account for, calculate cost per equivalent unit for each cost category, and assign total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work inprocess.
Aug 29, 2021 | Uncategorized
Weighted average method, spoilage. The Boston Company is a food processing company based in San Francisco. It operates under the weighted average method of process costing and has two departments: Cleaning and Packaging. For the Cleaning Department conversion costs are added evenly during the process, and direct materials are added at the beginning of the process. Spoiled units are detected upon inspection at the end of the process and are disposed of at zero net disposal value. All completed work is transferred to the Packaging Department. Summary data for May follow:
For the Cleaning Department summarize total costs to account for, and assign total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. Carry unit cost calculations to four decimal places when necessary. Calculate final totals to the nearest dollar. (Problem 18 32 explores additional facets of thisproblem.)
Aug 29, 2021 | Uncategorized
August 2010 I STRATEGIC FINANCE 3 7 By Jennifer Dosch, CMA, and Joel Wilson, CPA Process Costing and Management Accounting in Today’s Business Environment COST MANAGEMENT I t’s the classic “either/or” proposition in manufacturing settings, where assembly practices generally follow one of two tracks: job or process. The difference between the two is the ability to trace input costs to finished goods. A manufacturing process that requires specific amounts of raw materials and labor to complete a unit is the job method. With job costing, the amount of raw materials and labor placed into production can be traced or specifically identified to the finished good. A process method, on the other hand, involves the manufacture of large or mass quantities of identical units and is more complex because specific amounts of raw materials and labor can’t be traced to finished goods. In a process manufacturing environment, raw materials, labor, and overhead placed into production need to be allocated to inventory. Given the difference in the ability to trace input costs of these two methods, the valuations of work in process and finished goods inventories differ significantly. The topic of process costing as often presented in textbooks is simplified and doesn’t reflect industry practice. The primary difference is the textbook assumption that actual costs incurred each month are reflected in valuing inventory and cost of goods sold. In practice, predetermined standard costs—not actual ones—are used. Valuation and costing are important aspects when discussing standards. But potentially the most significant use for standards is as a strategic cost management tool, an approach that’s either ignored or limited to a description in most textbooks. Thus, many management accountants are untrained or unaware of the many potential uses of standards as a management tool. To clarify how process costing is done in industry and how the use of standards can facilitate strategic cost management, we conducted interviews with managers at three consumer packaged goods manufacturers. The homogeneous nature of the packaged goods industry provides an ideal application of process costing. To provide a balanced perspective, we selected three companies varied in size and complexity: a large multibillion dollar company, a $500 million company, and a small company. All of them use process costing and standards—in a manner ranging from straightforward to complex—to help them manage their business profitably. Theory of Process Costing Process costing is defined as an accounting methodology that tracks the production of large quantities of identical units. At the end of the period, units in production (work in process) and completed units (finished goods) must be valued for the balance sheet and income statement as required for external reporting. A popular textbook approach includes a five step method for allocating costs to inventory: Step 1: Summarize the flow of units: in process at the beginning of the period and placed into production. Step 2: Compute output: units completed and units in process at the end of the period. Step 3: Summarize total manufacturing costs incurred during the period. Step 4: Compute manufacturing costs per unit. Step 5: Assign manufacturing costs to units completed and ending work in process. The textbook focus is clearly on the “calculation.” Exercises and problems focus on the mathematical completion of allocating manufacturing costs to ending work in process and finished goods using the five step method. The discussion of process costing generally stops here. Little or no significant discussion is found in textbooks on how management uses process costing to manage the manufacturing operations. The emphasis is on providing values for work in process and finished inventory for external reporting. The textbooks generally place the management accountant in a traditional cost accounting role, focusing on the calculation of results for financial statements. Little discussion is devoted to interpersonal and analytical/strategic management skills (see Figure 1). The role of the management accountant in a manufacturing firm that utilizes process costing is best leveraged when the accountant is fully engaged in all phases of the process. This requires skills well beyond the tra3 8 STRATEGIC FINANCE I August 2010 COST MANAGEMENT The most significant use for standards is as a strategic cost management tool, an approach that’s either ignored or limited to a description in most textbooks. ditional cost accounting role. In a process costing environment, the management accountant will be required to work cross functionally to gather standard information, communicate results, and evaluate performance. In particular, interactions with the operations and sales departments will be critical to the development of accurate standards. Today’s management accountant must have a solid understanding of the manufacturing, sales, and distribution process and a good handle on what information is relevant to support management decision making. In short, today’s management accountant has evolved to that of a strategic partner in the organization. What the Interviews Taught Us Our interviews with three consumer packaged goods companies allowed us to gain insight into the actual method of valuation and costing used and, more importantly, how this information is employed from a strategic cost management perspective. Specifically, for each company the emphasis was on process costing methodology, inventory valuation, variance analysis, and strategic management application. The common theme among the three companies was that each one’s process costing practices are different from what’s taught in management texts. All three companies work with standard costs rather than actual costs. All three focus on the strategic use of standards, including the quick communication of results and the immediate investigation of significant variances. The textbook emphasis on inventory valuations takes a back seat to communicating necessary business changes and acting on them by examining standards and comparing them to the budget. The interviews also provided insight as to why standards are preferred over actual results. For one, communicating results using predetermined standards is much faster than waiting to accumulate actual cost data. Moreover, standards provide consistency across reporting periods that may fluctuate month to month. Most importantly, standards allow departments to work together using the same performance measures across the company. As shown in Figure 2, regardless of a company’s size, these characteristics are vital to organizations in today’s business environment. The Multibillion Dollar Company The large company’s application of process costing is the most complex, driven by substantial revenues, the large number of product offerings, and the sophisticated use of process costing information in managing the business efficiently and profitably. This approach utilizes two perspectives: operations and product profitability. As the following discussions will show, the steps necessary to complete standard costing in a process costing environment aren’t really new. The key is the vital role the management accountant plays in today’s business environment to work cross functionally to gather information, perform analyses, and communicate results. This allows the organization to react to marketplace or cusAugust 2010 I STRATEGIC FINANCE 3 9 STRONG PROCESS UNDERSTANDING AND FOCUS ON RELEVANT INFORMATION EFFECTIVELY COMMUNICATES CROSS FUNCTIONALLY KEY DECISION SUPPORT TO MANAGEMENT STRATEGIC PARTNER FACILITATES CROSS FUNCTIONAL COMMUNICATION ENSURES CONSISTENCY IN MEASURING, REPORTING, AND MANAGING COSTS ACROSS THE ORGANIZATION PROVIDES “REAL TIME” FEEDBACK OF RESULTS Figure 2: The Benefits of Standard Costing Figure 1: Implications for the Role of Today’s Management Accountant HOW IS STANDARD COSTING MOST ADVANTAGEOUS TODAY? tomer changes more rapidly, to recognize cost overruns sooner, and, ultimately, to align the company’s strategic objectives closer to its day to day activities (Figure 3). Applying Standard Costs in a Global Firm In the multibillion dollar company, the operations group is responsible for setting the standard manufacturing input costs per unit, and the product profitability group is charged with establishing standard volumes that are used in conjunction with the input costs. Let’s examine this process in more detail. In operations, the standard input costs are based on a set of assumptions that are updated each year during the company’s annual budgeting cycle. To make the input costs as accurate as possible, several divisions within the operations group are involved in developing standards. Updating standard costs begins with analyzing the prior year’s actual costs for each input: direct materials, direct labor, and overhead. Not surprisingly, analyzing input costs becomes highly complex given the large and diverse nature of the company. The analysis includes reviewing dozens of direct material inputs, several levels of labor tied to thousands of employees with various benefit cost combinations, and many manufacturing locations, which involve multiple facility types and configurations. All of these inputs are examined closely for cost efficiency and are applied consistently across the company. When the analysis of last year’s input costs is complete, these amounts are adjusted based on known changes related to the current year. Standard costs are then calculated on a per unit basis, 4 0 STRATEGIC FINANCE I August 2010 COST MANAGEMENT EXAMINE PRIOR YEAR’S ACTUAL RESULTS IDENTIFY EFFICIENCIES INCORPORATE KNOWN CHANGES COMMUNICATE STANDARDS CONDUCT VARIANCE ANALYSIS PROVIDE “REAL TIME” FEEDBACK ON ACTUAL RESULTS Figure 3: An Unbroken Cycle The process for developing process costing standards reflects the planning process. Standards, however, provide real time feedback to managers rather than having to wait for the close of the accounting cycle. dividing the total budgeted input costs by the budgeted number of production units, which are provided by the product profitability group. Once complete, these budgeted standards are agreed upon by the operations division managers, the product profitability managers, and the company’s top management as the basis for comparison throughout the budget period. A Highly Sophisticated Reporting System Standard costs are applied to production volume each month to determine inventory values. The large company’s reporting system has the capability to calculate actual production volume based on inputs used during the period. Additionally, each plant completes a physical inventory monthly to verify that the reporting system has calculated an accurate production volume. Cost of goods sold is based on actual units sold multiplied by the unit standard cost developed during the budget cycle. Finished goods on hand at the end of the period are also calculated using the actual production volume multiplied by standard unit cost. The company’s reporting system can also determine stages of production in process. Units are calculated at each stage and multiplied by standard unit costs to value ending work inprocess. The responsibility for developing cost estimates for raw materials, labor, and overhead rests with the operations group, which is typical of most companies this size. Thus, operations is responsible for cost efficiency. This group performs a monthly variance analysis to evaluate actual resource consumption vs. standard expectations. These variances are then communicated throughout the organization. In addition, operations managers review the variances between actual and standard results in four categories: raw materials price, raw materials used in production, direct labor, and manufacturing overhead. If the managers determine that the variance is significant, an adjustment is made to the income statement that month. If the variance is related to production volume as compared to budget expectations, the variance is reviewed with product profitability management to determine whether it’s explained by timing or if it’s real. If it’s real, adjustments are made to that month’s income statement. As discussed, operations is responsible for all variance adjustments because its divisions control the amount of direct materials and labor used in production. Overhead such as facilities and equipment can’t be impacted in the current reporting period. Direct materials are purchased at the overall company level to take advantage of largevolume, contractual price discounts. Therefore, the variance adjustments are recorded at the point of control: operations and purchasing. In each of the areas described, the size of the variance will dictate if adjustments are necessary monthly, quarterly, or annually. The standard input cost or raw material amount, however, will be adjusted only annually as part of the yearly budget cycle to maintain consistency and accountability. Product Profitability Management The large company—a giant in the packaged food industry—has a broad array of product offerings. Each product line is separated into a division for reporting purposes. Naturally, management believes the focus on individual product profitability will lead to greater overall company performance. The standard manufacturing input costs generated by the operations divisions are the same standards the product profitability group uses. The divisions are expected to manage the product line based on the standard costs developed by the operations group and the standard volumes developed by the product profitability group. Operations, product profitability, and top management must all agree on these standards. Each product division completes a monthly variance analysis comparing standards to actual results. Volume variances that are significant require input from product division management to determine if they’re expected to continue or are due to timing. Sizable volume variances that aren’t expected to change would have an immediate impact on cost of goods sold. Moreover, the cost standards developed by the operations group are used company wide for performance evaluation. In operations, for example, performance evaluation is measured by manufacturing efficiency—both the amount of inputs used and the cost incurred to produce units. Likewise, the group responsible for developing volume standards is evaluated on the volume and profitability of its respective product lines. In pulling everything together, top management evaluates each division using the same standards for different purposes. Operations is evaluated on cost control. The product profitability group is evaluated on the profitability of each product line to ensure proper pricing, the achievement of sales goals, market presence, and overall company profitability. August 2010 I STRATEGIC FINANCE 4 1 The $500 Million Company Process costing at the $500 million company is significantly less complex than at the large company, although there’s some overlap in methodology. Nevertheless, some characteristics are unique to the large company, such as proper costing for efficiency and effective volume estimates by product. Developing standard costs and standard production volumes is similar between the large company and the $500 million company. In the latter, the operations group has the primary responsibility for developing standard manufacturing input costs. The variances between actual and standard results are reviewed in four categories: raw materials price, raw materials used in production, direct labor, and manufacturing overhead. Budget amounts for each cost category are developed based on an analysis of the prior year’s actual costs, and adjustments are made for known changes to input cost categories. These budget amounts then become the basis for the standard costs used in process costing. As with the large company, the sales group in the medium sized firm is responsible for developing the volume standard. Operations then uses this volume estimate to create the cost standard. Standard costs per unit are utilized for allocating costs to inventory and managing the operations division. For inventory valuation, units sold in the current period are tracked on an actual physical count basis. Manufacturing costs are allocated to these finished units by multiplying standard input costs per unit by the number of units sold. Unsold finished units are also tracked by physical counts. Manufacturing costs are allocated to these finished goods by multiplying the standard costs per unit by the number of finished units on hand. Production that’s in process at the end of the period is estimated based on materials and labor used during the period. Operations management then estimates the percentage complete for those units in production at the end of the period. Based on the estimated volume and percentage, costs are allocated to these units by multiplying the standard costs per unit by the number of estimated units. A monthly variance analysis examines each of the four input categories for significant differences between the standard costs allocated and actual results. When variances are significant, the amounts are applied to the work in process inventory account. The rationale is the unit sales generally occur one month after production is complete. Volume variances are isolated and reviewed by the sales group. As mentioned earlier, as with the large company, the sales force in the $500 million firm is primarily responsible for the volume estimates. Large volume variances that require adjustment are made to work inprocess on the balance sheet. Again, this is due to a one month lag of sales after production. The medium sized company utilizes standard costs primarily to manage operations for efficiency. The main objective is to keep costs low, without the detailed emphasis on product profitability. Given the highly competitive nature of the consumer packaged foods industry, the medium sized company is less likely to drive market prices and is more apt to react to prices the market can bear. Therefore, the medium sized company must keep its costs low to be profitable. A Closer Look at the Small Company The small company generates and utilizes standard costs and volumes for process costing in a method that’s very similar to that of the large and medium sized companies. Developing standard manufacturing input costs begins with the annual budget cycle. Standard costs for each cost category, raw materials, direct labor, and manufacturing overhead are developed based on an analysis of the prior year’s actual costs, and adjustments are made for known changes for each input cost category. These budget amounts then form the basis for the standard costs that operations and management will analyze. Standard production volumes are also based on budget amounts. Much of the standard cost and production amounts are developed by the management accounting staff rather than operations and sales. With less complexity at this small company, the management accountants have a good understanding of the manufacturing process and sales estimates, allowing them to provide accurate standards. As with the two previous companies, standard input costs are used to determine inventory values at the end of the period. Cost of goods sold is calculated by multiplying the actual number of units sold by the standard input cost amounts. Finished goods that exist at the end of the period are counted by hand and multiplied by the standard input costs to determine the value of finished goods inventory. Production volume that’s in process at the end of the reporting period is estimated based on the standard cost per unit multiplied by a percentage complete standard. A study is conducted periodically that analyzes the level of 4 2 STRATEGIC FINANCE I August 2010 COST MANAGEMENT work in process over time. Results indicate that workin process tends to be, on average, 75% complete. The company uses this percentage (75%) of the inputs placed into production for the period as the volume standard to apply to work in process inventory for reporting purposes. Variance analysis of actual and standard costs is competed monthly. Variances for finished goods are recorded to cost of goods sold on the income statement. Variances for work in process result in adjustments to this inventory account on the balance sheet. Adjustments are made to standards semiannually if top management deems variances to be significant. As with the medium sized company, the small company is more likely to be a price taker, not a price setter in the market. This is true for product sales and for raw material input costs. Recent expansion of the manufacturing facility has provided excess capacity, positioning the firm for future expansion and long term growth. This small company is also highly focused on managing costs to ensure efficient production as the expected growth occurs. What We’ve Learned Textbook theory of process costing focuses on valuing work in process and finished goods inventory at the end of the period. A primary reason for this focus is to support external reporting of the financial statements. Based on our analysis of three companies that differ significantly in size, the industry practice of process costing focuses considerable effort on developing accurate standard input costs and volumes to help manage business operations efficiently and effectively. Additionally, the use of standard input costs allows management to determine if the company is making the most of raw materials and other resources deployed for production. When the sales divisions develop the volumes to be used as standards based on expected sales, top management can better evaluate product profitability, product mix, and market penetration. In practice, valuing inventory is fairly straightforward and doesn’t require significant amounts of management’s attention. For each of the three companies, standard manufacturing costs were used to assign values to units completed and estimated units in process at the end of the period. Textbooks, meanwhile, still tend to focus on actual costs and may mention standard costs only in passing. Another key attribute of standard costing is how quickly it allows management—as well as divisions—to get current financial information on business performance and to adjust near term and long term strategy, if necessary. By applying standard costs to production volume, clear and accurate reports can be generated right away without having to wait for actual cost data or having decisions improperly affected by normal peaks and valleys due to timing, seasonality, or customer order patterns. Companies need to be nimble in their ability to react to the current business environment. Standards help management of both large and small companies stay focused on effectively running the business for long term viability. Finally, let’s not forget you, the management accountant, a vital link to the successful implementation of standard costs in a process costing environment. Good interpersonal skills are critical in today’s business environment to facilitate cross functional communication when developing and reporting standard cost results. Managers need to ask, “Are we getting the most out of our standard costing system?” The answer may lie in another question, “Are we getting the most out of our management accountants?” SF Jennifer Dosch, CMA, is associate professor of accounting at Metropolitan State University in Minneapolis, Minn., and is a member of IMA’s Minneapolis Chapter. You can reach her at (612) 659 7249 or jennifer.dosch@metrostate.edu. Joel Wilson, CPA, is associate professor of accounting at Metropolitan State University. You can reach Joel at (612) 659 7307 or joel.wilson@metrostate.edu. August 2010 I STRATEGIC FINANCE 4 3 Copyright of Strategic Finance is the property of Institute of Management Accountants and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users may print, download, or email articles for individual use.
Aug 29, 2021 | Uncategorized
Classify each of the following financial statement items based upon the major balance sheet classifications.
 Current assetsStockholders’ equityLong term liabilitiesIntangible assetsCurrent liabilitiesLong term investmentsProperty, plant, and equipment |
|
Prepaid advertising |
| Stockholders’ equityLong term liabilitiesIntangible assetsCurrent assetsCurrent liabilitiesLong term investmentsProperty, plant, and equipment |
|
Equipment |
| Stockholders’ equityCurrent liabilitiesIntangible assetsCurrent assetsLong term investmentsLong term liabilitiesProperty, plant, and equipment |
|
Trademarks |
| Current assetsIntangible assetsLong term investmentsLong term liabilitiesCurrent liabilitiesProperty, plant, and equipmentStockholders’ equity |
|
Salaries and wages payable |
| Stockholders’ equityLong term liabilitiesProperty, plant, and equipmentIntangible assetsCurrent assetsCurrent liabilitiesLong term investments |
|
Income taxes payable |
| Current liabilitiesLong term investmentsIntangible assetsLong term liabilitiesCurrent assetsProperty, plant, and equipmentStockholders’ equity |
|
Retained earnings |
| Stockholders’ equityLong term liabilitiesCurrent assetsProperty, plant, and equipmentIntangible assetsCurrent liabilitiesLong term investments |
|
Accounts receivable |
| Property, plant, and equipmentCurrent liabilitiesLong term liabilitiesCurrent assetsStockholders’ equityLong term investmentsIntangible assets |
|
Land (held for future use) |
| Intangible assetsLong term investmentsCurrent liabilitiesCurrent assetsLong term liabilitiesProperty, plant, and equipmentStockholders’ equity |
|
Patents |
| Stockholders’ equityIntangible assetsCurrent assetsCurrent liabilitiesLong term investmentsLong term liabilitiesProperty, plant, and equipment |
|
Bonds payable |
| Property, plant, and equipmentLong term investmentsCurrent assetsLong term liabilitiesIntangible assetsStockholders’ equityCurrent liabilities |
|
Common stock |
| Intangible assetsStockholders’ equityCurrent liabilitiesLong term liabilitiesCurrent assetsLong term investmentsProperty, plant, and equipment |
|
Accumulated depreciation—equipment |
| Stockholders’ equityLong term liabilitiesProperty, plant, and equipmentIntangible assetsLong term investmentsCurrent assetsCurrent liabilities |
|
Unearned sales revenue |
| Long term liabilitiesStockholders’ equityCurrent assetsProperty, plant, and equipmentIntangible assetsCurrent liabilitiesLong term investments |
|
Inventory |
Aug 29, 2021 | Uncategorized
Date Description of Event
1
January 2, 2007
Employees are paid bi monthly on the first day of the month for work performed during the last half of the previous month (because of the New Year’s holiday, this month they are paid on the 2nd), and on the 16th for work done during the first half of the current month. Total wages paid on this date were $20,400. (Ignore payroll taxes for this assignment.)
2
Cottonwood signed and paid for an annual advertising agreement with the PRCA for banner ads on the PRCA website. Cottonwood’s advertisements will be posted to the website starting in March 2007 and run until February 28, 2008. The contract cost is $7,200 plus any art and setup charges, which will be billed as they occur.
3
January 3, 2007
Cottonwood’s office manager picked up office supplies from Office Max on her way into work. She checked the orders against Cottonwood’s purchase order and stocked the supplies in the supply cabinet. The Office Max invoice totaled $362 and payment terms are net the 15th of the month.
4
Cottonwood received a check for $12,620 from one of their customers as payment for a previous order.
5
Cottonwood received a shipment of event merchandise from the Rodeo Outfitters Company. This merchandise was ordered on December 20th and was delivered by Viking Freight. Rodeo Outfitters paid Viking for the shipping charge of $882. Cottonwood is to pay Rodeo Outfitters $92,000 based on terms of 2/10 net 30.
6
Cottonwood received their new product catalogs ordered from a local print shop. The print shop billed Cottonwood $6,000 for 5,000 catalogs with payment terms of net 10. Cottonwood considers catalogs as advertising and expenses the catalogs at the end of the month based on how many catalogs are sent out during the month.
7
January 4, 2007
Cottonwood received an order from the FFA rodeo in LaJunta Colorado, (LJ FFA), for $19,820 in event merchandise. The Cottonwood customer service representative confirmed that the LJ FFA Rodeo’s account was paid current and they had sufficient credit available to cover the new sale. The order was then sent tothe warehouse where it was picked and prepared for shipping. The merchandise was shipped via UPS at a cost of $170, which was paid by Cottonwood. Cost of the merchandise shipped was $12,584. Terms of the sale are net 30.
8
January 5, 2007
Cottonwood placed a purchase order with the Lazy J Ranchers Emporium for $76,000 in resale merchandise. Payment terms to Lazy J Ranchers are net 30 upon receipt of goods.
9
Cottonwood paid an outstanding vendor invoice of $16,050.
10
Cottonwood paid the December telephone bill to AT&T in the amount of $428. Expenses are usually accrued at the end of the month as “other accrued expenses payable”.
11
January 8, 2007
Cottonwood hired an additional employee for the warehouse. She starts work today. As with all of the other employees, this employee will be paid bi monthly at a rate of $2,400 per month.
12
Cottonwood received an order from the Del Norte County Rodeo in Trinity, CA for $18,000 of resale merchandise. This is a new rodeo with no credit history. Cottonwood has requested payment in full prior to the delivery of goods. The cost of the goods ordered is $10,440.
13
One of Cottonwood’s sales reps sold event merchandise to the Dust Bowl Rodeo in Kansas for a total sales amount of $126,000. Terms of the sale are net 15 and will be paid by electronic funds transfer (EFT). The order information was sent to the warehouse where the merchandise was picked and packaged for shipment. The order was picked up by CWX Freightlines and shipping costs of $685 were paid by Cottonwood at the time of shipment. Cost of the merchandise shipped was $80,600.
14
Cottonwood received customer checks totaling $28,400 for payment on outstanding accounts.
15
January 9, 2007
Cottonwood paid the December’s Pacific Gas & Electric (PG&E) bill in the amount of $2,110 using their bank’s automated billin the amount of $2,110 using their bank’s automated bill payment system.
16
A wire transfer in the amount of $18,000 is received from the Del Norte County Rodeo for payment of the order placed on January 8th. The goods are picked, packaged and shipped via UPS. Cottonwood has an account with UPS and will pay the shipping costs of $112 for this order. UPS’ payment terms are net 7 days.
17
Alamo Conference Center in Texas placed an order via email. Cottonwood’s sales rep wrote up the order, checked their credit and sent the order information to the warehouse for shipping. The sale amount was $102,240, which included $80,100 in resale merchandise and $22,140 in event merchandise. The cost of the resale merchandise was $51,264 and the cost of the event merchandise was $11,513. The goods were shipped that day. Cottonwood paid the shipping expense of $1,502. Payment terms for the order are net 15.
18
January 10, 2007
Cottonwood’s warehouse received the January 5th order from Lazy J Ranchers Emporium. The inventory was counted and placed on the shelves. Proof of receipt and the vendor’s invoice was sent to accounting. Lazy J paid the shipping of $1,190.
19
January 11, 2007
Cottonwood placed a purchase order with a local vendor for the new industrial shelving for the warehouse that was approved in Cottonwood’s budget. The total price for the shelving is $24,000 plus 7.25% sales tax. Installation costs are quoted at $1,200. Vendor payment terms are net 10.
20
The Bozeman Convention Center, (BCC), in Montana contacted Cottonwood with an order for $21,000 in resale merchandise. Cost of the merchandise was $13,440. BCC has never purchased from Cottonwood before, but has already submitted the appropriate paperwork to Cottonwood’s credit department.
21
January 12, 2007
Cottonwood’s credit department approved BCC for up to $15,000 credit at terms of net 15. BCC has been asked to send payment of $6,000 so that their order can be shipped.
22
Cottonwood paid Office Max for the supplies picked up on January 3rd.
23
Cottonwood paid for their printed catalogs received January 3rd.
©SAP AG 2007 / SAP University Alliances
9
©SAP AG 2007 / SAP University Alliances
24
Cottonwood paid the invoice for the shipment from Rodeo Outfitters received on January 3rd and took the 2% discount because of early payment.
25
January 15, 2007
After extensive collection effort including having a collection agency contact the party, Cottonwood was notified today that the Fly by Knight Rodeo has gone out of business. They owed Cottonwood $3,500 on account. Cottonwood now deems that debt as being uncollectible and removes it from their books.
26
Employees submitted their time statements for hours worked from January 1 – 15th.
27
January 16, 2007
BCC (see January 11 & 12) sent payment of $6,000 to Cottonwood via electronic funds transfer, (EFT). Cottonwood’s warehouse picked and packed BCC’s order and shipped it to Bozeman via CWX. Freight costs of $430 were paid by Cottonwood at the time of shipment.
28
Cottonwood paid $21,000 to employees for wages earned during the first half of January.
29
The industrial shelving was delivered and installed in Cottonwood’s warehouse (see January 11th). The vendor’s invoice, which matched Cottonwood’s purchase order, was hand delivered to accounts payable. Cottonwood paid the shipping of $320. The vendor’s contractor completed installation that day.
30
Cottonwood paid UPS for the shipment to Del Norte County Rodeo on January 9th.
31
January 17, 2007
Cottonwood received customer checks totaling $9,980 for payment on outstanding accounts.
32
The owners of Cottonwood were talking to the owner of the warehouses that they lease. They are good friends. The conversation centered around wise investment of the excess cash that Cottonwood presently has. The owner of the warehouses stated that he wishes to diversify his investments, especially with the flat real estate market. He suggested that Cottonwood purchase the warehouses. He said that he would give Cottonwood a good deal. Cottonwood decided to buy only one of the warehouses and continue to lease the other one. The price is to be $360,000 with a down payment of 20%. The original owner will carry a mortgage for the remainder with an interest rate of 7.5%. Title is to transfer on March 15, 2007. Today Cottonwood sent earnest money of $10,000 to the owner of the warehouse.
33
January 18, 2007
Cottonwood placed a purchase order with the Buckaroo Outfitters for $52,000 in resale merchandise. Payment terms to Buckaroo are net 30.
34
January 19, 2007
The Red Bluff Rodeo called in an order for $4,800 in event merchandise. The order information was given to the warehouse, where the merchandise was picked and set on the delivery dock for RB Rodeo to pick up. Cost of the merchandise was $2,496. Terms of the sale were cash on delivery, (COD).
Later in the day, Red Bluff Rodeo picked up and paid for their order, (including sales tax).
35
January 22, 2007
Cottonwood received payment from Dust Bowl Rodeo for theirorder from January 8th.
36
The FFA Rodeo in LaJunta Colorado (January 4th) returned $4,000 in event merchandise as excess merchandise. The merchandise was inspected and restocked. FFA is given a credit to their account for the returned merchandise. The credit is for the $4,000 minus a 10% restocking fee. The cost of the goods is $2,085. FFA LaJunta paid the return shipping of $62.
37
Cottonwood applied for credit with a new supplier, Howdy Partner U.S.A. A credit application was faxed to HP’s headquarters in San Antonio, TX. Cottonwood is anticipating an order with HP for $12,000 in resale merchandise.
38
January 23, 2007
Cottonwood’s bank notified them that an EFT in the amount of $102,240 from Alamo Conference Center had been deposited into their account.
39
Cottonwood received their order from Buckaroo Outfitters from January 18th. Buckaroo Outfitters paid the shipping charge of $105. The inventory was counted and placed on the shelves. Proof of receipt and the vendor’s invoice was sent to accounting.
40
January 24, 2007
The Boise Stampede called in an order for $98,726 in merchandise. $57,224 is for resale merchandise and $41,502 is for event merchandise. The cost of the resale merchandise is $36,623 and the cost of the event merchandise is $21,580. Boise Stampede has not yet established credit with Cottonwood. They are told that they must either supply the needed information to establish credit or pay cash before the goods can be delivered.
41
January 25, 2007
Cottonwood placed a purchase order with Rocking 5R Ranch Supplies for $38,000 in events merchandise. Cottonwood’s payment terms are 2% 10 net 30.
42
Cottonwood received a check from BCC (see January 12th) for $15,000.
43
January 29, 2007
Cottonwood has made arrangements with their two primary suppliers, Rodeo Outfitters and Lazy J for them to drop ship orders in the future. That means that the orders will be placed with the supplier and shipped directly from them. This reduces Cottonwood’s inventory carrying cost by reducing the need for inventory and frees up some cash for other purposes. The primary concern about this arrangement was that Cottonwood prides itself on almost always shipping the goods the same day as the order. Both suppliers have assured Cottonwood that they can also do same day shipment.
44
January 31, 2007
Cottonwood paid rent of $5,000 for the coming month’s lease of the warehouses.
45
Cottonwood pays sales tax once a year in January for the preceding 12 months. They do not make any sales tax deposits during the year. Cottonwood paid sales tax of $4,178 for 2006sales taxes collected.
46
Cottonwood purchased their warehouse and office equipment on December 1, 2004 for $162,000. At the time they signed a seven year note payable from the bank for $90,000. Over the seven years, payments of $1,589, which includes both principle and interest, are to be made at the end of each month. The annual interest rate on the loan is 12% calculated on the outstanding balance. The calculation of interest is based on each month having 30 days. Cottonwood transferred funds in the amount of $1,589 from their checking account to pay the loan amount due. (Hint: It is probably best to create an amortization schedule to handle this entry.)
47
Cottonwood paid the full amount due on the industrial shelving (see January 11th & 16th).
48
The employees submitted their time statements for January 16th through 31st. The calculated payroll is $21,600.
49
The owners and managers of Cottonwood choose a vendor from several responses to the RFP sent out in early December to supply them with their new shrink wrap equipment. The supplier will make some minor adjustments to their standard equipment to meet Cottonwood’s needs. Cottonwood owners sign the contract, which specifies a total equipment cost of $239,000 including customization, installation, initial training, and a two year warranty. Delivery and installation is tentatively scheduled for May 1, 2007. A down payment of $59,750 is due February 28th.
Adjustment information as of January 31, 2007 not already given in the original transaction(s):
1.
Rodeo supply sales is a relatively new industry, so bad debt average has not yet been established for the industry. Based on prior experience, Cottonwood estimates that approximately 1/2% of the net credit sales (gross credit sales minus returns of credit sales) for the month will become bad debt. Cottonwood writes off bad debts as they occur and recognizes bad debt expense based on anticipated bad debts as an adjusting entry each month.
2.
As a control measure, physical inventories are taken on a periodic basis alternating between the resale merchandise inventory and the event merchandise inventory. Physical inventory of the event merchandise inventory was taken at the end of January. It was determined that thecost of the event merchandise on hand was $144,860.
3.
Cottonwood counted the supplies on hand after the close of business on the last day of the month and determined the cost of the unused supplies to be $450.
4.
Warehouse and office equipment was placed in service on January 1, 2005 and is expected to last 15 years and has no salvage value. The industrial shelving is expected to have a life of 10 years and a salvage value of $5,000. Cottonwood depreciates fixed assets on a straight line basis and those assets acquired in the first half of the month for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).
5.
On February 2, Cottonwood received a $2,251 bill from PG&E for utilities consumed during January and the January AT&T bill in the amount of $412.
6.
Liability insurance for the 2007 fiscal year was paid at the end of November 2006. Liability insurance is assumed to be utilized uniformly monthly over the one year policy period.
7.
500 product catalogs were sent out in the month of January.
Aug 29, 2021 | Uncategorized
1. Accumulating costs means that
a. Costs must be summed and entered on the income statement.
b. Each cost must be linked to some cost object.
c. Costs must be measured and tracked.
d. Costs must be allocated to units of production.
e. Costs have expired and must be transferred from the balance sheet to the income statement.
2. Product (or manufacturing) costs consist of
a. Direct materials, direct labor, and selling costs.
b. Direct materials, direct labor, overhead, and operating expense.
c. Prime costs and conversion costs.
d. Prime costs and overhead.
e. Selling and administrative costs.
Last year, Wachman produced and sold 1,000 units at a price of $75 each. Total selling and administrative expense was $30,000.
3. Wachman Company produces a product with the following per unit costs:
Direct materials …………….$15
Direct labor ……………………6
Manufacturing overhead …….10
Conversion cost per unit was
a. $15.
b. $21.
c. $31.
d. $16.
e. none of the above.
4. Refer to the Wachman Company information in Multiple Choice Exercise 2 3. Total gross margin for last year was
a. $75,000.
b. $44,000.
c. $61,000.
d. $9,000.
e. $31,000.
5. The accountant in a factory that produces biscuits for fast food restaurants wants to assign costs to boxes of biscuits. Which of the following costs can be traced directly to boxes of biscuits?
a. The cost of flour and baking soda
b. The wages of the mixing labor
c. The cost of the boxes
d. The cost of packing labor
e. All of the above
6. Which of the following is an indirect cost?
a. The cost of denim in a jeans factory
b. The cost of mixing labor in a factory that makes over the counter pain relievers
c. The cost of restriping the parking lot at a perfume factory
d. The cost of bottles in a shampoo factory
e. All of the above
7. Bobby Dee’s is an owner operated company that details (thoroughly cleans—inside and out) automobiles. Bobby Dee’s is which of the following?
a. Retailer
b. Wholesaler
c. Manufacturing firm
d. Service firm
e. None of the above
8. Kellogg’s makes a variety of breakfast cereals. Kellogg’s is which of the following?
a. Retailer
b. Wholesaler
c. Manufacturing firm
d. Service firm
e. None of the above
9. Target is which of the following?
a. Retailer
b. Wholesaler
c. Manufacturing firm
d. Service firm
e. None of the above
Aug 29, 2021 | Uncategorized
1. Stone Inc. is a company that purchases goods (e.g., chess sets, pottery) from overseas and resells them to gift shops in the United States. Stone Inc. is which of the following?
a. Retailer
b. Wholesaler
c. Manufacturing firm
d. Service firm
e. None of the above
2. JackMan Company produces diecast metal bulldozers for toy shops. JackMan estimated the following average costs per bulldozer:
Direct materials ………………..$8.65
Direct labor ………………………1.10
Manufacturing overhead ………..0.95
Prime cost per unit is
a. $8.65.
b. $1.10.
c. $0.95.
d. $2.05.
e. $9.75.
3. Which of the following is a period expense?
a. Factory insurance
b. CEO salary
c. Direct labor
d. Factory maintenance
e. All of the above
4. Last year, Barnard Company incurred the following costs:
Direct materials ………………..$ 50,000
Direct labor ………………………20,000
Manufacturing overhead ………130,000
Selling expense …………………40,000
Administrative expense …………36,000
Barnard produced and sold 10,000 units at a price of $31 each.
Prime cost per unit is
a. $7.00.
b. $20.00.
c. $15.00.
d. $5.00.
e. $27.60.
5. Refer to the Barnard Company information in Multiple Choice Exercise 2 13. Conversion cost per unit is:
a. $7.00.
b. $20.00.
c. $15.00.
d. $5.00.
e. $27.60.
6. Refer to the Barnard Company information in Multiple Choice Exercise 2 13. The cost of goods sold per unit is
a. $7.00.
b. $20.00.
c. $15.00.
d. $5.00.
e. $27.60.
7. Refer to the Barnard Company information in Multiple Choice Exercise 2 13. The gross margin per unit is
a. $24.00.
b. $11.00.
c. $16.00.
d. $26.00.
e. $3.40.
8. Refer to the Barnard Company information in Multiple Choice Exercise 2 13. The total period expense is
a. $276,000.
b. $200,000.
c. $76,000.
d. $40,000.
e. $36,000.
9. Refer to the Barnard Company information in Multiple Choice Exercise 2 13. Operating income is
a. $34,000.
b. $110,000.
c. $234,000.
d. $270,000.
e. $74,000.
Aug 29, 2021 | Uncategorized
1. The provision of accounting information for internal users is known as
a. Managerial accounting.
b. Accounting.
c. Financial accounting.
d. Information provision.
e. Accounting for planning and control.
2. The users of managerial accounting information include
a. For profit companies.
b. Not for profit organizations.
c. City governments.
d. Educational institutions.
e. All of the above.
3. Setting objectives and identifying methods to achieve those objectives is called
a. Controlling.
b. Decision making.
c. Planning.
d. Performance evaluation.
e. None of the above.
4. The process of choosing among competing alternatives is called
a. Controlling.
b. Decision making.
c. Planning.
d. Performance evaluation.
e. None of the above.
5. Which of the following is a characteristic of managerial accounting?
a. There is an internal focus.
b. Subjective information may be used.
c. There is an emphasis on the future.
d. It is broad based and multidisciplinary.
e. All of the above.
6. Which of the following is a characteristic of financial accounting?
a. There is an internal focus.
b. Subjective information may be used.
c. There is a historical orientation.
d. It is broad based and multidisciplinary.
e. None of the above.
7. In terms of strategic positioning, which two general strategies may be chosen by a company?
a. Activity based costing and value chain emphasis
b. Revenue production and cost enhancement
c. Cost leadership and product differentiation
d. Increasing customer value and decreasing supplier orientation
e. Product differentiation and cost enhancement
8. Managerial accountants in an organization are typically
a. Line positions.
b. Marketing positions.
c. Staff positions.
d. Production positions.
e. Selling positions.
9. The chief accounting officer for a firm is the
a. Chief executive officer.
b. Chief operating officer.
c. Vice president of sales.
d. Production head.
e. Controller.
10. Which of the following is typically found in a corporation’s code of ethics?
a. Respect for others
b. Integrity
c. Honesty
d. Competence
e. All of the above
Aug 29, 2021 | Uncategorized
A partial list of Gaelic Medical Center’s costs is provided below.
a. Operating room supplies used on patients (catheters, sutures, etc.).
b. Utility costs of the hospital.
c. Training costs for nurses.
d. Cost of maintaining the staff and visitors’ cafeteria.
e. Cost of intravenous solutions.
f. Cost of blood tests.
g. Cost of improvements on the employee parking lot.
h. Salary of the nutritionist.
i. General maintenance of the hospital.
j. Cost of patient meals.
k. Cost of laundry services for operating room personnel.
l. Depreciation on patient rooms.
m. Depreciation of X ray equipment.
n. Cost of drugs used for patients.
o. Doctor’s fee.
p. Nurses’ salaries.
q. Overtime incurred in the Records Department due to a computer failure.
r. Salary of intensive care personnel.
s. Cost of X ray test.
t. Cost of new heart wing.
u. Cost of advertising hospital services on television.
Instructions
1. What would be Gaelic’s most logical definition for the final cost object?
2. Identify whether each of the costs is to be classified as direct or indirect. Define direct costs in terms of a patient as a cost object.
Aug 29, 2021 | Uncategorized
A product cost is also known as an inventoriable cost. Classify the following costs as either product (inventoriable) costs or period (non inventoriable) costs in a manufacturing company.
1. Depreciation on salespersons’ cars.
2. Rent on equipment used in the factory.
3. Lubricants used for maintenance of machines.
4. Salaries of finished goods warehouse personnel.
5. Soap and paper towels used by factory workers at the end of a shift.
6. Factory supervisor’s salaries.
7. Heat, water, and power consumed in the factory.
8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)
9. Advertising costs.
10. Workers’ compensation insurance on factory employees.
11. Depreciation on chairs and tables in the factory lunchroom.
12. The wages of the receptionist in the administrative offices.
13. Lease cost of the corporate jet used by the company’s executives.
14. Rent on rooms at a Florida resort for holding of the annual sales conference.
15. Attractively designed box for packaging the company’s product breakfast cereal.
Aug 29, 2021 | Uncategorized
Adam Williams was recently hired as assistant controller of GroChem, Inc., which processes chemicals for use in fertilizers. Williams was selected for this position because of his past experience in chemical processing. During his first month on the job, Williams made a point of getting to know the people responsible for the plant operations and learning how things are done at GroChem. During a conversation with the plant supervisor, Williams asked about the company procedures for handling toxic waste materials. The plant supervisor replied that he was not involved with the disposal of wastes and suggested that Williams might be wise to ignore this issue. This response strengthened Williams’ determination to probe this area further to be sure that the company was not vulnerable to litigation. Upon further investigation, Williams discovered evidence that GroChem was using a nearby residential landfill to dump toxic wastes—an illegal activity. It appeared that some members of GroChem’s management team were aware of this situation and may have been involved in arranging for this dumping; however, Williams was unable to determine whether his superior, the controller, was involved. Uncertain how he should proceed, Williams began to consider his options by outlining the following three alternative courses of action:
?c Seek the advice of his superior, the controller.
?c Anonymously release the information to the local newspaper.
?c Discuss the situation with an outside member of the board of directors with whom he is acquainted.
Required:
1. Discuss why Adam Williams has an ethical responsibility to take some action in the matter of GroChem, Inc., and the dumping of toxic wastes. Refer to the specific standards (competence, confidentiality, integrity, and/or credibility) in the Statement of Ethical Professional Practice established by the Institute of Management Accountants to support your answer.
2. For each of the three alternative courses of action that Adam Williams has outlined, explain whether or not the action is appropriate according to the Statement of Ethical Professional Practice established by the Institute of Management Accountants.
3. Assume that Adam Williams sought the advice of his superior, the controller, and discovered that the controller was involved in the dumping of toxic wastes. Describe the steps that Williams should take to resolve this situation.
(CMA, adapted)
Aug 29, 2021 | Uncategorized
Alice Shimeca, the bookkeeper for Woyak, a political consulting firm, has recently completed a managerial accounting course at her local college. One of the topics covered in the course was the cost of goods manufactured schedule. Alice wondered if such a schedule could be prepared for her firm. She realized that, as a service oriented company, it would have no Work in Process inventory to consider.
Listed below are the costs her firm incurred for the month ended August 31, 2011.
Supplies used on consulting contracts ……………………………$ 1,200
Supplies used in the administrative offices ……………………… 1,500
Depreciation on equipment used for contract work ……………… 900
Depreciation used on administrative office equipment ………….. 1,050
Salaries of professionals working on contracts ………………….. 12,600
Salaries of administrative office personnel ………………………. 7,700
Janitorial services for professional offices ……………………….. 400
Janitorial services for administrative offices …………………….. 500
Insurance on contract operations ………………………………… 800
Insurance on administrative operations ………………………….. 900
Utilities for contract operations ………………………………….. 1,400
Utilities for administrative offices ………………………………. 1,300
Instructions
(a) Prepare a schedule of cost of contract services provided (similar to a cost of goods manufactured schedule) for the month.
(b) For those costs not included in (a), explain how they would be classified and reported in the financial statements.
Aug 29, 2021 | Uncategorized
An analysis of the accounts of Chamberlin Manufacturing reveals the following manufacturing cost data for the month ended June 30, 2010.
?
Costs incurred: Raw materials purchases $54,000, direct labor $57,000, manufacturing overhead $19,900. The specific overhead costs were: indirect labor $5,500, factory insurance $4,000, machinery depreciation $4,000, machinery repairs $1,800, factory utilities $3,100, miscellaneous factory costs $1,500. Assume that all raw materials used were direct materials.
Instructions
(a) Prepare the cost of goods manufactured schedule for the month ended June 30, 2010.
(b) Show the presentation of the ending inventories on the June 30, 2010, balancesheet.
Aug 29, 2021 | Uncategorized
1. Do you agree with Cairns’s assertion that classifications of accounting are simplistic and of little relevance in today’s world? Are attempts to classify accounting futile and outmoded? Why or why not?
2. Some observers contend that financial reporting is becoming more and more alike among ?oworld class?? companies—the world’s largest multinational corporations—and especially those listed on the major stock exchanges, such as London, New York, and Tokyo. What is the relevance of this contention for classifications of accounting, and what are the factors that would cause this to happen?
MINI CASE
| When we look at the way that countries or companies account for particular transactions and events, it is increasingly difficult to distinguish in a systematic way so called Anglo American accounting from Continental European accounting or American accounting from, say, German accounting. I am increasingly persuaded . . . that the distinction between Anglo American accounting and Continental European accounting is becoming less and less relevant and more and more confused. In reaching this conclusion, I do not dispute that different economic, social and legal considerations have influenced the development of accounting in different countries. I also do not dispute the fact that there have been, and still are, differences in the means by which different countries determine accounting requirements and the form of the resulting requirements. I do believe, however, that those who continue to favour these classifications are ignoring what is happening in the world and how companies actually account for transactions and events. |
Aug 29, 2021 | Uncategorized
Assume that you are the managerial accountant at Infostore, a manufacturer of hard drives, CDs, and diskettes. Its reporting year end is December 31. The chief financial officer is concerned about having enough cash to pay the expected income tax bill because of poor cash flow management. On November 15, the purchasing department purchased excess inventory of CD raw materials in anticipation of rapid growth of this product beginning in January. To decrease the company’s tax liability, the chief financial officer tells you to record the purchase of this inventory as part of supplies and expense it in the current year; this would decrease the company’s tax liability by increasing expenses.
Required
1. In which account should the purchase of CD raw materials be recorded?
2. How should you respond to this request by the chief financial officer?
Aug 29, 2021 | Uncategorized
Berry Company is an architectural firm located in Detroit, Michigan. The company works with small and medium size construction businesses to prepare building plans according to client contract. Berry employs 10 professionals and 5 staff. The following data are provided for last year:
Number of designs completed and sold …………………………700
Beginning inventory of direct materials …………………….$20,000
Beginning inventory of designs in process ………………… $60,000
Ending inventory of direct materials ………………………………$0
Ending inventory of designs in process ……………………$100,000
Purchases, direct materials …………………………………..$40,000
Direct labor ………………………………………………….$800,000
Manufacturing overhead ……………………………………$100,000
Administrative expense …………………………………….$150,000
Selling expense ………………………………………………$60,000
Required:
1. Calculate the cost of services sold.
2. Assume that the average fee for a design is $2,100. Prepare an income statement for
Berry Company.
3. Refer to the cost of services sold (calculated in Requirement 1). What is the dominant cost? Will this always be true of service organizations? If not, provide an example of an exception.
4. Why does Berry Company show zero inventory of finished plans? What change(s) in the company could result in a positive finished goods inventory?
Aug 29, 2021 | Uncategorized
Bisby Company manufactures fishing rods. At the beginning of July, the following information was supplied by its accountant:
Raw materials inventory ……………………$40,000
Work in process inventory …………………..21,000
Finished goods inventory ……………………23,200
During July, the direct labor cost was $43,500, raw materials purchases were $64,000, and the total overhead cost was $108,750. The inventories at the end of July were:
Raw materials inventory ……………………$19,800
Work in process inventory …………………..32,500
Finished goods inventory ……………………22,100
Required:
1. What is the cost of the direct materials used in production during July?
2. What is the cost of goods manufactured for July?
3. What is the cost of goods sold for July?
Aug 29, 2021 | Uncategorized
Consider the terms and definitions that follow:
________ 1. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational objectives. Requires improving quality and eliminating defects and waste.
________ 2. Use of the Internet for such business functions as sales and customer service. Enables companies to reach thousands of customers around the world.
________ 3. Software systems that integrate all of a company’s worldwide functions, departments, and data into a single system.
________ 4. A system in which a company produces just in time to satisfy needs. Suppliers deliver materials just in time to begin production, and finished units are completed just in time for delivery to customers.
ERP
Just in time (JIT)
E commerce
Total quality management
Requirement
1. Match the term with the correct definition.
Aug 29, 2021 | Uncategorized
Customer orientation means that a company’s managers and employees respond to customers’ changing wants and needs. A manufacturer of plastic fasteners has created a customer satisfaction survey that it asks each of its customers to complete. The survey asks about the following factors:
(A) Lead time;
(B) Delivery;
(C) Price;
(D) Product performance.
Each factor is to be rated as unsatisfactory, marginal, average, satisfactory, or very satisfied.
a. Match the competitive forces 1 through 4 to the factors on the survey. A factor can be matched to more than one competitive force.
Survey Factor Competitive Force
A. Lead time_______ 1. Cost
B. Delivery _______ 2. Time
C. Price_______ 3. Quality
D. Product performance _______ 4. Flexibility of service
b. How can managers of this company use the information from this customer satisfaction survey to better meet competitive forces and satisfy their customers?
Aug 29, 2021 | Uncategorized
Dibene Company is a manufacturer of computers. Its controller resigned in October 2012. An inexperienced assistant accountant has prepared the following income statement for the month of October 2012.
Prior to October 2012, the company had been profit table every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of October were:
2. Only 70% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Instructions
(a) Prepare a schedule of cost of goods manufactured for October 2012.
(b) Prepare a correct income statement for October 2012.
Aug 29, 2021 | Uncategorized
Listed below are the budgeted factory overhead costs for 2011 for Muncie Manufacturing, Inc., at a projected level of 2,000 units:
Expenses:
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Straight line depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Factory property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000
Factory insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000
Required:
Prepare flexible budgets for factory overhead at the 1,000, 2,000, and 4,000 unit levels.
Aug 29, 2021 | Uncategorized
Ollie’s Olive Oil began business in 2010, during which it produced 104,000 quarts of olive oil. In 2010, the company sold 100,000 quarts of olive oil. Costs incurred during the year were as follows:
Ingredients used …………………………………$228,800
Direct labor ……………………………………… 104,000
Variable overhead ………………………………. 197,600
Fixed overhead ……………………………..…… 98,800
Variable selling expenses …………………..…… 50,000
Fixed selling and administrative expenses ……… 120,000
Total actual costs ………………………………..$799,200
a. What was the actual production cost per quart under variable costing? Under absorption costing?
b. What was variable cost of goods sold for 2010 under variable costing?
c. What was cost of goods sold for 2010 under absorption costing?
d. What was the value of ending inventory under variable costing? Under absorption costing?
e. How much fixed overhead was charged to expense in 2010 under variable costing? Under absorption costing?
Aug 29, 2021 | Uncategorized
Plano Products, Inc., had a remaining credit balance of $10,000 in its under and over applied factory overhead account at yearend. It also had year end balances in the following accounts:
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000
Required:
1. Prepare the closing entry for the $10,000 of over applied overhead, assuming that the balance is not considered to be material.
2. Prepare the closing entry for the $10,000 of over applied overhead, assuming that the balance is considered to be material.
Aug 29, 2021 | Uncategorized
Porta Light manufactures a high quality LED flashlight for home/office use. Data pertaining to the company’s 2010 operations are as follows:
Production for the year …………………………………………45,000 units
Sales for the year (sales price per unit, $8) ……………………..48,750 units
Beginning 2010 inventory ………………………………………8,750 units
Costs to produce one unit (2009 & 2010):
Direct material …………………$3.60
Direct labor ……………………1.00
Variable overhead ……………..0.60
Fixed overhead ………………..0.40
Selling and administrative costs:
Variable (per unit sold) ……………………$0.40
Fixed (per year) ……………………… $150,000
Fixed manufacturing overhead is assigned to units of production based on a predetermined OH rate using an expected production capacity of 100,000 units per year.
a. What is budgeted annual fixed manufacturing overhead?
b. If budgeted fixed overhead equals actual fixed overhead, what is underapplied or overapplied fixed overhead in 2010 under absorption costing? Under variable costing?
c. What is the product cost per unit under absorption costing? Under variable costing?
d. How much total expense is charged against revenues in 2010 under absorption costing? Under variable costing?
e. Is income higher under absorption or variable costing? By what amount?
Aug 29, 2021 | Uncategorized
Tom Snider is a staff accountant for BigBiz. Snider was recently given the task of developing a monthly flexible budget formula for several manufacturing costs. He was told that his equations would be used as an aid in developing future budgets for these manufacturing costs and he was told to put his results into an equation in the form y = a + bX for each cost. Snider gathered data and used high–low analysis to obtain the flexible budget formulas. Rather than using a single activity measure, he decided to use two. Thus, for each manufacturing cost analyzed, he developed two equations. However, after analyzing several equations, Snider became perplexed over his results because the results from the two equations were very different in some cases. Snider has asked you, his colleague, how he should decide which of the two estimated equations for each manufacturing cost he should submit to his boss.
To illustrate his dilemma, Snider provided you with his two equations for repairs and maintenance expense, which follow.
Using machine hours: y = $15,000 + $20X
Using direct labor hours: y = $450,000 + $4X
What advice will you give Snider?
Aug 29, 2021 | Uncategorized
Tom’s Shoe Repair provides a variety of shoe and repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination:
Supplies: y = $0 + $4.00X
Production supervision and direct labor: y = $500 + $7.00X
Utilities: y = $350 + $5.40X
Rent: y = $450 + $0.00X
Advertising: y = $75 + $0.00X
a. Prepare a flexible budget at 250, 300, 350, and 400 direct labor hours.
b. Calculate a total cost per direct labor hour at each level of activity.
c. Tom’s employees usually work 350 direct labor hours per month. The average shoe repair requires 1.25 labor hours to complete. Tom wants to earn a 40 percent margin on his cost. What should be the average charge per customer, rounded to the nearest dollar to achieve Tom’s profit objective?
Aug 29, 2021 | Uncategorized
Job costing, rework Solutions Corporation is a manufacturer of computer chips based in San Jose. It manufactures two types of computer chips, CS1 and CS2. The costs of manufacturing each CS1 chip, excluding rework costs, are direct materials, $60; direct manufacturing labor, $12; and manufacturing overhead, $38. Defective units are sent to a separate rework area. Rework costs per CS1 chip are direct materials, $12; direct manufacturing labor, $9; and manufacturing overhead, $15. In August 2008, Solutions manufactured 1,000 CS1 and 500 CS2 chips. Eighty of the CS1 chips and none of the CS2 chips required rework. Solutions classifies 50 of the CS1 chips reworked as normal rework caused by inherent problems in its production process that only coincidentally occurred during the production of CS1. Hence the rework costs for these 50 CS1 chips are normal rework costs not specifically attributable to the CS1 product. Solutions classifies the remaining 30 units of CS1 chips reworked as abnormal rework. Solutions allocates manufacturing overhead on the basis of machine hours required to manufacture CS1 and CS2. Each CS1 or CS2 chip requires the same number of machine hours.
1. Prepare journal entries to record the accounting for the cost of the spoiled chips and for rework.
2. What were the total rework costs of CS1 chips in August 2008?
Aug 29, 2021 | Uncategorized
Job costing, rework. Riposte Corporation manufactures a computer chip called XD1. Manufacturing costs of one XD1 chip, excluding rework costs, are direct materials, $60; direct manufacturing labor, $12; and manufacturing overhead, $38. At the inspection point, defective units are sent back for rework. Rework costs per XD1 chip are direct materials, $12; direct manufacturing labor, $9; and manufacturing overhead, $15.
In August 2011, Riposte manufactured 1,000 XD1 chips, 80 of which required rework. Of these 80 chips, 50 were considered normal rework common to all jobs and the other 30 were considered abnormal rework.
Required
1. Prepare journal entries to record the accounting for both the normal and abnormal rework.
2. What were the total rework costs of XD1 chips in August 2011?
3. Now assume instead that the normal rework is attributable entirely to job #3879, for 200 units of XD1. In this case, what would be the total and unit cost of the good units produced for that job in August 2011?
Prepare journal entries for the manufacture of the 200 units, as well as the normal rework costs.
Aug 29, 2021 | Uncategorized
Job costing spoilage and scrap. (F Mayne) Santa Cruz Metal Fabricators, Inc., has a large job, No. 2734, that calls for producing various ore bins, chutes, and metal boxes for enlarging a copper concentrator. The following charges were made to the job in November 2009:
The contract with the customer called for the total price to be based on a cost plus approach. The contract defined cost to include direct materials, direct manufacturing labor costs, and manufacturing overhead to be allocated at 50% of direct manufacturing labor costs. The contract also provided that the total costs of all work spoiled were to be removed from the billable cost of the job and that the benefits from scrap sales were to reduce the billable cost of the job.
1. In accordance with the stated terms of the contract, prepare journal entries for the following two items:
a. A cutting error was made in production. The up to date job cost record for this batch of work showed materials of $975, direct manufacturing labor of $600, and allocated overhead of $300. Because fairly large pieces of metal were recoverable, the company believed their value was $800 and that the materials recovered could be used on other jobs. The spoiled work was sent to the warehouse.
b. Small pieces of metal cuttings and scrap in November 2009 amounted to $1,995, which was the price quoted by a scrap dealer. No journal entries were made with regard to the scrap until the price was quoted by the scrap dealer The scrap dealer’s offer was immediately accepted.
2. Consider normal and abnormal spoilage. Suppose the contract described above had contained the clause ?oa normal spoilage allowance of 1% of the job costs will be included in the billable costs of the job.??
a.Is this clause specific enough to define exactly how much spoilage is normal and how much is abnormal? Explain.
b. Repeat requirement la with this ?onormal spoilage of 1%?? clause in mind. You should be able to provide two slightly different journalentries.
Aug 29, 2021 | Uncategorized
Physical units, inspection at various levels of completion, weighted average process costing report. Lester Company makes metal products and has a forging department. In this department, materials are added at the beginning of the process and conversion takes place uniformly. At the start of November 2011, the forging department had 20,000 units in beginning work in process, which are 100% complete for materials and 40% complete for conversion costs. An additional 100,000 units are started in the department in November, and 30,000 units remain in work in process at the end of the month. These unfinished units are 100% complete for materials and 70% complete for conversion costs.
The forging department had 15,000 spoiled units in November. Normal spoilage is 12% of good units.
The department’s costs for the month of November are as follows:
?
Required
1. Using the format on page 653, compute the normal and abnormal spoilage in units for November, assuming the inspection point is at (a) the 30% stage of completion, (b) the 60% stage of completion, and (c) the 100% stage of completion.
2. Refer to your answer in requirement 1. Why are there different amounts of normal and abnormal spoilage at different inspection points?
3. Now assume that the forging department inspects at the 60% stage of completion. Using the weighted average method, calculate the cost of units transferred out, the cost of abnormal spoilage, and the cost of ending inventory for the forging department inNovember.
Aug 29, 2021 | Uncategorized
Physical units, inspection at various stages of completion. Fantastic Furniture manufactures plastic lawn furniture in a continuous process. The company pours molten plastic into molds and then cools the plastic. Materials are added at the beginning of the process, and conversion is considered uniform through the period. Occasionally, the plastic does not completely fill a mold because of air pockets, and the chair is then considered spoiled. Normal spoilage is 6% of the good units that pass inspection. The following information pertains to March, 2011:
Beginning inventory 1,400 units (100% complete for materials; 20% complete for conversion costs)
Units started 12,000
Units in ending work in process 1,100 (100% complete for materials; 70% complete for conversion costs)
Fantastic Furniture had 1,000 spoiled units in March, 2011.
Required
Using the format on page 653, compute the normal and abnormal spoilage in units, assuming the inspection point is at (a) the 15% stage of completion, (b) the 40% stage of completion, and (c) the 100% stage of completion.
Aug 29, 2021 | Uncategorized
Recognition of loss from spoilage. Arokia Electronics manufactures cell phone models in its Walnut Creek plant. Suppose the company provides you with the following information regarding operations for September 2011:
Total cell phones manufactured………………..8,000
Phones rejected as spoiled units………………….300
Total manufacturing cost……………………$320,000
Assume the spoiled units have no disposal value.
Required
1. What is the unit cost of making the 8,000 cell phones?
2. What is the total cost of the 300 spoiled units?
3. If the spoilage is considered normal, what is the increase in the unit cost of good phones manufactured as a result of the spoilage?
4. If the spoilage is considered abnormal, prepare the journal entries for the spoilage incurred.
Aug 29, 2021 | Uncategorized
Reworked units, casts of rework. White Goods assembles washing machines at its Auburn plant. In February 2009, 60 tumbler units that cost $44 each (from a new supplier who subsequently went bankrupt) were defective and had to be disposed of at zero net disposal value. White Goods was able to rework all 60 washing machines by substituting new tumbler units purchased from one of its existing suppliers. Each replacement tumbler cost $50.
1. What alternative approaches are there to account for the material cost of reworked units?
2. Should White Goods use the $44 tumbler or the $50 tumbler to calculate the cost of materials reworked? Explain.
3. What other costs might White Goods include in its analysis of the total costs of rework due to the tumbler units purchased from the (now) bankrupt supplier?
Aug 29, 2021 | Uncategorized
Scrap, job costing. The Mendoza Company has an extensive job costing facility that uses a variety of metals. Consider each requirement independently.
1. Job 372 uses a particular metal alloy that is not used for any other job. Assume that scrap is material in amount and sold for $490 quickly after it is produced. Prepare the journal entry.
2. The scrap from Job 372 consists of a metal used by many other jobs. No record is maintained of the scrap generated by individual jobs. Assume that scrap is accounted for at the time of its sale. Scrap totaling $4,000 is sold. Prepare two alternative journal entries that could be used to account for the sale of scrap.
3. Suppose the scrap generated in requirement 2 is returned to the storeroom for future use, and a journal entry is made to record the scrap. A month later, the scrap is reused as direct material on a subsequent job. Prepare the journal entries to record these transactions.
Aug 29, 2021 | Uncategorized
Spoilage and job costing. (L. Bamber) Bamber Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias, and university dormitories. An order for 2,500 cases of mixed vegetables costs $6 per case: direct materials, $3; direct manufacturing labor, $2; and manufacturing overhead allocated $1. The manufacturing overhead rate includes a provision for normal spoilage. Consider each requirement independently.
1. Assume that a laborer dropped 200 cases. Suppose part of the 200 cases could be sold to a nearby prison for $200 cash. Prepare a journal entry to record this event Calculate and explain briefly the unit cost of the remaining 2,300 cases.
2. Refer to the original data. Tasters at the company reject 200 of the 2,500 cases. The 200 cases are disposed of for $400. Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and:
a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job.
b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this specific job.
c. Are unit costs the same in requirements 2a and 2b? Explain your reasoning briefly.
3. Refer to the original data. Tasters rejected 200 cases that had insufficient salt. The product can be placed in a vat salt can be added, and the product can be reprocessed into jars. This operation, which is considered normal, will cost $200. Prepare a journal entry to record this event and:
a. Calculate the unit cost of all the cases if this additional cost was incurred because of the exacting specifications of this particular job.
b. Calculate the unit cost of all the cases if this additional cost occurs regularly because of difficulty in seasoning.
c. Are unit costs the same in requirements 3a and 3b? Explain your reasoning briefly.
Aug 29, 2021 | Uncategorized
Spoilage in job costing. Crystal Clear Machine Shop is a manufacturer of motorized carts for vacation resorts. Peter Cruz, the plant manager of Crystal Clear, obtains the following information for Job #10 in August 2010. A total of 32 units were started, and 7 spoiled units were detected and rejected at final inspection, yielding 25 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are $1,450 per unit. The current disposal price of the spoiled units is $230 per unit. When the spoilage is detected, the spoiled goods are inventoried at $230 per unit.
Required
1. What is the normal spoilage rate?
2. Prepare the journal entries to record the normal spoilage, assuming the following:
a. The spoilage is related to a specific job.
b. The spoilage is common to all jobs.
c. The spoilage is considered to be abnormal spoilage.
Aug 29, 2021 | Uncategorized
Standard costing method, spoilage, journal entries. Aaron, Inc., is a manufacturer of vents for water heaters. The company uses a process costing system to account for its work in process inventories. When Job 512 was being processed in the machining department, a piece of sheet metal was off center in the bending machine and two vents were spoiled. Because this problem occurs periodically, it is considered normal spoilage and is consequently recorded as an overhead cost. Because this step comes first in the procedure for making the vents, the only costs incurred were $250 for direct materials. Assume the sheet metal cannot be sold, and its cost has been recorded in work in process inventory.
Prepare the journal entries to record the spoilage incurred.
Aug 29, 2021 | Uncategorized
Weighted average method, inspection at 80% completion (chapter appendix). (A. Atkinson) The Kim Company is a furniture manufacturer with two departments: molding and finishing. The company uses the weighted average method of process costing. In August, the following data were recorded for the Finishing Department:
Conversion costs are added evenly during the process. Direct material costs are added when production is 90%complete. The inspection point is at the 80% stage of production. Normal spoilage is 10% of all good units that pass inspection. Spoiled units are disposed of at zero net disposal value. For August, summarize total costs to account for, and assign these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work inprocess.
Aug 29, 2021 | Uncategorized
Weighted average method, Packaging Department (continuation of 18 30). In Boston Company’s Packaging Department, conversion costs are added evenly during the process, and direct materials are added at the end of the process. Spoiled units are detected upon inspection at the end of the process and are disposed of at zero net disposal value. All completed work is transferred to the next department. The transferred in costs for May equal the total cost of good units completed and transferred out in May from the Cleaning Department, which were calculated in Problem 18 30 using the weighted average method of process costing. Summary data for May follow.
For the Packaging Department, use the weighted average method to summarize total costs to account for and assign total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work inprocess.
Aug 29, 2021 | Uncategorized
Weighted average method, spoilage. Appleton Company makes wooden toys in its Forming Department, and it uses the weighted average method of process costing. All direct materials are added at the beginning of the process, and conversion costs are added evenly during the process. Spoiled units are detected upon inspection at the end of the process and are disposed of at zero net disposal value. Summary data for August 2009 are
1. For each cost category, calculate equivalent units. Show physical units in the first column of you schedule.
2. Summarize total costs to account for, calculate cost per equivalent unit for each cost category, and assign total costs to units completed and transferred out (including normal spoilage), to abnormal and to units in ending work inprocess.
Aug 29, 2021 | Uncategorized
Indicate which of the following errors, each considered individually, would cause the trial balance totals to be unequal:
a. A fee of $15,000 earned and due from a client was not debited to Accounts Receivable or credited to a revenue account, because the cash has not been received.
b. A receipt of $6,000 from an account receivable was journalized and posted as a debit of $6,000 to Cash and a credit of ^6,000 to Fees Earned.
c. A payment of $1,200 to a creditor was posted as a debit of $1,200 to Accounts payable and debit of $1,200 to Cash.
d. A payment of $10,000 for equipment purchased was posted as a debit of $1,000 to Equipment and a credit of $1,000 to Cash.
e. Payment of dividends of $10,000 was journalized and posted as a debit of $1,000 to Salary Expense and a credit of $10,000 to Cash.
Indicate which of the preceding errors would requite a correcting entry.
Aug 29, 2021 | Uncategorized
Jay Pembroke started a business. During the first month (April 20 ), the following transactions occurred.
(a) Invested cash in business, $18,000.
(b) Bought office supplies for $4,600: $2,000 in cash and $2,600 on account.
(c) Paid one year insurance premium, $1,200.
(d) Earned revenues totaling $3,300: $1,300 in cash and $2,000 on account.
(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $2,300.
(f) Paid office rent for the month, $750.
(g) Withdrew cash for personal use, $100.
REQUIRED
Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (Capital – Drawing + Revenues – Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance.
Aug 29, 2021 | Uncategorized
Lynette Moss, an architect, opened an office on April 1, 2008. During the month, she completed the following transactions connected with her professional practice:
a. Transferred cash from a personal bank account to an account to be used for the business, $22,500.
b. Purchased used automobile for $15,300, paying $4,000 cash and giving a note payable for the remainder.
c. Paid April rent for office and workroom, $2,500.
d. Paid cash for supplies, $1,200.
e. Purchased office and computer equipment on account, $5,200.
f. Paid cash for annual insurance policies on automobile and equipment, $1,600.
g. Received cash from a client for plans delivered, $6,500.
h. Paid cash to creditors on account, $1,800.
i. Paid cash for miscellaneous expenses, $300.
j. Received invoice for blueprint service, due in May, $800.
k. Recorded fee earned on plans delivered, payment to be received in May, $3,500.
l. Paid salary of assistant, $1,500.
m. Paid cash for miscellaneous expenses, $210.
n. Paid installment due on note payable, $200.
o. Paid gas, oil, and repairs on automobile for April, $250.
Instructions
1. Record the above transactions directly in the following T accounts, without journalizing: Cash; Accounts Receivable; Supplies; Prepaid Insurance; Automobiles; Equipment; Notes Payable; Accounts Payable; Lynette Moss, Capital; Professional Fees; Rent Expense; Salary Expense; Blueprint Expense; Automobile Expense; Miscellaneous Expense. To the left of each amount entered in the accounts, place the appropriate letter to identify the transaction.
2. Determine account balances of the T accounts. Accounts containing a single entry only (such as Prepaid Insurance) do not need a balance.
3. Prepare an unadjusted trial balance for Lynette Moss, Architect, as of April 30, 2008.
Aug 29, 2021 | Uncategorized
On February 3, 2012, Wilco Co. purchased $3,250 of supplies on account. In Wiko Co.’s chart of accounts, the supplies account in No. 15, and the accounts payable account is No. 21.
(a) Journalize the February 3, 2012, transaction on page 19 of Wilco Co.’s two column journal. Include an explanation of the entry.
(b) Prepare a four column account for supplies. Enter a debit balance of $975 as pf February 1, 2012. Place a check mark (() in the Posting Reference column.
(c) Prepare a four column account for Accounts Payable. Enter a credit balance of $13,150 as of February 1, 2012. Place a check mark (() in the Posting Reference column.
(d) Post the February 3, 2012, transaction to the accounts.
(e) Do the rules of debit and credit apply to all companies?
Aug 29, 2021 | Uncategorized
On March 1, 2012, Mitch Quade established Marine Realty, which completed the following transactions during the month:
a. Mitch Quade transferred cash from a personal bank account to as account to be used for the business in exchange for capital stock, $18,000.
b. Purchased supplies on account, $1,200.
c. Earned sales commissions, receiving cash, $14,000.
d. Paid rent on office and equipment for the month, $3,000.
e. Paid creditor on account, $750.
f. Paid dividends, $2,000.
g. Paid automobile expenses (including rental charge) for month, $1,500, and miscellaneous expenses, $400.
h. Paid office salaries, $2,800.
i. Determined that the cost of supplies used was $800.
Instructions
1. Journalize entries for transactions (a) through (i), using the following account titles; Cash; Supplies; Accounts Payable; Capital Stock; Dividends; Sales Commissions: Rent Expense; Office Salaries Expense; Automobile Expense; Supplies Expense; Miscellaneous Expense. Journal entry explanations may be omitted.
2. Prepare T accounts, using the account titles in (1). Post the journal entries to these accounts, placing the appropriate letter to the left of each amount to identify the transactions. Determine the account balances, after all posting is complete. Accounts containing only a single entry do not need a balance.
3. Prepare an unadjusted trial balance as of March 31, 2012.
4. Determine the following:
a. Amount of total revenue recorded in the ledger.
b. Amount of total expenses recorded in the ledger.
c. Amount of net income for March.
5. Determine the increase or decrease in retained earnings for March
Aug 29, 2021 | Uncategorized
On October 1, 2008, Kristy Gomez established an interior decorating business, Ultimate Designs. During the month, Kristy Gomez completed the following transactions related to the business:
Oct. 1. Kristy transferred cash from a personal bank account to an account to be used for the business, $20,000.
3. Paid rent for period of October 3 to end of month, $1,600.
10. Purchased a truck for $15,000, paying $5,000 cash and giving a note payable for the remainder.
13. Purchased equipment on account, $4,500.
14. Purchased supplies for cash, $1,100.
15. Paid annual premiums on property and casualty insurance, $2,800.
15. Received cash for job completed, $6,100.
21. Paid creditor a portion of the amount owed for equipment purchased on October 13, $2,400.
24. Recorded jobs completed on account and sent invoices to customers, $8,600.
26. Received an invoice for truck expenses, to be paid in November, $875.
27. Paid utilities expense, $900.
27. Paid miscellaneous expenses, $315.
29. Received cash from customers on account, $4,100.
30. Paid wages of employees, $2,500.
31. Withdrew cash for personal use, $3,000.
Instructions
1. Journalize each transaction in a two column journal, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted.
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Insurance
16 Equipment
18 Truck
21 Notes Payable
22 Accounts Payable
31 Kristy Gomez, Capital
32 Kristy Gomez, Drawing
41 Fees Earned
51 Wages Expense
53 Rent Expense
54 Utilities Expense
55 Truck Expense
59 Miscellaneous Expense
2. Post the journal to a ledger of four column accounts, inserting appropriate posting references as each item is posted. Extend the balances to the appropriate balance columns after each transaction is posted.
3. Prepare an unadjusted trial balance for Ultimate Designs as of October 31, 2008.
Aug 29, 2021 | Uncategorized
The following preliminary unadjusted trial balance of Nevada For You Co., a sports ticket agency, does not balance:
When the ledger and other records are reviewed, you discover the following: (1) the debits and credits in the cash account total $47,350 and $33,975, respectively; (2) a billing of $2,500 to a customer on account was not posted to the accounts receivable account; (3) a payment of $1,800 made to a creditor on account was not posted to the accounts payable account; (4) the balance of the unearned rent account is $4,250; (5) the correct balance of the equipment account is $75,000; and (6) each account has a normal balance. Prepare a corrected unadjusted trialbalance.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during August of the current year:
1. Billed customers for fees earned, $35,700.
2. Purchased supplies on account, $2,000.
3. Received cash from customers on account, $26,150.
4. Paid creditors on accounts, $800.
a. Journalize the above transactions in a two column journal, using the appropriate number to identify the transactions. Journal entry explanations may be omitted.
b. Post the entries prepared in (a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transactions.
c. Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does the credit balance mean an error has occurred?
Aug 29, 2021 | Uncategorized
The increasing complexity of the current business and regulatory environment has created an increased demand for accountants who can analyze business transactions and interpret their effects on the financial statements. In addition, a basic ability to analyze the effects of transaction is necessary to be successful in all fields of business as well as in other disciplines, such as law. To better understand the importance of accounting in today’s environment, search the Internet or your local newspaper for job opportunities. One possible Internet site is http://www.careerbuilder.com. Then do one of the following:
1. Print a listing of one or two ads for accounting jobs. Alternatively, bring to class one of two newspaper ads for accounting job.
2. Print a listing of one or two ads for non accounting jobs for which some knowledge of accounting is preferred or necessary. Alternatively, bring to class one or two newspaper ads for such jobs.
Aug 29, 2021 | Uncategorized
This exercise is an extension of Exercise 2 3A. Assume Alice Stern completed the following additional transactions during February. Show the effect of each transaction on the basic elements of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (Capital – Drawing + Revenues – Expenses). After transaction (k), report the totals for each element. Demonstrate that the accounting equation has remained in balance.
(e) Received cash from a client for professional services, $2,500.
(f) Paid office rent for February, $900.
(g) Paid February telephone bill, $73.
(h) Withdrew cash for personal use, $500.
(i) Performed services for clients on account, $1,000.
(j) Paid wages to part time employee, $600.
(k) Received cash for services performed on account in transaction (i), $600.
Aug 29, 2021 | Uncategorized
An examination of Frosty Corporation’s records reveals the following transactions:
a. On December 31, the physical inventory of raw material was 9,950 gallons. The book quantity, using the moving average method, was 10,000 gal@ $0.52 per gal.
b. Production returned to the storeroom materials that cost $775.
c. Materials valued at $770 were charged to Factory Overhead (Repairs and Maintenance), but should have been charged to Work in Process.
d. Defective material, purchased on account, was returned to the vendor. The material returned cost $234, and the return shipping charges (our cost) of $35 were paid in cash.
e. Goods sold to a customer, on account, for $5,000 (cost $2,500) were returned because of a misunderstanding of the quantity ordered. The customer stated that the goods returned were in excess of the quantity needed.
f. Materials requisitioned totaled $22,300, of which $2,100 represented supplies used.
g. Materials purchased on account totaled $25,500. Freight on the materials purchased was $185.
h. Direct materials returned to the storeroom amounted to $950.
i. Scrap materials sent to the storeroom were valued at an estimated selling price of $685 and treated as a reduction in the cost of all jobs worked on during the period.
j. Spoiled work sent to the storeroom valued at a sales price of $60 had production costs of $200 already charged to it. The cost of the spoilage is to be charged to the specific job worked on during the period.
k. The scrap materials in (i) were sold for $685 cash.
Required:
Record the entries for each transaction.
Aug 29, 2021 | Uncategorized
Mystic Manufacturing Company maintains the following accounts in the general ledger: Materials, Work in Process, Factory Overhead, and Accounts Payable. On June 1, the materials account had a debit balance of $5,000. Following is a summary of materials transactions for the month of June:
1. Materials purchased, $23,750.
2. Direct materials requisitioned to production, $19,250.
3. Direct materials returned to storeroom, $1,200.
4. Indirect materials requisitioned to production, $2,975.
5. Indirect materials returned to storeroom, $385.
a. Prepare journal entries to record the materials transactions. b. Post the journal entries to ledger accounts (in T account form).
c. What is the balance of the materials inventory account at the end of the month?
Aug 29, 2021 | Uncategorized
Pan Am Manufacturing Company prepares cost estimates for projects on which it will bid. In order to anticipate the labor cost to be included in a request to bid on a contract for 1,200,000 units that will be delivered to the customer at the rate of 100,000 units per month, the company has compiled the following data related to labor:
a. The first 100,000 units will require 5 hours per unit.
b. The second 100,000 units will require less labor due to the skills learned on the first 100,000 units finished. It is expected that labor time will be reduced by 10% if an incentive bonus of one half of the labor savings is paid to the employees.
c. For the remaining 1,000,000 units, it is expected that the labor time will be reduced 20% from the original estimate (the first 100,000 units) if the same incentive bonus (1/2 of the savings) is paid to the employees.
d. Overtime premiums are to be excluded when savings are computed. The contract will require 2,250 employees at a base rate of $20.00 per hour, with time and a half for overtime. The plant operates on a 5 day, 40 hour per week basis. Employees are paid for a two week vacation in August and for eight holidays. The scheduled production for the 50 week work year shows:
January—June: 26 weeks with 4 holidays
July—December: 24 weeks with 4 holidays
Required:
Prepare cost estimates for direct labor and labor related costs for the contract, showing the following:
1. Wages paid at the regular rate.
2. Overtime premium payments. (Don’t forget holidays in computing regular hours available.)
3. Incentive bonus payments.
4. Vacation and holiday pay.
5. Employer’s payroll taxes (13% of total wages, assuming that no employee has exceeded the wage bases for FICA and the unemployment insurance taxes).
Aug 29, 2021 | Uncategorized
The following transactions affecting materials occurred in February:
Feb. 1 Balance on hand, 1,200 ft @ $2.76, $3,312.00 (plastic tubing, materials ledger account #906).
5 Issued 60 ft to production on Materials Requisition No. 108.
11 Issued 200 ft on Materials Requisition No. 210.
14 Received 800 ft from a supplier, Receiving Report No. 634, price $2.80 per ft.
15 Issued 400 ft, Materials Requisition No. 274.
16 Returned to a supplier for credit, 90 ft purchased on February 14, which were found to be defective.
18 Received 1,000 ft, Receiving Report No. 712, price $2.83 per ft.
21 Issued 640 ft, Materials Requisition No. 318.
Required:
Record the transactions on materials ledger accounts similar to Figure. (The ?~?~On Order’’ columns should be omitted.) Use the following inventory methods, assuming the use of a perpetual inventory system. Carry unit prices to four decimal places.
1. FIFO
2. LIFO
3. Moving average
Aug 29, 2021 | Uncategorized
The total wages and salaries earned by all employees of Cutler Manufacturing Company during the month of March, as shown in the labor cost summary and the schedule of fixed administrative and sales salaries, are classified as follows:
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 625,125
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,120
Administrative salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,200
Sales salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,500
Total wages earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,099,945
a. Prepare a journal entry to distribute the wages earned during March.
b. What is the total amount of payroll taxes that will be imposed on the employer for the payroll, assuming that two administrative employees with combined earnings this period of $3,000 have exceeded $8,000 in earnings prior to the period?
Aug 29, 2021 | Uncategorized
Torre, Inc., manufactures electrical equipment from specifications received from customers. Job X10 was for 1,000 motors to be used in a specially designed electrical complex. The following costs were determined for each motor:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $117
Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300
At final inspection, Torre discovered that 33 motors did not meet the exacting specifications established by the customer. An examination indicated that 18 motors were beyond repair and should be sold as spoiled goods for $75 each. The remaining 15 motors, though defective, could be reconditioned as first quality units by the addition of $1,650 for materials, $1,500 for labor, and $1,200 for factory overhead.
Required:
Prepare the journal entries to record the following:
1. The scrapping of the 18 motors, with the income from spoiled goods treated as a reduction in the manufacturing cost of the specific job.
2. The correction of the 15 defective motors, with the additional cost charged to the specific job.
3. The additional cost of replacing the 18 spoiled motors with new motors.
4. The sale of the spoiled motors for $75 each.
Aug 29, 2021 | Uncategorized
ETA Company had a remaining credit balance of $20,000 in its under and over applied factory overhead account at year end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The year end balances of these accounts, before adjustment, showed the following:
Work in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
a. Determine the prorated amount of the over applied factory overhead that is chargeable to each of the accounts.
b. Prepare the journal entry to close the credit balance in Under and Over applied Factory Overhead.
Aug 29, 2021 | Uncategorized
Grand Island Brake Co. budgeted the following variable and fixed overhead costs for 2010:
Variable indirect labor ………………… $100,000
Variable indirect materials ………………… 20,000
Variable utilities …………………………… 80,000
Variable portion of other mixed costs …… 120,000
Fixed machinery depreciation ……………. 62,000
Fixed machinery lease payments ………… 13,000
Fixed machinery insurance ……………… 16,000
Fixed salaries ……………………………… 75,000
Fixed utilities ……………………………… 12,000
The company allocates overhead to production using machine hours. For 2010, machine hours have been budgeted at 40,000.
a. Determine the predetermined variable and fixed OH rates for Grand Island Brake Co. The company uses separate variable and fixed manufacturing overhead control accounts.
b. During 2010, the company used 43,000 machine hours during production and incurred a total of $273,600 of variable overhead costs and $185,680 of fixed overhead costs. Prepare journal entries to record the incurrence of the actual overhead costs and the application of overhead to production.
c. What amounts of underapplied or overapplied overhead exist at year end 2010?
d. The company’s management believes that the fixed overhead amount calculated in part (a) should be considered immaterial. Prepare the entry to close the Fixed Overhead Control account at the end of the year.
e. Management believes that the variable overhead amount calculated in part (a) should be considered material and should be prorated to the appropriate accounts. At yearend, balances were as follows for inventory and Cost of Goods Sold accounts:
Raw Material Inventory ………………………….$25,000
Work in Process Inventory ………………………234,000
Finished Goods Inventory ……………………….390,000
Cost of Goods Sold …………………………….936,000
Prepare the entry to close the Variable Overhead Control account at the end of the year.
Aug 29, 2021 | Uncategorized
Julio Manufacturing Company uses activity based costing. The factory overhead budget for the coming period is $500,000, consisting of the following:
Cost Pool Budgeted Amount
Direct labor support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150,000
Machine support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Machine setups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Design changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000
The potential allocation bases and their estimated amounts were as follows:
Cost Pool Budgeted Amount
Number of design changes . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Number of setups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 10,000
Direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Required:
1. Determine the overhead rate for each cost pool, using the most appropriate allocation base for each pool.
2. Job 2525 required $25,000 for direct materials, $10,000 for direct labor, 500 direct labor hours, 1,000 machine hours, five setups, and three design changes. Determine the cost of Job 2525.
Aug 29, 2021 | Uncategorized
La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available from the company’s most recent eight months of operations:
Machine Hours Maintenance Costs
4,000 ………………$1,470
7,000 ……………… 1,200
3,500 ……………… 1,680
6,000 ……………… 1,100
3,000 ……………… 1,960
9,000 ……………… 880
8,000 ……………… 1,020
5,500 ……………… 1,200
a. Using the high–low method, determine the cost formula for maintenance costs with machine hours as the basis for estimation.
b. What aspect of the estimated equation is bothersome? Provide an explanation for this situation.
c. Within the relevant range, can the formula be reliably used to predict maintenance costs? Can the a and b values in the cost formula be interpreted as fixed and variable costs? Why or why not?
Aug 29, 2021 | Uncategorized
The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine hours of variable manufacturing overhead at $8 per hour and 6 machine hours of fixed manufacturing overhead at $15 per hour. Actual output produced was 4,400 units. Variable manufacturing overhead incurred was $245,000. Fixed manufacturing overhead incurred was $373,000. Actual machine hours were 28,400.
Required
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4 variance analysis in Exhibit 8 4 (p. 277).
2. Prepare journal entries using the 4 variance analysis.
3. Describe how individual fixed manufacturing overhead items are controlled from day to day.
4. Discuss possible causes of the fixed manufacturing overhead variances.
Aug 29, 2021 | Uncategorized
The Monteiro Manufacturing Corporation manufactures and sells folding umbrellas. The corporation’s condensed income statement for the year ended December 31, 2011, follows:
Monteiro’s budget committee has estimated the following changes for 2012:
30% increase in number of units sold
20% increase in material cost per unit
15% increase in direct labor cost per unit
10% increase in variable indirect cost per unit
5% increase in indirect fixed costs
8% increase in selling expenses, arising solely from increased volume
6% increase in administrative expenses, reflecting anticipated higher wage and supply price levels
Any changes in administrative expenses caused solely by increased sales volume are considered immaterial. Because inventory quantities remain fairly constant, the budget committee considered that for budget purposes any change in inventory valuation can be ignored. The composition of the cost of a unit of finished product during 2011 for materials, direct labor, and manufacturing support, respectively, was in the ratio of 3:2:1. In 2011, $40,000 of manufacturing support was for fixed costs. No changes in production methods or credit policies were contemplated for 2012.
Required
(a) Compute the unit sales price at which the Monteiro Manufacturing Corporation must sell its umbrellas in 2012 in order to earn a budgeted profit of $200,000.
(b) Unhappy about the prospect of an increase in selling price, Monteiro’s sales manager wants to know how many units must be sold at the old price to earn the $200,000 budgeted profit. Compute the number of units that must be sold at the old price to earn $200,000.
(c) Believing that the estimated increase in sales is overly optimistic, one of the company’s directors wants to know what annual profit is likely if the selling price determined in part a is adopted but the increase in sales volume is only 10%. Compute the budgeted profit in thiscase.
Aug 29, 2021 | Uncategorized
The town council of Riverside met in December 2011. The council estimated revenues for 2012 to be $750,000 from property taxes and $150,000 from business licenses. The appropriations budget from the council was as follows:
General government ……….. $500,000
Parks and recreation ………… 110,000
Sanitation …………………….. 90,000
Streets and sidewalks ……….. 160,000
In 2012, heavy spring rains caused some flooding near the river. As a result, a picnic area at River’s Edge Park was ruined and several damaged shops had to shut down. The council adopted an upward revision of $22,000 for the parks and recreation budget and reduced the estimated revenues from business licenses by 10 percent.
The General Fund began the year with a balance of $22,888. During 2012, tax collections totaled $748,800 and revenues from business licenses were $137,202. Expenditures were $499,200 for general government, $131,345 for parks and recreation, $91,600 for sanitation, and $157,333 for streets and sidewalks. There are no outstanding encumbrances at year end.
1. Prepare a budgetary comparison schedule for the General Fund for 2012.
Aug 29, 2021 | Uncategorized
Tilson Company has projected sales and production in units for the second quarter of the coming year as follows: sales: April 55K May 45K June 65K Production: 65K 55K 55K Cash related production cost are budgeted at 7 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to$110K per month. The accounts payable balance on March 31 totals $193K, which will be paid in April. All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the following month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April totaled $520K(100K from February’s sale and the remainder from March).
Required:
a. Prepare a schedule for each month showing budgeted cash disbursements for the Tilson Company.
b. Prepare a schedule for each month showing bugted cash receipts for Tilson Co.
Aug 29, 2021 | Uncategorized
Total June 2010 sales for Roy’s Catering are expected to be $450,000. Of each month’s sales, 80 percent is expected to be on credit. The Accounts Receivable balance at May 31 is $119,600; of which $90,000 represents the remainder of May credit sales. There are no receivables from months prior to April 2010. The collection pattern of Roy’s Catering credit sales is 70 percent in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale. Roy’s Catering has no uncollectible accounts.
a. What were total sales for April 2010?
b. What were credit sales for May 2010?
c. What are projected cash collections for June 2010?
d. What is the expected balance of Accounts Receivable at June 30, 2010?
Aug 29, 2021 | Uncategorized
Trieste Toy Company manufactures only one product, Robot Ranger. The company uses a standard cost system and has established the following standards per unit of Robot Ranger:
During November, the company recorded the following activity:
?c The company produced 6,000 units.
?c A total of 21,000 pounds of material were used, purchased at a cost of $241,500.
?c The company employs 40 persons to work on the production of Robot Ranger. These employees worked an average of 160 hours at an average rate of $16 per hour.
The company’s management wishes to determine the efficiency of the activities related to the production of Robot Ranger.
Required
(a) For direct materials used in the production of Robot Ranger, compute the direct material price variance and the direct material quantity variance.
(b) The direct materials were purchased from a new supplier who is eager to enter into a long term purchase contract. Would you recommend that Trieste sign the contract? Explain.
(c) For direct labor employed in the production of Robot Ranger, compute the direct labor rate variance and the direct labor efficiency variance.
(d) In the past, the 40 persons employed in the production of Robot Ranger consisted of 16 experienced workers and 24 inexperienced assistants. During November, the company experimented with 20 experienced workers and 20 inexperienced assistants. Would you recommend that Trieste continue the new labor mix?Explain.
Aug 29, 2021 | Uncategorized
Use the following information to prepare the July cash budget for Anker Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31.
a. Beginning cash balance on July 1: $63,000.
b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,700,000; June (actual), $1,200,000; and July (budgeted), $1,400,000.
c. Payments on merchandise purchases: 90% in the month of purchase and 10% in the month following purchase. Purchases amounts are: June (actual), $620,000; and July (budgeted), $790,000.
d. Budgeted cash disbursements for salaries in July: $220,000.
e. Budgeted depreciation expense for July: $11,000.
f. Other cash expenses budgeted for July: $230,000.
g. Accrued income taxes due in July: $50,000.
h. Bank loan interest due in July: $7,000.
Aug 29, 2021 | Uncategorized
Use the information in Exercise 7 3 and the following additional information to prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31.
a. Cost of goods sold is 60% of sales.
b. Inventory at the end of June is $80,000 and at the end of July is $30,000.
c. Salaries payable on June 30 are $50,000 and are expected to be $60,000 on July 31.
d. The equipment account balance is $1,600,000 on July 31. On June 30, the accumulated depreciation on equipment is $280,000.
e. The $7,000 cash payment of interest represents the 1% monthly expense on a bank loan of $700,000.
f. Income taxes payable on July 31 are $24,600, and the income tax rate applicable to the company is 30%.
g. The only other balance sheet accounts are: Common Stock, with a balance of $850,000 on June 30; and Retained Earnings, with a balance of $931,000 on June 30.
Aug 29, 2021 | Uncategorized
Variable manufacturing overhead, variance analysis. Esquire Clothing is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labor costs, and manufacturing overhead costs) and one fixed cost category (manufacturing over head costs). Variable manufacturing overhead cost is allocated to each suit on the basis of budgeted direct manufacturing labor hours per suit. For June 2009, each suit is budgeted to take four labor hours. Budgeted variable manufacturing overhead cost per labor hour is $12….The budgeted number of suits to be manufactured in June 2009 is 1,040.
Actual variable manufacturing costs in June 2009 were $52,164 for 1,080 suits started and completed. There were no beginning or ending inventories of suits. Actual direct manufacturing labor hours for June were 4,536.
1. Compute the flexible budget variance, the spending variance, and the efficiency variance for variable manufacturing overhead.
2. Comment on the results.
Aug 29, 2021 | Uncategorized
Variance analysis, material and labor Each unit of job Y703 has standard requirements of 5 pounds of raw material at a price of $100 per pound and 0.5 hour of direct labor at $12 per hour. To produce 9,000 units of this product, job Y703 actually required 40,000 pounds of the raw material costing $97 per pound. The job used a total of 5,000 direct labor hours costing a total of $60,000.
Required
(a) Determine the material price variance for job Y703.
(b) Determine the material quantity variance for job Y703.
(c) Assume that the materials used on this job were purchased from a new supplier. Would you recommend continuing with this new supplier? Why or why not?
(d) Determine the direct labor rate variance for job Y703.
(e) Determine the direct labor efficiency variance for job Y703.
Aug 29, 2021 | Uncategorized
Variance analysis, materials and labor Pharout Company uses a standard cost system. Job 822 is for the manufacturing of 500 units of the product P521. The company’s standards for one unit of product P521 are as follows:
The job required 2,800 ounces of raw material costing $5,880. An unfavorable labor rate variance of $250 and a favorable labor efficiency variance of $100 also were determined for this job.
Required
(a) Determine the direct material price variance for job 822 based on the actual quantity of materials used.
(b) Determine the direct material quantity variance for job 822 based on the actual quantity of materials used.
(c) Determine the actual quantity of direct labor hours used on job 822.
(d) Determine the actual labor costs incurred for job822.
Aug 29, 2021 | Uncategorized
Variance analysis, non manufacturing setting
Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results ?~or June 2011 are provided below. Stevie has one employee who has been with him for all ten years that he has been in business. He has not been as lucky with his second and third employees. Stevie is hiring new employees in those positions almost every second month. It usually takes 2 hours to detail a vehicle. It takes as long for the seasoned employee as for the new ones, as the former tends to put more into the job. Stevie pays his long term employee $20 per hour and the other two employees $10 per hour Stevie pays all employees for 2 hours of work on each car, regardless of how long the work actually takes them. There were no wage increases in June.
?
1. Prepare a statement of the static budget variances that Stevie would be interested in.
2. Compute any flexible budget variances that you believe would be appropriate.
3. What information, in addition to that provided in the income statements, would you want Stevie to gather, if you wanted to improve operational efficiency?
4. How many cars, on average, did Stevie budget for each employee? How many cars did they actually detail?
5. What advice would you give Stevie about motivating hisemployees?
Aug 29, 2021 | Uncategorized
You are a new junior accountant at Clearview Corporation, maker of lenses for eyeglasses. Your company sells generic quality lenses for a moderate price. Your boss, the Controller, has given you the latest month’s report for the lens trade association. This report includes information related to operations for your firm and three of your competitors within the trade association. The report also includes information related to the industry benchmark for each line item in the report. You do not know which firm is which, except that you know you are Firm A.
Required
1. Calculate the total variable cost per unit for each firm in the trade association. Compute the percent of total for the material, labor, and variable overhead components.
2. Using the trade association’s industry benchmark, calculate direct materials and direct manufacturing labor price and efficiency variances for the four firms. Calculate the percent over standard for each firm and each variance.
3. Write a brief memo to your boss outlining the advantages and disadvantages of belonging to this trade association for benchmarking purposes. Include a few ideas to improve productivity that you want your boss to take to the department heads’meeting.
Aug 29, 2021 | Uncategorized
Zeller Company uses standard costing. The company has two manufacturing plants, one in Nevada and the other in Ohio. For the Nevada plant, Zeller has budgeted annual output of 4,000,000 units. Standard labor hours per unit are 0.25, and the variable overhead rate for the Nevada plant is $3.25 per direct labor hour. Fixed overhead for the Nevada plant is budgeted at $2,500,000 for the year. For the Ohio plant, Zeller has budgeted annual output of 4,200,000 units with standard labor hours also 0.25 per unit. However, the variable overhead rate for the Ohio plant is $3 per hour, and the budgeted fixed overhead for the year is only $2,310,000. Firm management has always used variance analysis as a performance measure for the two plants, and has compared the results of the two plants. Jack Jones has just been hired as a new controller for Zeller. Jack is good friends with the Ohio plant manager and wants him to get a favorable review. Jack suggests allocating the firm’s budgeted common fixed costs of $3,150,000 to the two plants, but on the basis of one third to the Ohio plant and two thirds to the Nevada plant. His explanation for this allocation base is that Nevada is a more expensive state than Ohio. At the end of the year, the Nevada plant reported the following actual results: output of 3,900,000 using 1,014,000 labor hours in total, at a cost of $3,244,800 in variable overhead and $2,520,000 in fixed overhead. Actual results for the Ohio plant are an output of 4,350,000 units using 1,218,000 labor hours with a variable cost of $3,775,800 and fixed overhead cost of $2,400,000. The actual common fixed costs for the year were $3,126,000.
Required
1. Compute the budgeted fixed cost per labor hour for the fixed overhead separately for each plant:
a. Excluding allocated common fixed costs
b. Including allocated common fixed costs
2. Compute the variable overhead spending variance and the variable overhead efficiency variance separately for each plant.
3. Compute the fixed overhead spending and volume variances for each plant:
a. Excluding allocated common fixed costs
b. Including allocated common fixed costs
4. Did Jack Jones’s attempt to make the Ohio plant look better than the Nevada plant by allocating common fixed costs work? Why or why not?
5. Should common fixed costs be allocated in general when variances are used as performance measures? Why or why not?
6. What do you think of Jack Jones’s behavior overall?
Aug 29, 2021 | Uncategorized
Anwar Askari is planning to manage and operate AA Caddy Service at Mission Valley Golf and Country Club during June through August 2012. Anwar will rent a small maintenance building from the country club for $700 per month and will offer caddy services, including cart rentals, to golfers. Anwar has had no formal training in record keeping. Anwar keeps notes of all receipts and expenses in a shoe box. An examination of Anwar’s shoe box records for June revealed the following:
June 1. Transferred $3,500 from personal bank account to be used to operate the caddy service.
1. Paid rent expense to Mission Valley Golf and Country Club, $700.
2. Paid for golf supplies (practice balls, etc.) $800.
3. Arranged for the rental of 25 regular (pulling) golf carts and 10 gasoline driven carts for $3,000 per month. Paid $500 in advance, with the remaining $2,500 due June 20.
7. Purchased supplies, including gasoline, for the golf carts on account, $600. Mission Valley Golf and Country Club has agreed to allow Anwar to store the gasoline in one of its fuel tanks at no cost.
15. Received cash for services from June 1 15, $4,150.
17. Paid cash to creditors on account, $600.
20. Paid remaining rental on golf carts, $2,500.
22. Purchased supplies, including gasoline, on account, $400.
25. Accepted IOUs from customers on accounts, $1,800.
28. Paid miscellaneous expenses, $350.
30. Received cash for services from June 16 30, $6,350.
30. Paid telephone and electricity (utilities) expenses, $340.
30. Paid wages of part time employees, $850.
30. Received cash in payment of IOUs on account, $1,200.
30. Determined the amount of supplies on hand at the end of June, $500.
Anwar has asked you several questions concerning his financial affairs to date, and he has asked you to assist with his record keeping and reporting of financial data.
a. To assist Anwar with his record keeping, prepare a chart of accounts that would be appropriate for AA Caddy Service.
b. Prepare an income statement for June is order to help Anwar assess the profitability of AA Caddy Service. For this purpose, the use of T accounts may be helpful in analyzing the effects of each June transaction.
c. Based on Anwar’s records of receipts and payments, compute the amount of cash on hand on June 30. For this purpose, a T account for cash may be useful.
d. A count of the cash on hand on June 30 totaled $8,390. Briefly discuss the possible causes of the difference between the amount of cash computed in (c) and the actual amount of cash on hand.
Aug 29, 2021 | Uncategorized
Income Statement Prepare an income statement for Jay Pembroke for the month of April 20xx using the account balances given below.
|
Cash
|
$12,950
|
|
|
Accounts Receivable
|
2,000
|
|
|
Office Supplies
|
4,600
|
|
|
Prepaid Insurance
|
|
1,200
|
|
Accounts Payable
|
|
$300
|
|
Jay Pembroke, Capital
|
18,000
|
|
|
Jay Pembroke, Drawing
|
100
|
|
|
Service Fees
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3,300
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|
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Rent Expense
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750
|
|
Aug 29, 2021 | Uncategorized
Benito Mendez opened Mendez Appraisals. He rented office space and has a part time secretary to answer the telephone and make appraisal appointments. His chart of accounts is as follows:
?
.:.
Mendez’s transactions for the first month of business are as follows:
May 1 Mendez invested cash in the business, $5,000.
2 Paid rent, $500.
3 Purchased office supplies, $100.
4 Purchased office equipment on account, $2,000.
5 Received cash for services rendered, $280.
8 Paid telephone bill, $38.
9 Paid electric bill, $42.
10 Received cash for services rendered, $310.
13 Paid part time employee, $500.
14 Paid car rental for out of town trip, $200.
15 Paid for newspaper ad, $30.
18 Received cash for services rendered, $620.
19 Paid mileage reimbursement for part time employee’s use of personal car for business deliveries (transportation expense), $22.
21 Mendez withdrew cash for personal use, $50.
23 Made payment on account for office equipment purchased earlier, $200.
24 Earned appraisal fee, which will be paid in a week, $500.
26 Paid for newspaper ad, $30.
27 Paid for local softball team sponsorship (miscellaneous expense), $15.
28 Paid part time employee, $500.
29 Received cash on account, $250.
30 Received cash for services rendered, $280.
31 Paid cab fare (transportation expense), $13.
REQUIRED
1. Set up general ledger accounts from the chart of accounts.
2. Journalize the transactions for May in a two column general journal. Use the following journal page numbers: May 1–10, page 1; May 13–24, page 2; May 26–31, page 3.
3. Post the transactions to the general ledger.
4. Prepare a trial balance.
5. Prepare an income statement and a statement of owner’s equity for the month of May, and a balance sheet as of May 31, 20 .
Aug 29, 2021 | Uncategorized
Prepare all general journal entries for the month of January, 2012.
- Prepare a trial balance as of 1/31/12.
- Prepare all closing entries for the month of January, 2012.
- Prepare a post closing trial balance as of 1/31/12.
- Prepare the income statement, balance sheet and statement of changes in retained earnings for the month of January, 2012 in their proper formats.
Aug 29, 2021 | Uncategorized
David Segal started a business. During the first month (October 20 ), the following transactions occurred.
(a) Invested cash in the business, $15,000.
(b) Bought office supplies for $3,800: $1,800 in cash and $2,000 on account.
(c) Paid one year insurance premium, $1,000.
(d) Earned revenues amounting to $2,700: $1,700 in cash and $1,000 on account.
(e) Paid cash on account to the company that supplied the office supplies in transaction (b), $1,800.
(f) Paid office rent for the month, $650.
(g) Withdrew cash for personal use, $150.
REQUIRED
Show the effect of each transaction on the individual accounts of the expanded accounting equation: Assets = Liabilities + Owner’s Equity (Capital – Drawing + Revenues – Expenses). After transaction (g), report the totals for each element. Demonstrate that the accounting equation has remained in balance.
Aug 29, 2021 | Uncategorized
Imperial Carpet has the following unadjusted trial balance as of March 31, 2012.
The debit and credit totals are not equal as a result of the following errors:
a. The balance of cash was understated by $12,000.
b. A cash receipt of $13,900 was posted as a debit to Cash of $19,300.
c. A debit of $15,000 to Accounts Receivable was not posted.
d. A return of $90 of defective supplies was erroneously posted as a $900 credit to Supplies.
e. The balance of Notes Payable was understated by $35,200.
g. A credit of $7,600 in Accounts Payable was overlooked when determining the balance of the account.
h. A debit of $10,000 for dividends was posted as a credit to Retained Earnings.
i. The balance of $116,200 in Rent Expense was entered as $112,600 in the trial balance.
j. Gas, Electricity, and Water Expense, with balance of $48,300 was omitted from the trial balance.
Instructions
1. Prepare a corrected unadjusted trial balance as of March 31, 2012.
2. Does the fact that the unadjusted trial balance in (1) is balanced mean that there are no errors in the accounts?Explain.
Aug 29, 2021 | Uncategorized
Overhead variances, missing information. Dvent budgets 18,000 machine hours for the product of computer chips in August 2009. The budgeted variable overhead rate is $6 per machine hour. At the end of August, there is a $375 favorable spending variance for variable overhead and a $1,575 unfavorable spending variance for fixed overhead. For the computer chips produced, 14,850 machine hours are budgeted and 15,000 machine hours are actually used. Total actual overhead costs are $120,000.
1. Compute efficiency and flexible budget variances for Dvent’s variable overhead in August 2009. W variable overhead be over or underallocated by how much?
2. Compute production volume and flexible budget variances for Dvent’s fixed overhead in August 2009. Will fixed overhead be over or underallocated by how much?
Aug 29, 2021 | Uncategorized
Overhead variances, service sector
Meals on Wheels (MOW) operate a meal home delivery service agreements with 20 restaurants to pick up and deliver meals to customers who phone or fax to MOW. MOW allocates variable and fixed overhead costs on the basis of delivery time. MOW’S Josh Carter, obtains the following information for May 2009 overhead costs:
?
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prentiall.com/horngren/cost13e and download the template for Exercise 8 24.
1. Compute spending and efficiency variances for MOW’s variable overhead in May 2009.
2. Compute the spending variance and production volume variance for MOW’s fixed overhead in May 2009.
3. Comment on MOW’s overhead variances and suggest how Josh Carter might manage MOW’s variable overhead differently from its fixed overheadcosts.
Aug 29, 2021 | Uncategorized
Possible causes for price and efficiency variances You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case based interview process. One of the students who successfully obtained a job with them upon graduation last year advised you to ?oknow your variances cold!?? When you inquired further, she told you that she had been asked to pretend that she was investigating wage and materials variances. Per her advice, you have been studying the causes and consequences of variances. You are excited when you walk in and find that the first case deals with variance analysis. You are given the following data for May for a detergent bottling plant located in Mexico:
Required
Please respond to the following questions as if you were in an interview situation:
1. Calculate the materials efficiency and price variance, and the wage and labor efficiency variances for the month of May.
2. You are given the following context: ?oUnion organizers are targeting our detergent bottling plant in Puebla, Mexico, for a union.?? Can you provide a better explanation for the variances that you have calculated on the basis of thisinformation?
Aug 29, 2021 | Uncategorized
Price and efficiency variances, journal entries. The Monroe Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor:
Direct materials: 10 lbs. at $4.50 per lb. $45.00
Direct manufacturing labor: 0.5 hour at $30 per hour 15.00
The number of finished units budgeted for January 2009 was 10,000; 9,850 units were actually produced. Actual results in January 2009 were:
Direct materials: 98,055 lbs. used
Direct manufacturing labor: 4,900 hours $154,350
Assume that there was no beginning inventory of either direct materials or finished units.
During the month, materials purchases amounted to 100,000 lbs., at a total cost of $465,000. Input price variances are isolated upon purchase. Input efficiency variances are isolated at the time of usage.
1. Compute the January 2009 price and efficiency variances of direct materials and direct manufacturing labor.
2. Prepare journal entries to record the variances in requirement 1.
3. Comment on the January 2009 price and efficiency variances of Monroe Corporation.
4. Why might Monroe calculate direct materials price variances and direct materials efficiency variances with reference to different points in time?
Aug 29, 2021 | Uncategorized
Price and efficiency variances, problems in standard setting, benchmarking. New Fashions manufactures shirts for retail chains. Andy Jorgenson, the controller, is becoming inerasably disenchanted with New Fashion’s standard costing system. The budgeted and actual amounts for direct materials and direct manufacturing labor for June 2009 were:
?
There were no beginning or ending inventories of materials. Standard costs are based on a study of the operations conducted by an independent consultant six months earlier. Jorgenson observes that since that study he has rarely seen an unfavorable variance of any magnitude. He notes that even at their current output levels, the workers seem to have a lot of time for sitting around and gossiping. Jorgenson is concerned that the production manager, Charlie Fenton, is aware of this but does not want to tighten up the standards because the lax standards make his performance look good.
1. Compute the price and efficiency variances of New Fashions for direct materials and direct manufacturing labor in June 2009.
2. Describe the types of actions the employees at New Fashions may have taken to reduce the accuracy of the standards set by the independent consultant. Why would employees take those actions? Is this behavior ethical?
3. If Jorgenson does nothing about the standard costs, will his behavior violate any of the Standards of Ethical Conduct for Management Accountants described in Exhibit 1 7?
4. What actions should Jorgenson take?
5. Jorgenson can obtain benchmarking information about the estimated costs of New Fashion’s major competitors from Benchmarking Clearing House (BCH). Discuss the pros and cons of using the BCH information to compute the variances in requirement1.
Aug 29, 2021 | Uncategorized
Responsibility and controllability. Consider each of the following independent situations:
1. A very successful salesman at Amcorp Computers regularly ignores the published sales catalog and offers lowered prices to his customers in order to close sales. The VP of sales notices that revenues are substantially lower than budgeted.
2. Every ?ospecial deal?? offered to a customer by any salesperson at Amcorp Computers has to be cleared by the VP of sales. Revenues for the second quarter have been lower than budgeted.
3. The shipping department of Amcorp has limited capacity, and sales orders are being cancelled by customers because of delays in delivery. Revenues for the past month have been lower than budgeted.
4. At Planetel Corp., a manufacturer of telecommunications equipment, the production supervisor notices that a significantly larger number of direct manufacturing labor hours were used than had been budgeted. Investigation revealed that it was due to a decline in educational standards required by the Human Resources department when it interviewed applicants for hourly production jobs six months earlier.
5. At Planetel Corp., a relatively new production supervisor finds that more direct manufacturing labor hours were used than had been budgeted. Interviews revealed that workers were unhappy with the supervisor’s management style and were intentionally working slowly and inefficiently.
6. At Planetel Corp., the production supervisor traces the excessive consumption of direct materials (relative to the budget) to the fact that waste was high on machines that had not been properly maintained.
Aug 29, 2021 | Uncategorized
Revenue and production budgets. (CPA, adapted) The Scarborough Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2009, Scarborough’s budget department gathered the following data to prepare budgets for 2010:
The following direct materials are used in the two products:
Projected data for 2010 with respect to direct materials are as follows:
Projected direct manufacturing labor requirements and rates for 2010 are as follows:
Manufacturing overhead is allocated at the rate of $20 per direct manufacturing labor hour.
Based on the preceding projections and budget requirements for Thingone and Thingtwo, prepare the following budgets for 2010:
1. Revenues budget (in dollars)
2. Production budget (in units)
3. Direct material purchases budget (in quantities)
4. Direct material purchases budget (in dollars)
5. Direct manufacturing labor budget (in dollars)
6. Budgeted finished goods inventory at December 31, 2010 (in dollars)
Aug 29, 2021 | Uncategorized
Revenues and production budget. Purity, Inc., bottles and distributes mineral water from the company’s natural springs in northern Oregon. Purity markets two products: twelve ounce disposable plastic bottles and four gallon reusable plastic containers.
1. For 2010, Purity marketing managers project monthly sales of 400,000 twelve ounce bottles and 100,000 four gallon containers. Average selling prices are estimated at $0.25 per twelve ounce bottle and $1.50 per four gallon container. Prepare a revenues budget for Purity, Inc., for the year ending December 31, 2010.
2. Purity begins 2010 with 900,000 twelve ounce bottles in inventory. The vice president of operations requests that twelve ounce bottles ending inventory on December 31, 2010, be no less than 600,000 bottles. Based on sales projections as budgeted above, what is the minimum number of twelve ounce bottles Purity must produce during 2010?
3. The VP of operations requests that ending inventory of four gallon containers on December 31, 2010, be 200,000 units. If the production budget calls for Purity to produce 1,300,000 four gallon containers during 2010, what is the beginning inventory of four gallon containers on January 1, 2010?
Aug 29, 2021 | Uncategorized
Revenues, production, and purchases budgets. The Suzuki Co. in Japan has a division that manufactures two wheel motorcycles. Its budgeted sales for Model G in 2010 are 900,000 units. Suzuki’s target ending inventory is 80,000 units, and its beginning inventory is 100,000 units. The company’s budgeted selling price to its distributors and dealers is 400,000 yen (?Y) per motorcycle.
Suzuki buys all its wheels from an outside supplier. No defective wheels are accepted. (Suzuki’s needs for extra wheels for replacement parts are ordered by a separate division of the company.) The company’s target ending inventory is 60,000 wheels, and its beginning inventory is 50,000 wheels. The budgeted purchase price is 16,000 yen (?Y) per wheel.
1. Compute the budgeted revenues in yen.
2. Compute the number of motorcycles to be produced.
3. Compute the budgeted purchases of wheels in units and in yen.
Aug 29, 2021 | Uncategorized
Romano’s Frozen Pizza Inc. has determine from its production budget the following estimate production volumes for 12’ and 16?? frozen pizzas for June 2012:
There are three direct materials used in producing the two types of Pizza. The quantities of direct material expected to be used for each pizza are as follows:
In addition, Romano’s has determine the following information about each material:
?
Prepare June’s direct material purchases budget for Romano’s Frozen Pizza Inc.
Aug 29, 2021 | Uncategorized
Sales budget, service setting. In 2009, McGrath & Sons, a small environmental testing firm, per: med 11,000 radon tests for $250 each and 15,200 lead tests for $200 each. Because newer homes are being built with lead free pipes, lead testing volume is expected to decrease by 10% next year. However, awareness of radon related health hazards is expected to result in a 5% increase in radon test volume each year in the near future. Jim McGrath feels that if he lowers his price for lead testing to $190 per test, he will have to face only a 5% decline in lead test sales in 2010.
1. Prepare a 2010 sales budget for McGrath & Sons assuming that McGrath holds prices at 2009 levels.
2. Prepare a 2010 sales budget for McGrath & Sons assuming that McGrath lowers the price of a lead test to $190 Should McGrath lower the price of a lead test in 2010 if its goal is to maximize sales revenue?
Aug 29, 2021 | Uncategorized
Shredder Manufacturing has the following projected unit sales (at $18 per unit) for four months of operations:
January …………………..25,000
February ………………..30,000
March ………………….32,000
April ……………………35,000
Twenty five percent of the customers are expected to pay in the month of sale and take a 3 percent discount; 70 percent of the customers are expected to pay in the month following sale. The remaining 5 percent will never pay.
It takes 2 pounds of raw material (costing $0.75 per pound) to produce a unit of product. In January, no raw material is in beginning inventories, but management wants to end each month with enough material for 20 percent of the next month’s production. (April’s production is assumed to be 34,000 units.) Shredder Manufacturing pays for 60 percent of its material purchases in the month of purchase and 40 percent in the following month.
Each unit of product requires 0.5 hours of labor time. Labor is paid $15 per hour and is paid in the same month as worked. Overhead is estimated to be $2 per unit plus $25,000 per month (including depreciation of $12,000). Overhead costs are paid as incurred.
Shredder will begin January with no Work in Process or Finished Goods Inventory. Inventory policy for these two accounts is set at zero ending WIP and 25 percent of the following month’s sales for FG.
a. Prepare a sales budget for January, February, and March.
b. Prepare a production budget for January, February, and March.
c. Prepare a purchases budget for January, February, and March.
d. Prepare a direct labor budget for January, February, and March.
e. Prepare an overhead budget for January, February, and March.
f. Prepare a cash receipts schedule for sales and a cash payments schedule for material purchased.
Aug 29, 2021 | Uncategorized
Sonnet, Inc., has the following budgeted standards for the month of March 2011:
Average selling price per diskette $ 6.00
Total direct material cost per diskette $ 1.50
Direct manufacturing labor
Direct manufacturing labor cost per hour $ 12.00
Average labor productivity rate (diskettes per hour) 300
Direct marketing cost per unit $ 0.30
Fixed overhead $ 800,000
Sales of 1,500,000 units are budgeted for March. The expected total market for this product was 7,500,000 diskettes. Actual March results are as follows:
Unit sales and production totaled 95% of plan.
Actual average selling price increased to $6.10.
Productivity dropped to 250 diskettes per hour.
Actual direct manufacturing labor cost is $12.20 per hour.
Actual total direct material cost per unit increased to $1.60.
Actual direct marketing costs were $0.25 per unit.
Fixed overhead costs were $10,000 above plan.
Actual market size was 8,906,250 diskettes.
Required
Calculate the following:
1. Static budget and actual operating income
2. Static budget variance for operating income
3. Flexible budget operating income
4. Flexible budget variance for operating income
5. Sales volume variance for operating income
6. Market share and market size variances
7. Price and efficiency variances for direct manufacturing labor
8. Flexible budget variance for direct manufacturing labor
Aug 29, 2021 | Uncategorized
Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results for June 2011 are provided next. Stevie has one employee who has been with him for all 10 years that he has been in business. In addition, at any given time he also employs two other less experienced workers. It usually takes each employee 2 hours to detail a vehicle, regardless of his or her experience. Stevie pays his experienced employee $40 per vehicle and the other two employees $20 per vehicle. There were no wage increases in June.
Required
1. How many cars, on average, did Stevie budget for each employee? How many cars did each employee actually detail?
2. Prepare a flexible budget for June 2011.
3. Compute the sales price variance and the labor efficiency variance for each labor type.
4. What information, in addition to that provided in the income statements, would you want Stevie to gather, if you wanted to improve operationalefficiency?
Aug 29, 2021 | Uncategorized
Straightforward coverage of manufacturing overhead, standard costing system
Straightforward coverage of manufacturing overhead, standard costing system, the Singapore division of a Canadian telecommunications company uses standard costing for its machine paced production of telephone equipment. Data regarding production during June are as follows:
?
1. Prepare an analysis of all manufacturing overhead variances. Use the 4 variance analysis framework illustrated in Exhibit 8 4.
2. Prepare journal entries for manufacturing overhead costs and their variances.
3. Describe how individual variable manufacturing overhead items are controlled from day to day.
4. Discuss possible causes of the variable manufacturing overheadvariances.
Aug 29, 2021 | Uncategorized
Tenneco, Inc., produces three models of tennis rackets: standard, deluxe, and pro. Following are the sales and cost information for 2011:
Fixed manufacturing support costs are $800,000, and fixed selling and administrative costs are $400,000. In addition, the company pays its sales representatives a commission equal to 10% of the price of each racket sold.
Required
(a) If the sales price of deluxe rackets decreases 10%, its sales are expected to increase 30%, but sales of standard rackets are expected to decrease 5%, as some potential buyers of standard rackets will upgrade to deluxe rackets. What will be the impact of this decision on Tenneco’s profits?
(b) Suppose that Tenneco decides to increase its advertising by $50,000 instead of cutting the price of deluxe rackets. This is expected to increase sales of all three models by 2% each. Is this decision advisable?
(c) The incentive created by sales commissions has led Tenneco’s sales force to push the higher priced rackets more than the lower priced ones. Is this in the best interests of thecompany?
Aug 29, 2021 | Uncategorized
The Beal Manufacturing Company’s costing system has two direct cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor hours (DLH). At the beginning of 2009, Beal adopted the following standards for its manufacturing costs:
The denominator level for total manufacturing overhead per month in 2009 is 40,000 direct manufacturing labor hours. Beal’s flexible budget for January 2009 was based on this denominator level. The records for January indicated the following:
1. Prepare a schedule of total standard manufacturing costs for the 7,800 output units in January 2009.
2. For the month of January 2009, compute the following variances, indicating whether each is favorable (F) or unfavorable (U):
a.Direct materials price variance, based on purchases
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Total manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production volume variance
Aug 29, 2021 | Uncategorized
The Budgetary Comparison Schedule for the City of Salem appears in Illustration 2–16. Assume the general and subsidiary ledgers for the General Fund were lost after a water pipe burst. You are charged with reproducing the journal entries that took place during the year ended December 31, 2012.
Use the excel file provided to prepare summary journal entries, including subsidiary ledger entries, for the following events.
a. Record the original budget.
b. Record the revisions to the budget.
c. Record the actual revenues.
d. Record the encumbrances, assuming all expenditures originated as encumbrances and the encumbrance and expenditure are equal in amount.
e. Record the actual expenditures and reversal of the associated encumbrance.
You should follow the format of the entries provided in entries 1 to 7 of the appendix to Chapter 3.
Aug 29, 2021 | Uncategorized
The City of Grafton’s records reflected the following budget and actual data for the General Fund for the fiscal year ended June 30, 2012.
1. Estimated revenues:
Taxes (Property) …………. $3,000,000
Licenses and permits ………… 800,000
Intergovernmental revenues ….. 300,000
Miscellaneous revenues ………. 200,000
2. Revenues:
Taxes (Property) …………… $3,000,000
Licenses and permits ………… 801,320
Intergovernmental revenues ….. 293,000
Miscellaneous revenues ………. 198,000
3. Appropriations:
General government …………. $ 900,000
Public safety …………………. 2,000,000
Health and welfare …………… 1,400,000
4. Expenditures of 2012 appropriations:
General government …………… $ 880,000
Public safety ……………………. 1,949,000
Health and welfare ……………… 1,398,000
5. Encumbrances of 2012 appropriations, outstanding as of June 30, 2012.
General government ……………….. $18,000
Public safety ………………………… 50,000
6. Transfer to debt service fund:
Budget …………………………….. $600,000
Actual ……………………………….. 600,000
7. Budget revisions approved by the city council:
Estimated revenues:
Decrease intergovernmental revenues … $10,000
Decrease miscellaneous revenues ………… 3,000
Appropriations:
Decrease general government ………………. 2,000
8. Total fund balance at July 1, 2011, was $1,038,000.
Required:
Use the Excel file provided to prepare a budgetary comparision schedule for the City of Grafton for the fiscal year ended June 30, 2012. Include outstanding encumbrances with expenditures. Use the formula feature (e.g., sum, =, etc.) of Excel to calculate the amounts in cells shaded blue.
Aug 29, 2021 | Uncategorized
The following information pertains to Torasic Company’s budgeted income statement for the month of June 2011:
Sales (1,200 units at $250) $300,000
Variable cost 150,000
Contribution margin $150,000
Fixed cost 200,000
Net loss ($50,000)
Required
(a) Determine the company’s breakeven point in both units and dollars.
(b) The sales manager believes that a $22,500 increase in the monthly advertising expenses will result in a considerable increase in sales. How much of an increase in sales must result from increased advertising in order to break even on the monthly expenditure?
(c) The sales manager believes that an advertising expenditure increase of $22,500 coupled with a 10% reduction in the selling price will double the sales quantity. Determine the net income (or loss) if these proposed changes are adopted.
Aug 29, 2021 | Uncategorized
Flexible budgets, 4 variance analysis. (CMA, adapted) Nolton Products uses standard costing allocates manufacturing overhead (both variable and fixed)to products on the basis of standard direct manufacturing labor hours (DLH). Nolton develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2009 is based on budgeted output of 720,000 units, requiring 3,600,000 DLH. The company is able to schedule production uniformly throughout the year.
A total of 66,000 output units requiring $315,000 DLH was produced during May 2009. Manufacturing overhead (MOH) costs incurred for May amounted to $375,000. The actual costs, compared with the a budget and 1/12 of the annual budget, are as follows:
?
Calculate the following amounts for Nolton Products for May 2009:
1. Total manufacturing overhead costs allocated
2. Variable manufacturing overhead spending variance
3. Fixed manufacturing overhead spending variance
4. Variable manufacturing overhead efficiency variance
5. Production volume variance
Be sure to identify each variance as favorable (F) or unfavorable(U).
Aug 29, 2021 | Uncategorized
Flexible budget and sales volume variances, market share and market size variances. Marron, Inc., produces the basic fillings used in many popular frozen desserts and treats—vanilla and chocolate ice creams, puddings, meringues, and fudge. Marron uses standard costing and carries over no inventory from one month to the next. The ice cream product group’s results for June 2012 were as follows:
Ted Levine, the business manager for ice cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs went up too. The bottom line is that contribution margin declined by $16,000, which is less than 1% of the budgeted revenues of $1,880,250. Overall, Levine feels that the business is running fine. Levine would also like to analyze how the company is performing compared to the overall market for ice cream products. He knows that the expected total market for ice cream products was 1,150,000 pounds and that the actual total market was 1,109,375 pounds.
Required
1. Calculate the static budget variance in units, revenues, variable manufacturing costs, and contribution margin. What percentage is each static budget variance relative to its static budget amount?
2. Break down each static budget variance into a flexible budget variance and a sales volume variance.
3. Calculate the selling price variance.
4. Calculate the market share and market size variances.
5. Assume the role of management accountant at Marron. How would you present the results to Ted Levine? Should he be more concerned? If so,why?
Aug 29, 2021 | Uncategorized
Follete Inc. operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Follette Inc. is planning its annual budget for fiscal year 2011. Information for 2011 follows:
Input Prices
Direct materials
Plastic $ 0.20 per ounce
Bristles $ 0.50 per bunch
Direct manufacturing labor$12 per direct manufacturing labor hour
Folette Inc. accounts for direct materials using a FIFO cost flow.
Folette Inc. uses a FIFO cost flow assumption for finished goods inventory. Combs are manufactured in batches of 200, and brushes are manufactured in batches of 100. It takes 20 minutes to set up for a batch of combs, and one hour to set up for a batch of brushes. Folette Inc. uses activity based costing and has classified all overhead costs as shown in the following table:
Delivery trucks transport units sold in delivery sizes of 1,000 combs or 1,000 brushes.
Required
Do the following for the year 2011:
1. Prepare the revenues budget.
2. Use the revenue budget to
a. find the budgeted allocation rate for marketing costs.
b. find the budgeted number of deliveries and allocation rate for distribution costs.
3. Prepare the production budget in units.
4. Use the production budget to
a. find the budgeted number of setups, setup hours, and the allocation rate for setup costs.
b. find the budgeted total machine hours and the allocation rate for processing costs.
c. find the budgeted total units produced and the allocation rate for inspection costs.
5. Prepare the direct material usage budget and the direct material purchases budgets in both units and dollars; round to whole dollars.
6. Use the direct material usage budget to find the budgeted allocation rate for materials handling costs.
7. Prepare the direct manufacturing labor cost budget.
8. Prepare the manufacturing overhead cost budget for materials handling, setup, and processing.
9. Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget.
10. Prepare the cost of goods sold budget.
11. Prepare the non manufacturing overhead costs budget for marketing and distribution.
12. Prepare a budgeted income statement (ignore incometaxes).
Aug 29, 2021 | Uncategorized
In September, TEE Company, a merchandising firm that sells one product, assembled the following information and estimates to prepare a budget for October. Expected sales are 40,000 units at a price of $32 per unit. The cost of merchandise purchases is expected to be $20 per unit. Selling and administrative expenses are estimated at $350,000, of which $20,000 is depreciation. The October 1 cash balance is expected to be $40,000. TEE estimates that 70% of each month’s sales are collected in the month of sale and the remaining 30% is collected in the month after sale. Expected sales for September are $1,000,000. The company pays for 20% of its merchandise purchases during the month of purchase, and pays the remaining 80% during the month following purchase. Merchandise purchases for September are estimated to be $880,000 and the purchase cost per unit is $20. All other out of pocket expenses are paid for in cash.
Required:
(a) TEE plans to purchase 38,000 units of merchandise in October. Prepare a cash budget or statement of estimated cash flows for October for the company.
(b) Prepare a budgeted income statement (for external reporting purposes) for the month ended October 31 for TEE Company.
Aug 29, 2021 | Uncategorized
Kaizen approach to activity based budgeting Family Supermarkets IFS) has a kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2008.
Each successive month, the budgeted cost driver rate decreases by 0.2% relative to the preceding month (so, for example, February’s budgeted cost driver rate is 0.998 times January’s budgeted cost driver rate and March’s budgeted cost driver rate is 0.998 times the budgeted February 2008 rate). ES assumes that the budgeted amount of cost driver usage remains the same each month. If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com, horngren/costl3e and download the template for Exercise 6 24.
1. What is the total budgeted cost for each activity and the total budgeted indirect cost for March 2008?
2. What are the benefits of using a kaizen approach to budgeting? What are the limitations of this approach, and how might ES management overcome them?
Aug 29, 2021 | Uncategorized
Katharine Stanley is the owner of Better Bikes, a company that produces high quality cross country bicycles. Better Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Better Bikes has purchased titanium from suppliers in the supply chain. Better Bikes uses titanium for the bicycle frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Better Bikes hired Michael Scott, a recent graduate from State University, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price. Better Bikes established the following standards based upon the company’s experience with previous suppliers. The standards are as follows:
Cost of titanium $22 per pound
Titanium used per bicycle 8 lb.
Actual results for the first month using the online supplier of titanium are as follows:
Bicycles produced 800
Titanium purchased 8,400 lb. for $159,600
Titanium used in production 7,900 lb.
Required
1. Compute the direct materials price and efficiency variances.
2. What factors can explain the variances identified in requirement 1? Could any other variances be affected?
3. Was switching suppliers a good idea for Better Bikes? Explain why or why not.
4. Should Michael Scott’s performance evaluation be based solely on price variances? Should the production manager’s evaluation be based solely on efficiency variances? Why it is important for Katharine Stanley to understand the causes of a variance before she evaluates performance?
5. Other than performance evaluation, what reasons are there for calculating variances?
6. What future problems could result from Better Bikes’ decision to buy a lower quality of titanium from the online marketplace?
Aug 29, 2021 | Uncategorized
Kimble and Sanchez, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2008:
Billable Hours
Audit Department:
Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,500
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200
Tax Department:
Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,700
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,150
Small Business Accounting Department:
Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,800
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,300
The average billing rate for staff is $120 per hour, and the average billing rate for partners is $240 per hour. Prepare a professional fees earned budget for Kimble and Sanchez, CPAs, for the year ending December 31, 2008, using the following column headings and showing the estimated professional fees by type of service rendered:
Billable Hours Hourly Rate Total Revenue
Aug 29, 2021 | Uncategorized
Logo Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:
Knights, with red blankets and the Knights logo
Raiders, with black blankets and the Raider logo
Also, the black blankets are slightly larger than the red blankets.
The budgeted direct cost inputs for each product in 2012 are as follows:
Unit data pertaining to the direct materials for March 2012 are as follows:
Unit cost data for direct cost inputs pertaining to February 2012 and March 2012 are as follows:
Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor hours per blanket. The budgeted variable manufacturing overhead rate for March 2012 is $15 per direct manufacturing labor hour. The budgeted fixed manufacturing overhead for March 2012 is $9,200. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods. Data relating to finished goods inventory for March 2012 are as follows:
Budgeted sales for March 2012 are 120 units of the Knights blankets and 180 units of the Raiders blankets. The budgeted selling prices per unit in March 2012 are $150 for the Knights blankets and $175 for the Raiders blankets. Assume the following in your answer:
Work in process inventories are negligible and ignored.
Direct materials inventory and finished goods inventory are costed using the FIFO method.
Unit costs of direct materials purchased and finished goods are constant in March 2012.
Required
1. Prepare the following budgets for March 2012:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget
d. Direct manufacturing labor budget
e. Manufacturing overhead budget
f. Ending inventories budget (direct materials and finished goods)
g. Cost of goods sold budget
2. Suppose Logo Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement1.
Aug 29, 2021 | Uncategorized
Lotus Fixtures, Inc. (LFI), manufactures steel fittings. Each fitting requires both steel and an alloy that allows the fitting to be used under extreme conditions. The following data apply to the production of the fittings:
Direct materials per unit
2 pounds of steel at $0.40 per pound
0.5 pounds of alloy at $3.00 per pound
Direct labor per unit
0.01 hours at $30 per hour
Overhead per unit
Indirect materials . . . . . . . . . . . . . . . . . . . $0.50
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . 0.80
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40
Plant and equipment depreciation . . . . . . 1.00
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 0.70
Total overhead per unit . . . . . . . . . . . . . . $3.40
The plant and equipment depreciation and miscellaneous costs are fixed and are based on production of 500,000 units annually. All other costs are variable. Plant capacity is 600,000 units annually.
All other overhead costs are variable.
The following are forecast for year 2. Contract negotiations with the union are expected to lead to an increase in hourly direct labor costs of 10 percent, mostly in the form of additional benefits. Commodity prices, including steel, are expected to decline by 20 percent due to the economic slowdown. Alloy prices are expected to remain constant. Plant and equipment depreciation costs are expected to increase by 5 percent. All other unit overhead costs are expected to remain constant.
LFI expects to sell 420,000 units in year 2. The current inventory of fittings is 40,000 units and management would like to see a reduction of inventory of 20,000 units by the end of the year 2.
Steel and alloy inventories will not change. Sales are approximately uniform over the year.
Required
Prepare a production budget and estimate the materials, labor, and overhead costs for year 2.
Aug 29, 2021 | Uncategorized
Manufacturing firm production and purchases budget Glynn Company is preparing a budget to determine the amount of part G12 to produce for the first quarter of the year, and the amount of resin to purchase for part G12. The company desires to have 25% of the next month’s estimated sales of G12 in inventory at the end of each month. Glynn has a very reliable supplier of resin and therefore desires an ending inventory of only 10% of resin needs for the next month’s production. Each unit of G12 requires half a pound of resin. Projected sales of G12 for January, February, and March are 50,000 units, 60,000 units, and 54,000 units, respectively.
Required
(a) How many units of part G12 will Glynn budget to produce in January and February?
(b) How many pounds of resin will Glynn budget to purchase in January and February?
Aug 29, 2021 | Uncategorized
Manufacturing overhead, variance analysis
The Solutions Corporation is a manufacturer of centrifuges. Fixed and variable manufacturing overheads are allocated to each centrifuge using budgeted assembly hours. Budgeted assembly time is two hours per unit. The following table shows the budgeted amounts and actual results related to overhead for June 2009.
?
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e and download the template for Exercise 8 20.
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances using the columnar approach in Exhibit 8 4.
2. Prepare journal entries for Solutions’ June 2009 variable and fixed manufacturing overhead costs and variances; write off these variances to cost of goods sold for the quarter ending June 30, 2009.
3. How does the planning and control of variable manufacturing overhead costs differ from the planning and control of fixed manufacturing overheadcosts?
Aug 29, 2021 | Uncategorized
Master budget Adams Company, a merchandising firm that sells one product, estimates it will sell 12,000 units of its product at $60 per unit in December. In November, the company prepared other information to prepare a budget for December, as shown here:
?c The company estimates that 60% of each month’s sales are collected in the month of sale and that the remaining 40% is collected in the month after sale.
?c The $200,000 of selling and administrative expenses includes $40,000 of depreciation.
?c The company pays for half of merchandise purchases during the month of purchase and pays the remainder during the month following purchase. Estimated merchandise purchases for November are $340,000.
?c All other out of pocket expenses are paid for in cash.
Required
(a) How many units of merchandise will Adams budget to purchase in December? What is the dollar amount of Adams’ budgeted merchandise purchases for December?
(b) Prepare a budgeted income statement for the month ended December for Adams Company.
(c) Prepare a statement of estimated cash flows for the month ended December for Adams Company.
Aug 29, 2021 | Uncategorized
Materials and manufacturing labor variances, standard costs. Dunn, Inc. is a privately held furniture manufacturer. For August 2009, Dunn had the following standards for one of its products, a wicker chair:
?
The following data were compiled regarding actual performance: actual output units (chairs) produced, 2,000; square yards of input purchased and used 3,700; price per square yard, $5.10; direct manufacturing labor costs, $8,820; actual hours of input 900; labor price per hour, $9.80.
1. Show computations of price and efficiency variances for direct materials and direct manufacturing labor give a plausible explanation of why each variance occurred.
2. Suppose 6,000 square yards of materials were purchased (at $5.10 per square yard), even though only. 3,700 square yards were used. Suppose further that variances are identified at their most timely control point; accordingly, direct materials price variances are isolated and traced at the time of purchase to the Purchasing Department rather than to the Production Department. Compute the price and efficiency variances under thisapproach.
Aug 29, 2021 | Uncategorized
Miriam Irby is president of MI Corp. Irby has decided to take a month’s vacation with her family to South Africa, Zimbabwe, and Angola. Irby has researched the trip and determined that the total cost of the trip for her family will be approximately $50,000—she wants to go first class on everything! Her travel agent says that a 10 percent discount can be obtained if Irby can write a check for the cost of the trip by the end of November. Irby says she sees no problem in doing that given that the company’s expected billings for October, November, and December, respectively, are $100,000, $65,000, and $15,000 (when Irby will be on vacation).
As of October 31, 2010, MI Corp.’s accountant has estimated cash collections from billings to be 15 percent in the month of sale, 55 percent in the month following sale, and 30 percent in the second month following sale. The September 30, 2010, Accounts Receivable balance is $11,000; that amount is expected to be collected in October. Average monthly business costs are $22,500.
a. What are MI Corp.’s expected cash collections for October, November, and December?
b. Can Irby pay for her trip in November and obtain the 10 percent discount? Explain.
c. What would you suggest that Irby do?
Aug 29, 2021 | Uncategorized
Morro Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $225 per board. This includes 30 pounds of direct materials, at the budgeted price of $3 per pound, and 9 hours of direct manufacturing labor, at the budgeted rate of $15 per hour. Following are additional data for the month of July:
Units completed 5,500 units
Direct material purchases 190,000 pounds
Cost of direct material purchases $579,500
Actual direct manufacturing labor hours 49,000 hours
Actual direct labor cost $739,900
Direct materials efficiency variance $ 1,500 F
There were no beginning inventories.
REQUIRED
1. Compute direct manufacturing labor variances for July.
2. Compute the actual pounds of direct materials used in production in July.
3. Calculate the actual price per pound of direct materials purchased.
4. Calculate the direct materials price variance.
Aug 29, 2021 | Uncategorized
Nassau Products is preparing a cash budget for April. The following information on accounts receivable collections is available from past collection experience:
Percent of current month’s sales collected this month . . . . . . . . . . . . . . . . . . . . . . 25%
Percent of prior month’s sales collected this month . . . . . . . . . . . . . . . . . . . . . . . . 62
Percent of sales two months prior to current month collected this month . . . . . . . 7
Percent of sales three months prior to current month collected this month . . . . . . 4
The remaining 2 percent is not collected and is written off as bad debts. Credit sales to date are:
April—estimated . . . . . . . . . . . . . . $300,000
March . . . . . . . . . . . . . . . . . . . . . . . . 270,000
February . . . . . . . . . . . . . . . . . . . . . . 240,000
January . . . . . . . . . . . . . . . . . . . . . . . 285,000
Required
What are the estimated cash receipts from accounts receivable collections in April?
Aug 29, 2021 | Uncategorized
On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the company through the seasonal peak in November and December.
Selected general ledger balances on December 1 are as follows:
Cash $ 88,000
Inventory 65,200
Accounts payable 136,000
Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sale, with the balance due by the end of the month after sale. Experience has shown that 50% of the billings will be collected within the discount period, 30% by the end of the month after purchase, and 14% in the following month. The remaining 6% will be uncollectible. There are no cash sales. The average selling price of the company’s products is $100 per unit. Actual and projected sales are as follows:
October actual $ 280,000
November actual 320,000
December estimated 330,000
January estimated 250,000
February estimated 240,000
Total estimated for year ending June 30, 2012 $2,400,000
All purchases are payable within 15 days. Approximately 60% of the purchases in a month are paid that month, and the rest the following month. The average unit purchase cost is $80. Target ending inventories are 500 units plus 10% of the next month’s unit sales. Total budgeted marketing, distribution, and customer service costs for the year are $600,000. Of this amount, $120,000 are considered fixed (and include depreciation of $30,000). The remainder varies with sales. Both fixed and variable marketing, distribution, and customer service costs are paid as incurred.
Required
Prepare a cash budget for December 2011 and January 2012. Supply supporting schedules for collections of receivables; payments for merchandise; and marketing, distribution, and customer service costs.
Aug 29, 2021 | Uncategorized
On January 1, 2008, the controller of Garden Master Tools Inc. is planning capital expenditures for the years 2008–2011. The following interviews helped the controller collect the necessary information for the capital expenditures budget.
Director of Facilities: A construction contract was signed in late 2007 for the construction of a new factory building at a contract cost of $12,000,000. The construction is scheduled to begin in 2008 and be completed in 2009.
Vice President of Manufacturing: Once the new factory building is finished, we plan to purchase $1.5 million in equipment in late 2009. I expect that an additional $300,000 will be needed early in the following year (2010) to test and install the equipment before we can begin production. If sales continue to grow, I expect we’ll need to invest another million in equipment in 2011.
Vice President of Marketing: We have really been growing lately. I wouldn’t be surprised if we need to expand the size of our new factory building in 2011 by at least 40%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years.
Director of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn’t make sense to do this until after the new factory building is completed and producing product. During 2010, once the factory is up and running, we should equip the whole facility with wireless technology. I think it would cost us $1,600,000 today to install the technology. However, prices have been dropping by 25% per year, so it should be less expensive at a later date.
President: I am excited about our long term prospects. My only short term concern is financing the $7,000,000 of construction costs on the portion of the new factory building scheduled to be completed in 2008.
Use the interview information above to prepare a capital expenditures budget for Garden Master Tools Inc. for the years 2008–2011.
Aug 29, 2021 | Uncategorized
Problem 1 100 Points
Earnest T. Bass, Inc., had the following debit general ledger balances as of January 1, 2009: Cash $53,500; Short term Investments – $20,000; Accounts Receivable – $32,500; Prepaid Insurance $8,000; Inventory – $55,000; Land – $75,000; Buildings $175,000; and Equipment – $80,000.
They had the following credit general ledger balances as of January 1, 2009: Accounts Payable $48,500; Salaries Payable $32,500; Property Taxes Payable $35,000; Short Term Notes Payable $0; Income Taxes Payable $25,000; Interest Payable $20,000; Long Term Notes Payable $187,500; Common Stock (4,000 shares outstanding) $80,000; and Retained Earnings – Unknown…..the server on the computer system crashed and this was lost.
Earnest T. Bass, Inc. sells t shirts retail. That is, they buy t shirt inventory and sell them at a profit. Occasionally a customer will place a special order and the company will embroider custom made t shirts.
In addition, the company has a line of credit with their bank. Anytime their cash balance falls below zero, they borrow money in $10,000 increments at an annual interest rate of 12%. For example, if their cash balance was $500, they would borrow $10,000. If their cash balance was $12,000, they would borrow $20,000. These short term notes payable are paid off in $10,000 increments, including interest, when there is adequate cash on hand. For example, assume they have borrowed $20,000 on their line of credit. If they had a cash balance of $11,000, they could pay off $10,000 plus interest. The cash balance must be zero or positive at all times. For purpose of interest calculations, assume a 365 day year and assume the dollars are borrowed at the end of the business day and any repayments occur at the end of the business day.
During the month of January, 2009, Earnest T. Bass, Inc. had the following transactions:
On January 2nd, inventory was purchased on credit amounting to $20,000.
On January 3
rd, the company issued an additional 1,000 shares of common stock for $15.00 per share, all received in cash.
On January 6, 2009, the company paid $60,000 in cash for property taxes covering the period June 1, 2008 through May 30, 2009.
On January 9
th, accounts payable totaling $48,500 was paid in cash.
On January 15
th, one half of the inventory on hand was sold for $50,000 on credit.
On January 17
th, payments were received on accounts receivable totaling $30,000.
On January 19
th, the company paid salaries of $60,000 for December, 2008 and January, 2009.
Insurance premiums of $24,000 were paid on January 20th, 2009. These premiums were for a policy that provides coverage from February 1, 2009 through April 30, 2009.
The long term notes payable of $187,500 has an annual interest rate of 10%. Principal and interest will be paid together on January 30, 2011.
2008 income taxes were paid on January 31, 2009. Income taxes for 2009 will equal 40% of net income. If there is a net loss, no income taxes will be due.
Required:
- Prepare all general journal entries for the month of January, 2009.
- Prepare a trial balance as of 1/31/09.
- Prepare all closing entries for the month of January, 2009.
- Prepare a post closing trial balance as of 1/31/09.
- Prepare the income statement, balance sheet and statement of changes in shareholders’ equity for the month of January, 2009 in their proper formats.
Aug 29, 2021 | Uncategorized
Overhead variances, ethics
Zeller Company uses standard costing. The company prepared its static budget for 2008 at 2,500,000 machine hours for the year. Total budgeted overhead cost is $31,250,000. The variable overhead rate is $10 per machine hour ($20 per unit). Actual results for 2008 follow:
?
1. Compute for the fixed overhead:
a. Budgeted amount
b. Budgeted cost per machine hour
c. Actual cost
d. Production volume variance
2. Compute the variable overhead spending variance and the variable overhead efficiency variance.
3. Jack Remich, the controller, prepares the variance analysis. It is common knowledge in the company at he and Ronald Monroe, the production manager, are not on the best of terms. In a recent executive committee meeting, Monroe had complained about the lack of usefulness of the accounting reports he receives. To get back at him, Remich manipulated the actual fixed overhead amount by assigning a greater than normal share of allocated costs to the production area. And, he decided to depreciate of all the newly acquired production equipment using the double declining balance method rather than the straight line method, contrary to company practice. As a result, there was a sizable unfavorable fixed overhead spending variance. He boasted to one of his confidants, ?oI am just returning the favor.?? Discuss Remich’s actions and theirramifications.
Aug 29, 2021 | Uncategorized
Comprehensive problem; ABC manufacturing two products. Dinettes Inc. operates at capacity and 2es glass topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Dinettes Inc. is planning its annual budget for fiscal year 2009. Information for 2009 follows:
Dinettes Inc. accounts for direct materials using a FIFD cost flow.
Dinette Inc. uses a FlEO cost flow assumption for finished goods inventory. Chairs are manufactured in batches of SOD, and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs, and two hours to set up for a batch of tables. Dinette Inc. uses activity based costing and has classified all overhead costs as shown in the table below:
Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables.
Do the following for the year 2009:
1. Prepare the revenues budget
2. Use the revenue budget to:
a. Find the budgeted allocation rate for marketing costs.
b. Find the budgeted number of deliveries and allocation rate for distribution costs.
3. Prepare the production budget in units.
4. Use the production budget to:
a. Find the budgeted number of setups, setup hours, and the allocation rate for setup costs.
b. Find the budgeted total machine hours and the allocation rate for processing costs.
5. Prepare the direct material usage budget and the direct material purchases budgets.
6. Use the direct material usage budget to find the budgeted allocation rate for materials handling costs.
7. Prepare the direct manufacturing labor cost budget
8. Prepare the manufacturing overhead cost budget for materials handling, setup, and processing.
9. Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget
10. Prepare cost of goods sold budget.
11. Prepare the non manufacturing overhead costs budget for marketing and distribution. 12. Prepare a budgeted income statement (ignore income taxes).
13. Compare the budgeted unit cost of a chair to its budgeted selling price. Why might Dinette Inc. continue to sell the chairs for only $80?
Aug 29, 2021 | Uncategorized
Comprehensive review of Chapters working backward from given variances. The Mancusco Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct cost categories (direct materials and direct manufacturing labor—both variable) and two overhead cost categories (variable manufacturing overhead and fixed manufacturing overhead, both allocated using direct manufacturing labor hours). At the 40,000 budgeted direct manufacturing labor hour level for August, budgeted direct manufacturing labor is $800,000, budgeted variable manufacturing overhead is $480,000, and budgeted fixed manufacturing overhead is $640,000.
The following actual results are for August:
The standard cost per pound of direct materials is $11.50. The standard allowance is three pounds of direct materials for each unit of product. During August, 30,000 units of product were produced. There was no beginning inventory of direct materials. There was no beginning or ending work in process. In August, the direct materials price variance was $1.10 per pound.
In July, labor unrest caused a major slowdown in the pace of production, resulting in an unfavorable direct manufacturing labor efficiency variance of $45,000. There was no direct manufacturing labor price variance. Labor unrest persisted into August. Some workers quit. Their replacements had to be hired at higher wage rates, which had to be extended to all workers. The actual average wage rate in August exceeded the standard average wage rate by $0.50 per hour.
1. Compute the following for August:
a. Total pounds of direct materials purchased
b. Total number of pounds of excess direct materials used
c. Variable manufacturing overhead spending variance
d. Total number of actual direct manufacturing labor hours used
e. Total number of standard direct manufacturing labor hours allowed for the units produced
f. Production volume variance
2. Describe how Mancusco’s control of variable manufacturing overhead items differs from its control of fixed manufacturing overheaditems.
Aug 29, 2021 | Uncategorized
Comprehensive variance analysis (CMA) Iceland, Inc. is a fast growing ice cream maker. The company’s new ice cream flavor, Cherry Star, sells for $8 per pound. The standard monthly production level is 200,000 pounds, and the standard inputs and costs per pound are:
Molly Cates, the CDO, is disappointed with the results for May 2009, Prepared based on these standard costs.
Cates notes that despite a sizable increase in the pounds of ice cream sold in May, Cherry Star’s contribution to the company’s overall profitability has been lower than expected. Cates gathers the following information to help analyze the situation:
If you want to use Excel to solve this problem, go to the Excel Lab at www.prenhall.com/horngren/cost13e and download the temple for Problem 7 41. Compute the following variances. Comment on the variances, with particular attention to the variances that may be related to each other and the controllability of each variance:
1. Selling price variance
2. Direct materials price variance
3. Direct materials efficiency variance
4. Direct manufacturing labor efficiency variance
Aug 29, 2021 | Uncategorized
Comprehensive variance analysis Kitchen Whiz manufactures premium food processors. The following is some manufacturing overhead data for Kitchen Whiz for the year ended December 31, 2010:
Budgeted number of output units: 888
Planned allocation rate: 2 machine hours per unit
Actual number of machine hours used: 1,824
Static budget variable manufacturing overhead costs: $71,040
Compute the following quantities (you should be able to do so in the prescribed order):
1. Budgeted number of machine hours planned
2. Budgeted fixed manufacturing overhead costs per machine hour
3. Budgeted variable manufacturing overhead costs per machine hour
4.Budgeted number of machine hours allowed for actual output produced
5. Actual number of output units
6. Actual number of machine hours used per outputunit
Aug 29, 2021 | Uncategorized
Comprehensive variance analysis, responsibility issues (CMA, adapted) Styles, Inc. manufactures a full line of well known sunglasses frames and lenses. Styles uses a standard costing system to set attainable standards for direct materials, labor, and overhead costs. Styles reviews and revises standards annually, as necessary. Department managers, whose evaluations and bonuses are affected by their department’s performance, are held responsible to explain variances in their department performance reports. Recently, the manufacturing variances in the Image prestige line of sunglasses have caused some concern. For no apparent reason, unfavorable materials and labor variances have occurred. At the monthly staff meeting, Jack Barton, manager of the Image line, will be expected to explain his variances and suggest ways of improving performance. Barton will be asked to explain the following performance report for 2008:
Barton collected the following information:
Three items comprised the standard variable manufacturing costs in 2008:
Direct materials: Frames. Static budget cost of $49,500. The standard input for 2008 is 3.00 ounces per unit.
Direct materials: Lenses. Static budget costs of $139,500. The standard input for 2008 is 6.00 ounces per unit.
Direct manufacturing labor Static budget costs of $135,000. The standard input for 2008 is 1.20 hours per unit
Assume there are no variable manufacturing overhead costs.
The actual variable manufacturing costs in 2008 were:
Direct materials: Frames. Actual costs of $55,872. Actual ounces used were 3.20 ounces per unit.
Direct materials: Lenses. Actual costs of $150,738. Actual ounces used were 7.00 ounces per unit.
Direct manufacturing labor Actual costs of $145,355. The actual labor rate was $14.80 per hour.
Prepare a report that includes:
(a) Selling price variance
(b) Sales volume variance and flexible budget variance for operating income in the format of the analysis in Exhibit 7 2
(c) Price and efficiency variances for:
Direct materials: frames
Direct materials: lenses
Direct manufacturing labor
2. Give three possible explanations for each of the three price and efficiency variances at Styles in requirement1c.
Aug 29, 2021 | Uncategorized
Comprehensive variance analysis. Sol Electronics, a fast growing electronic device producer, uses a standard costing system, with standards set at the beginning of each year. In the second quarter of 2009, Sol faced two challenges: it had to negotiate and sign a new short term labor agreement with its workers’ union, and it also had to pay a higher rate to its suppliers for direct materials. The new labor contract raised the cost of direct manufacturing labor relative to the company’s 2009 Standards. Similarly, the new rate for direct materials exceeded the company’s 2009 standards. However, materials were of better quality than expected, so Sol’s management was confident that there would be as waste and less rework in the manufacturing process. They also speculated that the per unit direct manufacturing labor cost might decline as a result of the materials’ improved quality. At the end of the second quarter, Sol’s CFO, Terence Shaw, reviewed the following results:
Shaw was relieved to see that the anticipated savings in material waste and rework seemed to have materialized. But, he was concerned that the union would press hard for higher wages given that actual unit costs came in below standard unit costs and operating income continued to climb. If you want to use Excel to solve this problem, go to the Excel Lab at www.prenhall.com/horngrenfcost13e and download the template for Problem 7 40.
1. Prepare a detailed variance analysis of the second quarter results relative to the static budget. Show how much of the improvement in operating income arose due to changes in sales volume and how much arose for other reasons. Calculate variances that isolate the effects of price and usage changes in direct materials and direct manufacturing labor.
2. Use the results of requirement 1 to prepare a rebuttal to the union’s anticipated demands in light of the second quarter results.
3. Terence Shaw thinks that the company can negotiate better if it changes the standards. Without performing any calculations, discuss the pros and cons of immediately changing the standards.
Aug 29, 2021 | Uncategorized
Compute the required answer for each of the following independent situations.
a. For next year, Penny Suits projects $8,000,000 of sales and total fixed manufacturing costs of $2,000,000. Variable manufacturing costs are estimated at 65 percent of sales. Assuming no change in inventory, what is the company’s projected cost of goods sold?
b. Tommy’s Company has projected the following information for October:
Sales ……………………………………………………………$800,000
Gross profit (based on sales) …………………………………… 25%
Increase in Merchandise Inventory in October ………………… $20,000
Decrease in Accounts Payable for October ……………………. $45,000
What are expected cash disbursements for inventory purchases for October?
a. Buda Corp. is attempting to budget its overhead costs for March 2011. Overhead is a mixed cost with the following flexible budget formula: y = $250,000 + $17.50X, where X represents machine hours. Fixed overhead includes $95,000 of depreciation. If Buda Corp. expects to utilize 7,500 machine hours in March, what is the company’s budgeted March overhead cost? How much cash will the company pay for budgeted overhead in March?
b. Elizabeth Enterprises expects to begin 2011 with a cash balance of $15,000. Cash collections from sales and on account during the year are expected to be $470,500. The firm wants to maintain a minimum cash balance of $5,000. Budgeted cash disbursements for the year are as follows:
Payoff of note payable …………………………………………………$52,500
Interest on note payable ………………………………………………… 4,700
Purchase of computer system …………………………………………… 17,900
Payments for operating costs and inventory purchases …………………193,500
Direct labor payments ………………………………………………….110,000
Cash overhead payments ……………………………………………….106,400
Cash selling and administrative payments ……………………………… 94,800
The company can, if necessary, borrow in $1,000 amounts. Prepare a cash budget for 2011.
Aug 29, 2021 | Uncategorized
Cute and Cuddly Inc. sells teddy bears in walk by kiosks in shopping malls. The company’s balance sheet on March 31, 2010, showed the following balances related to Accounts Receivable and inventories:
Accounts Receivable ……………………………………$346,000
Allowance for doubtful accounts ……………………… $35,000
Inventory ………………………………………………. 208,000
Accounts payable to suppliers ………………………….$455,000
The company’s controller, Brad Jones, is making budget projections for the second quarter of 2010 and has made the following assumptions:
?c Budgeted sales: April—60,000 units, May—140,000 units, June—46,000 units
?c Selling price per bear—$12
?c Cost per bear—$8
?c Expected cash collections from 3/31/2010 Accounts Receivable:
In April: ………………………………$36,000
In May: ……………………………….295,000
To be written off: …………………….. 15,000
Other information:
The Accounts Receivable balance at March 31 consists of $36,000 from February sales and $310,000 from March sales. For budgeting purposes, Jones estimates that $36,000 will be collected in April, $295,000 in May, and that the remaining $15,000 will be written off during the second quarter.
Eighty percent of sales are on credit. The remaining sales are cash sales. Twenty five percent of credit sales are collected in the month of sale, with 55 percent in the month following and 18 percent in the second month following. The remaining 2 percent are uncollectible. The company expects to write off $15,000 of accounts receivable during the second quarter.
Thirty percent of purchases are paid for in the month of purchase with the remainder in the month following.
The company budgets ending inventory equal to 40 percent of the following month’s sales in units. July’s sales are budgeted at 30,000 units.
a. Prepare a sales budget for the quarter ended June 30, 2010.
b. Compute budgeted cash collections for the quarter ending June 30, 2010.
c. Compute budgeted Accounts Receivable at June 30, 2010.
d. Compute the estimated bad debt expense that will appear in the budgeted income statement for the quarter ending June 30, 2010.
e. How would the Accounts Receivable be presented on the budgeted balance sheet at June 30, 2010?
f. Computed budgeted purchases for the quarter ended June 30, 2010.
g. Compute budgeted cash payments for inventory for the quarter ended June 30, 2010.
h. Compute budgeted accounts payable at June 30, 2010.
Aug 29, 2021 | Uncategorized
David James is a cost accountant and business analyst for Doorknob Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct cost categories: direct materials and direct manufacturing labor. James feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2012, DDC budgeted annual production of 400,000 doorknobs and adopted the following standards for each doorknob:
Actual results for April 2012 were as follows:
Production 35,000 doorknobs
Direct materials purchased 12,000 lb. at $11/lb.
Direct materials used 10,450 lb.
Direct manufacturing labor 38,500 hours for $808,500
Variable manufacturing overhead $64,150
Fixed manufacturing overhead $152,000
Required
1. For the month of April, compute the following variances, indicating whether each is favorable (F) or unfavorable (U):
a. Direct materials price variance (based on purchases)
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance
e. Variable manufacturing overhead spending variance
f. Variable manufacturing overhead efficiency variance
g. Production volume variance
h. Fixed manufacturing overhead spending variance
2. Can James use any of the variances to help explain any of the other variances? Giveexamples.
Aug 29, 2021 | Uncategorized
Delma Company manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets, and usually provide information about input quantities for materials, labor, and overhead costs. Wert Mimble is the manager of the department that produces product Z. Wert has estimated these inputs for product Z:
Input Budget Quantity per Unit of Output
Direct material 4 pounds
Direct manufacturing labor 15 minutes
Machine time 12 minutes
The department produces about 100 units of product Z each day. Wert’s department always gets excellent evaluations, sometimes exceeding budgeted production quantities. Each 100 units of product Z uses, on average, about 24 hours of direct manufacturing labor (four people working six hours each), 395 pounds of material, and 19.75 machine hours. Top management of Delma Company has decided to implement budget standards that will challenge the workers in each department, and it has asked Wert to design more challenging input standards for product Z. Wert provides top management with the following input quantities:
Input Budget Quantity per Unit of Output
Direct material 3.95 pounds
Direct manufacturing labor14.5 minutes
Machine time 11.8 minutes
Discuss the following:
Required
1. Are these standards challenging standards for the department that produces product Z?
2. Why do you suppose Wert picked these particular standards?
3. What steps can Delma Company’s top management take to make sure Wert’s standards really meet the goals of the firm?
Aug 29, 2021 | Uncategorized
Direct manufacturing labor and direct materials variances, missing data. (CMA heavily adapted). More Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $100 per board. This includes 20 pounds of direct materials, at the budgeted price of $2 per pound, and five hours of direct manufacturing labor, at the budgeted rate of $12 per hour. Following are additional data for the month of July:
?
There were no beginning inventories.
1. Compute direct manufacturing labor variances for July.
2. Compute the actual pounds of direct materials used in production in July.
3. Calculate the actual price per pound of direct materials purchased.
4. Calculate the direct materials pricevariance.
Aug 29, 2021 | Uncategorized
Direct Manufacturing Labor and Variable Manufacturing Overhead Variances. Sarah Beth’s Art Supply Company produces various types of paints. Actual direct manufacturing labor hours in the factory that produces paint have been higher than budgeted hours for the last few months and the owner, Sarah B. Jones, is concerned about the effect this has had on the company’s cost overruns. Because variable manufacturing overhead is allocated to units produced using direct manufacturing labor hours, Sarah feels that the mismanagement of labor will have a twofold effect on company profitability. Following are the relevant budgeted and actual results for the second quarter of 2008.
?
1. Calculate the direct manufacturing labor price and efficiency variances and indicate whether each is favorable (F or unfavorable (U).
2. Calculate the variable manufacturing overhead spending and efficiency variances and indicate whether each is favorable (F) or unfavorable (U).
3. For both direct manufacturing labor and variable manufacturing overhead, do the price/spending variances help Sarah explain the efficiency variances?
4. Is Sarah correct in her assertion that the mismanagement of labor has a twofold effect on cost over runs? Why might the variable manufacturing overhead efficiency variance not be an accurate representation of the effect of labor overruns on variable manufacturing overheadcosts?
Aug 29, 2021 | Uncategorized
Direct materials and manufacturing labor variances, journal entries, Shayna’s Smart Shawls Inc. is a small business that Shayna developed while in college. She began hand knitting shawls for her dorm friends to wear while studying. As demand grew, she hired some workers and began to manage the operation. Shayna’s shawls require wool and labor. She experiments with the type of wool that she uses, and she has great variety in the shawls she produces. Shayna has bi modal turnover in her labor. She has some employees who have been with her for a very long time and others who are new and inexperienced.
Shayna uses standard costing for her shawls. She expects that a typical shawl should take 3.5 hours to produce, and the standard wage rate is $10.50 per hour. An average shawl uses 12 skeins of wool. Shayna shops around for good deals, and expects to pay $3.00 per skein.
Shayna uses a just in time inventory system, as she has clients tell her what type and color of wool they would like her to use.
For the month of April, Shayna’s workers produced 230 shawls using 836 hours and 2,633.50 skeins of wool. Shayna bought wool for $8,295.50 (and used the entire quantity), and incurred labor costs of $7,814.50.
1. Calculate the price and efficiency variances for the wool, and the price and efficiency variances for direct manufacturing labor.
2. Record the journal entries for the variances incurred.
3. Discuss logical explanations for the combination of variances that Shayna experienced.
Aug 29, 2021 | Uncategorized
Direct materials and manufacturing labor variances, solving unknowns (CPA, adapted) On May 1, 2009, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy follow:
The following data were obtained from Bovar’s records for the month of May:
Actual production in May was 4,000 units of Dandy, and actual sales in May were 2,500 units.
The amount shown for direct materials price variance applies to materials purchased during May.
There was no beginning inventory of materials on May 1, 2009.
Compute each of the following items for Bovar for the month of May. Show your computations.
1. Standard direct manufacturing labor hours allowed for actual output produced
2. Actual direct manufacturing labor hours worked
3. Actual direct manufacturing labor wage rate
4. Standard quantity of direct materials allowed (in pounds)
5. Actual quantity of direct materials used (in pounds)
6. Actual quantity of direct materials purchased (in pounds)
7. Actual direct materials price per pound
Aug 29, 2021 | Uncategorized
Dover Chemical Company uses oil to produce two types of plastic products, P1 and P2. Dover budgeted 30,000 barrels of oil for purchase in June for $28 per barrel. Direct labor budgeted in the chemical process was $150,000 for June. Factory overhead was budgeted
$275,000 during June. The inventories on June 1 were estimated to be:
Oil . . . . . . . . . . . . . . . . . . . . . . . . $15,300
P1 . . . . . . . . . . . . . . . . . . . . . . . . . . 8,700
P2 . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200
Work in process . . . . . . . . . . . . . . 11,800
The desired inventories on June 30 were:
Oil . . . . . . . . . . . . . . . . . . . . . . . . $12,200
P1 . . . . . . . . . . . . . . . . . . . . . . . . . . 8,300
P2 . . . . . . . . . . . . . . . . . . . . . . . . . . 9,500
Work in process . . . . . . . . . . . . . . 10,700
Use the preceding information to prepare a cost of goods sold budget for June.
Aug 29, 2021 | Uncategorized
Eco Green Company manufactures cloth shopping bags that it plans to sell for $5 each. Budgeted production and sales for these bags for 2011 is 800,000 bags, with a standard of 400,000 machine hours for the whole year. Budgeted fixed overhead costs are $470,000, and variable overhead cost is $1.60 per machine hour. Because of increased demand, actual production and sales of the bags for 2010 are 900,000 bags using 440,000 actual machine hours. Actual variable overhead costs are $699,600 and actual fixed overhead is $501,900. Actual selling price is $6 per bag. Direct materials and direct labor actual costs were the same as standard costs, which were $1.20 per unit and $1.80 per unit, respectively.
Required
1. Calculate the variable overhead and fixed overhead variances (spending, efficiency, spending and volume).
2. Create a chart like that in Exhibit 7 2 showing Flexible Budget Variances and Sales Volume Variances for revenues, costs, contribution margin, and operating income.
3. Calculate the operating income based on budgeted profit per shopping bag.
4. Reconcile the budgeted operating income from requirement 3 to the actual operating income from your chart in requirement 2.
5. Calculate the operating income volume variance and show how the sales volume variance is comprised of the production volume variance and the operating income volume variance.
Aug 29, 2021 | Uncategorized
Executive Inn, Inc., operates a downtown hotel property that has 200 rooms. On average, 90% of Executive Inn’s rooms are occupied on weekdays, and 60% are occupied during the weekend. The manager has asked yow to develop a direct labor budget for the house keeping and restaurant staff for weekdays and weekends. You have determined that the housekeeping staff requires 30 minutes to clean each occupied room. The housekeeping staff is paid $12 per hour. The restaurant has six full time staff (eight hour day) on duty, regardless of occupancy. However, for every 60 occupied rooms, an additional person is brought in to work in the restaurant for the eight hour day. The restaurant staff is paid $10 per hour.
Determine the estimate housekeeping, restaurant, and total direct labor cost for an average weekday and average weekend day. Format the budget in two columns, labeled as weekday and weekend day.
Aug 29, 2021 | Uncategorized
Financial budgets: cash inflows Worthington Company makes cash (20% of total sales), credit card (50% of total sales), and account (30% of total sales) sales. Credit card sales are collected in the month following the sale, net a 3% credit card fee. This means that if the sale is $100, the credit card company’s fee is $3, and Worthington receives $97. Account sales are collected as follows: 40% in the first month following the sale, 50% in the second month following the sale, 8% in the third month following the sale, and 2% never collected. The following table identifies the projected sales for the next year:
Prepare a statement showing the cash expected each month from the collections from thesesales.
Aug 29, 2021 | Uncategorized
Flexible budget direct materials and direct manufacturing labor variances. Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2009:
Standard quantities, standard prices, and standard unit costs follow for direct materials and direct manufacturing labor
During 2009, actual number of units produced and sold was 6,000. Actual cost of direct materials used was 3594,000, based on 54,000 pounds purchased at $11 per pound. Direct manufacturing labor hours actually used were 25,000, at the rate of $38 per hour. As a result actual direct manufacturing labor consists were 3850,000. Actual fixed costs were $1,005,000. There were no beginnings or ending inventories.
1. Calculate the sales volume variance and flexible budget variance for operating income.
2. Compute price and efficiency variances for direct materials and direct manufacturing labor.
Aug 29, 2021 | Uncategorized
Flexible budget, working backward. The Clarkson Company produces engine parts for car manufacturers. A new accountant intern at Clarkson has accidentally deleted the calculations on the company’s variance analysis calculations for the year ended December 31, 2009. The following table is what remains of the data.
?
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e and download the template for Exercise 7 19.
1. Calculate all the required variances. (If your work is accurate, you will find that the total static budget variance is $0.)
2. What are the actual and budgeted selling prices? What are the actual and budgeted variable costs per unit?
3. Review the variances you have calculated and discuss possible causes and potential problems. What is the important lesson learnedhere?
Aug 29, 2021 | Uncategorized
Activity based costing flexible budget variances for finance function activities. FastGrocery.com an online company that delivers groceries to its customers has the following information for its three finance activities in 2008:
The output measure is the number of deliveries, which is the same as the number of remittances. The following is additional information.
1. Calculate the flexible budget variance for each activity in 2008.
2. Calculate the price and efficiency variances for each activity in 2008.
Aug 29, 2021 | Uncategorized
Activity based costing, batch level variance analysis. Jo Nathan Publishing Company specializes in printing specialty textbooks for a small but profitable college market. Due to the high setup costs for ea: batch printed, Jo Nathan holds the book requests until demand for a book is approximately 500. At that pc Jo Nathan will schedule the setup and production of the book. For rush orders, Jo Nathan will produce: smaller batches for an additional charge of $700 per setup.
Budgeted and actual costs for the printing process for 2009 were:
?
1. What is the static budget number of setups for 2009?
2. What is the flexible budget number of setups for 2009?
3. What is the actual number of setups in 2009?
4. Assuming fixed setup overhead costs are allocated using setup hours, what is the predetermined fixed setup overhead allocation rate?
5. Does Jo Nathan’s charge of $700 cover the budgeted variable overhead cost of an order? The budgeted total overhead cost?
6. For variable setup overhead costs, compute the spending and efficiency variances.
7. For fixed setup overhead costs, compute the spending and the production volume variances.
8. What qualitative factors should Jo Nathan consider before accepting or rejecting a specialorder?
Aug 29, 2021 | Uncategorized
Activity based costing, batch level variance analysis. Rica’s Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable and fixed overhead costs. The following information pertains to shipping costs for 2008.
?
1. What is the static budget number of crates for 2008?
2. What is the flexible budget number of crates for 2008?
3. What is the actual number of crates shipped in 2008?
4. Assuming fixed overhead is allocated using crate packing hours, what is the predetermined fixed over head allocation rate?
5. For variable overhead costs, compute the spending and efficiency variances.
6. For fixed overhead costs, compute the spending and the production volumevariances.
Aug 29, 2021 | Uncategorized
Adriana Lopez expects second quarter 2010 sales of her new line of computer furniture to be the same as the first quarter’s sales (reported below) without any changes in strategy. Monthly sales averaged 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500).
SUCCESS SYSTEMS
Segment Income Statement*
For Quarter Ended March 31, 2010
Sales† . . . . . . . . . . . . . . . . . . . . . . . $180,000
Cost of goods sold?! . . . . . . . . . . . . 115,000
Gross profit . . . . . . . . . . . . . . . . . . 65,000
Expenses
Sales commissions (10%) . . . . . . . . . 18,000
Advertising expenses . . . . . . . . . . . . 9,000
Other fixed expenses . . . . . . . . . . . . 18,000
Total expenses . . . . . . . . . . . . . . . . 45,000
Net income . . . . . . . . . . . . . . . . . . . $ 20,000
Lopez believes that sales will increase each month for the next three months (April, 48 desks, 32 chairs; May, 52 desks, 35 chairs; June, 56 desks, 38 chairs) if selling prices are reduced to $1,150 for desks and $450 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products’ variable cost will remain at $750 for desks and $250 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,000 and other fixed expenses will remain at $6,000 per month.
Required
1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes. Use a three column format, with one column for each month.
2. Use the budgeted income statements from part 1 to recommend whether Lopez should implement the proposed changes. Explain.
Aug 29, 2021 | Uncategorized
Anticipated sales for Sale Ride ?~Tire Company were 36,000 passenger car tires and 16,000 truck tires. Beginning and ending finished goods inventories for both products were negligible, and thus were omitted from the sales budget. Rubber and steel belts are used in producing passenger car and truck according to the following table:
?
The purchase prices of rubber and steel are $3.60 and $4.50 per pound, respectively. The desired ending inventories of rubber and steel belts are 40,000 and 10,000 pounds, respectively. The estimated beginning inventories for rubber and steel belts are 46,000 and 8,000 pounds, respectively.
Prepare a direct material purchases budget for safe Ride Tire Company for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Harmony Audio Company manufactures two models of speakers, DL and XL. Based on the following production and sales data for September 2012, prepare (a) a sales budget and (b) a production budget. Enter all amounts as positive numbers.
| |
DL
|
|
XL
|
|
Estimated inventory (units), September 1
|
259
|
|
83
|
|
Desired inventory (units), September 30
|
298
|
|
72
|
|
Expected sales volume (units):
|
|
|
|
|
East Region
|
3,250
|
|
3,650
|
|
West Region
|
5,250
|
|
5,950
|
|
Unit sales price
|
$100
|
|
$190
|
a. Prepare a sales budget.
Aug 29, 2021 | Uncategorized
Barney Briggs owns a restaurant franchise that is part of a chain of ?osouthern homestyle?? restaurants. One of the chain’s popular breakfast items is biscuits and gravy. Central Warehouse makes and freezes the biscuit dough, which is then sold to the franchise stores; there, it is thawed and baked in the individual stores by the cook. Each franchise also has a purchasing agent who orders the biscuits (and other items) based on expected demand. In March, 2012, one of the freezers in Central Warehouse breaks down and biscuit production is reduced by 25% for three days. During those three days, Barney’s franchise runs out of biscuits but demand does not slow down. Barney’s franchise cook, Janet Trible, sends one of the kitchen helpers to the local grocery store to buy refrigerated ready tobake biscuits. Although the customers are kept happy, the refrigerated biscuits cost Barney’s franchise three times the cost of the Central Warehouse frozen biscuits, and the franchise loses money on this item for those three days. Barney is angry with the purchasing agent for not ordering enough biscuits to avoid running out of stock, and with Janet for spending too much money on the replacement biscuits.
Required
Who is responsible for the cost of the biscuits? At what level is the cost controllable? Do you agree that Barney should be angry with the purchasing agent? With Janet? Why or why not?
Aug 29, 2021 | Uncategorized
Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine hours. In 2012, budgeted fixed manufacturing overhead cost was $17,000,000. Budgeted variable manufacturing overhead was $10 per machine hour. The denominator level was 1,000,000 machine hours.
Required
1. Prepare a graph for fixed manufacturing overhead. The graph should display how Best Around, Inc.’s fixed manufacturing overhead costs will be depicted for the purposes of (a) Planning and control and
(b) Inventory costing.
2. Suppose that 1,125,000 machine hours were allowed for actual output produced in 2012, but 1,150,000 actual machine hours were used. Actual manufacturing overhead was $12,075,000, variable, and $17,100,000, fixed. Compute (a) the variable manufacturing overhead spending and efficiency variances and (b) the fixed manufacturing overhead spending and production volume variances. Use the columnar presentation illustrated in Exhibit 8 4 (p. 277).
3. What is the amount of the under or overallocated variable manufacturing overhead and the under or overallocated fixed manufacturing overhead? Why are the flexible budget variance and the under or overallocated overhead amount always the same for variable manufacturing overhead but rarely the same for fixed manufacturing overhead?
4. Suppose the denominator level was 1,360,000 rather than 1,000,000 machine hours. What variances in requirement 2 would be affected? Recompute them.
Aug 29, 2021 | Uncategorized
Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012, and has estimated sales based on past experience. Other information for the month of June follows:
Borkenstick uses a FIFO cost flow assumption for finished goods inventory. All the sandals are made in batches of 50 pairs of sandals. Borkenstick incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Borkenstick ships 40 pairs of sandals per shipment. Borkenstick uses activity based costing and has classified all overhead costs for the month of June as shown in the following chart:
Required
1. Prepare each of the following for June:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
d. Direct manufacturing labor cost budget
e. Manufacturing overhead cost budgets for processing and setup activities
f. Budgeted unit cost of ending finished goods inventory and ending inventories budget
g. Cost of goods sold budget
h. Marketing and general administration costs budget
2. Borkenstick’s balance sheet for May 31 follows. Use it and the following information to prepare a cash budget for Borkenstick for June. Round to dollars.
? All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts.
? All purchases of materials are on account. Borkenstick pays for 80% of purchases in the month of purchase and 20% in the following month.
? All other costs are paid in the month incurred, including the declaration and payment of a $10,000 cash dividend in June.
? Borkenstick is making monthly interest payments of 0.5% (6% per year) on a $100,000 long term loan.
? Borkenstick plans to pay the $7,200 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
? 30% of processing and setup costs, and 10% of marketing and general administration costs are depreciation.
3. Prepare a budgeted income statement for June and a budgeted balance sheet for Borkenstick as of June30.
Aug 29, 2021 | Uncategorized
Both the budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not for profit organizations and government agencies is for management to spend any amounts remaining in a budget at the end of the budget period, a practice often called ?ouse it or lose it.’’ The view is that if a department manager does not spend the budgeted amount, top management will reduce next year’s budget by the amount not spent. To avoid losing budget dollars, department managers often spend all budgeted amounts regardless of the value added to products or services. All of us pay for the costs associated with this budget system.
Required
Write a one half page report to a local not for profit organization or government agency offering a solution to the ?ouse it or lose it?? budgeting problem.
Aug 29, 2021 | Uncategorized
Breakeven analysis, what if analysis The Herschel Candy Company produces a single product: a chocolate almond bar that sells for $0.40 per bar.
The variable costs for each bar (sugar, chocolate, almonds, wrapper, and labor) total $0.25. The total monthly fixed costs are $60,000. Last month, bar sales reached 1 million. However, the president of Herschel Candy Company was not satisfied with its performance and is considering the following options to increase the company’s profitability:
1. Increase advertising.
2. Increase the quality of the bar’s ingredients and simultaneously increase the selling price.
3. Increase the selling price with no change in ingredients.
Required
(a) The sales manager is confident that an intensive advertising campaign will double sales volume. If the company president’s goal is to increase this month’s profits by 50% over last month’s, what is the maximum amount that can be spent on advertising that doubles sales volume?
(b) Assume that the company increases the quality of its ingredients, thus increasing variable costs to $0.30 per bar. By how much must the selling price per unit be increased to maintain the same breakeven point in units?
(c) Assume next that the company has decided to increase its selling price to $0.50 per bar with no change in advertising or ingredients. Compute the sales volume in units that would be needed at the new price for the company to earn the same profit as it earned last month.
Aug 29, 2021 | Uncategorized
Breakeven point, what if analysis Air Peanut Company manufactures and sells roasted peanut packets to commercial airlines. Following are the price and cost data per 100 packets of peanuts:
Required
(a) Determine Air Peanut’s breakeven point in units.
(b) How many packets does Air Peanut have to sell to earn $156,000?
(c) Air Peanut expects its direct labor costs to increase by 5% next year. How many units will it have to sell next year to break even if the selling price remains unchanged?
(d) If Air Peanut’s direct labor costs increase by 5%, what selling price per 100 packets must it charge to maintain the same contribution margin to salesratio?
Aug 29, 2021 | Uncategorized
Budget schedules for a manufacturer. Sierra Furniture is an elite desk manufacturer. It makes two products:
Executive desks—3’ A? 5’ oak desks
Chairman desks—6’ A? 4’ red oak desks
The budgeted direct cost inputs for each product in 2009 are:
Unit data pertaining to the direct materials for March 2009 are:
Unit cost data for direct cost inputs pertaining to February 2009 and March 2009 are:
1anufacturing overhead (both variable and fixed) is allocated to each desk on the basis of budgeted direct manufacturing labor hours per desk. The budgeted variable manufacturing overhead rate for March 2009 is S35 per direct manufacturing labor hour. The budgeted fixed manufacturing overhead for March 2009 is 342,500. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.
Data relating to finished goods inventory for March 2009 are:
Budgeted sales for March 2009 are 740 units of the executive line and 390 units of the chairman line. The budgeted selling prices per unit in March 2009 are $1,020 for the executive line desk and $1,600 for the chairman line desk. Assume the following in your answer:
Work in process inventories are negligible and ignored.
Direct materials inventory and finished goods inventory are costed using the FIFO method.
Unit costs of direct materials purchased and finished goods are constant in March 2009.
1. Prepare the following budgets for March 2009:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget
d. Direct manufacturing labor budget
e. Manufacturing overhead budget
f. Ending inventories budget (direct materials and finished goods)
g. Cost of goods sold budget.
2. Suppose Sierra Furniture decides to incorporate continuous improvement into its budgeting process. Describe two areas where Sierra could incorporate continuous improvement into the budget schedules in requirement 1.
Aug 29, 2021 | Uncategorized
Butler Inc. has projected Cost of Goods Sold (CGS) for June 2011 of $1,500,000. Of this amount, $80,000 represents fixed overhead costs. Total variable costs for the company each month average 70 percent of sales. The company’s cost to retail (CGS to sales) percentage is 60 percent, and the company normally generates net income equal to 15 percent of sales. All purchases and expenses (except depreciation) are paid 65 percent in the month incurred and 35 percent in the following month. Depreciation is $45,000 per month.
a. What are Butler Inc.’s expected sales for June?
b. What are Butler Inc.’s expected variable selling and administrative costs for June?
c. What are Butler Inc.’s total fixed costs? How much of this is fixed selling and administrative cost?
d. Butler Inc. normally collects 55 percent of its sales in the month of sale and the rest in the next month. What are expected cash receipts and disbursements related only to June’s transactions?
Aug 29, 2021 | Uncategorized
Cash budget (appendix.) Refer to the information in problem 6 33. Assume the following: Pet Transport (PT) does not make any sales on credit PT sells only to the public; aid accepts cash and credit cards. 90% of its sales are to customers using credit cards, for which PT gets the cash right away less a 3% transaction fee. Purchases of materials are on account PT pays for half the purchases in the period of the purchase, and the other half in the following period. At the end of March, PT owes suppliers $8,500. PT plans to replace a machine in April at a net cash cost of $13,700. Labor, other manufacturing costs and non manufacturing costs are paid in cash in the month incurred except of course, depreciation, which is not a cash flow. $20,000 of the manufacturing cost and $10,000 of the non manufacturing cost for April is depreciation.
PT currently has a $2,000 loan at an annual interest rate of 12%. The interest is paid at the end of each month. If PT has more than $10,000 cash at the end of April it will pay back the loan. PT owes $5,000 in ?~come taxes that need to be remitted in April. PT has cash of $5,360 on hand at the end of March. Prepare a cash budget for April for Pet Transport.
Aug 29, 2021 | Uncategorized
Cash flow analysis, chapter appendix. (CMA, adapted) TabComp, Inc., is a retail distributor for MZB 33 computer hardware and related software and support services. TabComp prepares annual sales forecasts of which the first six months for 2009 are presented here.
Cash sales account for 25% of TabComp’s total sales, 30% of the total sales are paid by bank credit card, and the remaining 45% are on open account (TabComp’s own charge accounts). The cash sales and cash from bank credit card sales are received in the month of the sale. Bank credit card sales are subject to a 4% discount deducted at the time of the daily deposit. The cash receipts for sales on open account are 70% in the month following the sale and 28% in the second month after the sale. The remaining accounts receivable are estimated to be uncollectible.
TabComp’s month end inventory requirements for computer hardware units are 30% of the next month’s sales. A one month lead time is required for delivery from the manufacturer. Thus, orders for computer hardware units are placed on the 25th of each month to assure that they will be in the store by the first day of the month needed. The computer hardware units are purchased under terms of n/45 (payment in full within 45 days of invoice), measured from the time the units are delivered to TabComp. TabComp’s purchase price for the computer units is 60% of the selling price.
?
1. Calculate the cash that TabComp, Inc., can expect to collect during April 2009. Be sure to show all of your calculations.
2. TabComp, Inc., is determining how many MZB 33 computer hardware units to order on January 25, 2009. a. Determine the projected number of computer hardware units that will be ordered.
b. Calculate the dollar amount of the order that TabComp will place for these computer hardware units.
3. As part of the annual budget process, TabComp prepares a cash budget by month for the entire year. Explain why a company such as TabComp prepares a cash budget by month for the entireyear.
Aug 29, 2021 | Uncategorized
Causes of Indirect Variances. Heather’s Horse Spa (HHS) is an establishment that boards, trains, and pampers horses while their owners are on vacation. Heather sells her service as an ?oenchanting vacation experience for your horse while you vacation elsewhere.?? Horse feed, shampoos, ribbons, and other supplies are treated as variable indirect costs. Consequently, there are no direct materials involved in the vacation service. Other overhead costs including indirect labor, depreciation on the barn, and advertising are fixed. Both variable and fixed overhead are allocated to each horse guest week using the weight of the horse as the basis of allocation.
HHS budgeted amounts for August 2009 were:
Actual results for August 2009 were:
1. Calculate the variable overhead spending and efficiency variances and indicate whether each is favorable (F) or unfavorable (U).
2. Calculate the fixed overhead spending and production volume variances and indicate whether each favorable (F) or unfavorable (U).
3. Explain what the variable overhead spending variance means. What factors could have caused it?
4. What factors could have caused the variable overhead efficiency variance?
5. If fixed overhead is, in fact, fixed, how could a fixed overhead spending variance occur?
6. What caused the fixed overhead production volume variance? What does it mean? What are the negative implications, if any, of the production volume variance?
Aug 29, 2021 | Uncategorized
Coca Cola Enterprises is the largest bottler o Coca Cola in Western Europe, The company purchases Coke and Sprite concentrate from The Coca Cola Company, dilutes and mixes the concentrate with carbonated water, and then tills the blended beverage into cans or plastic two liter bottles. Assume that the estimated production for Coke and Sprite two liter bottles at the Wakefield, UK, bottling plant are as follows for the month of March:
Coke 143,000 two liter bottles
Sprite 104,000 two liter bottles
In addition, assume that the concentrate Costs $90 per pound far both Coke and Sprite and is used at a rate of 0.2 pound per 100 liters of carbonated water in blending Coke and 0. 15 pound per 100 liters of carbonated water in blending Sprite. Assume that two liters of carbonated water arc used for each two liter bottle of finished product. Assume further that two liter bottles Cost $0.10 per bottle and carbonated water Costs $0.08 per liter.
Prepare a direct materials purchases budget for March 2012, assuming no changes between beginning and ending inventories for concentrate, bottles, and carbonated water.
Aug 29, 2021 | Uncategorized
Comprehensive budgeting problem: activity based costing, operating and financial budgets. Yummi Lik makes really big lollipops in two sizes, large and giant. Yummi Lik sells these lollipops to convenience stores, fairs, schools for fundraisers, and in bulk on the internet. Summer is approaching, and Yummi Lik is preparing its budget for the month of June. The lollipops are hand made, mostly out of sugar, and attached to wooden sticks. Expected sales are based on past experience.
Other information for the month of June follows:
Yummi Lik uses a FlEO cost flow assumption for finished goods inventory. All the lollipops are made in batches of 10. Yummi Lik incurs manufacturing overhead costs, and marketing and general administration costs, but customers pay for shipping. Other than manufacturing labor costs, monthly processing costs are very small. Yummy Lik uses activity based costing and has classified all overhead costs for the month of June as shown in the following chart:
1. Prepare each of the following for June:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget
d. Direct manufacturing labor cost budget
e. Manufacturing overhead cost budgets for processing and setup activities
f. Budgeted unit cost of ending finished goods inventory and ending inventories budget
g. Cost of goods sold budget
h. Marketing and general administration costs budget
2. Yummi Lik’s Balance Sheet for May31 follows. Use it and the following information to prepare a Cash Budget for Yummi Uk for June.
?c80% of sales are on account of which half are collected in the month of the sale, 49% are collected the following month, and 1% are never collected and written off as bad debts.
?cAll purchases of materials are on account. Yummi Lik pays for 70% of purchases in the month of purchase and 30% in the following month.
?cAll other costs are paid in the month incurred.
?cYummi Lik is making monthly interest payments of 1% (12% per year) on a $20,000 long term loan.
?cYummi Lik plans to pay the $500 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
?c40% of processing and setup costs, and 30% of marketing and general administration costs are depreciation.
3. Prepare a budgeted income statement for June and a budgeted balance sheet for Yummi Lik as of June30.
Aug 29, 2021 | Uncategorized
Comprehensive problem with ABC costing. Pet Transport Company makes two pet carriers, the Cat allac and the Dog eriffic. They are both made of plastic with metal doors, but the Cat allac is smaller.
Information for the two products for the month of April is given in the following tables:
Pet Transport accounts for direct materials using a FlFO cost flow assumption.
Pet Transport uses a FIFO cost flow assumption for finished good inventory.
Pet Transport uses an activity based costing system and classifies overhead into three activity pools:
Setup, Processing and Inspection. Activity rates for these activities are $100 per setup hour, $5 per machine hour, and $16 per inspection hour, respectively. Other information follows:
Non manufacturing fixed costs for March equal $36,000, of which half are salaries. Salaries are expected to crease 5% in April. The only variable non manufacturing cost is sales commission, equal to 1% of sales revenue.
Prepare the following for April:
1. Revenues budget
2. Production budget in units
3. Direct material usage budget and direct material purchases budget
4. Direct manufacturing labor cost budget
5. Manufacturing overhead cost budgets for each of the three activities
6. Budgeted unit cost of ending finished goods inventory and ending inventories budget
7. Cost of goods sold budget
8. Non manufacturing costs budget
9. Budgeted income statement (ignore income taxes)
Aug 29, 2021 | Uncategorized
Nonfinancial measures of quality, manufacturing cycle efficiency. (CMA, adapted) Torrance Manufacturing evaluates the performance of its production managers based on a variety of factors, including cost, quality, and cycle time. The following are nonfinancial measures for quality and time for 2010 and 2011 for its only product:
?
The following information relates to the average amount of time needed to complete an order:
?
Required
1. Compute the manufacturing cycle efficiency for an order for 2010 and 2011.
2. For each year 2010 and 2011, calculate the following:
a. Percentage of goods returned
b. Defective units reworked as a percentage of units shipped
c. Percentage of on time deliveries
d. Percentage of hours spent by each employee on quality training
3. Evaluate management’s performance on quality and timeliness over the twoyears.
Aug 29, 2021 | Uncategorized
Partial productivity measurement Guble Company manufactures wallets from fabric. In 2008, Guble made 2,500,000 wallets using 1,875,000 yards of fabric. In 2009, Guble plans to make 2,650,000 wallets and wants to make fabric use more efficient. At the same time, l3uble wants to reduce capacity; capacity in 2008 was 3,000,000 wallets at a total cost of $9,000,000. Guble wants to reduce capacity to 2,800,000 wallets, at a total cost of $8,680,000 in 2009. Suppose that in 2009 Guble makes 2,650,000 wallets, uses 1,669,500 yards of fabric, and reduces capacity to 2,800,000 units and costs to $8,680,000.
1. Calculate the partial productivity ratios for materials and conversion (capacity costs) for 2009, and compare them to a benchmark for 2008 calculated based on 2009 output.
2. How can Guble Company use the information from the partial productivity calculations?
Aug 29, 2021 | Uncategorized
Partial productivity measurement. Gerhart Company manufactures wallets from fabric. In 2011, Gerhart made 2,520,000 wallets using 2,000,000 yards of fabric. In 2011, Gerhart has capacity to make 3,307,500 wallets and incurs a cost of $9,922,500 for this capacity. In 2012, Gerhart plans to make 2,646,000 wallets, make fabric use more efficient, and reduce capacity. Suppose that in 2012 Gerhart makes 2,646,000 wallets, uses 1,764,000 yards of fabric, and reduces capacity to 2,700,000 wallets, incurring a cost of $8,370,000 for this capacity.
Required
1. Calculate the partial productivity ratios for materials and conversion (capacity costs) for 2012, and compare them to a benchmark for 2011 calculated based on 2012 output.
2. How can Gerhart Company use the information from the partial productivity calculations?
Aug 29, 2021 | Uncategorized
Quality improvement, relevant costs, relevant revenues. SpeedPrint manufactures and sells 18,000 high technology printing presses each year. The variable and fixed costs of rework and repair are as follows:
?
SpeedPrint’s current presses have a quality problem that causes variations in the shade of some colors. Its engineers suggest changing a key component in each press. The new component will cost $70 more than the old one. In the next year, however, SpeedPrint expects that with the new component it will (1) save 14,000 hours of rework, (2) save 850 hours of customer support, (3) move 225 fewer loads, (4) save 8,000 hours of warranty repairs, and (5) sell an additional 140 printing presses, for a total contribution margin of $1,680,000. SpeedPrint believes that even as it improves quality, it will not be able to save any of the fixed costs of rework or repair. SpeedPrint uses a one year time horizon for this decision because it plans to introduce a new press at the end of the year.
Required
1. Should SpeedPrint change to the new component? Show your calculations.
2. Suppose the estimate of 140 additional printing presses sold is uncertain. What is the minimum number of additional printing presses that SpeedPrint needs to sell to justify adopting the newcomponent?
Aug 29, 2021 | Uncategorized
Refer to Exercise 13 10. Suppose that Mandy communicates the following weights to her CEO:
?c Perspective: Financial, 40%; Customer, 20%; Process, 20%; Learning and Growth, 20%
?c Financial objectives: Profits, 50%; Revenues, 25%; Costs, 25%
?c Customer objectives: Customer satisfaction, 60%; Market share, 40%
?c Process objectives: Defects decrease, 40%; Supplier selection, 30%; Redesign process, 30%
?c Learning and growth objective: Training, 100%
Mandy next sets up a bonus pool of $200,000 and announces that the weighting scheme just described will be used to determine the amount of potential bonus for each perspective and each objective.
Required:
1. Calculate the potential bonus for each perspective and objective.
2. Describe how Mandy might award actual bonuses so that her managers will be encouraged to implement the Balanced Scorecard.
3. What are some other ways that Mandy can use to encourage alignment with the company’s strategic objectives (other than incentive compensation)?
Aug 29, 2021 | Uncategorized
Strategic analysis of operating income (continuation of 13 30). Refer to Problem 13 30. As a result of the actions taken, quality has significantly improved in 2011 while rework and unit costs of the Mini have decreased. Music Master has reduced manufacturing capacity because capacity is no longer needed to support rework. Music Master has also lowered the Mini’s selling price to gain market share and unit sales have increased. Information about the current period (2011) and last period (2010) follows:
?
Conversion costs in each year depend on production capacity defined in terms of units of Mini that can be produced, not the actual units produced. Selling and customer service costs depend on the number of customers that Music Master can support, not the actual number of customers it serves. Music Master has 70 customers in 2010 and 80 customers in 2011.
Required
1. Calculate operating income of Music Master Company for 2010 and 2011.
2. Calculate the growth, price recovery, and productivity components that explain the change in operating income from 2010 to 2011.
3. Comment on your answer in requirement 2. What do these componentsindicate?
Aug 29, 2021 | Uncategorized
Strategic analysis of operating income (continuation of 13 30) Refer to Problem 13 30. Assume that in 2009, Dransfield has changed its processes and trained workers to recognize quality problems and fix them before products are finished and shipped to customers. Quality is now at an acceptable level. Cost per pound at materials is about the same as before, but conversion costs are higher, and Dransfield has raised its selling price in line with the market. Sales have increased and returns have decreased. Dransfield’s managers attribute this to higher quality and a price that is still less than Yorunt’s. Information about the current period (2009) and last period (2008) follows.
Conversion costs in each year depend on production capacity defined in terms of ZP98 units that be produced, not the actual units produced. Selling and customer service costs depend on the number of customers that Dransfield can support, not the actual number of customers it serves. Dransfield has 50 customers in 2008 and 60 customers in 2009. At the start of each year, management uses its discretion to determine the number of advertising staff for the year. Advertising staff and its costs have no direct relationship with the quantity of ZP98 units produced and sold or the number of customers who buy ZP98.
1. Calculate operating income of Dransfield Company for 2008 and 2009.
2. Calculate the growth, price recovery, and productivity components that explain the change in operating income from 2008 to 2009.
3. Comment on your answer in requirement 2. What do these componentsindicate?
Aug 29, 2021 | Uncategorized
Strategic analysis of operating income. Halsey Company sells women’s clothing. Halsey’s strategy is to offer a wide selection of clothes and excellent customer service and to charge a premium price. Halsey presents the following data for 2009 and 2010. For simplicity, assume that each customer purchases one piece of clothing.
Total selling and customer service costs depend on the number of customers that Halsey has created capacity to support, not the actual number of customers that Halsey serves. Total purchasing and administrative costs depend on purchasing and administrative capacity that Halsey has created (defined in terms of the number of distinct clothing designs that Halsey can purchase and administer). Purchasing and administrative costs do not depend on the actual number of distinct clothing designs purchased. Halsey purchased 930 distinct designs in 2009 and 820 distinct designs in 2010. At the start of 2010, Halsey planned to increase operating income by 10% over operating income in 2009.
1. Is Halsey’s strategy one of product differentiation or cost leadership? Explain.
2. Calculate Halsey’s operating income in 2009 and 2010.
3. Calculate the growth, price recovery, and productivity components of changes in operating income between 2009 and 2010.
4. Does the strategic analysis of operating income indicate Halsey was successful in implementing its strategy in 2010?Explain.
Aug 29, 2021 | Uncategorized
Strategy balanced scorecard. Meredith Corporation makes a special purpose machine, D4H, used in the textile industry. Meredith has designed the D4H machine for 2009 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data for 2008 and 2009.
Meredith produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2009. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer service costs depend on the number of customers that Meredith can support, not the actual number of customers it serves. Meredith has 75 customers in 2008 and 80 customers in 2009. At the start of each year, management uses its discretion to de mine the number of design staff for the year. The design staff and its costs have no direct relationship with the quantity of D4H produced or the number of customers to whom D4H is sold.
1. Is Meredith’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key elements that you would include in Meredith’s balanced scorecard and the reasons for doingso.
Aug 29, 2021 | Uncategorized
Strategy, balanced scorecard, merchandising operation Oceano & Sons buys T shirts in bulk, applies its own trendsetting silk screen designs, and then sells the T shirts to a number of retailers. Oceano wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Oceano T shirt. Oceano presents the following data for its first two years of operations, 2008 and 2009.
Administrative costs depend on the number of customers that Oceano has created capacity to support, not on the actual number of customers served. Oceano had 3,600 customers in 2008 and 3,500 customers in 2009. At the start of each year, management uses its discretion to determine the number of employees on the design staff for the year. The design staff and its costs have no direct relationship with the number of T shirts purchased and sold or the number of customers to whom T shirts are sold.
1. Is Oceano’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly the key elements Oceano should include in its balanced scorecard and the reasons it should doso.
Aug 29, 2021 | Uncategorized
Strategy, balanced scorecard, merchandising operation. Roberto & Sons buys T shirts in bulk, applies its own trendsetting silk screen designs, and then sells the T shirts to a number of retailers. Roberto wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Roberto T shirt. Roberto presents the following data for its first two years of operations, 2010 and 2011.
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Administrative costs depend on the number of customers that Roberto has created capacity to support, not on the actual number of customers served. Roberto had 3,600 customers in 2010 and 3,500 customers in 2011.
Required
1. Is Roberto ?~s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly the key measures Roberto should include in its balanced scorecard and the reasons it should doso.
Aug 29, 2021 | Uncategorized
Strategy, balanced scorecard, Service Company Snyder Corporation is a small information systems consulting firm that specializes in helping companies implement sales management software. The market for Snyder’s products is very competitive. To compete, Snyder must deliver quality service at a low cost. Snyder bills clients in terms of units of work performed, which depends on the size and complexity of the sales management system. Snyder presents the following data for 2008 and 2009.
Software implementation labor hour costs are variable costs. Software implementation support costs for each year depend on the software implementation support capacity (defined in terms of units of work) that Snyder chooses to maintain each year. It does not vary with the actual units of work performed that year. At the start of each year, management uses its discretion to determine the number of software development employees. The software development staff and costs have no direct relationship with the number of units of work performed.
1. Is Snyder Corporation’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe key elements you would include in Snyder’s balanced scorecard and your reasons for doingso.
Aug 29, 2021 | Uncategorized
Terry Travers is the manufacturing supervisor of the Aurora Manufacturing Company, which produces a variety of plastic products. Some of these products are standard items that are listed in the company’s catalog, whereas others are made to customer specifications. Each month, Travers receives a performance report displaying the budget for the month, the actual activity for the period, and the variance between budget and actual. Part of Travers’ annual performance evaluation is based on his department’s performance against budget. Aurora’s purchasing manager, Bob Christensen, also receives monthly performance reports and is evaluated in part on the basis of these reports.
The most recent monthly reports were just distributed when Travers met Christensen in the hallway outside their offices. Scowling, Travers began the conversation, “I see we have another set of monthly performance reports hand delivered by that not very nice junior employee in the budget office. He seemed pleased to tell me that I was in trouble with my performance again.” Christensen: “I got the same treatment. All I ever hear about are the things I haven’t done right. Now, I’ll have to spend a lot of time reviewing the report and preparing explanations. The worst part is that the information is almost a month old, and we spend all this time on history.” Travers: “My biggest gripe is that our production activity varies a lot from month to month, but we’re given an annual budget that’s written in stone. Last month, we were shut down for three days when a strike delayed delivery of the basic material used in our plastic formulation, and we had already exhausted our inventory. You know that, of course, since we had asked you to call all over the country to find an alternate source of supply. When we got what we needed on a rush basis, we had to pay more than we normally do.” Christensen: “I expect problems like that to pop up from time to time that’s part of my job but now we’ll both have to take a careful look at the report to see where charges are reflected for that rush order. Every month, I spend more time making sure I should be charged for each item reported than I do making plans for my department’s daily work. It’s really frustrating to see charges for things I have no control over.” Travers: “The way we get information doesn’t help, either. I don’t get copies of the reports you get, yet a lot of what I do is affected by your department, and by most of the other departments we have. Why do the budget and accounting people assume that I should be told only about my operations even though the president regularly gives us pep talks about how we all need to work together as a team?” Christensen: “I seem to get more reports than I need, and I am never getting asked to comment until top management calls me on the carpet about my department’s shortcomings. Do you ever hear comments when your department shines?” Travers: “I guess they don’t have time to review the good news. One of my problems is that all the reports are in dollars and cents. I work with people, machines, and materials.
I need information to help me solve this month’s problems not another report of the dollars expended last month or the month before.”
a. Based on the conversation between Travers and Christensen, describe the likely motivation and behavior of these two employees resulting from Aurora Manufacturing Company’s performance reporting system.
b. 1. When performance reporting systems have been properly implemented, both employees and companies should benefit from them. Describe the benefits that can be realized from using a performance reporting system.
2. Based on the situation presented here, recommend ways for Aurora Manufacturing Company to improve its performance system to increase employee motivation.
Aug 29, 2021 | Uncategorized
Theory of constraints, contribution margin, sensitivity analysis. Low Tech Toys (LTT) produces dolls in two processes: molding and assembly. LTT is currently producing two models: Chatty Chelsey and Talking Tanya. Production in the Molding Department is limited by the amount of materials available. Production in the Assembly Department is limited by the amount of trained labor available. The only variable costs are materials in the Molding Department and labor in the Assembly Department. Following are the requirements and limitations by doll model and department.
Molding Materials
1. If LIT sold only one type of doll, which doll would it produce? How many of these dolls would it make and sell?
2. If LIT sells two Chatty Chelseys for each Talking Tanya, how many dolls of each type would it produce and sell? What would be the total contribution margin?
3. If LIT sells two Chatty Chelseys for each Talking Tanya, how much would production and contribution margin increase if the Molding Department could buy 10 more pounds of materials for $10 per pound?
4. If LTT sells two Chatty Chelseys for each Talking Tanya, how much would production and contribution margin increase if the Assembly Department could get 10 more labor hours at $12 perhour?
Aug 29, 2021 | Uncategorized
Theory of constraints, throughput contribution, quality, relevant costs. Aardee Industries manufactures pharmaceutical products in two departments: Mixing and Tablet Making. Additional information on the two departments follows. Each tablet contains 0.5 gram of direct materials.
The Mixing Department makes 200,000 grams of direct materials mixture (enough to make 400,000 tablets) because the Tablet Making Department has only enough capacity to process 400,000 tablets. All direct material costs are incurred in the Mixing Department. Aardee incurs $156,000 in direct material costs. The Tablet Making Department manufactures only 390,000 tablets from the 200,000 grams of mixture processed; 2.5% of the direct materials mixture is lost in the tablet making process. Each tablet sells for $1. All costs other than direct material costs are fixed costs. The following requirements refer only to the preceding data. There is no connection between the requirements.
1. An outside contractor makes the following offer: If Aardee will supply the contractor with 10,000 grams of mixture the contractor will manufacture 19,500 tablets for Aardee (allowing for the normal 2.5% loss of the mixture during the tablet making process) at $0.12 per tablet. Should Aardee accept the contractor’s offer? Show your calculations.
2. Another company offers to prepare 20,000 grams of mixture a month from direct materials Aardee supplies. The company will charge $0.07 per gram of mixture. Should Aardee accept the company’s offer? Show your calculations.
3. Aardee’s engineers have devised a method that would improve quality in the Tablet Making Department. They estimate that the 10,000 tablets currently being lost would be saved. The modification would cost $7,000 a month. Should Aardee implement the new method? Show your calculations.
4. Suppose that Aardee also loses 10,000 grams of mixture in its Mixing Department. These losses can be reduced to zero if the company is willing to spend $9,000 per month in quality improvement methods. Should Aardee adopt the quality improvement method? Show your calculations.
5. What are the benefits of improving quality in the Mixing Department compared with improving quality in the Tablet MakingDepartment?
Aug 29, 2021 | Uncategorized
Theory of constraints, throughput margin, and relevant costs. Nevada Industries manufactures electronic testing equipment. Nevada also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment):
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Nevada manufactures only 250 units per year because the installation department has only enough capacity to install 250 units. The equipment sells for $60,000 per unit (installed) and has direct material costs of $35,000. All costs other than direct material costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.
Required
1. Nevada’s engineers have found a way to reduce equipment manufacturing time. The new method would cost an additional $60 per unit and would allow Nevada to manufacture 20 additional units a year. Should Nevada implement the new method? Show your calculations.
2. Nevada’s designers have proposed a change in direct materials that would increase direct material costs by $3,000 per unit. This change would enable Nevada to install 280 units of equipment each year. If Nevada makes the change, it will implement the new design on all equipment sold. Should Nevada use the new design? Show your calculations.
3. A new installation technique has been developed that will enable Nevada’s engineers to install 7 additional units of equipment a year. The new method will increase installation costs by $45,000 each year.
Should Nevada implement the new technique? Show your calculations.
4. Nevada is considering how to motivate workers to improve their productivity (output per hour). One proposal is to evaluate and compensate workers in the manufacturing and installation departments on the basis of their productivities. Do you think the new proposal is a good idea? Explainbriefly.
Aug 29, 2021 | Uncategorized
Theory of constraints, throughput margin, relevant costs. The Mayfield Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information:
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Each cabinet sells for $72 and has direct material costs of $32 incurred at the start of the machining operation. Mayfield has no other variable costs. Mayfield can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements.
Required
1. Mayfield is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,000 units. The annual cost of these jigs and tools is $30,000. Should Mayfield acquire these tools? Show your calculations.
2. The production manager of the machining department has submitted a proposal to do faster setups that would increase the annual capacity of the machining department by 10,000 units and would cost $5,000 per year. Should Mayfield implement the change? Show your calculations.
3. An outside contractor offers to do the finishing operation for 12,000 units at $10 per unit, double the $5 per unit that it costs Mayfield to do the finishing in house. Should Mayfield accept the subcontractor’s offer? Show your calculations.
4. The Hunt Corporation offers to machine 4,000 units at $4 per unit, half the $8 per unit that it costs Mayfield to do the machining in house. Should Mayfield accept Hunt’s offer? Show your calculations.
Aug 29, 2021 | Uncategorized
Waiting times, manufacturing lead times. The SRG Corporation uses an injection molding machine to make a plastic product, Z39. SRG makes products only after receiving firm orders from its customers. SRG estimates that it will receive 50 orders for Z39 (each order is for 1,000 units) during the coming year. Each order of Z39 will take 80 hours of machine time. The annual capacity of the machine is 5,000 hours.
1. Calculate (a) the average amount of time that an order for 239 will wait in line before it is processed and (b) the average manufacturing lead time per order for Z39.
2. SOS is considering introducing a new product Y28. SRG expects it will receive 25 orders of Y28 (each order for 200 units) in the coming year. Each order of Y28 will take 20 hours of machine time. The average demand for Z39 will be unaffected by the introduction of Y28. Calculate (a) the average waiting time for an order received and (b) the average manufacturing lead time per order for each product, if SRG introduces Y28.
Aug 29, 2021 | Uncategorized
A bank manager of City savings bank Inc. uses the managerial accounting system to track the costs of operating the various departments with in the bank. The departments include Cash Management, Trust, Commercial Loans, Mortgage Loans, Operations, Credit card, and Branch Services. The budget and actual results for the Operations Department are as follows:
(a) What information is provided by the budget? Specifically, what questions can the bank manager ask of the Operations Department manager?
(b) What information does the budget fail to provide? Specially, could the budget information be presented differently to provide even more insight for the bankmanager?
Aug 29, 2021 | Uncategorized
Activity based budget; kaizen improvements. Korna Company manufactures a product, gizmo that uses the following direct inputs:
Korna has no direct materials inventory. All manufacturing overhead costs are variable costs. The manufacturing overhead cost is comprised of two activities: Setup and Operations. The cost driver for setup is setup hours, and the cost driver for operations is direct manufacturing labor hours. Korna allocates setup cost at a rate of $80 per setup hour, and each setup takes two hours. Korna Company makes gizmos in batches of 100 units. Operations costs are allocated at a rate of $1.60 per direct manufacturing labor hour.
1. Korna plans to make and sell 20,000 gizmos in the first quarter of next year. The selling price for the product is $120. Prepare the revenues budget for the first quarter.
2. Prepare the direct material usage budget for the first quarter of next year.
3. Prepare the direct manufacturing labor usage budget for the first quarter of next year.
4. Prepare the manufacturing overhead cost budget for each activity for the first quarter of next year.
5. Compute the budgeted unit cost of a gizmo for the first quarter of next year
6. Prepare the cost of goods sold budget for the first quarter of next year. Assume Korna budgets
1,000 units of beginning finished goods inventory at a cost of $72 per unit Korna uses the LIFO cost flow assumption for finished goods inventory. Korna expects to sell all 20,000 gizmos made in the first quarter.
7. Calculate the budgeted gross margin for the first quarter of next year
8. Korna Company managers want to implement kaizen costing. They budget a 1% decrease in materials quantity and direct manufacturing labor hours and a 3% decrease in setup time per unit for each subsequent quarter Calculate the budgeted unit cost and gross margin for quarters two and three. Assume no change in budgeted output.
9. Refer to requirement 8 above. How could the reduction in materials and time be accomplished? Are there any problems with thisplan?
Aug 29, 2021 | Uncategorized
As one of the division managers for Premier Inc., your performance is evaluated primarily on a single measure: after tax divisional segment income less the cost of capital invested in divisional assets. The fair value of invested capital in your division is $20,000,000, the required return on capital is 10 percent, and the tax rate is 40 percent. Income projections for 2010 follow.
Sales ……………………………………$ 30,000,000
Expenses ……………………………… (26,250,000)
Segment income ……………………… $ 3,750,000
Taxes ………………………………….. (1,500,000)
After tax segment income …………….. $ 2,250,000
You are considering an investment in a new product line that would, according to projections, increase 2010 pre tax segment income by $600,000. The investment cost is not yet determinable because negotiations about several factors are still under way.
a. Ignoring the new investment, what is your projected EVA for 2010?
b. In light of your answer in (a), what is the maximum amount that you would be willing to invest in the new product line?
c. Assuming that the new product line would require an investment of $3,100,000, what would be the revised projected EVA for your division in 2010 if the investment were made?
Aug 29, 2021 | Uncategorized
At the beginning of the last quarter of 2008, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and was struggling to survive in a very competitive market. Maria immediately requested a projected income statement for 2008. In response, the controller provided the following statement:
Sales …………………… $25,000,000
Variable expenses ……….. 20,000,000
Contribution margin ……. $ 5,000,000
Fixed expenses …………… 6,000,000
Projected loss …………. $ (1,000,000)
After some investigation, Maria soon realized that the products being produced had a serious problem with quality. She once again requested a special study by the controller’s office to supply a report on the level of quality costs. By the middle of November, Maria received the following report from the controller:
Inspection costs, finished product ……… $ 400,000
Rework costs …………………………… 2,000,000
Scrapped units ……………………………. 600,000
Warranty costs ………………………….. 3,000,000
Sales returns (quality related) ………….. 1,000,000
Customer complaint department …………. 500,000
Total estimated quality costs …………. $7,500,000
Maria was surprised at the level of quality costs. They represented 30 percent of sales— certainly excessive. She knew that the division had to produce high quality products to survive. The number of defective units produced needed to be reduced dramatically. Thus, Maria decided to pursue a quality driven turnaround strategy. Revenue growth and cost reduction could both be achieved if quality could be improved. By growing revenues and decreasing costs, profitability could be increased.
After meeting with the managers of production, marketing, purchasing, and human resources, Maria made the following decisions, effective immediately (end of November 2008):
a. More will be invested in employee training. Workers will be trained to detect quality problems and empowered to make improvements. Workers will be allowed a bonus of 10 percent of any cost savings produced by their suggested improvements.
b. Two design engineers will be hired immediately, with expectations of hiring one or two more within a year. These engineers will be in charge of redesigning processes and products with the objective of improving quality. They will also be given the responsibility of working with selected suppliers to help improve the quality of their products and processes. Design engineers were considered a strategic necessity.
c. Implement a new process: evaluation and selection of suppliers. This new process has the objective of selecting a group of suppliers that are willing and capable of providing non defective components.
d. Effective immediately, the division will begin inspecting purchased components. According to production, many of the quality problems are caused by defective components purchased from outside suppliers. Incoming inspection is viewed as a transitional activity. Once the division has developed a group of suppliers capable of delivering nondefective components, this activity will be eliminated.
e. Within three years, the goal is to produce products with a defect rate of less than 0.10 percent. By reducing the defect rate to this level, marketing is confident that market share will increase by at least 50 percent (as a consequence of increased customer satisfaction). Products with better quality will help establish an improved product image and reputation, allowing the division to capture new customers and increase market share.
f. Accounting will be given the charge to install a quality information reporting system. Daily reports on operational quality data (e.g., percentage of defective units), weekly updates of trend graphs (posted throughout the division), and quarterly cost reports are the types of information required.
g. To help direct the improvements in quality activities, kaizen costing is to be implemented. For example, for the year 2008 change OK, a kaizen standard of 6 percent of the selling price per unit was set for rework costs, a 25 percent reduction from the current actual cost.
To ensure that the quality improvements were directed and translated into concrete financial outcomes, Maria also began to implement a Balanced Scorecard for the division. By the end of 2009, progress was being made. Sales had increased to $26,000,000, and the kaizen improvements were meeting or beating expectations. For example, rework costs had dropped to $1,500,000.
At the end of 2010, two years after the turnaround quality strategy was implemented, Maria received the following quality cost report:
Quality training ………………….. $ 500,000
Supplier evaluation ………………… 230,000
Incoming inspection costs …………. 400,000
Inspection costs, finished product … 300,000
Rework costs …………………….. 1,000,000
Scrapped units ……………………… 200,000
Warranty costs ……………………… 750,000
Sales returns (quality related) ………. 435,000
Customer complaint department ……. 325,000
Total estimated quality costs ……. $4,140,000
Maria also received an income statement for 2010:
Sales ……………………. $30,000,000
Variable expenses ……..…. 22,000,000
Contribution margin …….. $ 8,000,000
Fixed expenses ……………. 5,800,000
Income from operations … $ 2,200,000
Maria was pleased with the outcomes. Revenues had grown, and costs had been reduced by at least as much as she had projected for the two year period. Growth next year should be even greater, as she was beginning to observe a favorable effect from the higher quality products. Also, further quality cost reductions should materialize, as incoming inspections were showing much higher quality purchased components.
Required:
1. Identify the strategic objectives, classified by Balanced Scorecard perspective. Next, suggest measures for each objective.
2. Using the results from Requirement 1, describe Maria’s strategy using a series of if then statements. Next, prepare a strategy map.
3. Explain how you would evaluate the success of the quality driven turnaround strategy. What additional information would you like to have for this evaluation?
4. Explain why Maria felt that the Balanced Scorecard would increase the likelihood that the turnaround strategy would actually produce good financial outcomes.
5. Advise Maria on how to encourage her employees to align their actions and behavior with the turnaround strategy.
Aug 29, 2021 | Uncategorized
Balanced scorecard and strategy Dransfield Company manufactures an electronic component, ZP98. This component is significantly less expensive than similar products sold by Dransfield’s competitors. Order processing time is very short; however, approximately 10% of products are defective and returned by the customer. Returns and refunds are handled promptly. Yorunt Manufacturing, Dransfield’s main competitor, has a higher priced product with almost no defects, but a longer order processing time.
1. Draw a simple customer preference map for Dransfield and Yorunt using the attributes of price, quality, and delivery time.
2. Is Dransfield’s current strategy that of product differentiation or cost leadership?
3. Dransfield would like to improve quality without significantly increasing costs or order processing time. Dransfield’s managers believe the increased quality will increase sales. What elements should Dransfield include in its balanced scorecard?
4. Draw a strategy map like the one in Exhibit 13 3 to explain cause and effect relationships in Dransfield’s balanced scorecard.
Aug 29, 2021 | Uncategorized
Balanced scorecard and strategy. Music Master Company manufactures an MP3 player called the Mini. The company sells the player to discount stores throughout the country. This player is significantly less expensive than similar products sold by Music Master’s competitors, but the Mini offers just four gigabytes of space, compared with eight offered by competitor Vantage Manufacturing. Furthermore, the Mini has experienced production problems that have resulted in significant rework costs. Vantage’s model has an excellent reputation for quality, but is considerably more expensive.
Required
1. Draw a simple customer preference map for Music Master and Vantage using the attributes of price, quality, and storage capacity. Use the format of Exhibit 13 1.
2. Is Music Master’s current strategy that of product differentiation or cost leadership?
3. Music Master would like to improve quality and decrease costs by improving processes and training workers to reduce rework. Music Master’s managers believe the increased quality will increase sales.
Draw a strategy map as in Exhibit 13 2 describing the cause and effect relationships among the strategic objectives you would expect to see in Music Master’s balanced scorecard.
4. For each strategic objective suggest a measure you would recommend in Music Master’s balanced scorecard.
Aug 29, 2021 | Uncategorized
Balanced scorecard La Quinta Corporation manufactures corrugated cardboard boxes. It competes and plans to grow by selling high quality boxes at a low price and by delivering them to customers quickly after receiving customers’ orders. There are many other manufacturers who produce similar boxes. La Quinta believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2009.
1. Is La Quinta’s 2009 strategy one of product differentiation or cost leadership? Explain briefly.
2. Mesa Corporation, a competitor of La Quinta, manufactures corrugated boxes with more designs and color combinations than La Quinta at a higher price. Mesa’s boxes are of high quality but require more time to produce and so have longer delivery times. Draw a simple customer preference map as in Exhibit 13 1 for La Quinta and Mesa using the attributes of price, delivery time, quality, and design.
3. Indicate two measures you would expect to see under each perspective in La Quinta’s balanced scorecard for 2009. Use a strategy map as in Exhibit 13 3 to explain your answer.
Aug 29, 2021 | Uncategorized
Balanced Scorecard objectives, cause and effect linkages for different value propositions Required
(a) Use the objectives below to develop appropriate cause and effect linkages across the Balanced Scorecard’s four perspectives for the low total cost value proposition.
(1) Increase profit.
(2) Decrease process defects.
(3) Increase customer satisfaction.
(4) Improve employees’ process improvement skills.
(5) Decrease cost of serving customers.
(6) Increase revenues.
(b) Use the objectives below to develop appropriate cause and effect linkages across the Balanced Scorecard’s four perspectives for the product leadership value proposition.
(1) Increase number of products that are first on the market.
(2) Decrease product development time from idea to market.
(3) Increase profit.
(4) Reduce turnover of key design personnel.
(5) Increase number of new customers.
(6) Increase revenues.
(c) Use the objectives below to develop appropriate cause and effect linkages across the Balanced Scorecard’s four perspectives for the customer solutions value proposition.
(1) Increase revenues.
(2) Increase customer satisfaction with employees’ assistance.
(3) Increase number of products cross sold to customers.
(4) Increase employees’ customer relationship skill levels.
Aug 29, 2021 | Uncategorized
Balanced scorecard. Lee Corporation manufactures various types of color laser printers in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various color laser printers on the market are comparable in terms of features and price. Lee believes that satisfying customers with products of high quality at low costs is key to achieving its target profitability. For 2009, Lee plans to achieve higher quality and lower costs by improving yields and reducing defects in its manufacturing operations. Lee will train workers and encourage and empower them to take the necessary actions. Currently a significant amount of Lee’s capacity is used to produce products that are defective and cannot be sold. Lee expects that higher yields will reduce the capacity that Lee needs to manufacture products. Lee does not anticipate that improving manufacturing will automatically lead to lower costs because Lee has high fixed costs. To reduce fixed costs per unit, Lee could lay off employees and sell equipment, or it could use capacity to produce and sell more of its current products or improved models of its current products. Lee’s balanced scorecard (initiatives omitted) for the just completed fiscal year 2009 follows:
1. Was Lee successful in implementing its strategy in 2009? Explain.
2. Is Lee’s balanced scorecard useful in helping the company understand why it did not reach its target market share in 2009? If it is, explain why. If it is not, explain what other measures you might want to add under the customer perspective and why.
3. Would you have included some measure of employee satisfaction in the learning and growth perspective and new product development in the internal business process perspective? That is, do you think employee satisfaction and development of new products are critical for Lee to implement its strategy? Why or why not? Explain briefly.
4. What problems, if any, do you see in Lee improving quality and significantly downsizing to eliminate unusedcapacity?
Aug 29, 2021 | Uncategorized
Balanced scorecard. Ridgecrest Corporation manufactures corrugated cardboard boxes. It competes and plans to grow by selling high quality boxes at a low price and by delivering them to customers quickly after receiving customers’ orders. There are many other manufacturers who produce similar boxes. Ridgecrest believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2012.
Required
1. Is Ridgecrest’s 2012 strategy one of product differentiation or cost leadership? Explain briefly.
2. Kearney Corporation, a competitor of Ridgecrest, manufactures corrugated boxes with more designs and color combinations than Ridgecrest at a higher price. Kearney’s boxes are of high quality but require more time to produce and so have longer delivery times. Draw a simple customer preference map as in Exhibit 13 1 for Ridgecrest and Kearney using the attributes of price, delivery time, quality, and design.
3. Draw a strategy map as in Exhibit 13 2 with two strategic objectives you would expect to see under each balanced scorecard perspective.
4. For each strategic objective indicate a measure you would expect to see in Ridgecrest’s balanced scorecard for 2012.
Aug 29, 2021 | Uncategorized
Compensation linked with profitability, waiting time, and quality measures. Mid Atlantic Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semi annual bonus plan for each medical group’s president has three components:
a. Profitability performance. Add 1% of operating income.
b. Average patient waiting time. Add $50,000 if the average waiting time for a patient to see a doctor after the scheduled appointment time is less than 15 minutes. If average patient waiting time is more than 15 minutes, add nothing.
c. Patient satisfaction performance. Deduct $50,000 if patient satisfaction (measured using a survey asking patients about their satisfaction with their doctor and their overall satisfaction with Mid Atlantic Healthcare) falls below 70 on a scale from 0 (lowest) to 100 (highest). No additional bonus is awarded for satisfaction scores of 70 or more.
Semi annual data for 2009 for the Philadelphia and Baltimore groups are as follows:
1. Compute the bonuses paid in each half year of 2009 to the Philadelphia and Baltimore medical group presidents.
2. Discuss the validity of the components of the bonus plan as measures of profitability, waiting time performance, and patient satisfaction. Suggest one shortcoming of each measure and how it might be overcome (by redesign of the plan or by another measure).
3. Why do you think Mid Atlantic Healthcare includes measures of both operating income and waiting time in its bonus plan for group presidents? Give one example of what might happen if waiting time was dropped as a performancemeasure.
Aug 29, 2021 | Uncategorized
Costs of quality (CMA, adapted) Costen, Inc., produces cell phone equipment. Jessica Tolmy, Costen’s president, decided to devote more resources to the improvement of product quality after learning that her company had been ranked fourth in product quality in a 2006 survey of cell phone users. Costen’s quality improvement program has now been in operation for two years, and the cost report shown here has recently been issued.
1. For each period, calculate the ratio of each COG category to revenues and to total quality costs.
2. Based on the results of requirement 1, would you conclude that Costen’s quality program has beer successful? Prepare a short report to present your case.
3. Based on the 2008 survey, Jessica Tolmy believed that Costen had to improve product quality. In making her case to Costen management, how might Tolmy have estimated the opportunity cost of not implementing the quality improvementprogram?
Aug 29, 2021 | Uncategorized
Designing a Balanced Scorecard for a pharmaceutical company Chadwick, Inc.: The Balanced Scorecard (Abridged)14
Company Background
Chadwick, Inc., was a diversified producer of personal consumer products and pharmaceuticals. The Norwalk Division of Chadwick developed, manufactured, and sold ethical drugs for human and animal use. It was one of five or six sizable companies competing in these markets and, while it did not dominate the industry, the company was considered well managed and was respected for the high quality of its products. Norwalk did not compete by supplying a full range of products. It specialized in several niches and attempted to leverage its product line by continually searching for new applications for existing compounds.
Norwalk sold its products through several key distributors who supplied local markets, such as retail stores, hospitals and health service organizations, and veterinary practices. Norwalk depended on its excellent relations with the distributors who served to promote Norwalk’s products to end users and also received feedback from the end users about new products desired by their customers.
Chadwick knew that its long term success depended on how much money distributors could make by promoting and selling Norwalk’s products. If the profit from selling Norwalk products was high, then these products were promoted heavily by the distributors and Norwalk received extensive communication back about future customer needs. Norwalk had historically provided many highly profitable products to the marketplace, but recent inroads by generic manufacturers had been eroding distributors’ sales and profit margins. Norwalk had been successful in the past because of its track record of generating a steady stream of attractive, popular products. During the second half of the 1980s, however, the approval process for new products had lengthened and fewer big winners had emerged from Norwalk’s R&D laboratories.
Research and Development
The development of ethical drugs was a lengthy, costly, and unpredictable process. Development cycles now averaged about 12 years. The process started by screening a large number of compounds for potential benefits and use. For every drug that finally emerged as approved for use, up to 30,000 compounds had to be tested at the beginning of a new product development cycle. The development and testing processes had many stages. The development cycle started with the discovery of compounds that possessed the desirable properties and ended many years later with extensive and tedious testing and documentation to demonstrate that the new drug could meet government regulations for promised benefits, reliability in production, and absence of deleterious side effects.
Approved and patented drugs could generate enormous revenues for Norwalk and its distributors. Norwalk’s profitability during the 1980s was sustained by one key drug that had been discovered in the late 1960s. No blockbuster drug had emerged during the 1980s, however, and the existing pipeline of compounds going through development, evaluation, and test was not as healthy as Norwalk management desired. Management was placing pressure on scientists in the R&D lab to increase the yield of promising new products and to reduce the time and costs of the product development cycle. Scientists were currently exploring new bioengineering techniques to create compounds that had the specific active properties desired rather than depending on an almost random search through thousands of possible compounds. The new techniques started with a detailed specification of the chemical properties that a new drug should have and then attempted to synthesize candidate compounds that could be tested for these properties. The bioengineering procedures were costly, requiring extensive investment in new equipment and computer based analyses.
A less expensive approach to increase the financial yield from R&D investments was to identify new applications for existing compounds that had already been approved for use. While some validation still had to be submitted for government approval to demonstrate the effectiveness of the drug in the new applications, the cost of extending an existing product to a new application was much, much less expensive than developing and creating an entirely new compound. Several valuable suggestions for possible new applications from existing products had come from Norwalk salesmen in the field. The salesmen were now being trained not only to sell existing products for approved applications, but also to listen to end users who frequently had novel and interesting ideas about how Norwalk’s products could be used for new applications. Manufacturing
Norwalk’s manufacturing processes were considered among the best in the industry. Management took pride in the ability of the manufacturing operation to quickly and efficiently ramp up to produce drugs once they had cleared governmental regulatory processes. Norwalk’s manufacturing capabilities also had to produce the small batches of new products that were required during testing and evaluation stages.
Performance Measurement
Chadwick allowed its several divisions to operate in a decentralized fashion. Division managers had almost complete discretion in managing all the critical processes: R&D, production, marketing and sales, and administrative functions such as finance, human resources, and legal. Chadwick set challenging financial targets for divisions to meet. The targets were usually expressed as return on capital employed (ROCE). As a diversified company, Chadwick wanted to be able to deploy the returns from the most profitable divisions to those divisions that held out the highest promise for profitable growth. Monthly financial summaries were submitted by each division to corporate headquarters. The Chadwick executive committee, consisting of the chief executive officer, the chief operating officer, two executive vice presidents, and the chief financial officer met monthly with each division manager to review ROCE performance and backup financial information for the preceding month.
The Balanced Scorecard Project
Bill Baron, comptroller of Chadwick, had been searching for improved methods for evaluating the performance of the various divisions. Division managers complained about the continual pressure to meet short term financial objectives in businesses that required extensive investments in risky projects to yield long term returns. The idea of a Balanced Scorecard appealed to him as a constructive way to balance short run financial objectives with the long term performance of the company.
Baron brought the article and concept to Dan Daniels, the president and chief operating officer of Chadwick. Daniels shared Baron’s enthusiasm for the concept, feeling that a Balanced Scorecard would allow Chadwick divisional managers more flexibility in how they measured and presented their results of operations to corporate management. He also liked the idea of holding managers accountable for improving the long term performance of their division.
After several days of reflection, Daniels issued a memorandum to all Chadwick division managers. The memo had a simple and direct message: Read the Balanced Scorecard article, develop a scorecard for your division, and be prepared to come to corporate headquarters in 90 days to present and defend the divisional scorecard to Chadwick’s executive committee.
John Greenfield, the division manager at Norwalk, received Daniel’s memorandum with some concern and apprehension. In principle, Greenfield liked the idea of developing a scorecard that would be more responsive to his operations, but he was distrustful of how much freedom he had to develop and use such a scorecard. Greenfield recalled:
This seemed like just another way for corporate to claim that they have decentralized decision making and authority while still retaining ultimate control at headquarters.
Greenfield knew that he would have to develop a plan of action to meet corporate’s request but lacking a clear sense of how committed Chadwick was to the concept, he was not prepared to take much time from his or his subordinates’ existing responsibilities for the project.
The next day, at the weekly meeting of the Divisional Operating Committee, Greenfield distributed the Daniels memo and appointed a three man committee, headed by the divisional controller, Wil Wagner, to facilitate the process for creating the Norwalk Balanced Scorecard. Wagner approached Greenfield later that day:
I read the Balanced Scorecard article. Based on my understanding of the concept, we must start with a clearly defined business vision. I’m not sure I have a clear understanding of the vision and business strategy for Norwalk. How can I start to build the scorecard without this understanding? Greenfield admitted: ?oThat’s a valid point. Let me see what I can do to get you started.??
?
Required
(a) How does the Balanced Scorecard approach differ from traditional approaches to performance measurement? What, if anything, distinguishes the Balanced Scorecard approach from a ?omeasure everything, and you might get what you want?? philosophy?
(b) Develop the Balanced Scorecard for the Norwalk Pharmaceutical Division of Chadwick, Inc. What parts of the business strategy that John Greenfield sketched out should be included? Are there any parts that should be excluded or cannot be made operational? What scorecard measures would you use to implement your scorecard in the Norwalk Pharmaceutical Division? What new measures need to be developed, and how would you go about developing them?
(c) How would a Balanced Scorecard for Chadwick, Inc., differ from ones developed in its divisions, such as the Norwalk Pharmaceutical Division? Do you anticipate that there might be major conflicts between divisional scorecards and those of the corporation? If so, should those conflicts be resolved, and, if so, how should they be resolved?
Aug 29, 2021 | Uncategorized
Designing a Balanced Scorecard strategy map for an auto parts manufacturing company Domestic Auto Parts (DAP), 16 a $1 billion subsidiary of a U.S. auto parts manufacturing company, manufactured and marketed original and after market parts for automobile producers in the United States. It distributed products directly to original equipment automakers as well as to large retail chains. DAP was currently number four in market share in the United States out of nine direct competitors. Its 9% return on capital was respectable but less than that of its leading competitors.
DAP’s current product line was solid, but it had not introduced new products to the market during the past three years. This had caused its projected revenues to decline and its industry position to slip. As recently as two years ago, DAP was number two in the industry, but competitors Western Auto and Just in Time Automotive had passed it, pushing DAP to number four. Western Auto had introduced higher value products to the market with the use of technology both to manufacture products and in the parts themselves. Western’s customers paid a premium price for the improved performance of the company’s products.
DAP, on the other hand, had protected margins during its revenue decline by aggressively attacking costs. It succeeded in maintaining its gross and operating margin levels but at the cost of limiting plant investment and technology upgrades in manufacturing plants. It was beginning to experience maintenance problems, such as an increase in unscheduled downtime. Also, because it lacked the flexible manufacturing capabilities of competitors, it had to produce to stock rather than to order, causing inventory costs to rise to noncompetitive levels. Company management now recognized that the recent cost cutting had maintained margins in the short term but may have severely affected DAP’s ability to compete in the longer term.
To help turn the company around, the parent company had recently hired a new CEO, Ellen Bright. Her job was clearly set out for her—either turn the subsidiary around in two years or close the business. The minimum requirements for continued operations were to achieve 12% return on capital employed (ROCE) and a growth rate faster than the industry’s so that it could regain its number one or two position among competitors.
With this directive in hand, Bright held a meeting with her executive team to explain the situation and get their input. She started the meeting by stating:
The only way we can achieve our goal is for each of you and your departments to cooperate to improve our return on capital. Product quality has set us apart in the past. We must regain our high quality position and grow our revenues and our contribution to the parent company.
My review of the economics and the competitive situation at DAP suggests that we must do three things: we need to grow; we must be customer intimate; and, we must be operationally excellent. And we must do all three things at once to be successful.
Joe [the new chief financial officer brought in by Bright], you and I have been working on the economics required to achieve our financial goals. Why don’t you share our initial findings with the group?
Joe Nathan described the financial goals for the turnaround:
Basically, I designed a simple economic model to pinpoint the critical economic drivers needed to reach our goal of a 12% ROCE. We must increase our top line revenue by 50% through innovation and customer relationships, we need to better utilize our capital assets (both current and new)—currently we are operating at 65% on old assets—and we must get to 90% utilization on an upgraded asset base. Finally, we must minimize our total cost structure—today we are operating above the average cost in our competitor group. We need to get to the lowest cost quartile to compete. These are the key drivers needed to get to the financial results expected by the parent company. We must balance them—one against the other—to achieve our overall goal of 12% ROCE.
The question is how are we going to do this? What must we do—what objectives must we set and achieve?
Ellen Bright interjected, ?oWe are going to build a strategy to achieve each of these thrusts. I need your commitment and active contribution.?? She asked Michael Milton, vice president of manufacturing, for his perspective. Milton said:
I’ll admit that we certainly need to get more creative and bring to market new and improved products. But we need to do a lot of our processes better. Supplier management and manufacturing as well as product delivery have to be better coordinated so we can effectively and efficiently get new products to the customer. We need to be on time and on spec just to get the opportunity to sell new products. Key in my mind is managing the supplier pipeline, the raw materials—there is a lot of money to be saved there.
We also need to balance our intense focus on cost cutting with the need to make investments in process improvements and new and upgraded equipment. Unscheduled downtime and the inability to make product switchovers on the manufacturing floor are killing us. Upgraded capital will both reduce our costs and help deliver consistently on time and on spec. We talk a lot about preventive maintenance, but we need to get real about it. This could save us big time in terms of costs and effectiveness. If we don’t do these operational things we will have trouble convincing customers to pay a premium price for our products.
David Dillon, head of distribution, described the problems he faced:
At the moment, I don’t have the infrastructure tools to create a first class network of wholesalers and distributors. We need to streamline our distribution process and position ourselves as a strong business partner to attract and retain profitable customers. There are a lot of people out there with great experience and good ideas about how to achieve this, but the department is large and geographically dispersed, and there is no formal way of sharing best practices and best thinking. These steps will help us achieve our grow revenue goal by getting products to market at a reasonable price in a reasonable time.
Mary Stewart, vice president of marketing and sales, added:
Improving our distribution will be a major factor in our new customer intimacy thrust by providing the opportunity for win–win relationships with our distributor customers and enhancing our reputation for efficiency and organization.
In addition, we must position ourselves in the market—with the right customers—to be viable.
We have recently studied our customer base and found an important segment of the current customer base that is profitable in both the direct and wholesale segments. In fact, 69% of our customers produce 90% of our profit. We went on to determine what these key customers want and will pay for. Both key segments, direct and wholesale, want essentially the same things. They expect us to deliver products on time and on spec. This, however, is expected from everyone in the industry. It’s a hurdle that must be passed just to be considered a viable vendor. The differentiator is for a supplier to understand their needs and translate that by continuous communication and productive dialogue. They want a long term, mutually beneficial relationship with their suppliers.
They want superior, technology sophisticated products from a supplier with a superior reputation and image in the industry. Such a supplier makes their buying decisions less risky.
Rita Richardson, vice president of research and development, responded to the challenge to produce state of the art technologically sophisticated products:
Well, we have some talented people in our R&D group who can produce the kind of products our customers need. But all the products in the world will not be bought without a good marketing communications effort. We need to be able to tell people what we have and how it can benefit them. We need a marketing effort that positions us as an innovator with new and enhanced products to offer. I think it might help to have some of our marketing staff spend time in the R&D department to get a feel for what’s going on. Sure some reskilling may be needed to achieve our innovation goals but I think we have a solid base of R&D professionals.
Bright interjected at this point, ?oI think you have hit on something there, Rita. I think we all need to be more business focused and less functionally focused. The company seems to be suffering because employees know only what goes on inside their own area. This team needs to lead this cross functional view by example—in what we say and what we do.??
She closed the meeting by challenging the group even further:
None of our objectives can be accomplished without a major commitment from all of us to build a world class workforce. To operate as an innovator we must change the way we think in this organization. Our employees must value change not resist it. We must reskill large parts—not some—of the organization. This will require training. Training involves both time and money. To support the new workforce we will also need to provide tools to work smarter and harder. We can do this and align the organization through the use of just in time technology. This commitment to people and organization is necessary to do the things we need to do to deliver customer benefits and ultimately financial returns.
Required
From the meeting of senior DAP executives, develop a strategy map of objectives, as well as potential Balanced Scorecard measures, for DAP. You can be guided by the following questions:
Financial
1. Who are the shareholders, and what do they want?
2. What are the shareholders’ expectations in the following areas?
(a) Revenue growth.
(b) Asset utilization.
(c) Cost improvement.
Customer
1. Who are the customers?
2. What do the customers want? How does DAP create value for them?
Process
1. What processes are most important for creating value for DAP’s shareholders and customers?
2. What are the objectives and measures for each process identified here?
Learning and Growth
1. What specific skills and capabilities do DAP’s people need in order to excel at the critical processes that you identified in the process perspective?
2. What other objectives can you identify to improve the human resources, information technology, and organization culture and alignment of DAP if it is to succeed with its strategy?
Aug 29, 2021 | Uncategorized
Designing a Balanced Scorecard Wells Fargo’s web page (https://www .wellsfargo.com/pdf/invest_relations/VisionandValues04.pdf) states that the company’s vision is ?oto satisfy all our customers’ financial needs and help them succeed financially.?? The brochure also describes the following 10 strategic initiatives:
1. Investments, brokerage, trust, and insurance.
2. Going for ?ogr eight??! (Increase the average number of products per customer to eight).
3. Commercial bank of choice.
4. Doing it right for the customer.
5. Banking with a mortgage.
6. Wells Fargo cards in every Wells Fargo wallet.
7. When, where, and how.
8. Information based marketing.
9. Be our customers’ payment processor.
10. People as a competitive advantage.
Required
Based on the annual reports and any other information you are able to find about Wells Fargo or its competitors, develop a Balanced Scorecard for Wells Fargo that will help it achieve its vision and monitor its performance on the strategic initiatives.
Aug 29, 2021 | Uncategorized
Ethics and quality. Information from a quality report for 2009 prepared by Lindsey Williams, assistant controller of Citocell, a manufacturer of electric motors, is as follows:
Davey Evans, the plant manager of Citocell, is eligible for a bonus if the total costs of quality as a percentage of revenues are less than 10%, the percentage of customer complaints is less than 4%, and the on time delivery rate exceeds 92%. Evans is unhappy about the customer complaints of 5% because, when preparing her report, Williams actually surveyed customers regarding customer satisfaction. Evans expected Williams to be less proactive and to wait for customers to complain. Evans’s concern with Williams’s approach is that it introduces subjectivity into the results and also fails to capture the seriousness of customers’ concerns. ?oWhen you wait for a customer to complain, you know he is complaining because it is something important. When you do customer surveys, customers mention whatever is on their mind, even if it is not terribly important.?? John Roche, the controller, asks Williams to see him. He tells her about Evans’s concerns. ?oI think Davey has a point. See what you can do.?? Williams is confident that the customer complaints are genuine and that customers are concerned about quality and service. She believes it is important for Citocell to be proactive and obtain systematic and timely customer feedback, and then to use this information to make improvements. She is also well aware that Citocell has not done customer surveys in the past, and that. except for her surveys, Evans would probably be eligible for the bonus. She is confused about how to handle Roche’s request.
1. Calculate the ratio of each cost of quality category (prevention, appraisal, internal failure, and external failure) to revenues in 2009. Are the total costs of quality as a percentage of revenues less than 10%?
2. Would it be unethical for Williams to modify her analysis? What steps should Williams take to resolve thissituation?
Aug 29, 2021 | Uncategorized
Ethics and quality. Wainwright Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Wainwright’s largest manufacturing plants. The plant’s General Manager, Chris Sheldon, has just returned from a meeting at corporate headquarters where quality expectations were outlined for 2012. Chris calls Nancy into his office to relay the corporate quality objective that total quality costs will not exceed 10% of total revenues by plant under any circumstances. Chris asks Nancy to provide him with a list of options for meeting corporate headquarter’s quality objective. The plant’s initial budgeted revenues and quality costs for 2012 are as follows:
Revenue……………………………………………3,400,000
Quality Costs:
Testing of purchased materials…………………….….32,000
Quality control training for production staff…….…….5,000
Warranty repairs………………………………….……82,000
Quality design engineering……………………….……48,000
Customer support……………………………….…….37,000
Materials scrap…………………………………….….12,000
Product inspection…………………………………..102,000
Engineering redesign of failed parts………….……….21,000
Rework of failed parts………………………………..18,000
Prior to receiving the new corporate quality objective, Nancy had collected information for all of the plant’s possible options for improving both product quality and costs of quality. She was planning to introduce the idea of reengineering the manufacturing process at a one time cost of $75,000, which would decrease product inspection costs by approximately 25% per year and was expected to reduce warranty repairs and customer support by an estimated 40% per year. After seeing the new corporate objective, Nancy is reconsidering the reengineering idea.
Nancy returns to her office and crunches the numbers again to look for other alternatives. She concludes that by increasing the cost of quality control training for production staff by $15,000 per year, the company would reduce inspection costs by 10% annually and reduce warranty repairs and customer support costs by 20% per year, as well. She is leaning toward only presenting this latter option to Chris, the general manager, since this is the only option that meets the new corporate quality objective.
Required
1. Calculate the ratio of each costs of quality category (prevention, appraisal, internal failure, and external failure) to revenues for 2012. Are the total costs of quality as a percentage of revenues currently less than 10%?
2. Which of the two quality options should Nancy propose to the general manager, Chris Sheldon? Show the two year outcome for each option: (a) reengineer the manufacturing process for $75,000 and (b) increase quality training expenditure by $15,000 per year.
3. Suppose Nancy decides not to present the reengineering option to Chris. Is Nancy’s action unethical?
Explain.
Aug 29, 2021 | Uncategorized
Fashion Fabrics sells sewing and craft materials to specialty retail and department stores. For 2010, the company’s New York Division had the following performance targets:
Asset turnover ……………3.0
Profit margin …………….5.5%
Actual information concerning the performance of the New York Division in 2010 follows.
Total assets at beginning of year …………………$ 7,400,000
Total assets at end of year ……………………….. 9,900,000
Sales ……………………………………………… 24,000,000
Operating expenses ………………………………. 23,160,000
a. For 2010, did the New York Division achieve its target objectives for ROI, asset turnover, and profit margin?
b. Which, as indicated by the performance measures, are the most likely areas to improve performance?
c. If the company has an overall target return of 13 percent, what was the New York Division’s residual income for 2010?
Aug 29, 2021 | Uncategorized
Imelda Sanchez, manager of the Arias Division of PoncA? Chemical, is evaluated based on the division’s return on investment and residual income. Near the end of November 2010, she was reviewing the division’s financial information as well as some activities projected for the remainder of the year. The information she was reviewing follows.
1. Annual sales were projected at 100,000 units, each with a selling price of $30.
Sanchez has received a purchase order from a new customer for 5,000 units. The purchase order states that the units should be shipped on January 3, 2011, for arrival on January 5.
2. The division’s 2010 beginning inventory was 500 units, each with a cost of $11.
Purchases of 99,500 units have been made steadily throughout the year, and the per unit cost has been constant at $10. Sanchez intends to make a purchase of 5,200 units before year end, providing a 200 unit balance in inventory after making the shipment to the new customer. Carrying costs for the units are quite high, but ordering costs are extremely low. The division uses a last in, first out (LIFO) cost flow assumption for inventory.
3. Shipping expenses are $0.50 per unit sold.
4. Sanchez has just received a notice from her primary supplier that he is going out of business and is selling his remaining stock of 15,000 units for $9 each. She makes a note to herself to place her final order for the year from this supplier.
5. Division advertising is $5,000 per month for newspaper inserts and television spots.
No advertising has yet been purchased for December, but Sanchez intends to have her sales manager call the paper and TV station early next week.
6. Salaries through the end of the year are projected at $700,000. This amount assumes that the position to be vacated by the division’s personnel manager will be filled on December 1. The personnel manager’s job pays $66,000 per year. Sanchez has an interview on Monday with an individual who appears to be a good candidate for the position.
7. Other general and administrative costs for the full year are estimated to total $590,000.
8. As Sanchez was reviewing the divisional information, she received a phone call from the division’s maintenance supervisor. He informed her that $10,000 of electrical repairs to the office heating system are necessary. When asked if the repairs were essential, the supervisor replied, “No, the office won’t burn down if you don’t make them, but they are advisable for energy efficiency and long term operation of the system.” Sanchez tells the supervisor to see her on Monday at 8:00 a.m.
Using her information, Sanchez prepared a budgeted income statement and was fairly pleased with the division’s results. Although providing the 13 percent rate of return on investment desired by corporate management, the results did not reach the 16 percent rate needed for Sanchez to receive a bonus for the year.
a. Prepare a 2010 budgeted income statement for the Arias Division. Determine the division’s residual income, assuming that the division has an asset investment base of $4,500,000.
b. Sanchez’s less than scrupulous friend, John Greer, walked into the house at this time. When he heard that she was not going to receive a bonus, Greer said,
“Here, let me take care of this for you.” He proceeded to recompute the budgeted income statement and showed Sanchez that, based on his computation of $723,000 in income, she would receive her bonus. Prepare Greer’s budgeted income statement.
c. What future difficulties might arise if Sanchez acts in a manner that will make Greer’s pro forma income statement figures a reality?
Aug 29, 2021 | Uncategorized
In the mid 1990s, Mobil Corporation’s Marketing and Refining (M&R) division underwent a major reorganization and developed new strategic directions. In conjunction with these changes, M&R developed a Balanced Scorecard around four perspectives: financial, customer, internal business processes, and learning and growth. Subsequently, M&R linked compensation to its Balanced Scorecard metrics. To illustrate, all salaried employees in M&R’s Natural Business Units received the following percentages of their competitive market salary:
?
The Balanced Scorecards included numerous metrics. M&R’s financial metrics included return on capital employed and profitability , and customer metrics included share of targeted segments of consumers and profitability of dealers. Internal business process metrics included safety and quality indices. Finally , learning and growth metrics included an index of employees’ perceptions of the work climate at M&R.
Business units developed their own Balanced Scorecards. In addition to choosing targets for scorecard metrics, the business units chose percentage weights that determined how much the achieved scorecard measures would contribute to the bonus pool displayed in the table. These percentage weights were required to sum to 100%. Furthermore, in connection with the award for performance on the business unit Balanced Scorecard metrics, the business units assigned a performance factor, that is, a ?odegree of difficulty?? of target achievement for each target. The performance factors are similar in concept to those in diving or gymnastic competitions where performance scores depend on the difficulty of the attempted dive or gymnastic routine. The performance factors underwent review by peers, upper management, and the employees whose evaluation and compensation depended on the performance factors. The performance factors ranged from 1.25 (for best in industry performance) to 0.7 for poor performance. A target corresponding to average industry performance rated a 1.0 performance factor.
Required
(a) What are some general advantages of and areas of concerns surrounding the linking of compensation to a Balanced Scorecard?
(b) Evaluate M&R’s approach to linking compensation to multiple measures (Balanced Scorecard measures), including its system of assigning degrees of difficulty to achieving targets. In your response, consider the process that is involved in developing the compensationscheme.
Aug 29, 2021 | Uncategorized
Nonfinancial measures of quality and time. Worldwide Cell Phones (WCP) has developed a cell phone that can be used anywhere in the world (even countries like Japan that have a relatively unique cell phone system). WCP has been receiving complaints about the phone. For the past two years, WCP has been test marketing the phones and gathering nonfinancial information related to actual and perceived aspects of the phone’s quality. The company expects that, given the lack of competition in this market, increasing the quality of the phone will result in higher sales and thereby higher profits.
Quality data for 2010 and 2011 include the following:
?
Required
1. For each year, 2010 and 2011, calculate the following: Required
a. Percentage of defective units shipped
b. Customer complaints as a percentage of units shipped
c. Percentage of units reworked during production
d. Manufacturing cycle time as a percentage of total time from order to delivery
2. Referring to the information computed in requirement 1, explain whether WCP’s quality and timeliness have improved.
3. Why would manufacturing cycle time have increased while customer response time decreased? (It may be useful to first describe what is included in each time measurement—see Exhibit19 7)
Aug 29, 2021 | Uncategorized
Non financial quality measures, on time delivery. Checkers Pizza promises to deliver pizzas in twenty five minutes or less. If pizzas are not delivered on time, then the customer receives $5 off the price of the order. Some store managers, who receive bonuses based on store profits, believe that the guarantee is a win win situation for Checkers. Because the average pizza sells for $9 but has a marginal cost of $2.25, the store makes a profit no matter what the delivery time. If a pizza is delivered on time, then the store earns $6.75 ($9 — $2.25) per pizza. If a pizza is delivered late, then the store still earns $1.75 ($9 — $5 — $2.25) per pizza. If more than one pizza is ordered, then Checkers makes even more money because it only gives one $5 discount per order. The head of the Checkers chain is worried that this perceived win win situation may encourage a complacent attitude in store managers with respect to on time deliveries. While short run profits are still earned with late deliveries, repeated late deliveries could lead to annoyance on the part of customers and eventually to a loss of customers. Therefore, the Checkers corporate headquarters has decided to gather information about late deliveries and customer satisfaction. It has developed a survey that asks delivery customers to rate their satisfaction based on three attributes: delivery service, value for money, and overall satisfaction with Checkers. Responses can range from 1 to 5, where 1 is ?oAwful?? and 5 is ?oExcellent?? The following responses were gathered from stores in a single city.
1. Examine the relationship between the percentage of deliveries that were late and average responses to the three survey questions. Do the data provide any support for Checkers headquarters’ concerns?
2. Using the high low method discussed in Chapter 10 (pp. 346—347), estimate the effect of changes in the late delivery percentage on average overall satisfaction with Checkers. Use the customer satisfaction score as the dependent variable. Based on this analysis, compute the impact of a change from 5% late deliveries to 7% late deliveries on overall customer satisfaction.
3. What factors would Checkers need to consider when determining whether the delivery guarantee is actually beneficial for thecompany?
Aug 29, 2021 | Uncategorized
Professional ethics and end of year actions. Janet Taylor is the new division controller of the snack foods division of Gourmet Foods. Gourmet Foods has reported a minimum 15% growth in annual earnings for each of the past five years. The snack foods division has reported annual earnings growth of more than 20% each year in this same period. During the current year, the economy went into a recession. The corporate controller estimates a 10% annual earnings growth rate for Gourmet Foods this year. One month before the December 31 fiscal year end of the current year, Taylor estimates the snack foods division will report an annual earnings growth of only 8%. Warren Ryan, the snack foods division president, is not happy, but he notes that ?othe end of year actions?? still need to be taken.
Taylor makes some inquiries and is able to compile the following list of end of year actions that were more or less accepted by the previous division controller:
a. Deferring December’s routine monthly maintenance on packaging equipment by an independent contractor until January of next year
b. Extending the close of the current fiscal year beyond December31 so that some sales of next year are included in the current year
c. Altering dates of shipping documents of next January’s sales to record them as sales in December of the current year
d. Giving salespeople a double bonus to exceed December sales targets
e. Deferring the current period’s advertising by reducing the number of television spots run in December and running more than planned in January of next year
f. Deferring the current period’s reported advertising costs by having Gourmet Foods’ outside advertising agency delay billing December advertisements until January of next year or by having the agency alter invoices to conceal the December date
g. Persuading carriers to accept merchandise for shipment in December of the current year although they normally would not have done so
1. Why might the snack foods division president want to take these end of year actions?
2. The division controller is deeply troubled and reads the ?oStandards of Ethical Conduct for Practitioners of Management Accounting and Financial Management?? in Exhibit 1 7 (p. 16). Classify each of the end of year actions (a—g) as acceptable or unacceptable according to that document.
3. What should Taylor do if Ryan suggests that these end of year actions are taken in every division of Gourmet Foods and that she will greatly harm the snack foods division if she does not cooperate and paint the rosiest picture possible of the division’s results?
Aug 29, 2021 | Uncategorized
Professional ethics and reporting division performance. Marcia Miller is division controller and Tom Maloney is division manager of the Ramses Shoe Company. Miller has line responsibility to Maloney, but she also has staff responsibility to the company controller
Maloney is under severe pressure to achieve the budgeted division income for the year. He has asked Miller to book $200,000 of revenues on December 31. The customers’ orders are firm, but the shoes are still in the production process. They will be shipped on or around January 4. Maloney says to Miller, ?oThe key event is getting the sales order, not shipping the shoes. You should support me, not obstruct my reaching division goals.??
1. Describe Miller’s ethical responsibilities.
2. What should Miller do if Maloney gives her a direct order to book the sales?
Aug 29, 2021 | Uncategorized
Ramona Castro opened a veterinary business in Nashville, Tennessee, on August 1. On August 31, the balance sheet showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, and Owner’s Capital $13,700. During September, the following transactions occurred.
1. Paid $2,900 cash on accounts payable.
2. Collected $1,300 of accounts receivable.
3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account.
4. Earned revenue of $7,800, of which $2,500 is received in cash and the balance is due in October.
5. Withdrew $1,100 cash for personal use.
6. Paid salaries $1,700, rent for September $900, and advertising expense $450.
7. Incurred utilities expense for month on account $170.
8. Received $10,000 from Capital Bank (money borrowed on a note payable).
Instructions
(a) Prepare a tabular analysis of the September transactions beginning with August 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Owner’s Capital – Owner’s Drawings + Revenues – Expenses.
(b) Prepare an income statement for September, an owner’s equity statement for September, and a balance sheet at September 30.
Aug 29, 2021 | Uncategorized
Scott Hewitt, the new Plant Manager of Old World Manufacturing Plant Number 7, has just reviewed a draft of his year end financial statements. Hewitt receives a year end bonus of 10% of the plant’s operating income before tax. The year end income statement provided by the plant’s controller was disappointing to say the least. After reviewing the numbers, Hewitt demanded that his controller go back and ?owork the numbers?? again. Hewitt insisted that if he didn’t see a better operating income number the next time around he would be forced to look for a new controller. Old World Manufacturing classifies all costs directly related to the manufacturing of its product as product costs. These costs are inventoried and later expensed as costs of goods sold when the product is sold. All other expenses, including finished goods warehousing costs of $3,250,000 are classified as period expenses. Hewitt had suggested that warehousing costs be included as product costs because they are ?odefinitely related to our product.?? The company produced 200,000 units during the period and sold 180,000 units.
As the controller reworked the numbers he discovered that if he included warehousing costs as product costs, he could improve operating income by $325,000. He was also sure these new numbers would make Hewitt happy.
Required
1. Show numerically how operating income would improve by $325,000 just by classifying the preceding costs as product costs instead of period expenses?
2. Is Hewitt correct in his justification that these costs ?oare definitely related to our product???
3. By how much will Hewitt profit personally if the controller makes the adjustments in requirement 1.
4. What should the plant controller do?
Aug 29, 2021 | Uncategorized
Strategic decisions and management accounting. A series of independent situations in which a firm is about to make a strategic decision follow.
Decisions:
a. Roger Phones is about to decide whether to launch production and sale of a cell phone with standard features.
b. Computer Magic is trying to decide whether to produce and sell a new home computer software package that includes the ability to interface with a sewing machine and a vacuum cleaner. There is no such software currently on the market.
c. Christina Cosmetics has been asked to provide a ?ostore brand?? lip gloss that will be sold at discount retail stores.
d. Marcus Meats is entertaining the idea of developing a special line of gourmet bologna made with sun dried tomatoes, pine nuts, and artichoke hearts.
1. For each decision, state whether the company is following a low price or a differentiated product strategy.
2. For each decision, discuss what information the management accountant can provide about the source of competitive advantage for these firms.
Aug 29, 2021 | Uncategorized
Terminology, interpretation of statements
1. Calculate total prime costs and total conversion costs.
2. Compute total inventoriable costs and period costs.
3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of these costs be regarded as product costs? Give an example.
4. Suppose that both the direct materials used and the depreciation on plant and equipment are related to the manufacture of I million units of product Determine the unit cost for the direct materials assigned to those units and the unit cost for depreciation on plant and equipment Assume that yearly depreciation is computed on a straight line basis.
5. Assume that the implied cost behavior patterns in requirement 4 persist. That is, direct material costs behave as a variable cost and depreciation on plant and equipment behaves as a fixed cost. Repeat the computations in requirement 4, assuming that the costs are being predicted for the manufacture of 1.5 million units of product Determine the effect on total costs.
6. Assume that depreciation on the equipment (but not the plant) is computed based on the number of units produced because the equipment deteriorates with units produced. The depreciation rate on equipment is $4 per unit. Calculate the depreciation on equipment assuming (a) 1 million units of product are produced and (b) 1.5 million units of product are produced.
Aug 29, 2021 | Uncategorized
The amounts of the assets and liabilities of Padre Travel Service as of June 30, 2010, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $210,000, and the capital stock was $90,000 as of July 1, 2009, the beginning of the current year. Dividends of $180,000 were paid during the current year.
Accounts payable $71,500
Accounts receivable 188,100
Cash 318,300
Fees earned 1,579,200
Miscellaneous expense 16,000
Rent expense226,800
Supplies 20,100
Supplies expense 42,600
Taxes expense 33,600
Utilities expense 135,000
Wages expense 790,200
Instructions
1. Prepare an income statement for the current year ended June 30, 2010.
2. Prepare a retained earnings statement for the current year ended June 30, 2010.
3. Prepare a balance sheet as of June 30, 2010.
Aug 29, 2021 | Uncategorized
The following data are taken from the general ledger and other records of Black Hills Manufacturing Co. on January 31, the end of the first month of operations in the current fiscal year:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,000
Materials inventory (January 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Work in process inventory (January 1) . . . . . . . . . . . . . . . . . . . . . . 24,000
Finished goods inventory (January 1) . . . . . . . . . . . . . . . . . . . . . . . 32,000
Materials purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000
Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Factory overhead (including $1,000 of indirect materials used and
$3,000 of indirect labor cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Inventories at January 31:
Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
a. Prepare a statement of cost of goods manufactured.
b. Prepare the cost of goods sold section of the income statement.
Aug 29, 2021 | Uncategorized
The following data were taken from the general ledgers and other data of Alpha Manufacturing, Inc., and Bravo Merchandising Co. on April 30 of the current year:
Merchandise inventory, April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,000
Finished goods, April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,000
Cost of goods manufactured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287,000
Merchandise inventory, April 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000
Finished goods, April 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,000
Required:
1. Compute the cost of goods sold for Bravo Merchandising Co., selecting the appropriate items from the previous list.
2. Compute the cost of goods sold for Alpha Manufacturing, Inc., selecting the appropriate items from the previous list.
Aug 29, 2021 | Uncategorized
The following inventory data relate to Niagara Corp.:
Inventories
Ending Beginning
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,000 $110,000
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 70,000
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 90,000
Revenues and Costs for the Period:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000
Cost of goods available for sale . . . . . . . . . . . . . . . . . . . 775,000
Total manufacturing costs . . . . . . . . . . . . . . . . . . . . . . . . 675,000
Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000
Direct materials used . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,000
Calculate the following for the year:
a. Direct materials purchased.
b. Direct labor costs incurred.
c. Cost of goods sold.
d. Gross profit.
Aug 29, 2021 | Uncategorized
The management of The Hershey Company has asked union workers in two of its highest cost Pennsylvania plants to accept higher health insurance premiums and take a wage cut. The workers’ portion of the insurance cost would double from 6% of the premium to 12%. In addition, workers hired after January 2000 would have their hourly wages cut by $4, which would be partially off set by a 2% annual raise.
Management says that the plants need to be more cost competitive. Management has indicated that if the workers accept the proposal, the company would invest $30 million to modernize the plants and move future projects to the plants. Management, however, has refused to guarantee more work at the plants if the workers approve the proposal. If the workers reject the proposal, management implies that it would move future projects to other plants and that layoffs might be forthcoming. Do you consider management’s actions ethical?
Source: Susan Govzdas, Hershey to Cut Jobs or Wages,” Central Penn Business Journal, September 24, 2004.
Aug 29, 2021 | Uncategorized
Threet’s Repair Shop was started on May 1 by Erica Threet. A summary of May transactions is presented below.
1. Invested $10,000 cash to start the repair shop.
2. Purchased equipment for $5,000 cash.
3. Paid $400 cash for May office rent.
4. Paid $500 cash for supplies.
5. Incurred $250 of advertising costs in the Beacon News on account.
6. Received $6,100 in cash from customers for repair service.
7. Withdrew $1,000 cash for personal use.
8. Paid part time employee salaries $2,000.
9. Paid utility bills $170.
10. Provided repair service on account to customers $750.
11. Collected cash of $120 for services billed in transaction (10).
Instructions
(a) Prepare a tabular analysis of the transactions, using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner’s Capital, Owner’s Drawings, Revenues, and Expenses.
(b) From an analysis of the owner’s equity columns, compute the net income or net loss for May.
Aug 29, 2021 | Uncategorized
Total and unit cost decision making. Graham’s Glassworks makes glass flanges fur scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $20 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $20,000 per period. Period (non manufacturing) costs associated with flanges are $10,000 per period, and are fixed.
1. Graph the fixed, variable and total manufacturing cost for flanges, using units (number of flanges) on the x axis.
2. Assume Graham’s Glassworks manufactures and sells 5,000 flanges this period. Their competitor, Fred’s Flasks, sells flanges for $8.25 each. Can Graham sell below Fred’s price and still make a profit on the flanges?
3. How would your answer to requirement 2 differ if Graham’s Glassworks made and sold 10,000 flanges this period? Why? Whet does this indicate about the use of unit cost in decision making?
Aug 29, 2021 | Uncategorized
Total costs and unit costs, A student association has hired a band and a caterer for a graduation party. The band will charge a fixed fee of $1,000 for an evening of music, and the caterer will charge a fixed fee of $600 for the party setup and an additional $9 per person who attends. Snacks and soft drinks will be provided by the caterer for the duration of the party. Students attending the party will pay $5 each at the door.
1. Draw a graph depicting the fixed cost the variable cost and the total cost to the student association for different attendance levels.
2. Suppose 100 people attend the party. What will be the total cost to the student association? What will be the cost per person?
3. Suppose 500 people attend the party. What will be the total cost to the student association and the cost per attendee?
4. Draw a graph depicting the cost per attendee for different attendance levels. As president of the student association, you want to request a grant to cover some of the party costs. Will you use the per attendee cost numbers to make your case? Why or why not?
Aug 29, 2021 | Uncategorized
Value chain and classification of costs computer company, Company Computer incurs the following costs:
a. Electricity costs for the plant assembling the Presario computer line of products
b. Transportation costs for shipping the Presario line of products to a retail chain
c. Payments to David Kelly Designs for design of the Armada Notebook
d. Salary of computer scientist working on the next generation of minicomputers
e. Cost of Compaq employees’ visit to a major customer to demonstrate Compaq’s ability to interconnect with other computers
f. Purchase of competitors’ products for testing against potential Compaq products
g. Payments to television network for running Compaq advertisements
h. Cost of cables purchased form outside supplier to be used with Compaq printers.
Classify each of the cost items (a h as one of the business functions of the value chain shown in Exhibit 1 2 (p.7).
Aug 29, 2021 | Uncategorized
Value chain and classification of costs, fast food restaurant Burger King, a hamburger fast food restaurant, incurs the following costs:
a. Cost of oil for the deep fryer.
b. Wages of the counter help who give customers the food they order
c. Cost of the costume for the King on the Burger King Television commercials
d. Cost of children’s toys given away free with kids’ meals
e. Cost of the posters indicating the special ?otwo cheeseburgers for $2??
f. Costs of frozen onion rings and French fries.
g. Salaries of the food specialists who create new sandwiches for the restaurant chain.
h. Cost of ?oto go?? bags requested by customers who could not finish their meals in the restaurant.
Classify each of the cost items (a h as one of the business functions of the value chain shown in Exhibit 1 2 (p.7).
Aug 29, 2021 | Uncategorized
Value chain and classification of costs, pharmaceutical company Merck, a pharmaceutical company, incurs the following costs.
a. Cost of redesigning blister packs to make drug containers more tamperproof.
b. Cost of videos sent to doctors to promote sales of a new drug.
c. Cost of a toll free telephone line used for customer inquiries about drug usage, side effects of drugs, and so on.
d. Equipment purchased to conduct experiments on drugs yet to be approved by the government
e. Payment to actors for a television infomercial promoting a new hair growth product for balding men.
f. Labor costs of workers in the packaging area of a production facility.
g. Bonus paid to a salesperson for exceeding a monthly sales quota.
h. Cost of Federal Express courier service to deliver drugs to hospitals.
Classify each of the cost items (a h as one of the business functions of the value chain shown in Exhibit 1 2 (p.7).
Aug 29, 2021 | Uncategorized
Value chain, supply chain, and key success factors. A survey on the ways organizations are changing their management accounting systems reported the following:
a. Company A now prepares a value chain income statement for each brand it sells.
b. Company B now presents in a single report all costs related to achieving high quality levels in its products.
c. Company C now presents in its performance reports estimates of the manufacturing costs of its two most important competitors, in addition to its own manufacturing costs.
d. Company 0 now contracts with its suppliers to frequently deliver small quantities of materials directly to the production floor
e. Company E now reports the percentage of times it fails to meet delivery dates that it has promised to customers.
Link each of these changes to value chain or supply chain analysis or to the key success factors that are important to managers.
Aug 29, 2021 | Uncategorized
A manufacturing cell has the theoretical capability to produce 150,000 subassemblies per quarter. The conversion cost per quarter is $1,500,000. There are 50,000 production hours available within the cell per quarter.
Required:
1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit produced).
2. Compute the ideal amount of conversion cost that will be assigned per subassembly.
3. Suppose the actual time required to produce a subassembly is 30 minutes. Compute the amount of conversion cost actually assigned to each unit produced. What happens to product cost if the time to produce a unit is decreased to 25 minutes?
How can a firm encourage managers to reduce cycle time? Finally, discuss how this approach to assigning conversion cost can improve delivery time.
4. Calculate MCE. How much non value added time is being used? How much is it costing per unit?
5. Cycle time, velocity, MCE, conversion cost per unit (theoretical conversion rate A? actual conversion time), and non value added costs are all measures of performance for the cell process. Discuss the incentives provided by these measures.
Aug 29, 2021 | Uncategorized
A recent survey of U.S. chief financial officers provides compelling evidence that managers are willing to take extraordinary measures to achieve financial earnings targets. For example, the survey found 26 percent were willing to sacrifice some long term value of the firm to achieve short term earnings goals. Further, 55 percent were willing to delay the start of new projects to achieve higher earnings and 80 percent indicated they would reduce spending on research and development to achieve short term earnings targets.
a. Discuss the ethics of managers forfeiting long term value of their firms to achieve short term earnings goals and earn higher short term compensation.
b. How can boards of directors create incentives and performance measures that will discourage top managers from optimizing reported short run performance at the expense of long term performance?
Aug 29, 2021 | Uncategorized
Five step decision making process, service firm. Brite Exteriors is a firm that provides house painting services. Robert Brite, the owner, is trying to find new ways to increase revenues. Mr Brite per forms the following actions, not in the order listed.
Classify each action below according to its step in the five step decision making process (identify the problem and uncertainties, obtain information, make predictions about the future, choose among alternatives, implement the decision, evaluate performance, and learn).
a. Mr. Brite calls Home Depot to ask the price of paint sprayers.
b. Mr. Brite discusses with his employees the possibility of growing revenues of the firm.
c. One of Mr. Brite’s project managers suggests that using paint sprayers instead of hand painting will increase productivity and thus revenues.
d. The workers who are not familiar with paint sprayers take more time to finish a job than they did when painting by hand.
e. Mr. Brite compares the expected cost of buying sprayers to the expected cost of hiring more workers who paint by hand, and estimates profits from both alternatives.
f. The project scheduling manager confirms that demand for house painting services has increased.
g. Mr. Brite decides to buy the paint sprayers rather than hire additional painters.
Aug 29, 2021 | Uncategorized
Four different companies, Alpha, Beta, Charlie, and Dawg, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owners’ equity, are summarized as follows:
On the basis of the preceding data and the following additional information for the year, determine the net income (or loss) of each company for the year.
Company Alpha: No additional capital stock was issued, and no dividends were paid. Company Beta: No additional capital stock was issued, but dividends of $35,000 were paid. Company Charlie: Capital stock of $90,000 was issued, but no dividends were paid.
Company Dawg: Capital stock of $90,000 was issued, and dividends of $35,000 werepaid.
Aug 29, 2021 | Uncategorized
Gayle’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $28 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $28,000 per period. Period (nonmanufacturing) costs associated with flanges are $10,000 per period, and are fixed.
1. Graph the fixed, variable, and total manufacturing cost for flanges, using units (number of flanges) on the x axis.
2. Assume Gayle’s Glassworks manufactures and sells 5,000 flanges this period. Its competitor, Flora’s Flasks, sells flanges for $10 each. Can Gayle sell below Flora’s price and still make a profit on the flanges?
3. How would your answer to requirement 2 differ if Gayle’s Glassworks made and sold 10,000 flanges this period? Why? What does this indicate about the use of unit cost in decision making?
Aug 29, 2021 | Uncategorized
Global company, ethical challenges. In June 2009, the government of Vartan invited bids for the construction of a cellular telephone network. ZenTel, an experienced communications company, was eager to enter the growing field of cellular telephone networks in countries with poor infrastructures for land lines. If ZenTel won a few of these early contracts, it would be sought after for its field experience and expertise. After careful analysis, it prepared a detailed bid for the Communications Ministry of Vartan, building in only half of its usual profit margin and providing a contractual guarantee that the project would be completed in two years or less. The multimillion dollar bid was submitted before the deadline, and ZenTel received notification that it had reached the Vartan government. Then, despite repeated faxes, e mails, and phone calls to the ministry, there was no news on the bids or the project from the Vartan government.
Steve Cheng, VP of Global Operations for ZenTel, contacted the U.S. commercial attachA? in Vartan, who told him that his best chance was to go to Vartan and try to meet the deputy minister of communications in person. Cheng prepared thoroughly for the trip, rereading the proposal and making sure that he understood the details.
At the commercial attachA?’s office in Vartan’s capital, Cheng waited nervously for the deputy minister and his assistant. Cheng had come to Vartan with a clear negotiating strategy to try to win the bid. Soon the deputy minister and his staff arrived, introductions were made, and pleasantries were exchanged. The deputy minister asked a few questions about ZenTel and the bid and then excused himself, leaving his assistant to talk to Cheng. After clearly indicating that many other compelling bids had been made by firms from around the world, the assistant said, ?oMr. Cheng, I guarantee that ZenTel’s bid will be accepted if you pay a $1 million commission. Of course, your excellent proposal doesn’t have to be altered in any way.?? It was clear to Cheng that the ?ocommission?? was, in fact, a bribe. Tactfully, he pointed out that U.S. laws and ZenTel’s corporate policy prohibited such a payment. The assistant wished him a good day and a pleasant flight home and left.
1. As a shareholder in ZenTel, would you prefer that ZenTel executives agree to the payment of the ?ocommission???
2. When Cheng described his experience to his friend Hank Shorn, who managed international business development for another company, Hank said that his own ?opersonal philosophy?? was to make such payments if they were typical in the local culture. Do you agree with Hank’s point of view? Explain.
3. Why would ZenTel have a corporate policy against such payments?
4. What should Steve Cheng do next?
Aug 29, 2021 | Uncategorized
Grey Brothers Consulting has issued a report recommending changes for its newest manufacturing client, Energy Motors. Energy Motors currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestions for enhancing business performance:
a. Add a new product line to increase total revenue and to reduce the company’s overall risk.
b. Increase training hours of assembly line personnel to decrease the currently high volumes of scrap and waste.
c. Reduce lead times (time from customer order of product to customer receipt of product) by 20% in order to increase customer retention.
d. Reduce the time required to set up machines for each new order.
e. Benchmark the company’s gross margin percentages against its major competitors. Link each of these changes to the key success factors that are important to managers.
Aug 29, 2021 | Uncategorized
Helner Cell Phones (HCP) is developing a new touch screen smartphone to compete in the cellular phone industry. The phones will be sold at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the final customer. HCP has undertaken the following activities in its value chain to bring its product to market:
Identify customer needs (What do smartphone users want?)
Perform market research on competing brands
Design a prototype of the HCP smartphone
Market the new design to cell phone companies
Manufacture the HCP smartphone
Process orders from cell phone companies
Package the HCP smartphones
Deliver the HCP smartphones to the cell phone companies
Provide online assistance to cell phone users for use of the HCP smartphone
Make design changes to the smartphone based on customer feedback
During the process of product development, production, marketing, distribution, and customer service, HCP has kept track of the following cost drivers:
Number of smartphones shipped by HCP
Number of design changes
Number of deliveries made to cell phone companies
Engineering hours spent on initial product design
Hours spent researching competing market brands
Customer service hours
Number of smartphone orders processed
Number of cell phone companies purchasing the HCP smartphone
Machine hours required to run the production equipment
Number of surveys returned and processed from competing smartphone users
Required
1. Identify each value chain activity listed at the beginning of the exercise with one of the following value chain categories:
a. Design of products and processes
b. Production
c. Marketing
d. Distribution
e. Customer Service
2. Use the list of preceding cost drivers to find one or more reasonable cost drivers for each of the activities in HCP’s value chain.
Aug 29, 2021 | Uncategorized
Hidalgo Company manufactures goods to special order and uses a job order cost system. During its first month of operations, the following selected transactions took place:
a. Materials purchased on account . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,000
b. Materials issued to the factory:
Job 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,200
Job 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,700
Job 103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100
Job 104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700
For general use in the factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,350
c. Factory wages and salaries earned:
Job 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,700
Job 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800
Job 103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200
Job 104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,100
For general work in the factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,250
d. Miscellaneous factory overhead costs on account . . . . . . . . . . . . . . . $ 2,400
e. Depreciation of $2,000 on the factory machinery recorded.
f. Factory overhead allocated as follows:
Job 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200
Job 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Job 103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,800
Job 104 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
g. Jobs 101, 102, and 103 completed.
h. Jobs 101 and 102 shipped to the customer and billed at $39,000.
Required:
1. Prepare a schedule reflecting the cost of each of the four jobs.
2. Prepare journal entries to record the transactions.
3. Compute the ending balance in Work in Process.
4. Compute the ending balance in Finished Goods.
Aug 29, 2021 | Uncategorized
Inventoriable costs versus period costs. Each of the following cost items pertains to one of these companies: General Electric (a manufacturing sector company), Safeway (a merchandising sector company), and Google (a service sector company):
a. Perrier mineral water purchased by Safeway for sale to its customers
b. Electricity used to provide lighting for assembly line workers at a General Electric refrigerator assembly plant
c. Depreciation on Google’s computer equipment used to update directories of Web sites
d. Electricity used to provide lighting for Safeway’s store aisles
e. Depreciation on General Electric’s computer equipment used for quality testing of refrigerator components during the assembly process
f. Salaries of Safeway’s marketing personnel planning local newspaper advertising campaigns
g. Perrier mineral water purchased by Google for consumption by its software engineers
h. Salaries of 000gle’s marketing personnel selling banner advertising
1. Distinguish between manufacturing sector, merchandising sector, and service sector companies.
2. Distinguish between inventoriable costs and period costs.
3. Classify each of the cost items (a—h) as an inventoriable cost or a period cost. Explain your answers.
Aug 29, 2021 | Uncategorized
Jim Anderson works in the production department of Midwest Steelworks as a machine operator. Jim, a long time employee of Midwest, is paid on an hourly basis at a rate of $20 per hour. Jim works five 8 hour shifts per week Monday–Friday (40 hours). Any time Jim works over and above these 40 hours is considered overtime for which he is paid at a rate of time and a half ($30 per hour). If the overtime falls on weekends, Jim is paid at a rate of double time ($40 per hour). Jim is also paid an additional $20 per hour for any holidays worked, even if it is part of his regular 40 hours. Jim is paid his regular wages even if the machines are down (not operating) due to regular machine maintenance, slow order periods, or unexpected mechanical problems. These hours are considered ?oidle time.?? During December Jim worked the following hours:
Included in the total hours worked are two company holidays (Christmas Eve and Christmas Day) during Week 4. All overtime worked by Jim was Monday–Friday, except for the hours worked in Week 3. All of the Week 3 overtime hours were worked on a Saturday.
Required
1. Calculate (a) direct manufacturing labor, (b) idle time, (c) overtime and holiday premium, and (d) total earnings for Jim in December.
2. Is idle time and overtime premium a direct or indirect cost of the products that Jim worked on in December?Explain.
Aug 29, 2021 | Uncategorized
Labor cost classification; ethics. Zix Manufacturing has recently opened a plant in Costa Melon in order to take advantage of certain tax benefits. In order to qualify for these tax benefits, the company’s direct manufacturing labor costs must be at least 20% of total manufacturing costs for the period. Zix Manufacturing normally classifies direct manufacturing labor wages as direct manufacturing labor, but classifies fringe benefits, overtime premiums, idle time, and vacation time and sick leave as indirect manufacturing labor.
During the first period of operations in Costa Melon, Zix incurs a total of $2,500,000 in manufacturing costs. Of that, $410,000 is direct manufacturing labor wages, $45,000 is overtime premium, $86,000 is fringe benefits, $20,500 is vacation time and sick leave, and $10,900 is idle time.
1. Will Zix’s direct manufacturing labor costs qualify them for the tax benefit?
2. Bob Zixson, the manager of the new Costa Melon plant, is concerned that he will not get a bonus this year because the plant will not get the tax benefit. What might he ask the plant controller to do to make sure Zix gets the tax benefit? How might these accounting changes be rationalized?
3. Should the plant controller do what the manager has asked in requirement 2? Why or why not?
Aug 29, 2021 | Uncategorized
Labor cost overtime and idle time. Len Lippart is a line worker in the assembly department of Maxart Manufacturing. He normally earns $12 per hour, but gets time and a halt ($18 per hour) for overtime, over 40 hours per week. He earns double time if he works holidays even if he has not worked 40 hours that week. Sometimes the assembly line equipment goes down and Len has to wait for the mechanics to repair the equipment or there is a scheduling mix up. Len is paid for this time and Maxart considers this idle time.
In May, Len worked two 42 hour weeks, one 43 hour week, and the last week he worked 40 hours, but one of those days was Memorial Day (holiday). During regular hours, the assembly line equipment was down 4.2 hours in May, and Len had one hour of idle time because of a scheduling mix up.
1. Calculate (a) direct manufacturing labor, (b) idle time, (c) overtime holiday premium, and (d) total earnings for Lenin May.
2. Is idle time and overtime premium a direct or indirect cost of the jobs that Len worked on in May? Explain.
Aug 29, 2021 | Uncategorized
Management accounting guidelines. For each of the following items, identify which of the management accounting guidelines applies: cost benefit approach, behavioral and technical considerations, or different costs for different purposes.
1. Analyzing whether to keep the billing function within an organization or outsource it
2. Deciding to give bonuses for superior performance to the employees in a Japanese subsidiary and extra vacation time to the employees in a Swedish subsidiary
3. Including costs of all the value chain functions before deciding to launch a new product, but including only its manufacturing costs in determining its inventory valuation
4. Considering the desirability of hiring one more salesperson
5. Giving each salesperson the compensation option of choosing either a low salary and a high percentage sales commission or a high salary and a low percentage sales commission
6. Selecting the costlier computer system after considering two systems
7. Installing a participatory budgeting system in which managers set their own performance targets, instead of top management imposing performance targets on managers
8. Recording research costs as an expense for financial reporting purposes (as required by U.S. GAAP) but capitalizing and expensing them over a longer period for management performance evaluation purposes
9. Introducing a profit sharing plan for employees
Aug 29, 2021 | Uncategorized
Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three part classification for its manufacturing costs: direct materials, direct manufacturing labor, and manufacturing overhead costs. Total manufacturing overhead costs of the plant in July 2011 are $150 million ($15 million of which are fixed). This total amount is allocated to each product line on the basis of the direct manufacturing labor costs of each line. Summary data (in millions) for July 2011 are as follows:
?
Required
1. Compute the manufacturing cost per unit for each product produced in July 2011.
2. Suppose that in August 2011, production was 150 million units of Supreme, 190 million units of Deluxe, and 220 million units of Regular. Why might the July 2011 information on manufacturing cost per unit be misleading when predicting total manufacturing costs in August2011?
Aug 29, 2021 | Uncategorized
On April 1, Vince Morelli established Vince’s Travel Agency. The following transactions were completed during the month.
1. Invested $15,000 cash to start the agency.
2. Paid $600 cash for April office rent.
3. Purchased office equipment for $3,000 cash.
4. Incurred $700 of advertising costs in the Chicago Tribune, on account.
5. Paid $800 cash for office supplies.
6. Earned $10,000 for services rendered: $3,000 cash is received from customers, and the balance of $7,000 is billed to customers on account.
7. Withdrew $500 cash for personal use.
8. Paid Chicago Tribune $500 of the amount due in transaction (4).
9. Paid employees’ salaries $2,500.
10. Received $4,000 in cash from customers who have previously been billed in transaction (6).
Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner’s Capital, Owner’s Drawings, Revenues, and Expenses.
(b) From an analysis of the owner’s equity columns, compute the net income or net loss for April.
Aug 29, 2021 | Uncategorized
On June 1, Alexia Rios started Crazy Creations Co., a company that provides craft opportunities, by investing $12,000 cash in the business. Following are the assets and liabilities of the company at June 30 and the revenues and expenses for the month of June.
Alexia made no additional investment in June but withdrew $1,300 in cash for personal use during the month.
Instructions
(a) Prepare an income statement and owner’s equity statement for the month of June and a balance sheet at June 30, 2012.
(b) Prepare an income statement and owner’s equity statement for June assuming the following data are not included above: (1) $900 of revenue was earned and billed but not collected at June 30, and (2) $150 of gasoline expense was incurred but notpaid.
Aug 29, 2021 | Uncategorized
On May 1, A. J. Pierzynski started AJ Flying School, a company that provides flying lessons, by investing $40,000 cash in the business. Following are the assets and liabilities of the company on May 31, 2012, and the revenues and expenses for the month of May.
A. J. Pierzynski made no additional investment in May, but he withdrew $1,500 in cash for personal use.
Instructions
(a) Prepare an income statement and owner’s equity statement for the month of May and a balance sheet at May 31.
(b) Prepare an income statement and owner’s equity statement for May assuming the following data are not included above: (1) $900 of revenue was earned and billed but not collected at May 31, and (2) $1,500 of gasoline expense was incurred but notpaid.
Aug 29, 2021 | Uncategorized
O’Reilly Manufacturing, Inc.’s cost of goods sold for the month ended July 31 was $345,000. The ending work in process inventory was 90% of the beginning work in process inventory. Factory overhead was 50% of the direct labor cost. Other information pertaining to O’Reilly’s inventories and production for the month of July is as follows:
Beginning inventories, July 1:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,000
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,000
Purchases of direct materials during July . . . . . . . . . . . . . . . . . . . 110,000
Ending inventories, July 31:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000
Required:
1. Prepare a statement of cost of goods manufactured for the month of July.
2. Prepare a schedule to compute the prime cost incurred during July.
3. Prepare a schedule to compute the conversion cost charged to Work in Process during July.
Aug 29, 2021 | Uncategorized
Planning and control decisions, Internet company. WebNews.com offers its subscribers several services, such as an annotated TV guide and local area information on weather, restaurants, and movie theaters. Its main revenue sources are fees for banner advertisements and fees from subscribers. Recent data are:
The following decisions were made from June through October 2009:
a. June 2009: Raised subscription fee to $24.95 per month from July 2009 onward. The budgeted number of subscribers for this monthly fee is shown in the following table.
b. June 2009: Informed existing subscribers that from July onward, monthly fee would be $24.95.
c. July 2009: Offered e mail service to subscribers and upgraded other online services.
d. October 2009: Dismissed the vice president of marketing after significant slowdown in subscribers and subscription revenues, based on July through September 2009 data in table below.
e. October 2009: Reduced subscription fee to $21.95 per month from November 2009 onward.
Results for July—September 2009 are:
1. Classify each of the decisions (a) to (e) as a planning or a control decision.
2. Give two examples of other planning decisions and two examples of other control decisions that may be made at WebNews.com.
Aug 29, 2021 | Uncategorized
Planning and control decisions. Conner Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given below. For each action (a—e below,) state whether it is a planning decision or a control decision.
a. Conner asks its marketing team to consider ways to get back market share from its newest competitor, Swiffer.
b. Conner calculates market share after introducing its newest product
c. Conner compares costs it actually incurred with costs it expected to incur for the production of the new product.
d. Conner’s design team proposes a new product to compete directly with the Swiffer
e. Conner estimates the costs it will incur to sell 30,000 units of the new product in the first quarter of next fiscal year
Aug 29, 2021 | Uncategorized
Professional ethics and earnings management. Harvest Day Corporation is a publishing company that produces trade magazines. The company’s stockholders are awaiting the announcement of Harvest Day’s earnings for the fiscal year, which ends on December 31. Market analysts have predicted earnings to be around $1.34 per share. The CEO of Harvest Day expects earnings to be only $1.20 per share, and knows this will cause the price of the stock to drop. The CEO suggests the following ideas to various managers to try to increase reported earnings by the end of the fiscal year:
a. Delaying recording of cancelled subscriptions for December until January.
b. Waiting until the new fiscal year to update the software on office computers.
c. Recognizing unearned subscription revenue (cash received in advance for magazines that will be sent in the future) as revenue when received in the current month (just before fiscal year end) instead of booking it as a liability.
d. Delay recording purchases of office supplies on account until after year end.
e. Booking advertising revenues that relate to January in December.
f. Waiting until after fiscal year end to do building repairs.
g. Switching from declining balance to straight line depreciation to reduce depreciation expense in the current year.
1. Why would Harvest Day Corporation’s CEO want to ?omanage?? earnings?
2. From the point of view of the ?oStandards of Ethical Behavior for Practitioners of Management
Accounting and Financial Management,?? which of the items in a g above are acceptable to Harvest Day’s Controller? Which are unacceptable?
3. What should the Controller do about the CEO’s suggestions? What should the Controller do if the CEO refuses to change the suggestions?
Aug 29, 2021 | Uncategorized
Race Car Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Race Car Inc. on April 30, the end of the current year:
Common Stock, $10 par $ 400,000
Paid In Capital in Excess of Par Common Stock 120,000
Paid In Capital in Excess of Par Preferred Stock 90,000
Paid In Capital from Sale of Treasury Stock Common 30,000
Preferred 4% Stock, $50 par 1,500,000
Retained Earnings 3,900,000
Treasury Stock Common 55,000
Fifty thousand shares of preferred and 200,000 shares of common stock are authorized.
There are 5,000 shares of common stock held as treasury stock.
Prepare the Stockholders’ Equity section of the balance sheet as of April 30, the end of the current year.
Aug 29, 2021 | Uncategorized
Record the transactions below for Amena Company by recording the debit and credit entries directly in the following T accounts: Cash; Accounts Receivable; Office Supplies; Office Equipment; Accounts Payable; Common Stock; Dividends; Fees Earned; and Rent Expense. Use the letters beside each transaction to identify entries. Determine the ending balance of each T account.
a. Sergey Amena, owner, invested $14,000 cash in the company in exchange for its common stock.
b. The company purchased office supplies for $406 cash.
c. The company purchased $7,742 of office equipment on credit.
d. The company received $1,652 cash as fees for services provided to a customer.
e. The company paid $7,742 cash to settle the payable for the office equipment purchased in transaction c.
f. The company billed a customer $2,968 as fees for services provided.
g. The company paid $510 cash for the monthly rent.
h. The company collected $1,246 cash as partial payment for the account receivable created in transaction f.
i. The company paid $1,200 cash for dividends.
Aug 29, 2021 | Uncategorized
Rocky Mountain Sounds Corp., an electric guitar retailer, was organized by Cathy Dewitt, Melody Leimbach, and Mario Torres. The charter authorized 250,000 shares of common stock with a par of $40. The following transactions affecting stockholders’ equity were completed during the first year of operations:
(a) Issued 10,000 shares of stock at par to Cathy Dewitt for cash.
(b) Issued 750 shares of stock at par to Mario Torres for promotional services provided in connection with the organization of the corporation, and issued 20,000 shares of stock at par to Mario Torres for cash.
(c) Purchased land and a building from Melody Leimbach. The building is mortgaged for $400,000 for 20 years at 7%, and there is accrued interest of $7,000 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $125,000 and the building at $600,000, and that Melody Leimbach’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.
Journalize the entries to record the transactions.
Aug 29, 2021 | Uncategorized
Roy Akins was the accounting manager at Zelco, Inc., a tire manufacturer, and he played golf with Hugh Stallings, the CEO, who was something of a celebrity in the community. The CEO stood to earn a substantial bonus if Zelco increased net income by year end. Roy was eager to get into Hugh’s elite social circle; he boasted to Hugh that he knew some accounting tricks that could increase company income by simply revising a few journal entries for rental payments on storage units. At the end of the year, Roy changed the debits from ?orent expense?? to ?oprepaid rent?? on several entries. Later, Hugh got his bonus, and the deviations were never discovered.
Requirements
1. How did the change in the journal entries affect the net income of the company at year end?
2. Who gained and who lost as a result of these actions?
Aug 29, 2021 | Uncategorized
The mortgage on your house is five years old. It required monthly payments of $1402, had an original term of 30 years, and had an interest rate of 10% (APR). In the intervening five years, interest rates have fallen and so you have decided to refinance—that is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a 30 year term, requires monthly payments, and has an interest rate of 6 5/8% (APR).
a. What monthly repayments will be required with the new loan?
b. If you still want to pay off the mortgage in 25 years, what monthly payment should you make after you refinance?
c. Suppose you are willing to continue making monthly payments of $1402. How long will it take you to pay off the mortgage after refinancing?
d. Suppose you are willing to continue making monthly payments of $1402, and want to pay off the mortgage in 25 years. How much additional cash can you borrow today as part of the refinancing?
Aug 29, 2021 | Uncategorized
When Alfred Nobel died, he left the majority of his estate to fund five prizes, each to be awarded annually in perpetuity starting one year after he died (the sixth one, in economics, was added later).
a. If he wanted the cash award of each of the five prizes to be $45,000 and his estate could earn 7% per year, how much would he need to fund his prizes?
b. If he wanted the value of each prize to grow by 4% per year (perhaps to keep up with inflation), how much would he need to leave? Assume that the first amount was still $45,000.
c. His heirs were surprised by his will and fought it. If they had been able to keep the amount of money you calculated in (b), and had invested it at 7% per year, how much would they have in 2014, 118 years after he died?
Aug 29, 2021 | Uncategorized
You are trying to decide how much to save for retirement. Assume you plan to save $5000 per year with the first investment made 1 year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5000 investment.
a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $5000 per year, you wanted to make one lump sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?
c. If you hope to live for 20 years in retirement, how much can you withdraw every year in retirement (starting one year after retirement) so that you will just exhaust your savings with the twentieth withdrawal (assume your savings will continue to earn 10% in retirement)?
d. If, instead, you decide to withdraw $300,000 per year in retirement (again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?
e. Assuming the most you can afford to save is $1000 per year, but you want to retire with $1 million in your investment account, how high of a return do you need to earn on your investments?
Aug 29, 2021 | Uncategorized
You have just turned 22 years old, have just received your bachelor’s degree, and have accepted your first job. Now you must decide how much money to put into your retirement plan. The plan works as follows: Every dollar in the plan earns 7% per year. You cannot make withdrawals until you retire on your sixty fifth birthday. After that point, you can make withdrawals as you see fit. You decide that you will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $100,000 per year, starting at the end of the first year of retirement and ending on your one hundredth birthday. You will contribute the same amount to the plan at the end of every year that you work. How much do you need to contribute each year to fund your retirement?
Aug 29, 2021 | Uncategorized
Best Breads manufactures two types of bread, which are sold as wholesale products to various specialty retail bakeries. Each loaf of bread requires a three step process. The first step is mixing. The mixing department combines all of the necessary ingredients to create the dough and processes it through high speed mixers. The dough is then left to rise before baking. The second step is baking, which is an entirely automated process. The baking department molds the dough into its final shape and bakes each loaf of bread in a high temperature oven. The final step is finishing, which is an entirely manual process. The finishing department coats each loaf of bread with a special glaze, allows the bread to cool, and then carefully packages each loaf in a specialty carton for sale in retail bakeries.
Required
1. Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming ?ounits of production of each kind of bread?? is the cost object.
Costs:
Yeast Mixing department manager
Flour Materials handlers in each department
Packaging materials Custodian in factory
Depreciation on ovens Night guard in factory
Depreciation on mixing machines Machinist (running the mixing machine)
Rent on factory building Machine maintenance personnel in each department
Fire insurance on factory building Maintenance supplies for factory
Factory utilities Cleaning supplies for factory
Finishing department hourly laborers
2. If the cost object were the ?omixing department?? rather than units of production of each kind of bread, which preceding costs would now be direct instead of indirect costs?
Aug 29, 2021 | Uncategorized
Bredahl Logistics, a U.S. shipping company, has just begun distributing goods across the Atlantic to Norway. The company began operations in 2010, transporting goods to South America. The company’s earnings are currently trailing behind its competitors and Bredahl’s investors are becoming anxious. Some of the company’s largest investors are even talking of selling their interest in the shipping newcomer. Bredahl’s CEO, Marcus Hamsen, calls an emergency meeting with his executive team. Hamsen needs a plan before his upcoming conference call with uneasy investors. Brehdal’s executive staff makes the following suggestions for salvaging the company’s short term operating results:
a. Stop all transatlantic shipping efforts. The start up costs for the new operations are hurting current profit margins.
b. Make deep cuts in pricing through the end of the year to generate additional revenue.
c. Pressure current customers to take early delivery of goods before the end of the year so that more revenue can be reported in this year’s financial statements.
d. Sell off distribution equipment prior to year end. The sale would result in one time gains that could offset the company’s lagging profits. The owned equipment could be replaced with leased equipment at a lower cost in the current year.
e. Record executive year end bonus compensation for the current year in the next year when it is paid after the December fiscal year end.
f. Recognize sales revenues on orders received, but not shipped as of the end of the year.
g. Establish corporate headquarters in Ireland before the end of the year, lowering the company’s corporate tax rate from 28% to 12.5%.
REQUIRED:
1. As the management accountant for Brehdahl, evaluate each of the preceding items (a–g) in the context of the ?oStandards of Ethical Behavior for Practitioners of Management Accounting and Financial Management,?? Exhibit 1 7 on page 16. Which of the items are in violation of these ethics standards and which are acceptable?
2. What should the management accountant do with respect to those items that are in violation of the ethical standards for management accountants?
Aug 29, 2021 | Uncategorized
Classification at costs, merchandising sector Home Entertainment Center (HEC) operates a large store in San Francisco. The store has both a video section and a music (compact disks and tapes) section. HEC reports revenues for the video section separately from the music section.
Classify each of the following cost items as:
a. Direct or indirect (D or I) costs with respect to the total number of videos sold.
b. Variable or fixed (V or F) costs with respect to how the total costs of the video section change as the total number of videos sold changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of videos sold.)
You will have two answers (D or I; V or F) for each of the following items:
Cost item D or I V or F
A. Annual retainer paid to a video distributor
B. Electricity costs of HEC store (single bill covers entire store)
C. Costs of videos purchased for sale to customers
D. Subscription to Video Trends magazine
E. Leasing of computer software used for financial budgeting at HEC store
F. Cost of popcorn provided free to all customers of HEC
G. Earthquake insurance policy for HEC store
H. Freight in costs of videos purchased by HEC
Aug 29, 2021 | Uncategorized
Classification of costs, manufacturing sector, the Fremont, California, plant of New United Motor Manufacturing, Inc. (NUMMI), a joint venture of General Motors and Toyota, assembles two types of cars (Corollas and Geo Prisms). Separate assembly lines are used for each type of car. Classify each of the following cost items as:
a. Direct or indirect (D or I) costs with respect to the total number of cars of each type assembled (Corolla or Geo Prism).
b. Variable or fixed (V or F) costs with respect to how the total costs of the plant change as the total number of cars of each type assembled changes. (If in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the total number of cars of each type assembled.)
You will have two answers (D or I; V or F) for each of the following items:
Cost Item D or I V or F
A. Cost of tires used on Geo Prisms
B. Salary of public relations manager for NUMMI plant.
C. Annual awards dinner for Corolla
D. Salary of engineer who monitors design changes on Geo Prism
E. Freight Costs of Corolla engines shipped from Toyota City, Japan, to Fremont. California
F. Electricity costs for NUMMI plant (single bill covers entire plant)
G. Wages paid to temporary assembly line workers hired in periods of high production (paid u hourly basis)
H. Annual fire insurance policy cost for NUMMI plant
Aug 29, 2021 | Uncategorized
Classify the following as direct materials, direct labor, factory overhead, or selling and administrative expense.
a. Steel used in an overhead door plant.
b. Cloth used in a shirt factory.
c. Fiberglass used by a sailboat builder.
d. Cleaning solvent for the factory floor.
e. Wages of a binder employed in a printing plant.
f. Insurance on factory machines.
g. Rent paid for factory buildings.
h. Wages of the Machining Department supervisor.
i. Leather used in a shoe factory.
j. Wages of a factory janitor.
k. Electric power consumed in operating factory machines.
l. Depreciation on corporate offices.
m. Fuel used in heating a factory.
n. Paint used in the manufacture of jet skis.
o. Wages of an ironworker in the construction business.
p. Electricity used in lighting sales offices.
Aug 29, 2021 | Uncategorized
Comprehensive problem on unit costs, product costs Tampa Office Equipment manufactures and sells metal shelving. It began operations on January 1, 2009. Costs incurred for 2009 are as follows (V stands for variable; F stands for fixed):
Variable manufacturing costs are variable with respect to units produced. Variable marketing, distribution, and customer service costs are variable with respect to units sold. Inventory data are:
Production in 2009 was 100,000 units. Two pounds of direct materials are used to make one unit of finished product. Revenues in 2009 were $436,800. The selling price per unit and the purchase price per pound of direct materials were stable throughout the year. The company’s ending inventory of finished goods is carried at the average unit manufacturing cost for 2009. Finished goods inventory at December31, 2009, was $20,970.
1. Calculate direct materials inventory, total cost, December31, 2009
2. Calculate finished goods inventory, total units, December 31, 2009.
3. Calculate selling price in 2009.
4. Calculate operating income for 2009.
Aug 29, 2021 | Uncategorized
Deacon Publishing House is a publishing company that produces consumer magazines. The house and home division, which sells home improvement and home decorating magazines, has seen a 20% reduction in operating income over the past nine months, primarily due to the recent economic recession and the depressed consumer housing market. The division’s Controller, Todd Allen, has felt pressure from the CFO to improve his division’s operating results by the end of the year. Allen is considering the following options for improving the division’s performance by year end:
a. Cancelling two of the division’s least profitable magazines, resulting in the layoff of twenty five employees.
b. Selling the new printing equipment that was purchased in January and replacing it with discarded equipment from one of the company’s other divisions. The previously discarded equipment no longer meets current safety standards.
c. Recognizing unearned subscription revenue (cash received in advance for magazines that will be delivered in the future) as revenue when cash is received in the current month (just before fiscal year end) instead of showing it as a liability.
d. Reducing the division’s Allowance for Bad Debt Expense. This transaction alone would increase operating income by 5%.
e. Recognizing advertising revenues that relate to January in December.
f. Switching from declining balance to straight line depreciation to reduce depreciation expense in the current year.
1. What are the motivations for Allen to improve the division’s year end operating earnings?
REQUIRED:
2. From the point of view of the ?oStandards of Ethical Behavior for Practitioners of Management Accounting and Financial Management,?? Exhibit 1 7 on page 16, which of the preceding items (a–f) are acceptable? Which are unacceptable?
3. What should Allen do about the pressure to improve performance?
Aug 29, 2021 | Uncategorized
Derby Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Capital Stock; Retained Earnings; Dividends; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense. Journalize the following selected transactions for March 2009 in a two column journal.
Mar. 1 Paid rent for the month, $3,000.
2 Paid advertising expense, $1,800.
5 Paid cash for supplies, $900.
6 Purchased office equipment on account, $12,300.
10 Received cash from customers on account, $4,100.
15 Paid creditor on account, $1,200.
27 Paid cash for repairs to office equipment, $500.
30 Paid telephone bill for the month, $180.
31 Fees earned and billed to customers for the month, $26,800.
31 Paid electricity bill for the month, $315.
31 Paid dividends, $2,000.
Aug 29, 2021 | Uncategorized
Direct indirect fixed and variable casts, Ceramica Company manufactures three kinds of hand painted ceramic figurines in a two step process. The first step is automated; in the Baking Department a machine presses the clay figurines into molds and bakes them. In the Painting Department the baked figurines are carefully removed from their molds and hand painted. After they dry, the figurines are packed and shipped to customers. Ceramica’s two departments, Baking and Painting, are in a single factory building. Packaging takes place in the Painting Department.
1. Costs involved in the process are listed below. For each cost below, indicate whether it is a direct variable, direct fixed, indirect variable or indirect fixed cost assuming ?ounits of production of each kind of figurine?? is the cost object
Costs:
Clay
Paint
Packaging materials
Depreciation on machinery and molds
Rent on factory
Insurance on factory
Factory utilities
Painters
Painting Department manager
Baking Department manager
Materials handlers
Custodian in factory
Night guard in factory
Machinist (running the baking machine)
Machine maintenance personnel
Maintenance supplies for factory Cleaning supplies for factory
2. If the cost object were ?oBaking Department?? rather than output which costs above would now be direct instead of indirect costs?
Aug 29, 2021 | Uncategorized
Eric Johnson was recently promoted to Controller of Research and Development (R&D) for PharmaCor, a Fortune 500 pharmaceutical company, which manufactures prescription drugs and nutritional supplements. The company’s total R&D cost for 2012 was expected (budgeted) to be $5 billion. During the company’s mid year budget review, Eric realized that current R&D expenditures were already at $3.5 billion, nearly 40% above the mid year target. At this current rate of expenditure, the R&D division was on track to exceed its total year end budget by $2 billion!
In a meeting with CFO, James Clark, later that day, Johnson delivered the bad news. Clark was both shocked and outraged that the R&D spending had gotten out of control. Clark wasn’t any more understanding when Johnson revealed that the excess cost was entirely related to research and development of a new drug, Lyricon, which was expected to go to market next year. The new drug would result in large profits for PharmaCor, if the product could be approved by year end.
Clark had already announced his expectations of third quarter earnings to Wall Street analysts. If the R&D expenditures weren’t reduced by the end of the third quarter, Clark was certain that the targets he had announced publicly would be missed and the company’s stock price would tumble. Clark instructed Johnson to make up the budget short fall by the end of the third quarter using ?owhatever means necessary.??
Johnson was new to the Controller’s position and wanted to make sure that Clark’s orders were followed.
Johnson came up with the following ideas for making the third quarter budgeted targets:
a. Stop all research and development efforts on the drug Lyricon until after year end. This change would delay the drug going to market by at least six months. It is also possible that in the meantime a PharmaCor competitor could make it to market with a similar drug.
b. Sell off rights to the drug, Markapro. The company had not planned on doing this because, under current market conditions, it would get less than fair value. It would, however, result in a onetime gain that could offset the budget short fall. Of course, all future profits from Markapro would be lost.
c. Capitalize some of the company’s R&D expenditures reducing R&D expense on the income statement. This transaction would not be in accordance with GAAP, but Johnson thought it was justifiable, since the Lyricon drug was going to market early next year. Johnson would argue that capitalizing R & D costs this year and expensing them next year would better match revenues and expenses.
REQUIRED:
1. Referring to the ?oStandards of Ethical Behavior for Practitioners of Management Accounting and Financial Management,?? Exhibit 1 7 on page 16, which of the preceding items (a–c) are acceptable to use? Which are unacceptable?
2. What would you recommend Johnson do?
Aug 29, 2021 | Uncategorized
Fire Loss, computing inventory costs a distraught employee, Fang W. Arson, put a torch to a manufacturing plant on a blustery February 26. The resulting blaze destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They reveal the following for the period from
?
The loss is fully covered by insurance. The insurance company wants to know the historical cost of the inventories as a basis for negotiating a settlement although the settlement is actually to be based on replacement cost, not historical cost
Calculate the cost of:
1. Finished goods inventory, 2/26/2009
2. Work in process inventory, 2/26/2009
3. Direct materials inventory,2/26/2009
Aug 29, 2021 | Uncategorized
Five step decision making process, manufacturing. Garnicki Foods makes frozen dinners that it sells through grocery stores. Typical products include turkey dinners, pot roast fried chicken, and meat loaf. The managers at Garnicki have recently introduced a line of frozen chicken pies. They take the following actions with regard to this decision.
Classify each action (a—g below) as a step in the five step decision making process (identify the problem and uncertainties, obtain information, make predictions about the future, choose among alternatives, implement the decision, evaluate performance, and learn). The actions below are not listed in the order they are performed.
a. Garnicki performs a taste test at the local shopping mall to see if consumers like the taste of its proposed new chicken pie product
b. Garnicki sales managers estimate they will sell more meat pies in their northern sales territory than in their southern sales territory.
c. Garnicki managers discuss the possibility of introducing a new product
d. Garnicki managers compare actual costs of making chicken pies with their budgeted costs.
e. Costs for making chicken pies are budgeted.
f. Garnicki decides to make chicken pies.
g. The purchasing manager calls a supplier to check the prices of chicken.
Aug 29, 2021 | Uncategorized
Melvin Patel bid for and won a concession to rent bicycles in the local park during the summer. During the month of June, Patel completed the following transactions for his bicycle rental business:
June 2 Began business by placing $7,200 in a business checking account in the name of the company.
3 Purchased supplies on account for $150
4 Purchased 10 bicycles for $2,500, paying $1,200 down and agreeing to pay the rest in 30 days.
June 5 Paid $2,900 in cash for a small shed to store the bicycles and so use for other operations.
8 Paid $400 in cash for shipping and installation costs (considered an addition to the cost of the shed) to place the shed at the park entrance.
9 Hired a part time assistant to help out on weekends at $7 per hour.
10 Paid a maintenance person $75 to clean the grounds.
13 Received $970 in cash for rentals.
17 Paid $150 for the supplies purchased on June 3.
18 Paid a $55 repair bill on bicycles.
23 Billed a company $110 for bicycle rentals for an employee outing.
25 Paid the $100 fee for June to the Park District for the right to operate the bicycle concession.
27 Received $960 in cash for rentals.
29 Paid the assistant $240.
30 Made a cash withdrawal of $500.
Required
1. Prepare entries to record these transactions in journal form.
2. Set up the following T accounts and post all the journal entries: Cash; Accounts Receivable; Supplies; Shed; Bicycles; Accounts Payable; M. Patel, Capital; M. Patel, Withdrawals; Rental Revenue; Wages Expense; Maintenance Expense; Repair Expense; and Concession Fee Expense.
3. Prepare a trial balance for Patel Rentals as of June 30, 2011.
4. Compare and contrast how the issues of recognition, valuation, and classification are settled in the transactions of June 3 and 10.
Aug 29, 2021 | Uncategorized
On January 1, 2010, Garcia Inc. had the following shareholders’ equity balances.
Common Stock, no par value (1,000,000 shares issued) …. $3,000,000
Common Stock Dividends Distributable …………………….. 400,000
Retained Earnings …………………………………………. 1,200,000
During 2010, the following transactions and events occurred.
1. Issued 100,000 shares of common stock as a result of a 10% stock dividend declared on December 15, 2009.
2. Issued 60,000 shares of common stock for cash at $5 per share.
3. Corrected an error that had understated the net income for 2008 by $140,000.
4. Declared and paid a cash dividend of $300,000.
5. Earned net income of $600,000.
Instructions
Prepare the stockholders’ equity section of the balance sheet at December 31, 2010.
Aug 29, 2021 | Uncategorized
On January 10, 2010, the first day of the spring semester, the cafeteria of The Defiance College purchased for cash enough paper napkins to last the entire 16 week semester. The total cost was $4,800.
Required:
Use the horizontal model to show the effects of recording the following:
a. The purchase of the paper napkins, assuming that the purchase was initially recorded as an expense.
b. At January 31, it was estimated that the cost of the paper napkins used during the first three weeks of the semester totaled $950. Use the horizontal model to show the adjustments that should be made as of January 31 so that the appropriate amount of expense will be shown in the income statement for the month of January.
c. Use the horizontal model to show the effects of the alternative way of recording the initial purchase of napkins.
d. Use the horizontal model to show the effects of the adjustment that should occur at January 31 if the initial purchase had been recorded as in c.
e. Consider the effects that entries a and b would have on the financial statements of The Defiance College. Compare these effects to those that would be caused by entries c and d. Are there any differences between these alternative sets of entries on the
1. Income statement for the month of January?
2. Balance sheet at January 31?
Aug 29, 2021 | Uncategorized
Pal Corporation acquired a 90 percent interest in Sto Corporation on January 1, 2011, for $270,000, at which time Sto’s capital stock and retained earnings were $150,000 and $90,000, respectively. The fair value cost/book value differential is due to a patent with a 10 year amortization period. Financial statements for Pal and Sto for 2012 are as follows (in thousands):
ADDITIONAL INFORMATION
1. Pal sold inventory to Sto for $60,000 during 2011 and $72,000 during 2012; Sto’s inventories at December 31, 2011 and 2012, included unrealized profits of $10,000 and $12,000, respectively.
2. On July 1, 2011, Pal sold machinery with a book value of $28,000 to Sto for $35,000. The machinery had a useful life of 3.5 years at the time of intercompany sale, and straight line depreciation is used.
3. During 2012, Pal sold land with a book value of $15,000 to Sto for $20,000.
4. Pal’s accounts receivable on December 31, 2012, includes $10,000 due from Sto.
5. Pal uses the equity method for its 90 percent interest in Sto.
REQUIRED: Prepare a consolidation workpaper for Pal and Subsidiary for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Pan Corporation acquired 100 percent of Sal Corporation’s outstanding voting common stock on January 1, 2011, for $660,000 cash. Sal’s stockholders’ equity on this date consisted of $300,000 capital stock and $300,000 retained earnings. The difference between the fair value of Sal and the underlying equity acquired in Sal was allocated $30,000 to Sal’s undervalued inventory and the remainder to goodwill. The undervalued inventory items were sold by Sal during 2011. Pan made sales of $100,000 to Sal at a gross profit of $40,000 during 2011; during 2012, Pan made sales of $120,000 to Sal at a gross profit of $48,000. One half the 2011 sales were inventoried by Sal at year end 2011, and one fourth the 2012 sales were inventoried by Sal at year end 2012. Sal owed Pan $17,000 on account at December 31, 2012. The separate financial statements of Pan and Sal Corporations at and for the year ended December 31, 2012, are summarized as follows:
REQUIRED: Prepare workpapers to consolidate the financial statements of Pan Corporation and Subsidiary at and for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Pan Corporation has an 80 percent interest in Sip Corporation, its only subsidiary. The 80 percent interest was acquired on July 1, 2011, for $400,000, at which time Sip’s equity consisted of $300,000 capital stock and $100,000 retained earnings. The excess of fair value over book value was assigned to buildings with a 20 year remaining useful life. On December 31, 2013, Sip sold equipment with a remaining useful life of four years to Pan at a gain of $20,000. Pan Corporation had separate income for 2013 of $500,000 and for 2014 of $600,000. Income and retained earnings data for Sip Corporation for 2013 and 2014 are as follows:
REQUIRED
1. Compute Pan Corporation’s income from Sip, net income, and consolidated net income for each of the years 2013 and 2014.
2. Compute the correct balances of Pan’s investment in Sip at December 31, 2013 and 2014, assuming no changes in Sip’s outstanding stock since Pan acquired itsinterest.
Aug 29, 2021 | Uncategorized
Pap Corporation acquired an 80 percent interest in Son Corporation at book value equal to fair value on January 1, 2012, at which time Son’s capital stock and retained earnings were $100,000 and $40,000, respectively. On January 2, 2013, Son purchased $50,000 par of Pap’s 8 percent, $100,000 par bonds for $48,800 three years before maturity. Interest payment dates are January 1 and July 1. During 2013, Son reports interest income of $4,400 from the bonds, and Pap reports interest expense of $8,000.
ADDITIONAL INFORMATION
1. Pap’s separate income for 2013 is $200,000.
2. Son’s net income for 2013 is $50,000.
3. Pap accounts for its investment by the equity method.
4. Straight line amortization is applicable.
REQUIRED
1. Determine the gain or loss on the bonds.
2. Prepare the journal entries for Son to account for its bond investment during 2013.
3. Prepare the journal entries for Pap to account for its bonds payable during 2013.
4. Prepare the journal entry for Pap to account for its 80% investment in Son for 2013.
5. Calculate noncontrolling interest share and consolidated net income for 2013.
Aug 29, 2021 | Uncategorized
Par Corporation acquired a 90 percent interest in Sag Corporation’s outstanding voting common stock on January 1, 2011, for $630,000 cash. The stockholders’ equity of Sag on this date consisted of $500,000 capital stock and $200,000 retained earnings. The financial statements of Par and Sag at and for the year ended December 31, 2011, are summarized as follows (in thousands):
During 2011, Par made sales of $50,000 to Sag at a gross profit of $15,000. One third of these sales were inventoried by Sag at year end. Sag owed Par $10,000 on open account at December 31, 2011. Sag sold land that cost $20,000 to Par for $30,000 on July 1, 2011. Par still owns the land. On January 1, 2011, Par sold equipment with a book value of $20,000 and a remaining useful life of four years to Sag for $40,000. Sag uses straight line depreciation and assumes no salvage value on this equipment.
REQUIRED: Prepare a consolidation workpaper for Par and Subsidiary for the year ended December 31,2011.
Aug 29, 2021 | Uncategorized
Par Corporation acquired an 80 percent interest in Sin Corporation on January 1, 2011, for $108,000 cash, when Sin’s capital stock was $100,000 and retained earnings were $10,000. The difference between investment fair value and book value acquired is due to a patent being amortized over a 10 year period. Separate financial statements for Par and Sin on December 31, 2014, are summarized as follows (in thousands):
ADDITIONAL INFORMATION
1. Sin’s sales include intercompany sales of $8,000, and Par’s December 31, 2014, inventory includes $1,000 profit on goods acquired from Sin. Par’s December 31, 2013, inventory contained $2,000 profit on goods acquired from Sin.
2. Par owes Sin $4,000 on account.
3. On January 1, 2013, Sin sold plant assets to Par for $60,000. These assets had a book value of $40,000 on that date and are being depreciated by Par over five years.
4. Park uses the equity method to account for its investment in Sin.
REQUIRED: Prepare a consolidation workpaper for Par Corporation and Subsidiary for2014.
Aug 29, 2021 | Uncategorized
Party Time Amusements Company owns movie theaters. Party Time engaged in the following business transactions in 2012:
Aug 1 Daniel Smith invested $400,000 personal cash in the business by depositing that amount in a bank account titled Party Time Amusements. The business issued common stock to Smith.
2 Paid $350,000 cash to purchase a theater building.
5 Borrowed $200,000 from the bank. Smith signed a note payable to the bank in the name of Party Time.
10 Purchased theater supplies on account, $1,300.
15 Paid $1,000 on account.
15 Paid property tax expense on theater building, $1,200.
16 Paid employees’ salaries $2,700, and rent on equipment $1,700. Make a single compound entry.
28 Paid cash dividends of $8,000.
31 Received $25,000 cash from service revenue and deposited that amount in the bank.
Requirements
1. Create the list of accounts that Party Time Amusements will use to record these transactions.
2. Identify the account type and normal balance of each account identified in Requirement 1.
Aug 29, 2021 | Uncategorized
Pay Corporation acquired a 75 percent interest in Sue Corporation for $600,000 on January 1, 2011, when Sue’s equity consisted of $300,000 capital stock and $100,000 retained earnings. The fair values of Sue’s assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $160,000, and at December 31, 2011, Sue’s inventory included items on which there were $20,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $260,000, and at December 31, 2012, Sue’s inventory included items on which there were $40,000 unrealized profits. On December 31, 2012, Sue owed Pay $30,000 on account for merchandise purchases. The financial statements of Pay and Sue Corporations at and for the year ended December 31, 2012, are summarized as follows (in thousands):
REQUIRED: Prepare consolidation workpapers for Pay Corporation and Subsidiary for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Ped Industries manufactures heavy equipment used in construction and excavation. On January 3, 2011, Ped sold a piece of equipment from its inventory that cost $180,000 to its 60 percent owned subsidiary, Spa Corporation, at Ped’s standard price of twice its cost. Spa is depreciating the equipment over six years using straight line depreciation and no salvage value.
REQUIRED
1. Determine the net amount at which this equipment will be included in the consolidated balance sheets for Ped Industries and Subsidiary at December 31, 2011 and 2012.
2. Ped accounts for its investment in Spa as a one line consolidation. Prepare the consolidation workpaper entries related to this intercompany sale that are necessary to consolidate the financial statements of Ped and Spa at December 31, 2011 and 2012.
Aug 29, 2021 | Uncategorized
Pep Corporation owns 40 percent of the outstanding voting stock of Sat Corporation, acquired for $100,000 on July 1, 2011, when Sat’s common stockholders’ equity was $200,000. The excess of investment fair value over book value acquired was due to valuable patents owned by Sat that were expected to give Sat a competitive advantage until July 1, 2016. Sat’s net income for 2011 was $40,000 (for the entire year), and for 2012, Sat’s net income was $60,000. Pep’s December 31, 2011 and 2012, inventories included unrealized profit on goods acquired from Sat in the amounts of $4,000 and $6,000, respectively. At December 31, 2011, Pep sold land to Sat at a gain of $2,000. This land is still owned by Sat at December 31, 2012.
REQUIRED
1. Compute Pep’s investment income from Sat for 2011 on the basis of a one line consolidation.
2. Compute Pep’s investment income from Sat for 2012 on the basis of a one line consolidation.
Aug 29, 2021 | Uncategorized
Pet Corporation acquired an 80 percent interest in She Corporation on January 1, 2011, for $320,000, at which time She had capital stock of $200,000 outstanding and retained earnings of $100,000. The price paid reflected a $100,000 undervaluation of She’s plant and equipment. The plant and equipment had a remaining useful life of eight years when Pet acquired its interest. Separate and consolidated financial statements for Pet Corporation and its subsidiary, She Corporation, for the year ended December 31, 2013, are as follows:
She sells merchandise to Pet but never purchases from Pet. On January 1, 2013, She purchased $100,000 par of 10 percent Pet Corporation bonds for $106,000. These bonds mature on December 31, 2015, and She expects to hold the bonds until maturity. Both She and Pet use straight line amortization. Interest is payable on December 31.
REQUIRED: Show computations for each of the following items:
1. The $3,000 loss in the consolidated income statement
2. The $230,000 consolidated sales
3. Consolidated cost of goods sold of $110,000
4. Intercompany profit in beginning inventories
5. Intercompany profit in ending inventories
6. Consolidated accounts receivable of $165,000
7. Noncontrolling interest share of $8,000
8. Noncontrolling interest at December 31, 2013
9. Investment in She stock at December 31, 2012
10. Investment income account of $20,000 (Pet’sbooks)
Aug 29, 2021 | Uncategorized
Pic Corporation acquired an 80 percent interest in Sic Company on January 1, 2011, for $136,000, when Sic’s capital stock and retained earnings were $100,000 and $70,000, respectively. At the beginning of 2011, Sic sold a machine to Pic for $10,000. The machine had cost Sic $7,000, had depreciated $2,000 while being used by Sic, and had a remaining useful life of five years from the date of sale. Trial balances of the two companies on December 31, 2011 and 2012, are as follows (in thousands):
REQUIRED: Prepare consolidation workpapers for Pic Corporation and Subsidiary for the year ended December 31, 2011, and the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Pol Corporation purchased a 90 percent interest in San Corporation on December 31, 2010, for $2,700,000 cash, when San had capital stock of $2,000,000 and retained earnings of $500,000. All San’s assets and liabilities were recorded at their fair values when Pol acquired its interest. The excess of fair value over book value is due to previously unrecorded patents and is being amortized over a 10 year period. The Pol–San affiliation is a vertically integrated merchandising operation, with San selling all of its output to Pol Corporation at 140 percent of its cost. Pol sells the merchandise acquired from San at 150 percent of its purchase price from San. All of Pol’s December 31, 2011, and December 31, 2012, inventories of $280,000 and $420,000, respectively, were acquired from San. San’s December 31, 2011, and December 31, 2012, inventories were $800,000 each. Pol’s accounts payable at December 31, 2012, includes $100,000 owed to San from 2012 purchases. Comparative financial statements for Pol Corporation and San Corporation at and for the year ended December 31, 2012, are as follows (in thousands):
REQUIRED: Prepare consolidation workpapers for Pol Corporation and Subsidiary for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Por Corporation acquired its 90 percent interest in Sam Corporation at its book value of $1,800,000 on January 1, 2011, when Sam had capital stock of $1,500,000 and retained earnings of $500,000. The December 31, 2011 and 2012, inventories of Por included merchandise acquired from Sam of $150,000 and $200,000, respectively. Sam realizes a gross profit of 40 percent on all merchandise sold. During 2011 and 2012, sales by Sam to Por were $300,000 and $400,000, respectively. Summary adjusted trial balances for Por and Sam at December 31, 2012, follow (in thousands):
REQUIRED: Prepare a combined consolidated income and retained earnings statement for Por Corporation and Subsidiary for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Pot Corporation acquired all the outstanding stock of Ski Corporation on April 1, 2011, for $15,000,000, when Ski’s stockholders’ equity consisted of $5,000,000 capital stock and $2,000,000 retained earnings. The price reflected a $500,000 undervaluation of Ski’s inventory (sold in 2011) and a $3,500,000 undervaluation of Ski’s buildings (remaining useful life seven years from April 1, 2011). During 2012, Ski sold land that cost $1,000,000 to Pot for $1,500,000. Pot resold the land for $2,200,000 during 2015. Pot sells inventory items to Ski on a regular basis, as follows (in thousands):
Ski sold equipment with a book value of $800,000 to Pot on January 3, 2015, for $1,600,000. This equipment had a remaining useful life of four years at the time of sale. Pot uses the equity method to account for its investment in Ski. The financial statements for Pot and Ski are summarized as follows (in thousands):
REQUIRED: Prepare a consolidation workpaper for Pot Corporation and Subsidiary for the year ended December 31,2015.
Aug 29, 2021 | Uncategorized
Principe Technology Solutions, Inc., completed the following transactions during August 2012, its first month of operations:
Aug 1 Received cash of $48,000 and issued common stock.
2 Purchased supplies of $500 on account.
4 Paid $47,000 cash for a building.
6 Performed service for customers and received cash, $4,400.
9 Paid $200 on accounts payable.
17 Performed service for customers on account, $2,200.
23 Received $1,600 cash from a customer on account.
31 Paid the following expenses: salary, $1,900; rent, $700.
Requirement
1. Record the preceding transactions in the journal of Principe Technology Solutions. Include an explanation for each entry, as illustrated in the chapter. Use the following accounts: Cash, Accounts receivable, Supplies, Building, Accounts payable, Common stock, Service revenue, Salary expense, and Rent expense.
Aug 29, 2021 | Uncategorized
Proco had an account payable of $16,800 due to Shirmoo, Inc., one of its suppliers. The amount was due to be paid on January 31. Proco did not have enough cash on hand then to pay the amount due, so Proco’s treasurer called Shirmoo’s treasurer and agreed to sign a note payable for the amount due. The note was dated February 1, had an interest rate of 7% per annum, and was payable with interest on May 31.
Required:
Use the horizontal model to show the effects of each of these transactions and adjustments for Proco on
a. February 1, to show that the account payable had been changed to a note payable.
b. March 31, to accrue interest expense for February and March.
c. May 31, to record payment of the note and all of the interest due to Shirmoo.
Aug 29, 2021 | Uncategorized
Danielle Neylon has trouble keeping her debits and credits equal. During a recent month, Danielle made the following accounting errors:
a. In preparing the trial balance, Danielle omitted a $7,000 note payable.
b. Danielle posted a $90 utility expense as $900. The credit to Cash was correct.
c. In recording an $800 payment on account, Danielle debited Furniture instead of Accounts payable.
d. In journalizing a receipt of cash for service revenue, Danielle debited Cash for $1,200 instead of the correct amount of $120. The credit was correct.
e. Danielle recorded a $540 purchase of supplies on account by debiting Supplies and crediting Accounts payable for $450.
Requirements
1. For each of these errors, state whether total debits equal total credits on the trial balance.
2. Identify each account that has an incorrect balance, and indicate the amount and direction of the error (such as ?oAccounts receivable $500 too high??).
Note: Exercise 2 19 should be used only after completing Exercise 2 16.
Aug 29, 2021 | Uncategorized
DeBauge Realtors, Inc., is a realty firm owned by Jeff and Kristi DeBauge. The DeBauge family owns 100% of the corporation’s stock. The following summarized data (in thousands) are taken from the December 31, 2010, financial statements:
For the Year Ended December 31, 2010:
Commissions revenue . . . . . . . . . . . . . . . . . . . . . . $142
Cost of services provided . . . . . . . . . . . . . . . . . . . 59
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . 28
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . $ 55
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . 16
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34
At December 31, 2010:
Assets
Cash and short term investments . . . . . . . . . . . . . $ 30
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 40
Property, plant, and equipment, net . . . . . . . . . . . . 125
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $195
Liabilities and Owners’ Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 90
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 5
Notes payable (long term) . . . . . . . . . . . . . . . . . . . 50
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 30
Total liabilities and owners’ equity . . . . . . . . . . . . $195
At December 31, 2009, total assets were $205 and total owners’ equity was $50. There were no changes in notes payable or paid in capital during 2010.
Required:
a. What particular expense do you suppose accounts for the largest portion of the $59 cost of services provided?
b. The cost of services provided amount includes all operating expenses (i.e., selling, general, and administrative expenses) except advertising expense. What do you suppose the primary reason was for DeBauge Realtors, Inc., to separate advertising from other operating expenses?
c. Calculate the effective interest rate on the notes payable for DeBauge Realtors, Inc.
d. Calculate the company’s average income tax rate.
e. Calculate the amount of dividends declared and paid to Jeff and Kristi DeBauge during the year ended December 31, 2010.
f. DeBauge Realtors, Inc., was organized and operates as a corporation rather than a partnership. What is the primary advantage of the corporate form of business to a realty firm? What is the primary disadvantage of the corporate form?
g. Explain why the amount of income tax expense is different from the amount of income taxes payable.
h. Calculate the amount of working capital and the current ratio at December 31, 2010. Assess the company’s overall liquidity.
i. Calculate ROI (including margin and turnover) and ROE for the year ended December 31, 2010. Explain why these single measures may not be very meaningful for this firm.
Aug 29, 2021 | Uncategorized
Dominick Corporation is authorized to issue 10,000 shares of $40 par value, 10% preferred stock and 200,000 shares of $5 par value common stock. On January 1, 2012, the ledger contained the following stockholders’ equity balances.
Preferred Stock (5,000 shares)…………………………………. $200,000
Paid in Capital in Excess of Par—Preferred Stock…………………60,000
Common Stock (70,000 shares)…………………………………..350,000
Paid in Capital in Excess of Par—Common Stock……………….700,000
Retained Earnings……………………………………………….. 300,000
During 2012, the following transactions occurred.
Feb. 1 Issued 1,000 shares of preferred stock for land having a fair value of $65,000.
Mar. 1 Issued 2,000 shares of preferred stock for cash at $60 per share.
July 1 Issued 20,000 shares of common stock for cash at $5.80 per share.
Sept. 1 Issued 800 shares of preferred stock for a patent. The asking price of the patent was $60,000. Market values were preferred stock $65 and patent, indeterminable.
Dec. 1 Issued 10,000 shares of common stock for cash at $6 per share.
Dec. 31 Net income for the year was $210,000. No dividends were declared.
Instructions
(a) Journalize the transactions and the closing entry for net income.
(b) Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use J2 as the posting reference.)
(c) Prepare a stockholders’ equity section at December 31, 2012.
Aug 29, 2021 | Uncategorized
Doris Stewart started her practice as a design consultant on September 1, 2012. During the first month of operations, the business completed the following transactions:
Sep 1 Received $42,000 cash and issued common stock.
4 Purchased supplies, $700, and furniture, $1,900, on account.
6 Performed services for a law firm and received $1,400 cash.
7 Paid $24,000 cash to acquire land for a future office site.
10 Performed service for a hotel and received its promise to pay the $1,000 within one week.
14 Paid for the furniture purchased September 4 on account.
15 Paid secretary’s bi monthly salary, $490.
17 Received cash on account, $400.
20 Prepared a design for a school on account, $700.
28 Received $2,100 cash for consulting with Plummer & Gorden.
30 Paid secretary’s bi monthly salary, $490.
30 Paid rent expense, $650.
30 Paid cash dividends of $3,000.
Requirements
1. Open the following T accounts: Cash, Accounts receivable, Supplies, Furniture, Land, Accounts payable, Common stock, Dividends, Service revenue, Salary expense, and Rent expense.
2. Record each transaction in the journal, using the account titles given. Key each transaction by date. Explanations are not required.
3. Post the transactions to the T accounts, using transaction dates as posting references in the ledger accounts. Label the balance of each account Bal, as shown in the chapter.
4. Prepare the trial balance of Doris Stewart, Designer, P.C., at September 30, 2012.
Aug 29, 2021 | Uncategorized
During 2012, Margan Corporation had the following transactions and events.
1. Declared a cash dividend.
2. Issued par value common stock for cash at par value.
3. Completed a 2 for 1 stock split in which $10 par value stock was changed to $5 par value stock.
4. Declared a small stock dividend when the market value was higher than par value.
5. Made a prior period adjustment for overstatement of net income.
6. Issued the shares of common stock required by the stock dividend declaration in item no. 4 above.
7. Paid the cash dividend in item no. 1 above.
8. Issued par value common stock for cash above par value.
Instructions
Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’ equity. Present your answer in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect. Item no. 1 is given as anexample.
Aug 29, 2021 | Uncategorized
Financial statements for Pad Corporation and its 75 percent owned subsidiary, Sum Corporation, for 2011 are summarized as follows (in thousands):
Pad acquired its interest in Sum at book value during 2008, when the fair values of Sum’s assets and liabilities were equal to their recorded book values.
ADDITIONAL INFORMATION
1. Pad uses the equity method for its investment in Sum.
2. Intercompany merchandise sales totalled $100,000 during 2011. All intercompany balances have been paid except for $20,000 in transit at December 31, 2011.
3. Unrealized profits in Sum’s inventory of merchandise purchased from Pad were $24,000 on December 31, 2010, and $30,000 on December 31, 2011.
4. Sum sold equipment with a six year remaining life to Pad on January 3, 2009, at a gain of $48,000. Pad still uses the equipment in its operations.
5. Pad sold land to Sum on July 1, 2011, at a gain of $20,000.
6. Pad sold a building to Sum on July 1, 2011, at a gain of $40,000. The building has a 10 year remaining life and is still used by Sum.
7. Sum purchased $200,000 par value of Pad’s 10 percent bonds in the open market for $188,000 plus $10,000 accrued interest on December 31, 2011. Interest is paid semiannually on January 1 and July 1. The bonds mature on December 31, 2016.
REQUIRED: Prepare consolidation workpapers for Pad Corporation and Subsidiary for the year ended December 31,2011.
Aug 29, 2021 | Uncategorized
Financial statements for Pal and Sun Corporations for 2011 are as follows (in thousands):
ADDITIONAL INFORMATION
1. Pal acquired an 80 percent interest in Sun on January 2, 2009, for $290,000, when Sun’s stockholders’ equity consisted of $300,000 capital stock and no retained earnings. The excess of investment fair value over book value of the net assets acquired related 50 percent to undervalued inventories (subsequently sold in 2009) and 50 percent to goodwill.
2. Sun sold equipment to Pal for $25,000 on January 1, 2010, when the equipment had a book value of $10,000 and a five year remaining useful life (included in plant assets).
3. During 2011, Sun sold land to Pal at a profit of $10,000 (included in plant assets).
4. Pal uses the equity method to account for its investment in Sun.
REQUIRED: Prepare a consolidation workpaper for Pal and Subsidiary for the year ended December 31,2011.
Aug 29, 2021 | Uncategorized
Financial statements for Pil and San Corporations for 2011 are as follows (in thousands):
ADDITIONAL INFORMATION
1. Pil acquired an 80 percent interest in San on January 2, 2009, for $290,000, when San’s stockholders’ equity consisted of $300,000 capital stock and no retained earnings. The excess of investment fair value over book value of the net assets acquired related 50 percent to undervalued inventories (subsequently sold in 2009) and 50 percent to a patent with a 10 year amortization period.
2. San sold equipment to Pil for $25,000 on January 1, 2010, at which time the equipment had a book value of $10,000 and a five year remaining useful life (included in plant assets in the financial statements).
3. During 2011, San sold land to Pil at a profit of $10,000 (included in plant assets in the financial statements).
4. Pil uses the equity method to accounting for its investment in San.
REQUIRED: Prepare a consolidation workpaper for Pil Corporation and Subsidiary for the year ended December 31,2011.
Aug 29, 2021 | Uncategorized
In a recent year, the stockholders’ equity section of Aluminum Company of America (Alcoa) showed the following (in alphabetical order): additional paid in capital $6,101, common stock $925, preferred stock $55, retained earnings $7,428, and treasury stock 2,828.All dollar data are in millions.
The preferred stock has 557,740 shares authorized, with a par value of $100 and an annual $3.75 per share cumulative dividend preference. At December 31, 557,649 shares of preferred are issued and 546,024 shares are outstanding. There are 1.8 billion shares of $1 par value common stock authorized, of which 924.6 million are issued and 844.8 million are outstanding at December 31.
Instructions
Prepare the stockholders’ equity section, including disclosure of all relevant data.
Aug 29, 2021 | Uncategorized
Intercompany transactions between Pew Corporation and Sat Corporation, its 80 percent owned subsidiary, from January 2011, when Pew acquired its controlling interest, to December 31, 2014, are summarized as follows:
2011 Pew sold inventory items that cost $60,000 to Sat for $80,000. Sat sold $60,000 of these inventory items in 2011 and $20,000 of them in 2012.
2012 Pew sold inventory items that cost $30,000 to Sat for $40,000. All of these items were sold by Sat during 2013.
2013 Sat sold land with a book value of $40,000 to Pew at its fair market value of $55,000. This land is to be used as a future plant site by Pew.
2013 Pew sold equipment with a four year remaining useful life to Sat on January 1 for $80,000. This equipment had a book value of $50,000 at the time of sale and was still in use by Sat at December 31, 2014.
2014 Sat purchased $100,000 par of Pew’s 10% bonds in the bond market for $106,000 on January 2, 2014. These bonds had a book value of $98,000 when acquired by Sat and mature on January 1, 2018.
The separate income of Pew (excludes income from Sat) and the reported net income of Sat for 2011 through 2014 were:
REQUIRED: Compute Pew’s net income (and the controlling share of consolidated net income) for each of the years 2011 through 2014. A schedule with columns for each year is suggested as the most efficient approach to solve of this problem. (Use straight line depreciation and amortization and take a full year’s depreciation on the equipment sold to Sat in2013.)
Aug 29, 2021 | Uncategorized
Jay Cutler owns and manages a computer repair service, which had the following trial balance on December 31, 2011 (the end of its fiscal year).
?
Summarized transactions for January 2012 were as follows.
1. Advertising costs, paid in cash, $1,000.
2. Additional supplies acquired on account $4,200.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Supplies used during January $4,000.
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,500.
9. Jay’s drawings during January were $3,000.
Instructions
(a) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2012.
(b) Prepare journal entries to record each of the January transactions. (Omit explanations.)
(c) Post the journal entries to the accounts in the ledger. (Add accounts as needed.)
(d) Prepare a trial balance as of January 31,2012.
Aug 29, 2021 | Uncategorized
Jerry Hasbrow, a sales representative for Penn Office Supplies Company, is compensated on a commission basis and receives a substantial bonus if he meets his annual sales goal. The company’s recognition point for sales is the day of shipment. On December 31, Hasbrow realizes he needs sales of $2,000 to reach his sales goal and receive the bonus. He calls a purchaser for a local insurance company, whom he knows well, and asks him to buy $2,000 worth of copier paper today. The purchaser says, ?oBut Jerry, that’s more than a year’s supply for us.?? Hasbrow says, ?oBuy it today. If you decide it’s too much, you can return however much you want for full credit next month.?? The purchaser says, ?oOkay, ship it.?? The paper is shipped on December 31 and recorded as sale. On January 15, the purchaser returns $1,750 worth of paper for full credit (approved by Hasbrow) against the bill. Should the shipment on December 31 be recorded as a sale? Discuss the ethics of Hasbrow’s action.
Aug 29, 2021 | Uncategorized
On
September 1, 2011, Parcel Corporation purchased 80% of the outstanding common stock of
Sack Corporation for $152,000. On that date, Sack’s net book values equaled fair values, and
there was no excess of cost or book value resulting from the purchase. Parcel has been maintaining its investment under the simple equity method.
Over the next three years, the intercompany transactions between the companies were as
follows:
a. On September 1, 2011, Sack sold its 4 year old delivery truck to Parcel for $14,000 in cash.
At that time, Sack had depreciated the truck, which had cost $15,000, to its $5,000 salvage
value. Parcel estimated on the date of the sale that the asset had a remaining useful life of
three years and no salvage value.
b. On September 1, 2012, Parcel sold equipment to Sack for $103,000. Parcel originally paid
$80,000 for the equipment and planned to depreciate it over 20 years, assuming no salvage
value. However, Parcel had the property for only 10 years and carried it at a net book value
of $40,000 on the sale date. Sack will use the equipment for 10 years, at which time Sack
expects no salvage value.
Both companies use straight line depreciation for all assets.
Trial balances of Parcel Corporation and Sack Corporation as of the August 31, 2013, yearend were as shown on page 255.
Aug 29, 2021 | Uncategorized
Managers and accountants often encounter transactions with which they are unfamiliar. Use your analytical skills to analyze and record in journal form the following transactions, which have not yet been discussed in the text.
May 1 Purchased merchandise inventory on account, $1,200.
2 Purchased marketable securities for cash, $3,000.
3 Returned part of merchandise inventory purchased for full credit, $250.
4 Sold merchandise inventory on account, $800 (record sale only).
5 Purchased land and a building for $300,000. Payment is $60,000 cash, and there is a 30 year mortgage for the remainder. The purchased price is allocated as follows: $100,000 to the land and $200,000 to the building.
6 Received an order for $12,000 in services to be provided. With the order was a deposit of $3,500.
Aug 29, 2021 | Uncategorized
Maui Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by Maui Outfitters during the current fiscal year are as follows:
Feb 19. Split the common stock 4 for 1 and reduced the par from $80 to $20 per share. After the split, there were 600,000 common shares outstanding.
Mar1. Declared semiannual dividends of $1.20 on 75,000 shares of preferred stock and $0.08 on the 600,000 shares of $20 par common stock to stockholders of record on March 31, payable on April 30.
Apr30. Paid the cash dividends.
June27. Purchased 90,000 shares of the corporation’s own common stock at $24, recording the stock at cost.
Aug17. Sold 40,000 shares of treasury stock at $30, receiving cash.
Sept1. Declared semiannual dividends of $1.20 on the preferred stock and $0.12 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $28.
Oct31. Paid the cash dividends and issued the certificates for the common stock dividend.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
Maurey Wills started an environmental consulting company and during the first month of operations (February 2012), the business completed the following transactions:
a. Wills began the business with an investment of $48,000 cash and a building at $30,000. The business issued $8,000 of common stock to Wills.
b. Purchased office supplies on account, $2,000.
c. Paid $14,000 for office furniture.
d. Paid employee’s salary, $2,200.
e. Performed consulting services on account, $3,700.
f. Paid $900 of the account payable created in transaction (b).
g. Received a $600 bill for advertising expense that will be paid in the near future.
h. Performed consulting service for cash, $1,100.
i. Received cash on account, $1,100.
j. Paid the following cash expenses:
(1) Rent on equipment, $1,000.
(2) Utilities, $900.
k. Paid cash dividends of $2,300.
Requirements
1. Open the following four column accounts: Cash, Accounts receivable, Office supplies, Office furniture, Building, Accounts payable, Common stock, Dividends, Service revenue, Salary expense, Rent expense, Advertising expense, and Utilities expense.
2. Record each transaction in the journal. Use the letters to identify the transactions.
3. Post to the accounts and keep a running balance for each account.
4. Prepare the trial balance of Wills Environmental Consulting Company at February 29, 2012.
Aug 29, 2021 | Uncategorized
Coil Welding Corporation sells and services pipe welding equipment in California. The following selected accounts appear in the ledger of Coil Welding Corporation on February 1, 2010, the beginning of the current fiscal year:
?
During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:
(a) Purchased 60,000 shares of treasury common for $540,000.
(b) Sold 42,000 shares of treasury common for $462,000.
(c) Issued 7,500 shares of preferred 2% stock at $38.
(d) Issued 120,000 shares of common stock at $15, receiving cash.
(e) Sold 13,000 shares of treasury common for $110,500.
(f) Declared cash dividends of $0.50 per share on preferred stock and $0.42 per share on common stock.
(g) Paid the cash dividends.
Instructions
Journalize the entries to record the transactions. Identify each entry byletter.
Aug 29, 2021 | Uncategorized
Comparative income statements for Par Corporation and its 80 percent owned subsidiary, Saw Corporation, for the year ended December 31, 2012, are summarized as follows:
Par purchased its 80 percent interest in Saw at book value on January 1, 2011, when Saw’s assets and liabilities were equal to their fair values. On January 1, 2012, Par paid $783,000 to purchase all of Saw’s $1,000,000, 6 percent outstanding bonds. The bonds were issued at par on January 1, 2010, pay interest semiannually on June 30 and December 31, and mature on December 31, 2018.
REQUIRED: Prepare a consolidated income statement for Par Corporation and Subsidiary for the year ended December 31,2012.
Aug 29, 2021 | Uncategorized
Comparative income statements for Pim Corporation and its 100 percent owned subsidiary, Sad Corporation, for the year ended December 31, 2019, are summarized as follows:
Pim purchased its interest in Sad at fair value equal to book value on January 1, 2011. On January 1, 2012, Pim sold $500,000 par of 10 percent, 10 year bonds to the public at par, and on January 2, 2019, Sad purchased $200,000 par of the bonds at 97. The companies use straight line amortization. There are no other intercompany transactions between the affiliates.
REQUIRED: Prepare a consolidated income statement for Pim Corporation and Subsidiary for the year ended December 31,2019.
Aug 29, 2021 | Uncategorized
Country Sounds Corp., an electric guitar retailer, was organized by Julie Arnold, Joe Harris, and Scott Pickens. The charter authorized 500,000 shares of common stock with a par of $12. The following transactions affecting stockholders’ equity were completed during the first year of operations:
a. Issued 20,000 shares of stock at par to Julie Arnold for cash.
b. Issued 500 shares of stock at par to Scott Pickens for promotional services provided in connection with the organization of the corporation, and issued 18,000 shares of stock at par to Scott Pickens for cash.
c. Purchased land and a building from Joe Harris. The building is mortgaged for $200,000 for 25 years at 7%, and there is accrued interest of $2,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $75,000 and the building at $240,000, and that Joe Harris’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.
Journalize the entries to record the transactions.
Aug 29, 2021 | Uncategorized
1. If $1.5625 can be exchanged for 1 British pound, the direct and indirect exchange rate quotations are:
(a) $1.5625 and 1 British pound, respectively
(b) $1.5625 and 0.64 British pounds, respectively
(c) $1.00 and 1.5625 British pounds, respectively
(d) $1.00 and 0.64 British pounds, respectively
2. A U.S. firm purchases merchandise from a Canadian firm with payment due in 60 days and denominated in Canadian dollars. The U.S. firm will report an exchange gain or loss on settlement if the transaction is:
(a) Recorded in U.S. dollars
(b) Measured in U.S. dollars
(c) Not hedged through a forward contract
(d) Settled after an exchange rate change has occurred
3. Exchange gains and losses on accounts receivable and payable that are denominated in a foreign currency are:
(a) Accumulated and reported upon settlement
(b) Deferred and treated as transaction price adjustments
(c) Reported as equity adjustments from translation
(d) Recognized in the periods in which exchange rates change
Aug 29, 2021 | Uncategorized
1. Intercompany profit elimination entries in consolidation workpapers are prepared in order to:
a. Nullify the effect of intercompany transactions on consolidated statements
b. Defer intercompany profit until realized
c. Allocate unrealized profits between controlling and noncontrolling interests
d. Reduce consolidated income
2. The direction of intercompany sales (upstream or downstream) does not affect consolidation workpaper procedures when the intercompany sales between affiliates are made:
a. At fair value
b. Above market value
c. At book value
d. To a 100 percent owned subsidiary
3. Pet Corporation sells inventory items for $500,000 to Sen Corporation, its 80 percent owned subsidiary. The consolidated workpaper entry to eliminate the effect of this intercompany sale will include a debit to sales for:
a. $500,000
b. $400,000
c. The amount remaining in Sen’s ending inventory
d. 80 percent of the amount remaining in Sen’s ending inventory
4. Sar Corporation, a 90 percent owned subsidiary of Pan Corporation, buys half of its raw materials from Pan. The transfer price is exactly the same price as Sar pays to buy identical raw materials from outside suppliers and the same price as Pan sells the materials to unrelated customers. In preparing consolidated statements for Pan Corporation and Subsidiary:
a. The intercompany transactions can be ignored because the transfer price represents arm’s length bargaining
b. Any unrealized profit from intercompany sales remaining in Pan’s ending inventory must be offset against the unrealized profit in Pan’s beginning inventory
c. Any unrealized profit on the intercompany transactions in Sar’s ending inventory is eliminated in its entirety
d. Only 90 percent of any unrealized profit on the intercompany transactions in Sar’s ending inventory is eliminated
5. Pit Corporation sells an inventory item to its subsidiary, Sin Company, to be used as a plant asset by Sin. The workpaper entry to eliminate intercompany profits in the year of sale will not include:
a. A debit to sales
b. A credit to cost of sales
c. A credit to inventories
d. A credit to plant assets
6. Sel Corporation regularly sells inventory items to its parent, Pul Corporation. In preparing the consolidated income statement, which of the following items would not be affected by the direction (upstream or downstream) of these intercompany sales?
a. Consolidated gross profit
b. Noncontrolling interest share
c. Controlling interest share of consolidated net income
d. Consolidated retained earnings
7. Pen Corporation regularly sells inventory items to its subsidiary, Shu Corporation. If unrealized profits in Shu’s 2011 year end inventory exceed the unrealized profits in its 2012 year end inventory:
a. Combined cost of sales will be greater than consolidated cost of sales in 2011
b. Combined cost of sales will be less than consolidated cost of sales in 2011
c. Combined gross profit will be greater than consolidated gross profit in 2011
d. Combined sales will be less than consolidated sales in 2011
8. Spa Corporation is a 90 percent owned subsidiary of Ply Corporation, acquired on January 1, 2011, at a price equal to book value and fair value. Ply accounts for its investment in Spa using the equity method of accounting.
The only intercompany transactions between the two affiliates in 2011 and 2012 are as follows:
2011 Ply sold inventory items that cost $400,000 to Spa for $500,000.
One fourth of this merchandise remains unsold at December 31, 2011
2012 Ply sold inventory items that cost $600,000 to Spa for $750,000.
One third of this merchandise remains unsold at December 31, 2012
At December 31, 2012, Ply’s Investment in Spa account:
a. Will equal its underlying equity in Spa
b. Will be $25,000 greater than its underlying equity in Spa
c. Will be $50,000 less than its underlying equity in Spa
d. Will be $25,000 less than its underlying equity in Spa
Aug 29, 2021 | Uncategorized
1. On January 1, 2011, Pan Company sold equipment to its wholly owned subsidiary, Sun Company, for $1,800,000. The equipment cost Pan $2,000,000. Accumulated depreciation at the time of sale was $500,000. Pan was depreciating the equipment on the straight line method over 20 years with no salvage value, a procedure that Sun continued. On the consolidated balance sheet at December 31, 2011 the cost and accumulated depreciation, respectively, should be:
a. $1,500,000 and $600,000
b. $1,800,000 and $100,000
c. $1,800,000 and $500,000
d. $2,000,000 and $600,000
2. In the preparation of consolidated financial statements, intercompany items for which eliminations will not be made are:
a. Purchases and sales where the parent employs the equity method
b. Receivables and payables where the parent employs the cost method
c. Dividends received and paid where the parent employs the equity method
d. Dividends receivable and payable where the parent employs the equity method
3. Pun Corporation owns 100 percent of Sir Corporation’s common stock. On January 2, 2011, Pun sold to Sir for $40,000 machinery with a carrying amount of $30,000. Sir is depreciating the acquired machinery over a fiveyear life by the straight line method. The net adjustments to compute 2011 and 2012 consolidated income before income tax would be an increase (decrease) of:
4. Pot Company owns 100 percent of Sal Company. On January 1, 2011, Pot sold Sal delivery equipment at a gain. Pot had owned the equipment for two years and used a five year straight line depreciation rate with no residual value. Sal is using a three year straight line depreciation rate with no residual value for the equipment. In the consolidated income statement, Sal’s recorded depreciation expense on the equipment for 2011 will be decreased by:
a. 20% of the gain on sale
b. 33.33% of the gain on sale
c. 50% of the gain on sale
d. 100% of the gain onsale
Aug 29, 2021 | Uncategorized
1. On September 1, 2011, Bain Corporation received an order for equipment from a foreign customer for 300,000 euros, when the U.S. dollar equivalent was $400,000. Bain shipped the equipment on October 15, 2011, and billed the customer for 300,000 euros when the U.S. dollar equivalent was $420,000. Bain received the customer’s remittance in full on November 16, 2011, and sold the 300,000 euros for $415,000. In its income statement for the year ended December 31, 2011, what should Bain report as a foreign exchange gain or loss?
2. On September 22, 2011, Yumi Corporation purchased merchandise from an unaffiliated foreign company for 10,000 euros. On that date, the spot rate was $1.20. Yumi paid the bill in full on March 20, 2012, when the spot rate was $1.30. The spot rate was $1.24 on December 31, 2011. What amount should Yumi report as a foreign currency transaction gain or loss in its income statement for the year ended December 31, 2011?
3. On July 1, 2011, Clark Company borrowed 1,680,000 pesos from a foreign lender by signing an interest bearing note due on July 1, 2012, which is denominated in pesos. The U.S. dollar equivalent of the note principal was as follows:
July 1, 2011 (date borrowed) ………………. $210,000
December 31, 2011 (Clark’s year end) ……… 240,000
July 1, 2012 (date paid) ……………………… 280,000
In its income statement for 2012, what amount should Clark include as a foreign exchange gain or loss?
4. On July 1, 2011, Stone Company lent $120,000 to a foreign supplier by accepting an interest bearing note due on July 1, 2012. The note is denominated in the currency of the borrower and was equivalent to 840,000 pesos on the loan date. The note principal was appropriately included at $140,000 in the receivables section of Stone’s December 31, 2011, balance sheet. The note principal was repaid to Stone on the July 1, 2012, due date, when the exchange rate was 8 pesos to $1. In its income statement for the year ended December 31, 2012, what amount should Stone include as a foreign currency transaction gain or loss?
Aug 29, 2021 | Uncategorized
1. Pat Corporation owns 70 percent of Sue Company’s common stock, acquired January 1, 2012. Patents from the investment are being amortized at a rate of $20,000 per year. Sue regularly sells merchandise to Pat at 150 percent of Sue’s cost. Pat’s December 31, 2012, and 2013 inventories include goods purchased intercompany of $112,500 and $33,000, respectively. The separate incomes (do not include investment income) of Pat and Sue for 2013 are summarized as follows:
Total consolidated income should be allocated to controlling and noncontrolling interest shares in the amounts of:
a. $344,550 and $61,950, respectively
b. $358,550 and $60,000, respectively
c. $346,500 and $60,000, respectively
d. $346,500 and $67,950, respectively
2. Pac acquired a 60 percent interest in Slo on January 1, 2011, for $360,000, when Slo’s net assets had a book value and fair value of $600,000. During 2011, Pac sold inventory items that cost $600,000 to Slo for $800,000, and Slo’s inventory at December 31, 2011, included one fourth of this merchandise. Pac reported separate income from its own operations (excludes investment income) of $300,000, and Slo reported a net loss of $150,000 for 2011. Controlling share of consolidated net income for Pac Corporation and Subsidiary for 2011 is:
a. $260,000
b. $180,000
c. $160,000
d. $100,000
3. San Corporation, a 75 percent owned subsidiary of Par Corporation, sells inventory items to its parent at 125 percent of cost. Inventories of the two affiliates for 2011 are as follows:
Par’s beginning and ending inventories include merchandise acquired from San of $150,000 and $200,000, respectively, which is sold in the following year. If San reports net income of $300,000 for 2011, Par’s income from San will be:
a. $255,000
b. $217,500
c. $215,000
d.$195,000
Aug 29, 2021 | Uncategorized
1. Son Corporation is an 80 percent owned subsidiary of Pin Corporation. In 2011, Son sold land that cost $15,000 to Pin for $25,000. Pin held the land for eight years before reselling it in 2019 to Roy Company, an unrelated entity, for $55,000. The 2019 consolidated income statement for Pin and its subsidiary, Son, will show a gain on the sale of land of:
a. $40,000
b. $32,000
c. $30,000
d. $24,000
2. On January 3, 2011, Pal Corporation sells equipment with a book value of $90,000 to its 100 percent owned subsidiary, Sat Corporation, for $120,000. The equipment has a remaining useful life of three years with no salvage at the time of transfer. Sat uses the straight line method of depreciation. As a result of this intercompany transaction, Pal’s Investment in Sat account balance at December 31, 2011, will be:
a. $20,000 greater than its underlying equity interest
b. $20,000 less than its underlying equity interest
c. $30,000 less than its underlying equity interest
d. $10,000 greater than its underlying equity interest
3. Pen Corporation sells equipment with a book value of $80,000 to Sir Company, its 75 percent owned subsidiary, for $100,000 on January 1, 2011. Sir determines that the remaining useful life of the equipment is four years and that straight line depreciation is appropriate. The December 31, 2011, separate financial statements of Pen and Sir show equipment—net of $500,000 and $300,000, respectively. Consolidated equipment—net will be:
a. $800,000
b. $785,000
c. $780,000
d. $650,000
4. Par Corporation sold equipment with a remaining three year useful life and a book value of $14,500 to its 80 percent owned subsidiary, Sad Corporation, for $16,000 on January 2, 2011. A consolidated workpaper entry on December 31, 2011, to eliminate the unrealized profits from the intercompany sale of equipment will include:
a. A debit to gain on sale of equipment for $1,000
b. A debit to gain on sale of equipment for $1,500
c. A credit to depreciation expense for $1,500
d. A debit to machinery for $1,500
5. A subsidiary sells equipment with a four year remaining useful life to its parent at a $12,000 gain on January 1, 2011. The effect of this intercompany transaction on the parent’s investment income from its subsidiary for 2011 will be:
a. An increase of $12,000 if the subsidiary is 100% owned
b. An increase of $9,000 if the subsidiary is 100% owned
c. A decrease of $9,000 if the subsidiary is 100% owned
d. A decrease of $3,600 if the subsidiary is 60% owned
6. On January 1, 2011, Sin Corporation, a 60 percent owned subsidiary of Pot Company, sells a building with a book value of $300,000 to its parent for $350,000. At the time of sale, the building has an estimated remaining life of 10 years with no salvage value. Pot uses straight line depreciation. If Sin reports net income of $1,000,000 for 2011, noncontrolling interest share will be:
a. $450,000
b. $400,000
c. $382,000
d. $355,000
Aug 29, 2021 | Uncategorized
1. The separate incomes of Pil Corporation and Sil Corporation, a 100 percent owned subsidiary of Pil, for 2012 are $2,000,000 and $1,000,000, respectively. Pil sells all of its output to Sil at 150 percent of Pil’s cost of production.
During 2011 and 2012, Pil’s sales to Sil were $9,000,000 and $7,000,000, respectively. Sil’s inventory at December 31, 2011, included $3,000,000 of the merchandise acquired from Pil, and its December 31, 2012, inventory included $2,400,000 of such merchandise. Assume Sil sells the inventory purchased from Pil in the following year. A consolidated income statement for Pil Corporation and Subsidiary for 2012 should show controlling interest share of consolidated net income of:
a. $2,200,000
b. $2,800,000
c. $3,000,000
d. $3,200,000
Pan Corporation owns 75 percent of the voting common stock of Sat Corporation, acquired at book value during 2011. Selected information from the accounts of Pan and Sat for 2011 are as follows: During 2012 Pan sold merchandise to Sat for $100,000, at a gross profit to Pan of $40,000. Half of this merchandise remained in Sat’s inventory at December 31, 2012. Sat’s December 31, 2011, inventory included unrealized profit of $8,000 on goods acquired from Pan.
2. In a consolidated income statement for Pan Corporation and Subsidiary for the year 2012, consolidated sales should be:
a. $2,900,000
b. $2,800,000
c. $2,725,000
d. $2,700,000
3. In a consolidated income statement for Pan Corporation and Subsidiary for the year 2012, consolidated cost of sales should be:
a. $1,372,000
b. $1,360,000
c. $1,272,000
d.$1,248,000
Aug 29, 2021 | Uncategorized
A high percentage of Americans own stock in corporations. As a shareholder in a corporation, you will receive an annual report. One of the goals of this course is for you to learn how to navigate your way around an annual report.
Instructions
Use the annual report provided in Appendix A to answer the following questions.
(a) What CPA firm performed the audit of PepsiCo’s financial statements?
(b) What was the amount of PepsiCo’s earnings per share in 2007?
(c) What was net revenue in 2007?
(d) How many shares of treasury stock did the company have at the end of 2007?
(e) How much cash did PepsiCo spend on capital expenditures in 2007?
(f) Over what life does the company depreciate its buildings?
(g) What was the total amount of dividends paid in 2007?
Aug 29, 2021 | Uncategorized
A trial balance has total debits of $20,000 and total credits of $24,500. Which one of the following errors would create this imbalance? Explain.
a. A $2,250 credit to Consulting Fees Earned in a journal entry is incorrectly posted to the ledger as a $2,250 debit, leaving the Consulting Fees Earned account with a $6,300 credit balance.
b. A $4,500 debit to Salaries Expense in a journal entry is incorrectly posted to the ledger as a $4,500 credit, leaving the Salaries Expense account with a $750 debit balance.
c. A $2,250 debit to Rent Expense in a journal entry is incorrectly posted to the ledger as a $2,250 credit, leaving the Rent Expense account with a $3,000 debit balance.
d. A $2,250 debit posting to Accounts Receivable was posted mistakenly to Cash.
e. A $4,500 debit posting to Equipment was posted mistakenly to Supplies.
f. An entry debiting Cash and crediting Notes Payable for $4,500 was mistakenly not posted.
Aug 29, 2021 | Uncategorized
After researching the different forms of business organization. Natalie Koebel decides to operate ?oCookie Creations?? as a proprietorship. She then starts the process of getting the business running. In November 2011, the following activities take place.
Nov. 8 Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.
8 She opens a bank account under the name ?oCookie Creations?? and transfers $500 from her personal account to the new account.
11 Natalie pays $65 for advertising.
13 She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125 cash.
14 Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top of the line food processor and mixer that originally cost her $750. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $300. She invests the equipment in the business.
16 Natalie realizes that her initial cash investment is not enough. Her grandmother lends her $2,000 cash, for which Natalie signs a note payable in the name of the business. Natalie deposits the money in the business bank account.
17 She buys more baking equipment for $900 cash.
20 She teaches her first class and collects $125 cash.
25 Natalie books a second class for December 4 for $150. She receives $30 cash in advance as a down payment.
30 Natalie pays $1,320 for a one year insurance policy that will expire on December 1, 2011.
Instructions
(a) Prepare journal entries to record the November transactions.
(b) Post the journal entries to general ledger accounts.
(c) Prepare a trial balance at November 30.
Aug 29, 2021 | Uncategorized
All of the first month’s activity for Shine King Cleaning is as follows.
Nov 1 Evan Hudson deposited $35,000 in the business account. Also on this date, Evan transferred his truck title, worth $8,000, to the business. Evan received 200 shares of no par common stock in return.
2 Wrote a check for $2,000 to Pleasant Properties. In the ?ofor?? area of the check, it states ?oNovember through February Rent.?? (Debit Prepaid rent)
3 Purchased business insurance policy for $2,400 for the term November 1, 2012, through October 31, 2013, and paid cash. (Debit Prepaid insurance)
4 Evan went to the Cleaning Supply Company and purchased S2’0 of cleaning supplies on account. The invoice is due 20 days from the date of purchase.
5 Purchased on account an industrial vacuum cleaner from Penny Purchase costing $1,000. The invoice is payable on or before November 25. Purchased a computer and printer costing a total of $1,200. A check for the same amount to the computer store was written on the same date.
9 Performed cleaning services on account for Pierre’s Wig Stand in the amount of $3,000.
10 Deposited Pierre’s check for $100 in the bank.
15 Wrote check payable to Eric Ryder for $500 for contract labor.
16 Received $3,600 for 1 year contract beginning November 16 for cleaning services to be provided to the Sea Side Restaurant. Contract begins November 16, 2012, and ends November 15, 2013. (Credit Unearned service revenue)
17 Provided cleaning services for Tip Top Solutions for $800. Tip Top paid with a check.
18 Received water and electric bill for $175 with due date of December 4, 2012.
20 Borrowed $40,000 from bank with interest at rate of 9% per year.
21 Deposited check from Pierre’s Wig Stand for $900, with the notation ?oon account.??
25 Wrote check to Penny Purchase for invoice #1035 in the amount of $500.
29 Wrote check payable to St. Petersburg News for $100 for advertising.
30 Paid dividends to Evan Hudson of $600.
Requirements
1. Journalize transactions as required from the activity data.
2. Post journal entries to T accounts and calculate account balances.
3. Prepare the trial balance at November 30.
Aug 29, 2021 | Uncategorized
Alpha School is a newly organized business that teaches people how to inspire and influence others. The list of accounts to be opened in the general ledger is as follows:
Accounts Payable …………………..Miscellaneous Expense
Accounts Receivable ………………Prepaid Insurance
Cash ………………………………..Rent Expense
Equipment …………………………Supplies
Fees Earned ………………………..Supplies Expense
Jan Pulver, Capital …………………Unearned Rent
Jan Pulver, Drawing ……………….Wages Expense
List the accounts in the order in which they should appear in the ledger of Alpha School and assign account numbers. Each account number is to have two digits: the first digit is to indicate the major classification (1 for assets, etc.), and the second digit is to identify the specific account within each major classification (11 for Cash, etc.).
Aug 29, 2021 | Uncategorized
American TV Corporation had two foreign currency transactions during December 2011, as follows:
December 12 Purchased electronic parts from Toko Company of Japan at
an invoice price of 50,000,000 yen when the spot rate for yen
was $0.00750. Payment is due on January 11, 2012.
December 15 Sold television sets to British Products Ltd. for 40,000 pounds
when the spot rate for British pounds was $1.65. The invoice
is denominated in pounds and is due on January 14, 2012.
REQUIRED
1. Prepare journal entries to record the foregoing transactions.
2. Prepare journal entries to adjust the accounts of American TV Corporation at December 31, 2011, if the current exchange rates are $0.00760 and $1.60 for Japanese yen and British pounds, respectively.
3. Prepare journal entries to record payments to Toko Company on January 11, 2012, when the spot rate for Japanese yen is $0.00765, and to record receipt from British Products Ltd. on January 14, 2012, when the spot rate for British pounds is $1.63.
Aug 29, 2021 | Uncategorized
Baird Products Inc., a wholesaler of office products, was organized on January 30 of the current year, with an authorization of 80,000 shares of 2% preferred stock, $75 par and 800,000 shares of $20 par common stock. The following selected transactions were completed during the first year of operations:
Jan.30, Issued 300,000 shares of common stock at par for cash.
31, Issued 750 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Feb.21. Issued 32,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $150,000, $460,000, and $90,000, respectively.
Mar.2. Issued 15,000 shares of preferred stock at $77. 50 for cash.
Journalize the transactions.
Aug 29, 2021 | Uncategorized
Bob Lutz opened a secretarial school called Best Secretarial Training.
a. Lutz contributed the following assets to the business:
Cash ……………………………..$5,700
Computers ………………………. 4,300
Office Equipment ……………….. 3,600
b. Found a location for his business and paid the first month’s rent, $260.
c. Paid for an advertisement announcing the opening of the school, $190.
d. Received applications from three students for a four week secretarial program and two students for a ten day keyboarding course. The students will be billed a total of $1,300.
e. Purchased supplies on credit, $330.
f. Billed the enrolled student, $1,740.
g. Purchased a second hand computer, $480, and office equipment, $380, on credit.
h. Paid for the supplies purchased on credit in e, $330.
i. Paid cash to repair a broken computer, $40.
j. Received partial payment from students previously billed, $1,080.
k. Paid the utility bill for the current month, $90.
l. Paid an assistant one week’s salary, $440.
m. Made a cash withdrawal of $330.
Required
1. Set up the following T accounts: Cash; Accounts Receivable. Supplies; Computers; Office Equipment: Accounts Payable; B. Lutz, Capital; B. Lutz, Withdrawals, Tuition Revenue; Salaries Expense; Utilities Expense; Rent Expense; Repair Expense; and Advertising Expense.
2. Record the transactions directly in the T accounts, using the transaction letter to identify each debit and credit.
3. Prepare a trail balance using today’s date.
4. Examine transactions f and j. What were the revenues and how much cash was received from the revenues? What business issues might you see arising from the differences in these numbers?
Aug 29, 2021 | Uncategorized
Brad Cupello began an upholstery cleaning business on October 1 and engaged in the following transactions during the month:
Oct. 1 Began business by depositing $15,000 in a bank account in the name of company.
2 Ordered cleaning supplies, $3,000.
3 Purchased cleaning equipment for cash, $2,800.
4 Made two months’ van lease payment in advance, $1,200.
7 Received the cleaning supplies ordered on October 2 and agreed to pay half the amount in 10 days and the rest in 30 days.
9 Paid for repairs on the van with cash, $1,080.
12 Received cash for cleaning upholstery, $960.
17 Paid half the amount owed on supplies purchased on October 7, $1,500.
21 Billed customers for cleaning upholstery, $1,340.
24 Paid cash for additional repairs on the van, $80.
27 Received $600 from the customers billed on October 21.
31 Made a cash withdrawal of $700.
Required
1. Set up the following T accounts: Cash; Accounts Receivable; Cleaning Supplies; Prepaid Lease; Cleaning Equipment; Accounts Payable; B. Cupello, Capital; B. Cupello, Withdrawals; Cleaning Revenue; and Repair Expense.
2. Record transactions directly in the T accounts. Identify each entry by date.
3. Prepare a trial balance for Cupello Upholstery Cleaning as of October 31, 2011.
4. Compare and contrast how the issues of recognition, valuation, and classification are settled in the transactions of October 7 and 9.
Aug 29, 2021 | Uncategorized
Brandon Corporation had the following stockholders’ equity accounts on January 1, 2012: Common Stock ($5 par) $500,000, Paid in Capital in Excess of Par—Common Stock $200,000, and Retained Earnings $100,000. In 2012, the company had the following treasury stock transactions.
Mar. 1 Purchased 5,000 shares at $9 per share.
June 1 Sold 1,000 shares at $12 per share.
Sept. 1 Sold 2,000 shares at $10 per share.
Dec. 1 Sold 1,000 shares at $6 per share.
Brandon Corporation uses the cost method of accounting for treasury stock. In 2012, the company reported net income of $30,000.
Instructions
(a) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2012, for net income.
(b) Open accounts for (1) Paid in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. Post to these accounts using J10 as the posting reference.
(c) Prepare the stockholders’ equity section for Jacobsen Corporation at December 31, 2012.
Aug 29, 2021 | Uncategorized
Buellton Welding Corporation sells and services pipe welding equipment in California. The following selected accounts appear in the ledger of Buellton Welding Corporation on January 1, 2008, the beginning of the current fiscal year:
Preferred 2% Stock, $50 par (100,000 shares authorized,
50,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,500,000
Paid In Capital in Excess of Par—Preferred Stock . . . . . . . . . . . 180,000
Common Stock, $15 par (900,000 shares authorized,
600,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000,000
Paid In Capital in Excess of Par—Common Stock . . . . . . . . . . . 1,500,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,100,000
During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:
a. Purchased 25,000 shares of treasury common for $650,000.
b. Sold 18,000 shares of treasury common for $576,000.
c. Sold 10,000 shares of preferred 2% stock at $80.
d. Issued 40,000 shares of common stock at $30, receiving cash.
e. Sold 6,000 shares of treasury common for $150,000.
f. Declared cash dividends of $1 per share on preferred stock and $0.10 per share on common stock.
g. Paid the cash dividends.
Instructions
Journalize the entries to record the transactions. Identify each entry by letter.
Aug 29, 2021 | Uncategorized
Calco, Inc., rents its store location. Rent is $1,500 per month, payable quarterly in advance. On July 1, a check for $4,500 was issued to the landlord for the July–September quarter.
Required:
Use the horizontal model to show the effects on the financial statements of Calco, Inc.:
a. To record the payment, assuming that all $4,500 is initially recorded as Rent Expense.
b. To record the adjustment that would be appropriate at July 31 if your entry in a had been made.
c. To record the initial payment as Prepaid Rent.
d. To record the adjustment that would be appropriate at July 31 if your entry in c had been made.
e. To record the adjustment that would be appropriate at August 31 and September 30, regardless of how the initial payment had been recorded (and assuming that the July 31 adjustment had been made).
f. If you were supervising the bookkeeper, how would you suggest that the July 1 payment be recorded? Explain your answer.
Aug 29, 2021 | Uncategorized
Chalet Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Andee Freese, Capital; Andee Freese, Drawing; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense. Journalize the following selected transactions for October 2012 in a two column journal. Journal entry explanations may be omitted.
Oct. 1. Paid rent for the month, $2,000.
2. Paid advertising expense, $900.
5. Paid cash for supplies, $1,300.
6. Purchased office equipment on account, $16,000.
10. Received cash from customers on account, $6,700.
15. Paid creditor on account, $1,200.
27. Paid cash for repairs to office equipment, $600.
30. Paid telephone bill for the month, $180.
31. Fees earned and billed to customers for the month, $26,800.
31. Paid electricity bill for the month, $400.
31. Withdrew cash for personal use, $3,000.
Aug 29, 2021 | Uncategorized
M. L. DiMaurizio had the following notes receivable transactions:
20 3
June 20 Received a $2,400, 30 day, 10% note from K. Lorenzo in payment for sale of merchandise.
July 20 K. Lorenzo paid the note plus interest.
25 Sold merchandise on account to R. Boone, $5,600.
Aug. 4 R. Boone paid $600 and gave a $5,000, 30 day, 12% note to extend time for payment.
Sept. 3 R. Boone paid the note plus interest.
10 Sold merchandise to T. Akins for $3,000: $400 plus a $2,600, 30 day, 11% note.
Oct. 10 T. Akins paid $600, plus interest, and extended the note ($2,000) for 30 days.
Nov. 9 T. Akins paid the note plus interest.
10 Sold merchandise on account to J. Brown, $5,000.
25 J. Brown paid $1,000 and gave a $4,000, 30 day, 12% note to extend time for payment.
Dec. 25 J. Brown’s note is dishonored.
20 4
Jan. 13 J. Brown’s dishonored note is collected, plus interest at 12% on the maturity value.
REQUIRED
Record the transactions in a general journal.
Aug 29, 2021 | Uncategorized
Milo Radio Shop had the following notes payable transactions:
Apr. 1 Borrowed $5,000 from Builder’s Bank, signing a 90 day, 8% note.
5 Gave a $2,000, 60 day, 10% note to Breaker Parts Co. for purchase of merchandise.
10 Paid $500 cash and gave a $1,500, 30 day, 12% note to M. K. Reynolds in payment of an account payable.
May 10 Paid $500 cash, plus interest, and issued a new $1,000, 30 day, 14% note to M. K. Reynolds.
20 Borrowed $3,500 for 60 days from Builder’s Bank on a non interest bearing note. The discount rate is 12%.
June 4 Paid $500 cash, plus interest, to Breaker Parts Co. (see April 5) and gave a new $1,500, 30 day, 12% note to extend time for payment.
9 Paid the principal and interest due on the $1,000 note to M. K. Reynolds. (See May 10.)
30 Paid the principal and interest due on the $5,000 note to Builder’s Bank. (See April 1.)
July 4 Paid the principal and interest due on the $1,500 note to Breaker Parts Co. (See June 4.)
19 Paid the $3,500 non interest bearing note to Builder’s Bank. (See May 20.)
REQUIRED
Record the transactions in a general journal.
Aug 29, 2021 | Uncategorized
Rochelle needed to borrow $3,000 for three months in order to pay for college expenses while waiting for her scholarship to arrive. After Rochelle filled out the loan application, the loan officer at the bank asked her if she would like to pay the interest up front or at the maturity of the note. He went on to explain that it didn’t make a difference, but he preferred that she pay it up front because it would make his paperwork easier. He also told Rochelle that the interest rate and amount would be the same. Rochelle agreed, signed the three month, 12%, discounted note and left with a check for $2,910.
1. Did the loan officer offer Rochelle an acceptable explanation of the interest rate? Justify your answer.
2. What is the effective rate of interest on Rochelle’s loan? Round to the nearest tenth of a percent.
3. In a short paragraph, explain the difference between an ?ointerest bearing?? note and a ?odiscounted?? note.
4. In groups of two or three, discuss some common situations where the average person might misunderstand interest rate quotations.
Aug 29, 2021 | Uncategorized
GAAS, GAGAS, and the Single Audit. A city has approached you concerning the audit of its 2011 financial statements. State law requires the city to have an audit and submit the audited financial report to the state. New elections at the beginning of the fiscal year resulted in a change in the administration of the city. Your firm and the audit firm that conducted the prior year’s audit have been asked by the city to submit bids for the current year’s audit. Since the new city administration is quite inexperienced, it has not provided you with a formal Request for Proposal (RFP). Therefore, you have the prior year’s audit and financial reports, and little more information than the following for fiscal year 2011.
1. The new city controller is a certified public accountant who worked for a firm that specialized in government audits.
2. For the last three years the city has received a clean audit opinion.
3. The city is receiving grants and other aid from state and federal sources totaling $3,977,000.
4. Total budgeted revenues for the year were $20,980,000 and expenditures were $25,749,000. Approximately 48 percent of revenues are from property taxes.
5. The city has six governmental funds, three enterprise funds, and an agency fund.
6. It is five months until the end of fiscal year 2011.
Required
Prior to determining whether you would be interested in submitting a bid for the audit, you decide to use the information you have to draw up a list of factors that would affect the cost of your bid. Provide your list and explain why each item would affect your fee bid.
Aug 29, 2021 | Uncategorized
Unqualified Audit Report. Following is the unqualified audit report for the City of Sand Key.
The Honorable Mayor
Members of the City Commission and
City Manager
City of Sand Key
We have audited the accompanying financial statements of the City of Sand Key (the City) as of and for the year ended September 30, 2011. These financial statement are the responsibility of the City’s management. Our responsibility is to express an opinion on these financial statements based on our audit
We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audit contained in the Government Audit Standards, issued by the Comptroller General of the United States. Those standards require that we plan and the audit to obtain a reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above present fairly in all material respects, the financial position of the City as of September 30, 2011, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The information presented in the Statistical Section is presented for the purpose of additional analysis and is not a required part of the basic financial statement. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statement and, accordingly, we express no opinion on it.
Steele and Steele, PA.
January 12, 2012
Required
Based on your knowledge of audit reporting requirements for government audits, you have determined that the audit report issued by Steele and Steele does not meet requirements. Provide a list of changes that would need to be made to the audit report to bring it into conformance with audit report requirements.
Aug 29, 2021 | Uncategorized
Beginning and Ending Fund Balances. The following information is provided about the Village of Wymette’s General Fund operating statement and budgetary accounts for the fiscal year ended June 30, 2010.
Estimated revenues $3,150,000
Revenues 3,190,000
Appropriations 3,185,000
Expenditures 3,175,000
Fund balance (beginning of year) 580,000
Budgetary fund balance (after FY 2010
budget was recorded) (35,000)
Required
a. Did the Village of Wymette engage in imprudent budgeting practice by authorizing a greater amount of expenditures than revenues estimated for the year, or potentially violate village or state balanced budget laws?
b. Calculate the end of year balances for the Fund Balance and Budgetary Fund Balance accounts that would be reported on the Village’s balance sheet prepared as of June 30, 2010. Show all necessary work.
Aug 29, 2021 | Uncategorized
Capital Lease. The City of Jamestown has agreed to acquire a new city maintenance building under a capital lease agreement. At the inception of the lease, a payment of $100,000 is to be made: nine annual lease payments, each in the amount of $100,000 are to be made at the end of each year after the inception of the lease. The total amount to be paid under this lease, therefore, is $1,000,000. The town could borrow this amount for nine years at the annual rate of 8 percent: therefore, the present value of the lease at inception, including the initial payment is $724,689. Assume that the fair value of the building at the inception of the lease is $750,000.
a. Show the entry that should be made in a capital projects fund at the inception of the lease after the initial payment has been made.
b. Show the entry that should be made at the inception of the lease in the government activities journal.
c. Show the entry that should be made in the debt service fund and governmental activities journal to record the second lease payment.
Aug 29, 2021 | Uncategorized
Financial Condition. Write the letters a through o on a sheet of paper. Beside each letter, put a plus (+) if a high or increasing value of the item is generally associated with stronger financial condition, a minus (–) if a high or increasing value of the item is generally associated with a weaker financial condition, and NE if the item generally has no effect on the financial condition or the direction of the effect cannot be predicted.
a. Unfunded pension liability.
b. Level of overlapping debt.
c. Reserves for self insurance.
d. Potential for natural disasters.
e. Level of business activity.
f. Median age of citizens.
g. Unemployment rate.
h. Restrictions on revenues.
i. Personal income per capita.
j. Inflation rate.
k. Percentage of households below the poverty level.
l. Bank deposits.
m. Property values.
n. Population growth.
o. Political party of the mayor.
Aug 29, 2021 | Uncategorized
General Capital Assets. Make all necessary entries in the appropriate governmental hind general journal and the government wide governmental activities general journal for each of the following transactions entered into by the City of Fordache.
1. The city received a donation of land that is to be used by Parks and Recreation for a park. At the time of the donation, the land had a fair value of $5,200,000 and was recorded on the donor’s books at a historical cost of $4,500,000.
2. The Public Works Department sold machinery with a historical cost of $35,100 and accumulated depreciation of $28,700 for $6,400. The machinery had originally been purchased with special revenue funds.
3. A car was leased for the mayor’s use. Since the tern of the lease exceeded
75 percent of the useful life of the car, the lease was capitalized. The first payment was $550 and the present value of the remaining lease payments was $30,000.
4. During the current year, a capital projects fund completed a new public safety building that was started in the prior year. The total cost of the project was $9,720,000. Financing for the project came from a $9,000,000 bond issue that was sold in the prior year and from a $720,000 federal capital grant received in the current year. Current year expenditures for the project totaled $1,176,000. The full cost is attributed to the building since it was constructed on city owned property.
5. Due to technological developments, the city determined that the service capacity of some of the technology equipment used by general government had been impaired. The calculated impairment loss due to technology obsolescence was $1,156,000.
Aug 29, 2021 | Uncategorized
Identification of Fiduciary Funds. Following is a list of fund names and descriptions of funds from comprehensive annual financial reports (CAFRs).
Required
For each fund, indicate which type of fund should be used to account for the activities and explain why that fund is most appropriate.
a. Tri Centennial Fund. Accounts for money raised or contributed by several local area governments and other organizations. The purpose is to ensure availability of resources to celebrate the United States Tri Centennial in 2076.
b. Perpetual Care Fund. Accounts for endowed gifts and investment earnings dedicated to perpetual care of the city’s cemeteries.
c. Debt Service Trust Fund. The city collects special assessments from citizens in designated special benefit districts that are intended for debt service on bonds issued for projects within the district. The city bears no responsibility for this debt.
d. School Impact Fee Fund. The city collects school impact fees as part of the cost of building permits issued. Money must be remitted periodically to the local school district, a legally separate government that is not a component unit of the city.
e. Housing Rehabilitation Fund, Accounts for several revolving funds that provide low interest loans for housing. The collection of the loans is used to run the program and make new loans to qualified citizens. Several government sources provided the start up funds.
f. Pay roll Fund. The city has established a fund in which all payroll deductions are reported.
g. Telephone Commissions Fund. The city collects commissions on pay telephones used by jail inmates. The funds are used to provide inmates such benefits as library resources and fitness equipment.
h. Block Grant Fund. The state receives federal funds for the homeless which it passes through to local not for profit organizations. The only responsibility the state has is to contribute an additional amount of funds (match) to the federal grant.
i. Health Benefits Fund. The county has agreed to pay a portion of the health insurance premiums for employees when they retire. Contributions for the benefit are paid into this fund.
j. Unclaimed Property Fund. The state has established a fund to account for abandoned and unclaimed property. The property is held in the fund for 10 years. If a legal claimant to the property is not found within the 10 year time period, the property reverts to the state.
Aug 29, 2021 | Uncategorized
Matching Funds with Transactions. Choose the letter of the sample transaction in the right hand column that would most likely be reported in the fund listed in the left hand column.
Fund Example
1. Agency a. Construction of highways, bridges, or parks.
2. Capital projects b. Administrative expenses of the city manager’s
3. Debt service office.c. Gills in which (he principal must be invested and preserved but the investment earnings must be used to provide scholarships to children of police officers who died in the line of duty.
4. Enterprised. Costs of a central purchasing and warehouse function.
5, General
6. Internal service
7. Investment trust
8. Private purpose truste. Assets held for external government participants in the government’s investment pool for the Special revenue the purpose of earning investment income.
9. Permanent
10. Private purpose trust
f: Gills in which the principal must be invested and preserved but the investment earnings can be used for public purposes.
g. Costs of operating a municipal swimming pool.
h. Grant revenues restricted for particular operating purposes.
i. Assets held in trust to provide retirement benefits for municipal workers.
j. Principal and interest payments on general long term debt.
k. Taxes collected on behalf of another governmental unit.
Aug 29, 2021 | Uncategorized
Multiple Choice. Choose the best answer.
1. When equipment was purchased with General Fund resources, which of the following accounts would have been debited in the General Fund?
a. Expenditures.
b. Equipment.
c. Encumbrances.
d. No entry should be made in the General Fund.
2. The City of Marshall uses the purchases method for recording its inventory of supplies in the General Fund. Rather than using a perpetual inventory system, inventories are updated at year end based on a physical count. Physical inventories were $85,000 and $75,000 at December 31, 2010 and 2011, respectively. The adjusting journal entry on December 31, 2011, will include a:
a. Debit to Inventory of Supplies for $75,000.
b. Debit to Expenditures for $10,000.
c. Credit to Inventory of Supplies for $10,000.
d. Credit to Expenditures for $10,000.
3. Goods for which a purchase order had been placed at an estimated cost of $1,000 were received at an actual cost of $985. The journal entry in the General Fund to record the receipt of the goods will include a:
a. Debit to Reserve for Encumbrances for $1,000.
b. Credit to Vouchers Payable for $985.
c. Debit to Expenditures for $985.
d. All of the above are correct.
4. The City of Fenton levied $3,000,000 of General Fund property taxes for the fiscal year ending December 31, 201 1, with an estimated uncollectible amount of $200,000. During 2011 and January and February of 2012, $2,500,000 of the levy is expected to be collected; however. $300,000 of the levy is not expected to be collected until after February 2012. The amount of property tax revenues to be recognized in FY 2011 is:
a. $3,000,000 in governmental activities at the government wide level and $2,800,000 in the General Fund.
b. $2,800,000 in governmental activities at the government wide level and $2,500,000 in governmental activities at in the General Fund.
c. $2,500,000 in governmental activities at the government wide level and $2,800,000 in governmental activities at in the General Fund.
d. $2,500,000 in governmental activities at the government wide level and $2,500,000 in governmental activities at in the General Fund.
5. Which of the following items would be reported as a program revenue on the government wide statement of activities?
a. Sales taxes.
b. Interest and penalties on taxes.
c. Unrestricted federal grants.
d. Fines and forfeits.
6. Internal exchange transactions in which a governmental fund receives goods or services from an enterprise fund are:
a. Reported as expenditures by the governmental fund and as revenues by the enterprise fund.
b. Reported as interfund transfers out by the governmental fund and as inter fund transfers in by the internal service fund.
c. Reported as expenses by governmental funds and as revenues by the enterprise fund.
d. Either a or b, depending on local policy.
7. Which of the following revenues would be classified as an imposed nonexchange revenue?
a. Sales taxes.
b. Federal and state grants.
c. Property taxes.
d. Income taxes.
8. Which of the following transactions is reported on the government wide financial statements?
a. An interfund loan from the General Fund to a special revenue fund.
b. Equipment used by the General Fund is transferred to an internal service fund that predominantly serves departments that are engaged in governmental activities.
c. The City Airport Fund, an enterprise fund, transfers a portion of boarding fees charged to passengers to the General Fund.
d. An interfund transfer is made between the General Fund and the Debt Service Fund.
9. A special revenue fund that administers a program funded by a reimbursement type (expenditure driven) federal grant should recognize revenue:
a. When notified of grant approval.
b. When qualifying expenditures have been made.
c. When cash is received.
d. When the special revenue fund has paid for all of the services it has provided.
10. A city received a $1,000,000 cash contribution under a trust agreement in which investment earnings (but not the principal amount) can be used to maintain the city cemetery. This contribution should be recorded in a (an):
a. Fiduciary fund.
b. Permanent fund.
c. Special revenue fund.
d. Internal service fund.
Aug 29, 2021 | Uncategorized
Multiple Choice. Choose the best answer.
1. Which of the following correctly states the role of budgeting in proprietary funds?
a. Proprietary fund managers should ensure that a valid appropriation exists before providing goods or services to other funds or departments of the same government.
b. Proprietary fund managers should have discretion to operate within a flexible budget consistent with pricing and other policies established by the legislative body.
c. To ensure that appropriations are not overspent, all proprietary funds should use encumbrance procedures.
d. Expenditures from proprietary funds should not be made unless there is a valid appropriation authorizing the expenditure.
2. Which of the following would most likely be accounted for in an internal service fund?
a. City golf courses.
b. The city’s investments, which are pooled with the county’s and the school district’s investments.
c. An asphalt plant used to supply the asphalt needed to resurface the city’s streets.
d. Proceeds from an endowment that are used to maintain the city’s cemeteries.
3. The Computer Services Department operates as an internal service fund. It has billed the Parks and Recreation Department $3,000 for the services provided by its computer technicians. How would this be shown at the government wide level?
a. It would be an increase in governmental activities expenses of $3,000.
b. It would be an increase in governmental activities internal balances of $3,000.
c. It would be an increase in business type activities revenues of $3,000.
d. There would be no increase in governmental activities.
4. The City of Jenkins operates a central motor pool as an internal service fund for the benefit of the city’s other funds and departments. In 2011, this fund billed the Community Services Department $30,000 for vehicle rentals. What account should the internal service fund use to record these billings?
a. Interfund Transfers In.
b. Interfund Exchanges.
c. Billings to Departments.
d. Cost of Providing Rentals to Other Funds and Units.
5. Which of the following events would generally be classified as nonoperating on an enterprise fund’s statement of revenues, expenses, and changes in net assets?
a. Billing other funds of the same government for services.
b. Loss on the sale of a piece of equipment.
c. Depreciation expense.
d. Administrative expense.
6. During 2011 Darden City reported the following operating receipts from self sustaining activities paid by users of the services rendered:
Operations of water supply plant$4,000,000
Operations of transit system 800,000
What amounts should be reported as operating revenues of Darden’s enterprise funds?
a. $4,800,000.
b. $4,000,000.
c. $800,000.
d. $0.
7. Under GASB standards, which of the following events would be classified as an investing activity on a proprietary fund’s statement of cash flows?
a. Interest earned on certificates of deposit held by the proprietary fund.
b. Purchase of equipment for use by the proprietary fund.
c. Grant received to construct a building that will be used by the proprietary fund.
d. All of the above would be considered investing activities for reporting purposes.
8. The proceeds of tax supported bonds issued for the benefit of an enterprise fund and being serviced by a debt service fund:
a. Should not be reported by the enterprise fund at all.
b. Should be reported in the notes to enterprise fund statements but not in the body of any of the statements.
c. Should be reported in the enterprise fund as long term debt.
d. Should be reported in the enterprise fund as a contribution or interfund transfer in the statement of revenues, expenses, and changes in net assets.
9. During the year an enterprise fund purchased $230,000 worth of equipment. The equipment was acquired with a cash down payment of $23,000 and a $207,000 loan. What is the net effect of this transaction on the net asset accounts of the enterprise fund?
a. Invested in capital assets, net of related debt is increased by $23,000.
b. Invested in capital assets, net of related debt is increased by $230,000.
c. Invested in capital assets, net of related debt is increased by $207,000.
d. Invested in capital assets, net of related debt is decreased by $207,000.
10. The financial statements required by GASB for a proprietary fund are:
a. Balance sheet and statement of revenues, expenditures, and changes in net assets.
b. Balance sheet; statement of revenues, expenditures, and changes in fund balance: statement of cash flows.
c. Statement of net assets: statement of revenues, expenses, and changes in fund net assets; statement of cash flows.
d. Balance sheet and statement of revenues, expenses, and changes in retained earnings.
Aug 29, 2021 | Uncategorized
Recording Adopted Budget. The City of Marion adopted the following General Fund budget for fiscal year 2011:
Estimated revenues:
Taxes…………………………….…………$3,000,000
Intergovernmental revenues…….…………. 1,000,000
Licenses and permits…………….………… 400,000
Fines and forfeits………………..…………. 150,000
Miscellaneous revenues………….………… 100,000
Total estimated revenues……………………$4,650,000
Appropriations ions:
General government………………………..$ 950.000
Public safety……………………………….2,000,000
Public works………………………………. 950,000
Health and welfare………………………… 850,000
Miscellaneous……………………………… 50,000
Total appropriations……………………….. $4,800,000
Required
a. Assuming that a city ordinance mandates a balanced budget, what must be the minimum amount in the Fund Balance account of the General Fund at the beginning of FY 2011?
b. Prepare the general journal entries to record the adopted budget at the beginning of FY 2011. Show entries in the subsidiary ledger accounts as well as the general ledger accounts.
Aug 29, 2021 | Uncategorized
Research Case—Governmental or Not for Profit Entity? In partnership with Jefferson County and the Mound City Visitor’s Bureau, Mound City recently established a Native American Heritage Center and Museum, organized as a tax exempt not for profit organization. Although the facility does not charge admission, signs at the information desk in the entry lobby encourage gifts of $3.00 for adults and $1.00 for children, 12 and under. Many visitors make the recommended contribution, some contribute larger amounts, and some do not contribute at all. Such contributions comprise 40 percent of the museum’s total annual revenues, with net proceeds from fund raising events and governmental grants comprising the remaining 60 percent. The center operates from a city owned building for which it pays a nominal $1 per year in rent. Except for a full time executive director and a part time assistant, the center is staffed by unpaid volunteers. The center is governed by a seven member board of directors, each appointed for a three year term. Four of the directors are appointed by the Mound City Council, t by the Jefferson County Commission, and one by the Mound City Visitor’s Bureau. Should the center cease to operate, its charter pro sides that 60 percent of its net assets will revert to the city, 25 percent to the county, and 15 percent to the Visitor’s Bureau.
At the end of its first year of operation, the board of directors decided to engage a local CPA to conduct an audit of the center’s financial statements. The board expects to receive an unqualified clean) audit opinion stating that its financial statements are presented fairly in conformity with generally accepted accounting principles.
Required
Assume you are the CPA who has been engaged to conduct this audit. To which standards setting body for bodies) would you look for accounting and financial reporting standards to assist you in determining whether the center’s financial statements are in conformity with generally accepted accounting principles? Explain how you arrived at this conclusion.
Aug 29, 2021 | Uncategorized
Serial Bond Debt Service Fund Journal Entries and Financial Statements. As of December 31, 2010, New Town had $9,500,000 in 4.5 percent serial bonds outstanding. Cash of $509,000 is the debt service fund’s only asset as of December 31, 2010, and there are no liabilities. The serial bonds pay interest semiannually on January 1 and July 1, with $500,000 in bonds being retired on each interest payment date. Resources for payment of interest are transferred from the General Fund and the debt service fund levies property taxes in an amount sufficient to cover principal payments.
Required
a. Prepare debt service fund and government wide entries in general journal form to reflect, as necessary, the following information and transactions for FY 2011.
(1) The operating budget for FY 2011 consists of estimated revenues of $1,020,000 and estimated other financing sources equal to the amount of interest to be paid in FY 2011. Appropriations must be provided for interest payments and bond redemptions on January 1 and July 1.
(2) Cash was received from the General Fund and checks were written and mailed for the January 1 principal and interest payments.
(3) Property taxes in the amount of $1,020,000 were levied (no estimate for uncollectible accounts has been made).
(4) Property taxes in the amount of $1,019,000 were collected.
(5) Cash was received from the General Fund and checks were written and mailed for the July 1 principal and interest payments.
(6) Adjusting entries were made and uncollected taxes receivable were reclassified as delinquent. At the hind level, entries were also made to close budgetary and operating statement accounts. (Ignore closing entries in the government activities journal.)
b. Prepare a statement of revenues, expenditures, and changes in fund balances for the debt service fund for the year ended December 31, 2011.
c. Prepare a balance sheet for the debt service fund as of December 31, 2011.
Aug 29, 2021 | Uncategorized
Special Revenue Fund, Voluntary Nonexchange Transactions. The City of Eldon applied for a competitive grant from the state government for park improvements such as upgrading hiking trails and bike paths. On May 1, 2011, the City was notified that it had been awarded a grant of $200,000 for the program, to be received in two installments on July 1, 2011, and July 1, 2012. The grant stipulates that $100,000 is for use in each of the city’s fiscal years ending June 30. 2012, and June 30, 2013. Any amounts not expended during FY 2012 can be carried over for use in FY 2013. During FY 2012, the city expended $90,000 for park improvements from grant resources.
Required
For the special revenue fund, provide the appropriate journal entries, if any that would be made for the following:
1. May 1, 2011, notification of grant approval.
2. July 1, 2011, receipt of first installment of the grant.
3. During FY 2011 to record expenditures under the grant.
4. July 1, 2012.
Aug 29, 2021 | Uncategorized
Statement of Cash Flows for Proprietary Funds From the right hand column, choose the letter that corresponds to the section of the statement of cash flows where the activity listed in the left hand column would be reported.
ActivitiesCash Flow Section
1. Interest earned on investmentsA. Operating Activities
2. Grants received from the state for summer internsB. Noncapital Financing Activities
3. Payments to vendorsC. Capital & Related Financing Activities
4. Receipts from customersD. Investing Activities
5. Interest paid on construction loans
6. Sale of equipment
7. Transfers to the General Fund
8 Receipts from the General Fund for service provided
9. Purchase of treasury notes
10. Payment of debt principal
Aug 29, 2021 | Uncategorized
Statement of Legal Debt Margin. In preparation for a proposed bond sale, the city manager of the City of Appleton requested that you prepare a statement of legal debt margin for the city as of December 31, 2010. You ascertain that the following bond issues are outstanding on that date:
Convention center bonds……………..……$3,600,000
Electric utility bonds………………….…… 2,700,000
General obligation serial bonds…………… 3,100,000
Tax increment bonds…………………..….. 2,500,000
Water utility bonds………………………… 1,900,000
Transit authority bonds…………….….…… 2,000,000
You obtain other information that includes the following items:
1. Assessed valuation of real and taxable personal property in the city totaled $240,000,000.
2. The rate of debt limitation applicable to the City of Appleton was 8 percent of total real and taxable personal property valuation.
3. Electric utility, water utility, and transit authority bonds were all serviced by enterprise revenues, but each carries a full faith and credit contingency provision. By law, such self supporting debt is not subject to debt limitation.
4. The convention center bonds and tax increment bonds are subject to debt limitation.
5. The amount of assets segregated for debt retirement at December 31, 2010, is $1,800,000.
Aug 29, 2021 | Uncategorized
Tax Agency Fund. The county collector of Lincoln County is responsible for collecting all property taxes levied by funds and governments within the boundaries of the county. To reimburse the county for estimated administrative expenses of operating the tax agency fund, the agency fund deducts 1 percent from the collections for the town, the school district, and the townships. The total amount deducted is added to the collections for the county and remitted to the Lincoln County General Fund.
The following events occurred in 2011:
1. Current year tax levies to be collected by the agency fund were:
County General Fund$2,752,000
Town of Smithton General Fund 4,644,000
Lincoln Co. Consolidated School District 7,912,000
Various townships 1,892,000
Total $17,200,000
2. $8,400,000 of current taxes was collected during the first half of 2011.
3. Liabilities to all funds and governments as the result of the first half year collections were recorded. (A schedule of amounts collected for each participant. showing the amount withheld for the county General Fund and net amounts due the participants. is recommended for determining amounts to be recorded for this transaction.)
4. All money in the tax agency fund was distributed.
Required
a. Make journal entries for each of the foregoing transactions that affected the tax agency fund.
b. Make journal entries for each of the foregoing transactions that affected the Lincoln County General Fund. Begin with the tax levy entry, assuming 3 percent of the gross levy will be uncollectible.
c. Make journal entries for each of the foregoing entries that affected the Town of Smithton General Fund. Begin with the tax levy entry, assuming 3 percent of the gross levy will be uncollectible.
d. Which financial statements would be prepared by the tax agency fund?
Aug 29, 2021 | Uncategorized
Zebra Imaginarium, a retail business, had the following cash receipts during December 20 . The sales tax is 6%.
Dec. 1 Received payment on account from Michael Anderson, $1,360.
2 Received payment on account from Ansel Manufacturing, $382.
7 Made cash sales for the week, $3,160, plus tax. Bank credit card sales for the week, $1,000, plus tax. Bank credit card fee is 3%.
8 Received payment on account from J. Gorbea, $880.
11 Michael Anderson returned merchandise for a credit, $60, plus tax.
14 Made cash sales for the week, $2,800, plus tax. Bank credit card sales for the week, $800, plus tax. Bank credit card fee is 3%.
20 Received payment on account from Tom Wilson, $1,110.
21Ansel Manufacturing returned merchandise for a credit, $22, plus tax.
21 Made cash sales for the week, $3,200, plus tax.
24 Received payment on account from Rachel Carson, $2,000.
Beginning general ledger account balances were as follows:
Cash ………………………. $9,862
Accounts Receivable ………. 9,352
Beginning customer account balances were as follows:
M. Anderson ……………… $2,480
Ansel Manufacturing …………. 982
J. Gorbea ………………………. 880
R. Carson …………………… 3,200
T. Wilson …………………… 1,810
REQUIRED
1. Record the transactions in the cash receipts journal. Total and verify column totals and rule the columns. Use the general journal to record sales returns and allowances.
2. Post from the journals to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
During 2011, the following transactions were recorded by the Baton Rouge Community Hospital, a private sector, not for profit institution.
1. Gross charges for patient services, all charged to Patient Accounts Receivable, amounted to $1,200,000. Contractual adjustments with third party payors amounted to $300,000.
2. Charity services, not included in transaction 1, would amount to $100,000, had billings been made at gross amounts.
3. Other revenues, received in cash, were parking lot, $20,000; cafeteria, $15,000; gift shop, $5,000.
4. Cash gifts for cancer research amounted to $20,000 for the year. During the year, $35,000 was expended for cancer research technicians salaries (Debit Operating Expense—Salaries and Benefits).
5. Mortgage bond payments amounted to $50,000 for principal and $40,000 for interest. Assume unrestricted resources are used.
6. During the year, the hospital received, in cash, unrestricted contributions of $40,000 and unrestricted income of $60,000 from endowment investments. (It is the hospital’s practice to treat unrestricted gifts as non operating income.)
7. New equipment, costing $120,000, was acquired, using donor restricted cash that was on hand at the beginning of the year. Baton Rouge’s policy is to record all equipment in the unrestricted net asset class.
8. An old piece of lab equipment that originally cost $50,000 and that had an un depreciated cost of $10,000 was sold for $8,000 cash.
9. Pledges made in 2011 for use in 2012 that were unrestricted as to purpose were collected in the amount of $80,000. The $80,000 had been recorded in the Temporarily Restricted Net Asset Class. At the end of 2012, pledges received in the amount of $120,000 are intended to be paid and used for unrestricted purposes in 2013.
10. Cash contributions were received as follows: temporarily restricted for purposes other than plant, $40,000; temporarily restricted for plant acquisition, $30,000.
11. Bills totaling $200,000 were received for the following items:
Utilities……………120,000
Insurance……………80,000
12. Depreciation of plant and equipment amounted to $70,000.
13. Cash payments on vouchers payable amounted to $180,000. Another
$800,000 was expended on wages and benefits. Cash collections of patient accounts receivable amounted to $1,080,000.
14. Closing entries were prepared.
a. Record the transactions in the general journal of the Baton Rouge Community Hospital.
b. Prepare, in good form, a Statement of Operations for the Baton Rouge
Community Hospital for the year ended December 31, 2012.
Aug 29, 2021 | Uncategorized
Gift Shop UBIT. A local exempt organization that trains at risk youth for employment has an annual operating budget of $300,000, which includes revenue from operating a gift shop in a nearby hotel lobby. Gift shop sales result in a profit of $15,000. The organization has $6,500 of endowment income that it earns on permanently restricted net assets. The income from both the gift shop and the endowment is used to support the organization’s exempt purpose. The balance of $278,500 required for annual operations is provided through public support and charges for services.
Required
a. Calculate the UBIT if the corporate tax rate is 15 percent on the first $50,000 of net income and 25 percent on the next $25,000 of income.
b. Assume that the endowment income is reinvested rather than being used to support annual operations. Calculate the amount of unrelated business income.
Aug 29, 2021 | Uncategorized
Joint Activities with a Fund Raising Appeal. Consider the following scenarios relating to activities that include a fund raising appeal:
1. The Green Group’s mission is to protect the environment by increasing the portion of waste recycled by the public. The group conducts a door to door canvass of communities that recycle a low portion of their waste. The canvassers share their knowledge about the environmental problems caused by not recycling with households, asking them to change their recycling habits. The canvassers also ask for charitable contributions to continue this work, although these canvassers have not participated in fund raising activities before.
2. Central University’s mission is to educate students in various academic pursuits. The political science department holds a special lecture series in which prominent world leaders speak about current events. Admission is priced at $250, which is above the $50 fair value of other lectures on campus, resulting in a $200 contribution. Invitations are sent to previous attendees and donors who have contributed significant amounts in the past.
3. The mission of Kid’s Camp is to provide summer camps for economically disadvantaged youths. It conducts a door to door solicitation campaign for its camp programs by sending volunteers to homes in upper class neighborhoods. The volunteers explain the camp’s programs and distribute leaflets explaining the organization’s mission. Solicitors say, ?oAlthough your own children most likely are not eligible to attend this camp, we ask for your financial support so that children less fortunate can have this summer camp experience.??
Required
Determine for each scenario whether its purpose, audience, and content meet the criteria described in this chapter and Chapter 13 of the AICPA, Audit and Accounting Guide. Not For Profit Organizations so that the joint costs can be allocated between programs and support expenses. Explain your reasons.
Aug 29, 2021 | Uncategorized
Multiple Choice. Choose the best answer.
The organization assigned primary responsibility for establishing accounting and financial reporting standards for health care organizations is the:
a. American Institute of CPAs (AICPA),
b. Financial Accounting Standards Board (FASB for for profit and nongovernmental not for profit health care organizations.
c. Governmental Accounting Standards Board (GASB) for governmental health care organizations.
d. Both b and c are correct.
2. A not for profit hospital would present all of the following financial statements, except a:
a. Balance sheet or statement of financial position.
b. Statement of functional expenses.
c. Statement of operations.
d. Statement of cash flows.
3 of the following is a true statement regarding a performance indicator?
a. All health care organizations are required to report a performance indicator.
b. Only governmental health care organizations are required to report a performance indicator.
c. The purpose of reporting a performance indicator is to make it easier to compare the results of operations of not for profit health care organizations to those of for profit health care organizations.
d. The purpose of reporting a performance indicator is to assist in evaluating the efficiency and effectiveness of a health care organization’s operating activities.
4. Which of the following is nor a correct statement about the statement of cash flows presented by a health care organization?
a. Governmental health care organizations must report cash flows from operating activities using the direct method.
b. For profit and not for profit health care organizations may report cash flows from operating activities using either the direct or indirect method.
c. All health care organizations report acquisition of capital assets in the cash flows from investing activities section of the statement of cash flows.
d. All of the above are correct statements.
5. How should charity service be reported in the operating statement?
a. Receivables and revenues should hot be reported for these services.
b. Receivables and revenues should be reported at the regular self pay amount.
c. Receivables and revenues should be reported at the regular self pay amount, less the estimated cost of collection efforts.
d. None of the above.
6. Contractual adjustments are reported as:
a. Additions to the cost of providing medical services.
b. Reductions to receivables and revenue for medical services provided to insured patients.
c. Reductions to receivables and revenues for charity care medical services.
d. Contingent liabilities.
7. Assets that are set aside under a bond covenant for future debt service payments are reported by a not for profit health care organization as:
a. Assets limited as to use.
b. Temporarily restricted net assets.
c. Restricted for debt service.
d. Assets held by trustee.
8. Fees received by a hospital for medical record transcripts should be reported as:
a. Patient service revenue.
b. Administrative service revenue.
c. Other revenue.
d. Nonoperating gains.
9. A governmental health care organization, depending on its legal form, may be required to prepare which of the following financial statements?
a. Statement of revenues, expenses, and changes in net assets.
b. Statement of revenues, expenditures, and changes in fund balances.
c. Statement of cash flows.
d. All of the above.
10. Which of the following would be most useful for evaluating the financial liquidity of a not for profit health care organization?
a. Current ratio.
b. Debt to capitalization.
c. Capital expense.
d. Debt services coverage.
Aug 29, 2021 | Uncategorized
On January 1, 2012, a foundation made a pledge to pay $30,000 per year at the end of each of the next five years to the Cancer Research Center, a nonprofit voluntary health and welfare organization as a salary supplement for a well known researcher. On December 31, 2012, the first payment of $30,000 was received and paid to the researcher.
1. On the books of the Cancer Research Center, record the pledge on January 1 in the temporarily restricted asset class, assuming the appropriate discount rate is 5 percent on an annual basis. The appropriate discount factor is 4.33.
2. Record the increase in the present value of the receivable in the temporarily restricted net asset class as of December 31.
3. Record the receipt of the first $30,000 on December 31 and the payment to the researcher. Indicate in which asset class (unrestricted, temporarily restricted) each account is recorded.
Aug 29, 2021 | Uncategorized
On January 1, the Voluntary Action Agency received a cash contribution of $300,000 restricted to the purchase of buses to be used in transporting senior citizens. On January 2 of that same year, buses were purchased with the $300,000 cash. The buses are expected to be used for five years and have no salvage value at the end of that time.
1. Record the journal entries on January 1, January 2, and December 31 for the receipt of cash, the purchase of buses, and one year’s depreciation, assuming that plant assets are recorded as unrestricted assets at the time of purchase.
2. Record the journal entries on January 1, January 2, and December 31 for the receipt of cash, the purchase of buses, and one year’s depreciation, assuming that plant assets purchased with restricted resources are recorded as temporarily restricted assets at the time of purchase and reclassified in accord with the depreciation schedule.
3. Compute the amount that would be included in net assets (after closing the books on December 31) for
(a) Unrestricted net assets and
(b) Temporarily restricted net assets under requirements 1 and 2. What incentives might exist for the Voluntary Action Agency to choose either alternative?
Aug 29, 2021 | Uncategorized
Performance Measures. Information from the Form 990 for the American Heart Association for the fiscal year ending June 30, 2007, follows.
Required
a. Compute the following performance measures using the Form 990 data presented in this exercise and comment on what information they convey to a potential donor without comparing them to prior years or other comparable agencies.
1. Current ratio—liquidity.
2. Revenues/expenses—going concern.
3. Program expenses/total expenses—program effectiveness.
4. Public support/fund raising expenses—fund raising efficiency.
5. Investment performance.
b. Obtain the audited annual financial statement for the American Heart Association for fiscal year 2007 from www.americanheart.org (or Illustrations14—2 and 14—3 in this text). Calculate the same ratios listed in requirement
a. Comment on any differences.
c. Discuss the advantages of analyzing financial performance using audited annual financial statement information versus IRS Form 990 information.
Aug 29, 2021 | Uncategorized
Private College Transactions. Elizabeth College, a small private college, had the following transactions in fiscal year 2011.
1. Billings for tuition and fees totaled $5,600,000. Tuition waivers and scholarships of $61,500 were granted. Students received tuition refunds of $101,670.
2. During the year the college received $1,891,000 cash in unrestricted private gifts, $575,200 cash in temporarily restricted grants, and $1,000,000 in securities for an endowment.
3. A pledge campaign generated $626,000 in unrestricted pledges, payable in fiscal year 2012.
4. Auxiliary enterprises provided goods and services that generated $94,370 in cash.
5. Collections of tuition receivable totaled $5,380,000.
6. Unrestricted cash of $1,000,000 was invested.
7. The college purchased computer equipment at a cost of $10,580.
8. During the year the following expenses were paid:
Instruction $3,866,040
Academic support 1,987,000
Student services 87,980
Institutional support 501,130
Auxiliary enterprises 92.410
9. Instruction provided $450,000 in services related to the temporarily restricted grant recorded in transaction 2.
10. At year end, the allowance for uncollectible tuition and fees was increased by $7200. The fair value of investments had increased $11,540; of this amount, $3,040 was allocated to permanently restricted net assets the remainder was allocated to unrestricted net assets. Depreciation on plant and equipment was allocated $34,750 to instruction, $41,000 to auxiliary enterprises, and $12,450 to academic support.
11. All nominal accounts were closed.
Required
a. Prepare journal entries in good form to record the foregoing transactions for the fiscal year ended June 30, 2011.
b. Prepare a statement of activities for the year ended June 30, 2011, Assume beginning net asset amounts of $7,518,000 unrestricted. $200,000 temporarily restricted, and $5,000,000 permanently restricted.
Aug 29, 2021 | Uncategorized
Record the following transactions on the books of Hope Hospital, which follows FASB and AICPA standards. The year is 2012.
1. Hope received $135,000 in cash from pledges made in 2011 that were unrestricted as to purpose but intended to be expended in 2012.
2. Hope received $150,000 in pledges that indicated the money was to be paid in 2013 and used in that year for any purpose desired by the board.
3. Hope expended $37,000 for nursing training, using $30,000 of temporarily restricted resources that had been given in 2011 for that purpose.
4. Hope received $40,000, restricted by the donor for cancer research. The funds were not expended in 2012.
5. Hope received $50,000 in cash. The board decided to invest the funds for future plant expansion.
Aug 29, 2021 | Uncategorized
Revenue and Related Transactions. During its current fiscal year, Dearborn General Hospital, a not for profit health care organization, had the following revenue related transactions (amounts summarized for the year).
1. Services provided to inpatients and outpatients amounted to $9,600,000, of which $450,000 was for charity care, $928,000 was paid by uninsured patients, and $8,222,000 was billed to Medicare, Medicaid, and insurance companies.
2. Pharmaceutical drugs sold by the hospital pharmacy amounted to $970,000, all of which was paid by customers or insurance.
3. Medicare, Medicaid, and third party payors (insurance companies) approved and paid $5,365,000 of the $8,222,000 billed by the hospital during the year (see transaction 1).
4. An unconditional contribution of $5,000,000 was received in cash from a donor to construct a new facility for care of Alzheimer’s patients. The frill amount is expendable for that purpose. No activity occurred on this project during the current year.
5. A total of $840,000 was received from the following activities/sources: cafeteria and gift shop sales. $71 0.000: unrestricted transfers from the Dearborn General Hospital Foundation. $75,000: and fees for medical transcripts, $55,000.
6. The allowance for uncollectible receivables was increased by $1,200.
Required
a. Record the preceding transactions in general journal form.
b. Prepare the unrestricted revenues, gains, and other support section of Dearborn General Hospital’s statement of operations for the current year, following the format in Illustration 17 4.
c. On which statement would restricted contributions be reported? Explain.
Aug 29, 2021 | Uncategorized
Revenue Classifications. Rosemont Hospital, a not for profit hospital, recorded the following transactions. For each transaction, indicate the appropriate revenue or gain classification by selecting the letter or letters of that (those) classification(s) from the list in the right hand column.
1. Received $100 as co pay from a. Patient service revenue
a patient for an out patient visit.b. Contractual adjustments
Billed $500 to insurance. c. Other revenue
2. Gift shop sales amounted to $ 1,500. d. Nonoperating gain
3. Citizen’s Health Insurance paid $350 e. Contribution revenue
as final payment on the $500 billedf. No revenue or gain
for the patient in transaction 1.
4. The hospital provided medical care valued at
$20,000 for homeless citizens.
5. A grateful patient contributed $1,000 for
unrestricted use by the hospital.
6. The hospital received $500 for CPR training
it provided to the city fire department.
7. The hospital sold $45,000 of prescription medications
from its pharmacy.
8. Pharmaceutical firms donated recently approved drugs valued
at $8,000. The hospital would not have purchased these drugs had they not been donated.
Aug 29, 2021 | Uncategorized
The City of Grinders Switch maintains its books so as to prepare fund accounting statements and records worksheet adjustments in order to prepare government wide statements. You are to prepare, in journal form, worksheet adjustments for each of the following situations.
1. General fixed assets as of the beginning of the year, which had not been recorded, were as follows:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 7,250,000
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . 32,355,000
Improvements Other Than Buildings . . . . 16,111,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 11,554,000
Accumulated Depreciation, Capital Assets 14,167,000
2. During the year, expenditures for capital outlays amounted to $6,113,000. Of that amount, $4,321,000 was for buildings; the remainder was for improvements other than buildings.
3. The capital outlay expenditures outlined in (2) were completed at the end of the year (and will begin to be depreciated next year). For purposes of financial statement presentation, all capital assets are depreciated using the straight line method, with no estimated salvage value. Estimated lives are as follows: buildings, 40 years; improvements other than buildings, 20 years; and equipment, 10 years.
4. In the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances, the City reported proceeds from the sale of land in the amount of $600,000. The land originally cost $535,000.
5. At the beginning of the year, general obligation bonds were outstanding in the amount of $4,000,000. Unamortized bond premium amounted to $40,000. Note: This entry is not covered in the text, but is similar to entry 9 in the chapter.
6. During the year, debt service expenditures for the year amounted to: interest, $580,000; principal, $400,000. For purposes of government wide statements, $4,000 of the bond premium should be amortized. No adjustment is necessary for interest accrual.
7. At year end, additional general obligation bonds were issued in the amount of $1,200,000, at par.
Aug 29, 2021 | Uncategorized
The City of South Pittsburgh maintains its books so as to prepare fund accounting statements and records worksheet adjustments in order to prepare government wide statements. You are to prepare, in journal form, worksheet adjustments for each of the following situations:
1. Deferred property taxes of $89,000 at the end of the previous fiscal year were recognized as property tax revenue in the current year’s Statement of Revenues, Expenditures, and Changes in Fund Balance.
2. The City levied property taxes for the current fiscal year in the amount of $10,000,000. When making the entries, it was estimated that 2 percent of the taxes would not be collected. At year end, $600,000 of the taxes had not been collected. It was estimated that $300,000 of that amount would be collected during the 60 day period after the end of the fiscal year and that $100,000 would be collected after that time. The City had recognized the maximum of property taxes allowable under modified accrual accounting.
3. In addition to the expenditures recognized under modified accrual accounting, the City computed that $250,000 should be accrued for compensated absences and charged to public safety.
4. The City’s actuary estimated that the annual required contribution (ARC) under the City’s public safety employees pension plan is $229,000 for the current year. The City, however, only provided $207,000 to the pension plan during the current year.
5. In the Statement of Revenues, Expenditures, and Changes in Fund Balances, General Fund transfers out included $500,000 to a debt service fund, $600,000 to a special revenue fund, and $900,000 to an enterprise fund.
Aug 29, 2021 | Uncategorized
The Evangelical Private School follows FASB standards of accounting and reporting. Record the following transactions during the year ended June 30, 2012.
1. Cash contributions were received as follows:
(a) $1,200,000 for any purpose desired by the school,
(b) $500,000 for salary supplements for school faculty,
(c) $300,000 to be used during the next fiscal year in any manner desired by the school,
(d) $600,000 for the construction of a new auditorium, and
(e) $700,000 to be invested permanently, with the income to be used as desired by the school. The school’s policy is to record all restricted gifts as temporarily restricted and then reclassify when the restriction is lifted.
2. The school expended $400,000 of the $1,200,000 mentioned in 1(a) for school furniture. Record the plant as unrestricted.
3. The school expended the $470,000 for salary supplements as directed by the donor in 1(b).
4. The $300,000 in 1(c) was retained for use next year, as directed by the donor.
5. $650,000 was expended for the construction of the new auditorium. School policy is to record all plant as unrestricted.
6. The $700,000 mentioned in 1(e) was invested permanently, as directed by the donor, and in the year ended June 30, 2012, earned $16,000, none of which was expended.
Aug 29, 2021 | Uncategorized
The Folpe Museum Association, a nonprofit organization, had the following transactions for the year ended December 31, 2012.
1. Cash contributions to the Association for the year included
(a) Unrestricted, $1,100,000;
(b) Restricted for traveling displays, $350,000;
(c) Restricted by the donor for endowment purposes, $1,400,000; and
(d) Restricted by the donor for equipment, $500,000.
2. Additional unrestricted cash receipts included
(a) Admission charges, $300,000;
(b) Interest income, $210,000; and
(c) Tuition for museum school, $50,000.
3. Donors made pledges in 2012 in a pledge drive specifically for funds to be used in 2013. The amount was $400,000.
4. A multiyear pledge (temporarily restricted) was made at the end of the year by a private foundation. The foundation pledged $50,000 per year for the next five years (at the end of each year). The present value (rounded) of those future payments is $211,000, using a 6 percent discount rate.
5. $195,000 in funds restricted for traveling displays was expended during 2012.
6. The Museum Association had $150,000 in pledges in 2011 that was intended by the donors to be expended in 2012. The cash was received in 2012. (Expenses are included in transaction 8.)
7. $575,000 in cash previously restricted for equipment purchases was expended in 2012. The Museum Association records all equipment in the unrestricted class of net assets.
8. In addition to the amount expended in transaction 5, expenses (paid in cash) amounted to
(a) Museum displays, $1,300,000;
(b) Museum school, $90,000;
(c) Management and general, $350,000;
(d) Fundraising, $250,000; and
(e) Membership development, $200,000.
9. Depreciation on museum fixed assets amounted to:
(a) $40,000 for museum displays,
(b) $7,000 for museum school,
(c) $12,000 for management and general,
(d) $4,000 for fund raising, and
(e) $4,000 for membership development.
Required:
a. Prepare journal entries to record these transactions, including closing entries. Prepare a Statement of Activities for the Folpe Museum Association for the year ended December 31, 2012. Use the format in the text. The beginning net asset balances were unrestricted, $400,000; temporarily (time) restricted, $150,000; and permanently restricted, $3,500,000.
b. The Museum School program expenses are substantially larger than its revenues. Do you recommend that the program be discontinued?
Aug 29, 2021 | Uncategorized
The fund basis financial statements of Jefferson County have been completed for the year 2012 and appear in the first tab of the Excel spreadsheet provided with this exercise. The following information is also available:
a. Capital Assets
?c Capital assets purchased in previous years through governmental type funds totaled $752,000 (net of accumulated depreciation) as of January 1, 2012.
?c Depreciation on capital assets used in governmental type activities amounted to $79,500 for 2012.
?c No capital assets were sold or disposed of in 2012 and all purchases are properly reflected in the fund basis statements as capital expenditures.
b. Long term Debt
?c There was no outstanding long term debt associated with governmental type funds as of January 1, 2012.
?c April 1, 2012, 6 percent bonds with a face value of $700,000 were issued in the amount of $720,000. Bond payments are made on October 1 and April 1 of each year. Interest is based on an annual rate of 6 percent and principal payments are $17,500 each. The first payment (interest and principal) was made on October 1.
?c Amortization of the bond premium for the current year is $1,000.
c. Deferred Revenues
?c Deferred revenues (comprised solely of property taxes) are expected to be collected more than 60 days after year end. The balance of deferred taxes at the end of 2011 was $18,200.
d. Transfers
?c Transfers were between governmental type funds.
e. Internal Service Fund
?c The (motor pool) internal service fund’s revenue is predominantly derived from departments classified as governmental type activities.
?c There were no amounts due to the internal service fund from the General Fund. The outstanding balance of ?odue to other funds?? was with the Enterprise Fund and is not capital related.
?c The enterprise fund provided a long term advance to the internal service fund (not capital related).
Required:
Use the Excel template provided to complete the following requirements; a separate tab is provided in Excel for each of these steps.
1. Prepare the journal entries necessary to convert the governmental fund financial statements to the accrual basis of accounting.
2. Post the journal entries to the conversion worksheet provided.
3. Prepare a government wide Statement of Activities and Statement of Net Assets for the year 2012. All of the governmental fund revenues are ?ogeneral revenues.??
This is an involved problem, requiring many steps. Here are some hints.
a. Tab 1 is information to be used in the problem. You do not enter anything here.
b. After you make the journal entries (Tab 2), post these to the worksheet to convert to the accrual basis. This worksheet is set up so that you enter debits as positive numbers and credits as negative. After you post your entries, look at the numbers below the total credit column to see that debits equal credits. If not, you probably entered a credit as a positive number.
c. Make sure that total debits equal total credits in the last column (balances for government wide statements).
d. When calculating Restricted Net Assets, recall that permanent fund principal is added to restricted fund balances.
Aug 29, 2021 | Uncategorized
The fund basis financial statements of the City of Cottonwood have been completed for the year 2012 and appear in the first tab of the Excel spreadsheet provided with this exercise. In addition, the Statement of Net Assets from the previous fiscal year is provided and should be used to determine beginning balances for accounts not appearing in the fund basis statements. The following information is also available:
a. Capital Assets:
?c Capital assets purchased by governmental funds are charged to capital expenditure and do not appear as assets in the fund basis balance sheet. However, the balance is reflected in the statement of net assets in the government wide financial statements.
?c Depreciation on capital assets used in governmental type activities amounted to $2,450,000 for 2012.
?c No capital assets were sold or disposed of in 2012, and all purchases are properly reflected in the fund basis statements as capital expenditures.
b. Long term debt
?c Proceeds from bonds issued by governmental funds are reflected in other financing sources and do not appear as liabilities in the fund basis balance sheet. Payments of principal are recognized as expenditures when due. The balance of outstanding bonds balance is reflected in the statement of net assets in the government wide financial statements.
?c Interest is recognized in the fund basis statements only when payment is due. Interest accrued but not yet payable amounted to $107,500 at December 31, 2012. Interest accrued for purposes of the government wide statements in 2011 has been paid and is reflected in interest expenditure in 2012.
?c There are no bond discounts or premiums.
c. Deferred Revenues
?c Deferred revenues are comprised solely of property taxes expected to be collected more than 60 days after year end. The balance of deferred taxes at the end of 2011 was $128,200 and was recognized as revenue in the fund basis statements in 2012.
d. The City accounts for its solid waste landfill in the General Fund (public works department). The estimated liability for closure and post closure care costs as of December 31, 2012, is $1,580,900 and appears only in the government wide statements.
e. Transfers
?c During the year, the General Fund transferred cash to the courthouse renovation, debt service, and enterprise funds.
f. The City does not operate any Internal Service Funds.
g. When entering amounts in the Statement of Activities, Charges for Services Revenue in the governmental funds is attributable to the following functions:
General Government . . . . . . . . . . . . . . . $1,144,018
Judicial Administration . . . . . . . . . . . . . 56,497
Public Safety . . . . . . . . . . . . . . . . . . . . . 275,492
Parks and Recreation . . . . . . . . . . . . . . . 604,359
Community Development . . . . . . . . . . . 51,611
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,131,977
Required:
Use the Excel template provided to complete the following requirements; a separate tab is provided in Excel for each of these steps.
1. Prepare the journal entries necessary to convert the governmental fund financial statements to the accrual basis of accounting.
2. Post the journal entries to the conversion worksheet provided.
3. Prepare a government wide Statement of Activities and Statement of Net Assets for the year 2012.
This is an involved problem, requiring many steps. Here are some hints.
a. Tab 1 is information to be used in the problem. You do not enter anything here.
b. After you make the journal entries (Tab 2), post these to the worksheet to convert to the accrual basis. This worksheet is set up so that you enter debits as positive numbers and credits as negative. After you post your entries, look at the numbers below the total credit column to see that debits equal credits. If not, you probably entered a credit as a positive number.
c. Make sure that total debits equal total credits in the last column (Balances for government wide statements).
d. When calculating Restricted Net Assets, recall that permanent fund principal is added to restricted fund balances.
Aug 29, 2021 | Uncategorized
Various Unrelated Transactions. Following are several unrelated transactions involving a university.
1. In fiscal year 2011, the university was notified by the federal government that in 2012 it would receive a $500,000 grant for wetlands research.
2. The university received $234,000 in contributed services from nurses providing services in its community outreach clinics. The services were part of the regular operation of the clinics.
3. During the year, the university constructed a new street, to allow for the expansion of its student housing efforts. The cost of the street was $1,980,000.
4. The university extended $325,000 in loans to students. During the year, $196,000 in loans was collected, along with $2,450 in interest.
5. At year end the Allowance for Doubtful Accounts was increased by $1,670.
Required
a. Prepare journal entries to record the foregoing transactions, assuming the university is a private institution.
b. Prepare journal entries to record the foregoing transactions, assuming the university is a public institution.
Aug 29, 2021 | Uncategorized
J. K. Pratt Co. had the following transactions:
20 1
July 20 Received a $750, 30 day, 10% note from J. Akita in payment for sale of merchandise.
Aug. 19 J. Akita paid note issued July 20 plus interest.
25 Sold merchandise on account to L. Beene, $1,100.
Sept. 5 L. Beene paid $100 and gave a $1,000, 30 day, 12% note to extend time for payment.
Oct. 5 L. Beene paid note issued September 5, plus interest.
10 Sold merchandise to R. Harris for $750: $50 plus a $700, 30 day, 11% note.
Nov. 9 R. Harris paid $200 plus interest on note issued October 10 and extended the note ($500) for 30 days.
Dec. 9 R. Harris paid note extended on November 9, plus interest.
10 Sold merchandise on account to B. Kraus, $1,500.
15 B. Kraus paid $150 on merchandise purchased on account, and gave a $1,350, 30 day, 12% note to extend time for payment.
20 2
Jan. 14 B. Kraus’s note of December 15 is dishonored.
Feb. 13 Collected B. Kraus’s dishonored note, plus interest at 12% on the maturity value.
REQUIRED
Record the transactions in a general journal.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Water Tech Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers.
July 1. Sold merchandise on account to Upshaw Co., $8,000, terms FOB shipping point, n/eom. The cost of merchandise sold was $4,800.
2. Sold merchandise for $15,000 plus 7% sales tax to cash customers. The cost of merchandise sold was $8,800.
5. Sold merchandise on account to Westone Company, $16,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $10,500.
8. Sold merchandise for $11,500 plus 7% sales tax to customers who used VISA cards. The cost of merchandise sold was $7,000.
13. Sold merchandise to customers who used MasterCard cards, $8,000. The cost of merchandise sold was $4,750.
14. Sold merchandise on account to Tyler Co., $7,500, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $4,000.
15. Received check for amount due from Westone Company for sale on July 5.
16. Issued credit memorandum for $800 to Tyler Co. for merchandise returned from sale on July 14. The cost of the merchandise returned was $360.
18. Sold merchandise on account to Horton Company, $6,850, terms FOB shipping point, 2/10, n/30. Paid $210 for transportation costs and added them to the invoice. The cost of merchandise sold was $4,100.
24. Received check for amount due from Tyler Co. for sale on July 14 less credit memorandum of July 16 and discount.
28. Received check for amount due from Horton Company for sale of July 18.
31. Paid Uptown Delivery Service $3,100 for merchandise delivered during July to customers under shipping terms of FOB destination.
31. Received check for amount due from Upshaw Co. for sale of July 1.
Aug. 3. Paid First National Bank $780 for service fees for handling MasterCard and VISA sales during July.
10. Paid $1,855 to state sales tax division for taxes owed on sales.
Instructions
Journalize the entries to record the transactions of Water Tech Supplies Co.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during August between Salem Company and Boulder Co.:
Aug. 1. Salem Company sold merchandise on account to Boulder Co., $28,600, terms FOB destination, 2/15, n/eom. The cost of the merchandise sold was $17,000.
2. Salem Company paid freight of $500 for delivery of merchandise sold to
Boulder Co. on August 1.
5. Salem Company sold merchandise on account to Boulder Co., $18,000, terms FOB shipping point, n/eom. The cost of the merchandise sold was $10,800.
6. Boulder Co. returned $1,600 of merchandise purchased on account on August 1 from Salem Company. The cost of the merchandise returned was $960.
9. Boulder Co. paid freight of $350 on August 5 purchase from Salem Company.
15. Salem Company sold merchandise on account to Boulder Co., $36,200, terms FOB shipping point, 1/10, n/30. Salem Company paid freight of $900, which was added to the invoice. The cost of the merchandise sold was $19,600.
16. Boulder Co. paid Salem Company for purchase of August 1, less discount and less return of August 6.
25. Boulder Co. paid Salem Company on account for purchase of August 15, less discount.
31. Boulder Co. paid Salem Company on account for purchase of August 5.
Instructions
Journalize the August transactions for (1) Salem Company and (2) Boulder Co.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during June between Salinas Company and Brokaw Company:
June 2. Salinas Company sold merchandise on account to Brokaw Company, $20,000, terms FOB shipping point, 2/10, n/30. Salinas Company paid freight of $675, which was added to the invoice. The cost of the merchandise sold was $12,000.
8. Salinas Company sold merchandise on account to Brokaw Company, $34,750, term FOB destinations, 1/15, n/eom. The cost of the merchandise sold was $19,850.
8. Salinas Company paid freight of $800 for delivery of merchandise sold to Brokaw Company on June 8.
12. Brokaw Company returned $5,750 of merchandise purchased on account on June 8 from Salinas Company. The cost of the merchandise returned was $3.000.
12. Brokaw Company paid Salinas Company for purchase of June 2, less discount.
23. Brokaw Company paid Salinas Company for purchase of June 8, less discount and less return of June 12.
24. Salinas Company sold merchandise on account to Brokaw Company, $31,800, terms FOB shipping point, n/eom. The cost of the merchandise sold was $20,500.
26. Brokaw Company paid freight of $475 on June 24 purchase from Salinas Company.
30. Brokaw Company paid Salinas Company on account for purchase of June 24.
Instructions
Journalize the June transactions for (1) Salinas Company and (2) Brokaw Company:
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during June between Schnaps Company and Brandy Company:
June 2 Schnaps Company sold merchandise on account to Brandy Company, $14,000, terms FOB shipping point, 2/10, n/30. Schnaps Company paid transportation costs of $350, which were added to the invoice. The cost of the merchandise sold was $8,000.
8 Schnaps Company sold merchandise on account to Brandy Company $12,500, terms FOB destination, 1/15, n/eom. The cost of the merchandise sold was $7,500.
8 Schnaps Company paid transportation costs of $550 for delivery of merchandise sold to Brandy Company on June 8.
12 Brandy Company returned $3,000 of merchandise purchased on account on June 8 from Schnaps Company. The cost of the merchandise returned was $1,800.
12 Brandy Company paid Schnaps Company for purchase of June 2, less discount.
23 Brandy Company paid Schnaps Company for purchase of June 8, less discount and less return of June 12.
24 Schnaps Company sold merchandise on account to Brandy Company, $10,000, terms FOB shipping point, n/eom. The cost of the merchandise sold was $6,000.
26 Brandy Company paid transportation charges of $310 on June 24 purchase from Schnaps Company.
30 Brandy Company paid Schnaps Company on account for purchase of June 24.
Instructions
Journalize the June transactions for
(1) Schnaps Company and
(2) Brandy Company.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during May between Sky Company and Big Co.:
May 1. Sky Company sold merchandise on account to Big Co., $72,000, terms FOB destination, 2/15, n/eom. The cost of the merchandise sold was $43,200.
2. Sky Company paid freight of $3,000 for delivery of merchandise sold to Big Co. on May 1.
5. Sky Company sold merchandise on account to Big Co., $48,500, terms FOB shipping point, n/eom. The cost of the merchandise sold was $30,000.
6. Big Co. returned $12,000 of merchandise purchased on account on May 1 from Sky Company. The cost of the merchandise returned was $7,200.
9. Big Co. paid freight of $1,800 on May 5 purchase from Sky Company.
15. Sky Company sold merchandise on account to Big Co., $64,000, terms FOB shipping point, 1/10, n/30. Sky Company paid freight of $2,500, which was added to the invoice. The cost of the merchandise sold was $38,400.
16. Big Co. paid Sky Company for purchase of May 1, less discount and less return of May 6.
25. Big Co. paid Sky Company on account for purchase of May 15, less discount.
31. Big Co. paid Sky Company on account for purchase of May 5.
Instructions
Journalize the May transactions for
(1) Sky Company and
(2) Big Co.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed during November between Sycamore Company and Bonita Company:
Nov. 2. Sycamore Company sold merchandise on account to Bonita Company, $16,000, terms FOB shipping point, 2/10, n/30. Sycamore Company paid freight of $375, which was added to the invoice. The cost of the merchandise sold was $10,000.
8. Sycamore Company sold merchandise on account to Bonita Company, $24,750, terms FOB destination, 1/15, n/eom. The cost of the merchandise sold was $14,850.
8. Sycamore Company paid freight of $640 for delivery of merchandise sold to Bonita Company on November 8.
12. Bonita Company returned $5,750 of merchandise purchased on account on November 8 from Sycamore Company. The cost of the merchandise returned was $3,000.
12. Bonita Company paid Sycamore Company for purchase of November 2, less discount.
23. Bonita Company paid Sycamore Company for purchase of November 8, less discount and less return of November 12.
24. Sycamore Company sold merchandise on account to Bonita Company, $13,200, terms FOB shipping point, n/eom. The cost of the merchandise sold was $8,000.
26. Bonita Company paid freight of $290 on November 24 purchase from Sycamore Company.
30. Bonita Company paid Sycamore Company on account for purchase of November 24.
Instructions
Journalize the November transactions for (1) Sycamore Company and (2) Bonita Company.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by Theisen Company during December of the current year:
Dec. 3. Purchased merchandise on account from Shipley Co., list price $24,000, trade discount 25%, terms FOB shipping point, 2/10, n/30, with prepaid transportation costs of $615 added to the invoice.
5. Purchased merchandise on account from Kirch Co., $10,250, terms FOB destination, 2/10, n/30.
6. Sold merchandise on account to Murdock Co., list price $18,000, trade discount 35%, terms 2/10, n/30. The cost of the merchandise sold was $8,250.
7. Returned $1,800 of merchandise purchased on December 5 from Kirch Co.
13. Paid Shipley Co. on account for purchase of December 3, less discount.
15. Paid Kirch Co. on account for purchase of December 5, less return of December 7 and discount.
16. Received cash on account from sale of December 6 to Murdock Co., less discount.
19. Sold merchandise on MasterCard, $39,500. The cost of the merchandise sold was $23,700.
22. Sold merchandise on account to Milk River Co., $11,300, terms 2/10, n/30. The cost of the merchandise sold was $6,700.
23. Sold merchandise for cash, $17,680. The cost of the merchandise sold was $9,100.
28. Received merchandise returned by Milk River Co. from sale on December 22, $2,000. The cost of the returned merchandise was $1,100.
31. Paid MasterCard service fee of $1,050.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by Calworks Company during April of the current year:
Apr. 3. Purchased merchandise on account from Prescott Co., list price $42,000, trade discount 40%, terms FOB destination, 2/10, n/30.
4. Sold merchandise for cash, $18,200. The cost of the merchandise sold was $11,000.
5. Purchased merchandise on account from Stafford Co., $21,300, terms FOB shipping point, 2/10, n/30, with prepaid freight of $600 added to the invoice.
6. Returned $6,000 of merchandise purchased on April 3 from Prescott Co.
11. Sold merchandise on account to Logan Co., list price $8,500, trade discount 20%, terms 1/10, n/30. The cost of the merchandise sold was $4,500.
13. Paid Prescott Co. on account for purchase of April 3, less return of April 6 and discount.
14. Sold merchandise on VISA, $60,000. The cost of the merchandise sold was $36,000.
Apr. 15. Paid Stafford Co. on account for purchase of April 5, less discount.
21. Received cash on account from sale of April 11 to Logan Co., less discount.
24. Sold merchandise on account to Alma Co., $9,200, terms 1/10, n/30. The cost of the merchandise sold was $5,500.
28. Paid VISA service fee of $1,800.
30. Received merchandise returned by Alma Co. from sale on April 24, $1,200. The cost of the returned merchandise was $720.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by The Grill Company during April of the current year:
Apr. 3. Purchased merchandise on account from Grizzly Co., list price $60,000, trade discount 30%, terms FOB destination, 2/10, n/30.
4. Sold merchandise for cash, $23,750. The cost of the merchandise sold was $14,000.
Apr. 5. Purchased merchandise on account from Ferraro Co., $26,000, terms FOB shipping point, 2/10, n/30, with prepaid freight of $600 added to the invoice.
6. Returned $7,000 ($10,000 list price less trade discount of 30%) of merchandise purchased on April 3 from Grizzly Co.
11. Sold merchandise on account to Logan Co., list price $12,000, trade discount 25%, terms 1/10, n/30. The cost of the merchandise sold was $5,000.
13. Paid Grizzly Co. on account for purchase of April 3, less return of April 6 and discount.
14. Sold merchandise on VISA, $90,000. The cost of the merchandise sold was $55,000.
15. Paid Ferraro Co. on account for purchase of April 5, less discount.
21. Received cash on account from sale of April 11 to Logan Co., less discount.
24. Sold merchandise on account to Half Moon Co., $17,500, terms 1/10, n/30.
The cost of the merchandise sold was $10,000.
28. Paid VISA service fee of $4,000.
30. Received merchandise returned by Half Moon Co. from sale on April 24, $2,500. The cost of the returned merchandise was $1,400.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions complete by Wild Adventures Company during December of the current year.
Dec. 3. Purchased merchandise on account from Miramar Co., list price $45,000, trade discount 20% , terms FOB shipping point, 2/10, n/30, with prepaid freight of $1,200 added to the invoice.
5. Purchased merchandise on account from Grand Canyon Co., $19,000, terms FOB destinations, 2/10, n/30.
6. Sold merchandise on account to Arches Co., list price $30,000, trade discount 25% terms 2/10, n/30. The cost of the merchandise sold was $14,000.
7. Returned $3,000 of merchandise purchased on December 5 from Grand Canyon Co.
13. Paid Miramar Co. on account for purchase of December 3, less discount.
15. Paid Grand Canyon Co. on account for purchase of December 5, less return of December 7 and discount.
16. Received cash on account from sale of December 6 to Arches Co., less discount.
19. Sold merchandise on MasterCard, $41,950. The cost of the merchandise sold was $25,000.
22. Sold merchandise on account to Yellowstone River Co., $20,000 terms 2/10, n/30. The cost of the merchandise sold was $9,000.
23. Sold merchandise for cash, $57,500. The cost of the merchandise sold was $34,500.
28. Received merchandise returned by Yellowstone River Co. from sale on December 22, $4,000. The cost of the returned merchandise was $1,800.
31. Paid MasterCard service fee of $1,700.
Instructions
Journalize the transaction.
Aug 29, 2021 | Uncategorized
The trial balance of Dealer’s Choice Wholesale Company contained the accounts shown at December 31, the end of the company’s fiscal year.
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Adjustment data:
1. Depreciation is $8,000 on buildings and $7,000 on equipment. (Both are operating expenses.)
2. Interest of $4,500 is due and unpaid on notes payable at December 31.
3. Income tax due and unpaid at December 31 is $24,000.
Other data: $15,000 of the notes payable are payable next year.
Instructions
(a) Journalize the adjusting entries.
(b) Create T accounts for all accounts used in part (a). Enter the trial balance amounts into the T accounts and post the adjusting entries.
(c) Prepare an adjusted trial balance.
(d) Prepare a multiple step income statement and a retained earnings statement for the year, and a classified balance sheet at December 31,2012.
Aug 29, 2021 | Uncategorized
The trial balance of Runway Fashion Center contained the accounts on the next page at November 30, the end of the company’s fiscal year.
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Adjustment data:
1. Store supplies on hand total $3,100.
2. Depreciation is $14,000 on the store equipment and $6,000 on the delivery equipment.
3. Interest of $4,400 is accrued on notes payable at November 30.
4. Income tax due and unpaid at November 30 is $3,000.
Other data: $24,000 of notes payable are due for payment next year.
Instructions
(a) Journalize the adjusting entries.
(b) Prepare T accounts for all accounts used in part (a). Enter the trial balance amounts into the T accounts and post the adjusting entries.
(c) Prepare an adjusted trial balance.
(d) Prepare a multiple step income statement and a retained earnings statement for the year, and a classified balance sheet at November 30,2012.
Aug 29, 2021 | Uncategorized
The trial balance of Terry Manning Fashion Center contained the following accounts at
November 30, the end of the company’s fiscal year.
Adjustment data:
1. Store supplies on hand totaled $2,500.
2. Depreciation is $9,000 on the store equipment and $5,000 on the delivery equipment.
3. Interest of $4,080 is accrued on notes payable at November 30.
4. Merchandise inventory actually on hand is $44,400.
Instructions
(a) Enter the trial balance on a worksheet, and complete the worksheet.
(b) Prepare a multiple step income statement and an owner’s equity statement for the year, and a classified balance sheet as of November 30, 2010. Notes payable of $30,000 are due in January 2011.
(c) Journalize the adjusting entries.
(d) Journalize the closing entries.
(e) Prepare a post closing trialbalance.
Aug 29, 2021 | Uncategorized
The weekly time tickets indicate the following distribution of labor hours for three direct labor employees:
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The direct labor rate earned by the three employees is as follows:
Washington………….. $20
Jefferson……………… 22
Adams………………. 18
The process improvement category includes training, quality improvement, housekeeping, and other indirect tasks.
a. Determine the amounts of factory labor costs transferred to Work in Process and Factory Overhead for the week.
b. Assume that Jobs 201 and 202 were completed but not sold during the week and that Job 203 remained incomplete at the end of the week. How would the direct labor costs for all three jobs be reflected on the financial statements at the end of theweek?
Aug 29, 2021 | Uncategorized
Three years ago, Amy Blodgett and her brother in law Dennis Torres opened Megamart Department Store. For the first 2 years, business was good, but the following condensed income statement results for 2012 were disappointing.
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Amy believes the problem lies in the relatively low gross profit rate of 20%. Dennis believes the problem is that operating expenses are too high. Amy thinks the gross profit rate can be improved by making two changes:
(1) Increase average selling prices by 15%; this increase is expected to lower sales volume so that total sales dollars will increase only 4%.
(2) Buy merchandise in larger quantities and take all purchase discounts; these changes are expected to increase the gross profit rate from 20% to 25%. Amy does not anticipate that these changes will have any effect on operating expenses.
Dennis thinks expenses can be cut by making these two changes:
(1) Cut 2012 sales salaries of $60,000 in half and give sales personnel a commission of 2% of net sales.
(2) Reduce store deliveries to one day per week rather than twice a week; this change will reduce 2012 delivery expenses of $40,000 by 40%. Dennis feels that these changes will not have any effect on net sales.
Amy and Dennis come to you for help in deciding the best way to improve net income.
Instructions
With the class divided into groups, answer the following.
(a) Prepare a condensed income statement for 2013 assuming
(1) Amy’s changes are implemented and
(2) Dennis’s ideas are adopted.
(b) What is your recommendation to Amy and Dennis?
(c) Prepare a condensed income statement for 2013 assuming both sets of proposed changes are made.
(d) Discuss the impact that other factors might have. For example, would increasing the quantity of inventory increase costs? Would a salary cut affect employee morale? Would decreased morale affect sales? Would decreased store deliveries decrease customer satisfaction? What other suggestions might be considered?
Aug 29, 2021 | Uncategorized
Three years ago, Carrie Dungy and her brother in law Luke Barber opened FedCo Department Store. For the first two years, business was good, but the following condensed income results for 2009 were disappointing.
Carrie believes the problem lies in the relatively low gross profit rate (gross profit divided by net sales) of 21%. Luke believes the problem is that operating expenses are too high. Carrie thinks the gross profit rate can be improved by making both of the following changes. She does not anticipate that these changes will have any effect on operating expenses.
1. Increase average selling prices by 17%.This increase is expected to lower sales volume so that total sales will increase only 6%.
2. Buy merchandise in larger quantities and take all purchase discounts. These changes are expected to increase the gross profit rate by 3 percentage points. Luke thinks expenses can be cut by making both of the following changes. He feels that these changes will not have any effect on net sales.
1. Cut 2009 sales salaries of $60,000 in half and give sales personnel a commission of 2% of net sales.
2. Reduce store deliveries to one day per week rather than twice a week; this change will reduce 2009 delivery expenses of $30,000 by 40%.
Carrie and Luke come to you for help in deciding the best way to improve net income.
Instructions
With the class divided into groups, answer the following.
(a) Prepare a condensed income statement for 2010 assuming (1) Carrie’s changes are implemented and (2) Luke’s ideas are adopted.
(b) What is your recommendation to Carrie and Luke?
(c) Prepare a condensed income statement for 2010 assuming both sets of proposed changes aremade.
Aug 29, 2021 | Uncategorized
Use the following information to prepare a multiple step income statement, including the revenue section and the cost of goods sold section, for Aeito’s Plumbing Supplies for the year ended December 31, 20 .
Sales …………………………………….… $166,000
Sales Returns and Allowances ………….……. 1,620
Sales Discounts ………………………………. 3,320
Interest Revenue ……………………………… 3,184
Merchandise Inventory, January 1, 20 ….…. 33,200
Purchases ……………………………………. 111,300
Purchases Returns and Allowances …………… 3,600
Purchases Discounts …………………………… 2,226
Freight In …………………………………….…. 640
Merchandise Inventory, December 31, 20 … 29,600
Wages Expense ……………………………… 22,000
Supplies Expense ……………………………….. 650
Telephone Expense …………………………… 1,100
Utilities Expense ……………………………… 9,000
Insurance Expense ……………………………. 1,000
Depreciation Expense—Building ……………. 4,600
Depreciation Expense—Equipment …………. 2,800
Miscellaneous Expense ………………………… 214
Interest Expense ……………………………… 1,126
Aug 29, 2021 | Uncategorized
Using T accounts for Cash, Accounts Receivable, Sales Tax Payable, Sales, Sales Returns and Allowances, and Sales Discounts, enter the following sales transactions. Use a new set of accounts for each part, 1–5.
1. No sales tax.
(a) Merchandise is sold for $250 cash.
(b) Merchandise is sold on account for $225.
(c) Payment is received for merchandise sold on account.
2. 6% sales tax.
(a) Merchandise is sold for $250 cash plus sales tax.
(b) Merchandise is sold on account for $225 plus sales tax.
(c) Payment is received for merchandise sold on account.
3. Cash and credit sales, with returned merchandise.
(a) Merchandise is sold for $481 cash.
(b) $18 of merchandise sold for $481 is returned for a refund.
(c) Merchandise is sold on account for $388.
(d) $24 of merchandise sold for $388 is returned for a credit.
(e) Payment is received for balance owed on merchandise sold on account.
4. 6% sales tax, with returned merchandise.
(a) Merchandise is sold on account for $480 plus sales tax.
(b) Merchandise sold on account for $30 plus sales tax is returned.
(c) The balance on the account is paid in cash.
(d) Merchandise is sold for $300 cash plus sales tax.
(e) $30 of merchandise sold for $300 cash plus sales tax is returned for a refund.
5. Sales on account, with 2/10, n/30 cash discount terms.
(a) Merchandise is sold on account for $280.
(b) The balance is paid within the discount period.
(c) Merchandise is sold on account for $203.
(d) The balance is paid after the discount period.
Aug 29, 2021 | Uncategorized
Vargo Company engaged in the following transactions in August 2011:
Aug. 7 Sold merchandise on credit to Ken Smith, terms n/30, FOB shipping point, $3,000 (cost, $1,800).
8. Purchased merchandise on credit from Novak Company, terms n/30, FOB shipping point, $6,000.
9 Paid Smart Company for shipping charges on merchandise purchased on August 8, $254.
10 Purchased merchandise on credit from Mara’s Company, terms n/30, FOB shipping point, $9,600, including $600 freight costs paid by Sewall.
14 Sold merchandise on credit to Rose Milito, terms n/30, FOB shipping point, $2,400 (cost, $1,440).
14 Returned damaged merchandise received from Novak Company on August 8 for credit, $600.
17 Received check from Ken Smith for his purchase of August 7.
19 Sold merchandise for cash, $1,800 (cost, $1,080).
20 Paid Mara’s Company for purchase of August 10.
21 Paid Novak Company the balance from the transactions of August 8 and August 14.
24 Accepted from Rose Milito a return of merchandise, which was put back in inventory, $200 (cost, $120).
Required
1. Prepare entries in journal form (refer to the Review Problem) to record the transactions, assuming use of the perpetual inventory system.
2. Receiving cash rebates from suppliers based on the past year’s purchases is a common practice in some industries. If at the end of the year Vargo Company receives rebates in cash from a supplier, should these cash rebates be reported as revenue? Why or why not?
Aug 29, 2021 | Uncategorized
Your sister operates Budget Parts Company, an online boat parts distributorship that is in its third year of operation. The income statement is shown below and was recently prepared for the year ended July 31, 2012.
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Your sister is considering a proposal to increase net income by offering sales discounts of 2/15, n/30, and by shipping all merchandise FOB shipping point. Currently, no sales discounts are allowed and merchandise is shipped FOB destination. It is estimated that these credit terms will increase net sales by 15%. The ratio of the cost of merchandise sold to net sales is expected to be 60%. All selling and administrative expenses are expected to remain unchanged, except for store supplies, miscellaneous selling, office supplies, and miscellaneous administrative expenses, which are expected to increase proportionately with increased net sales. The amounts of these preceding items for the year ended July 31, 2012, were as follows:
Store supplies expense$9,000
Miscellaneous selling expense 2,400
Office supplies expense 2,000
Miscellaneous administrative expense 1,000
The other income and other expense items will remain unchanged. The shipment of all merchandise FOB shipping point will eliminate all deliver expenses, which for the year ended July 31, 2012, were $12,000.
1. Prepare a projected single step income statement for the year ending July 31, 2013, based on the proposal. Assume all sales are collected within the discount period.
2. a. Based on the projected income statement in (1), would you recommend the implementation of the proposed changes?
b. Describe any possible concerns you may have related to the proposed changes described in(1).
Aug 29, 2021 | Uncategorized
Staircase Equipment Company uses a job order cost system. The following data summarize the operations related to production for April 2010, the first month of operations:
a. Materials purchased on account, $23,400.
b. Materials requisitioned and factory labor used:
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c. Factory overhead costs incurred on account, $4,500.
d. Depreciation of machinery and equipment, $1,560.
e. The factory overhead rate is $50 per machine hour. Machine hours used:
Job……………………. Machine Hours
No. 201…………………….. 18
No. 202…………………….. 30
No. 203…………………….. 24
No. 204…………………….. 75
No. 205…………………….. 33
No. 206…………………….. 20
Total………………………. 200
f. Jobs completed: 201, 202, 203, and 205.
g. Jobs were shipped and customers were billed as follows: Job 201, $6,540; Job 202, $8,820; Job 203, $11,880.
Instructions
1. Prepare a schedule summarizing manufacturing costs by job for April. Use the following form:
Job……. Direct Materials……… Direct Labor……. Factory Overhead……. Total
2. Prepare a schedule of jobs finished in April.
3. Prepare a schedule of jobs sold in April. What account does this schedule support for the month of April?
4. Prepare a schedule of completed jobs on hand as of April 30, 2010. What account does this schedule support?
5. Prepare a schedule of unfinished jobs as of April 30, 2010. What account does this schedulesupport?
Aug 29, 2021 | Uncategorized
STATEMENT Use the following information to prepare a multiple step income statement, including the revenue section and the cost of goods sold section, for Rau Office Supplies for the year ended December 31, 20 .
Sales ……………………………………….. $148,300
Sales Returns and Allowances ………………… 1,380
Sales Discounts ………………………………… 2,166
Interest Revenue …………………………………. 240
Merchandise Inventory, January 1, 20 ………. 26,500
Purchases ……………………………………… 98,000
Purchases Returns and Allowances …..…………. 2,180
Purchases Discounts …………………………….. 1,960
Freight In …………………………………………. 750
Merchandise Inventory, December 31, 20 …… 33,250
Wages Expense ………………………………… 23,800
Supplies Expense ………………………………….. 900
Telephone Expense ……………………………… 1,100
Utilities Expense ………………………………… 7,000
Insurance Expense ……………………………… 1,000
Depreciation Expense—Equipment ……………. 3,100
Miscellaneous Expense ………………………….. 720
Interest Expense ………………………………. 3,880
Aug 29, 2021 | Uncategorized
Tattle Company engaged in the following transactions in October 2010:
Oct. 7 Sold merchandise on credit to Lina Ortiz, terms n/30, FOB shipping point, $6,000 (cost, $3,600).
8 Purchased merchandise on credit from Ruff Company, terms n/30, FOB shipping point, $12,000.
9 Paid Ruff Company for shipping charges on merchandise purchased on October 8, $508.
10 Purchased merchandise on credit from Sewall Company, terms n/30, FOB shipping point, $19,200, including $1,2200 freight costs paid by Sewall.
14 Sold merchandise on credit to Peter Watts, terms n/30, FOB shipping point, $4,800 (cost, $2,880).
Oct. 14 Returned damaged merchandise received from Ruff Company on October 8 for credit, $1,200.
17 Received check from Lina Ortiz for her purchase of October 7.
19 Sold merchandise for each, $3,600 (cost, $2,160).
20 Paid Sewall Company for purchase of October 10.
21 Paid Ruff Company the balance from the transactions of October 8 and October 14.
24 Accepted from Peter Watts a return of merchandise, which was put back in inventory, $400 (cost, $240).
Required
1. Prepare entries in journal form (refer to the Review Problem) so record the transactions assuming use of the perpetual inventory system.
2. Receiving cash rebates from suppliers based on the past year’s purchases is a common practice in some industries. If at the end of the year Tattle Company receives rebates in cash from a supplier, should these cash rebates be reported as revenue? Why or why not?
Aug 29, 2021 | Uncategorized
The Ad Guys Inc. provides advertising services for clients across the nation. The Ad Guys is presently working on four projects, each for a different client. The Ad Guys accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 50% of media purchases. On June 1, the four advertising projects had the following accumulated costs:
June 1 Balances
Clinton Bank…………………. $80,000
Pryor Airlines………………….. 24,000
O’ Ryan Hotels………………… 56,000
Marshall Beverages…………… 34,000
During June, The Ad Guys incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:
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At the end of June, both the Clinton Bank and Pryor Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.
Determine each of the following for the month:
a. Direct labor costs.
b. Media purchases.
c. Overhead applied.
d. Completion of Clinton Bank and Pryor Airlinescampaigns.
Aug 29, 2021 | Uncategorized
The Encore Video Store Co. is owned and operated by Sergio Alonzo. The following is an excerpt from a conversation between Sergio Alonzo and Suzie Engel, the chief accountant for The Encore Video Store.
Sergio: Suzie, I’ve got a question about this recent balance sheet.
Suzie: Sure, what’s your question?
Sergio: Well, as you know, I’m applying for a bank loan to finance our new store in Cherokee, and I noticed that the accounts payable are listed as $120,000.
Suzie: That’s right. Approximately $100,000 of that represents amounts due our suppliers, and the remainder is miscellaneous payables to creditors for utilities, office equipment, supplies, etc.
Sergio: That’s what I thought. But as you know, we normally receive a 2% discount from our suppliers for earlier payment, and we always try to take the discount.
Suzie: That’s right. I can’t remember the last time we missed a discount.
Sergio: Well, in that case, it seems to me the accounts payable should be listed minus the 2% discount. Let’s list the accounts payable due suppliers as $98,000, rather than $100,000. Every little bit helps. You never know. It might make the difference between getting the loan and not. How would you respond to Sergio Alonzo’s request?
Aug 29, 2021 | Uncategorized
The following account titles and balances were taken from the adjusted trial balance of Brisco Farm Co. for 2012. The company uses the periodic inventory system.
Account Title Balance
Sales returns and allowances ………………………..$ 3,250
Miscellaneous expense ……………………………… 400
Transportation out …………………………………… 700
Sales ………………………………………………… 69,750
Advertising expense ………………………………… 2,750
Salaries expense …………………………………….. 8,500
Transportation in …………………………………… 1,725
Purchases …………………………………………… 42,000
Interest expense ……………………………………. 360
Merchandise inventory, January 1 …………………. 6,200
Rent expense ……………………………………….. 5,000
Merchandise inventory, December 31 ……………… 4,050
Purchase returns and allowances …………………… 1,250
Loss on sale of land ………………………………… 3,400
Utilities expense …………………………………….. 710
Required
a. Prepare a schedule to determine the amount of cost of goods sold.
b. Prepare a multistep income statement.
c. Prepare a single step income statement.
Aug 29, 2021 | Uncategorized
The following information was taken from the accounts of Healthy Foods Market, a small grocery store at December 31, 2012. The accounts are listed in alphabetical order, and all have normal balances.
Accounts payable …………. $ 300
Accounts receivable ………. 1,040
Advertising expense ………. 200
Cash ……………………….. 820
Common stock ……………. 600
Cost of goods sold ………… 900
Interest expense …………… 140
Merchandise inventory ……. 500
Prepaid rent ……………….. 280
Retained earnings ………… 1,050
Sales revenue ……………… 2,400
Salaries expense …………… 260
Supplies expense ………….. 210
Gain on sale of land ……….. 75
Required
First, prepare an income statement for the year using the single step approach. Then prepare another income statement using the multistep approach.
Aug 29, 2021 | Uncategorized
The following is an excerpt from a conversation between Brad Hass and Terry Mann. Brad is debating whether to buy a stereo system from Radiant Sound, a locally owned electronics store, or Audio Pro Electronics, a mail order electronics company.
Brad: Terry, I don’t know what to do about buying my new stereo.
Terry: What’s the problem?
Brad: Well, I can buy it locally at Radiant Sound for $395.00. However, Audio Pro Electronics has the same system listed for $399.99.
Terry: So what’s the big deal? Buy it from Radiant Sound.
Brad: It’s not quite that simple. Audio Pro said something about not having to pay sales tax, since I was out of state.
Terry: Yes, that’s a good point. If you buy it at Radiant Sound, they’ll charge you 6% sales tax.
Brad: But Audio Pro Electronics charges $12.50 for shipping and handling. If I have them send it next day air, it’ll cost $25 for shipping and handling.
Terry: I guess it is a little confusing.
Brad: That’s not all. Radiant Sound will give an additional 1% discount if I pay cash.
Otherwise, they will let me use my MasterCard, or I can pay it off in three monthly installments.
Terry: Anything else???
Brad: Well . . . Audio Pro says I have to charge it on my MasterCard. They don’t accept checks.
Terry: I am not surprised. Many mail order houses don’t accept checks.
Brad: I give up. What would you do?
1. Assuming that Audio Pro Electronics doesn’t charge sales tax on the sale to Brad, which company is offering the best buy?
2. What might be some considerations other than price that might influence Brad’s decision on where to buy the stereo system?
Aug 29, 2021 | Uncategorized
The following is an excerpt from a conversation between Kate Fleming and Bob Dent. Kate is debating whether to buy a stereo system from Design Sound, a locally owned electronics store, or Big Sound Electronics, an online electronics company.
Kate: Bob, I don’t know what to do about buying my new stereo.
Bob: What’s the problem?
Kate: Well, I can buy it locally at Design Sound for $580.00. However, Big Sound Electronics has the same system listed for $599.99.
Bob: So what’s the big deal? Buy it from Design Sound.
Kate: It’s not quite that simple. Big Sound said something about not having to pay sales tax, since I was out of state.
Bob: Yes, that’s a good point. If you buy it at Design Sound, they’ll charge you 8% sales tax.
Kate: But Big Sound Electronics charges $18.99 for shipping and handling. If I have them send it next day air, it’ll cost $24.99 for shipping and handling.
Bob: I guess it is a little confusing.
Kate: That’s not all. Design Sound will give an additional 1% discount if I pay cash.
Otherwise, they will let me use my VISA, or I can pay it off in three monthly installments.
Bob: Anything else???
Kate: Well . . . Big Sound says I have to charge it on my VISA. They don’t accept checks.
Bob: I am not surprised. Many online stores don’t accept checks.
Kate: I give up. What would you do?
1. Assuming that Big Sound Electronics doesn’t charge sales tax on the sale to Kate, which company is offering the best buy?
2. What might be some considerations other than price that might influence Kate’s decision on where to buy the stereo system?
Aug 29, 2021 | Uncategorized
The following selected transactions were complete by Britt Co. during October of the current year:
Oct. 1. Purchased merchandise from Mable Co., $17,500, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $300 was added to the invoice.
5. Purchased merchandise from Conway Co., $22,600, terms FOB destination, n/30.
10. Paid Mable Co. for invoice of October 1, less discount.
13 Purchased merchandise from Larson Co., $12,750, term FOB destination, 2/10, n/30.
14. Issued debit memo to Larson Co. for $1,500 of merchandise returned from purchase on October 13.
18. Purchased merchandise from Lakey Company, $12,250, terms FOB shipping point, n/eom.
18. Paid freight of $275 on October 18 purchases from Lakey Company.
19. Purchased merchandise from Adler Co., $14,200, terms FOB destination, 2/10, n/30.
23. Paid Larson Co. for invoice of October 13, less debit memo of October 14 and discount.
29. Paid Adler Co. for invoice of October 19, less discount.
31. Paid Lakey Company for invoice of October r18.
31. Paid Conway Co. for invoice of October 5.
Aug 29, 2021 | Uncategorized
The following selected transactions were complete by Burton Company during July of the current year. Burton Company uses the periodic inventory system.
July 2. Purchased $24,000 of merchandise on account, FOB shipping point, terms 2/15, n/30.
5. Paid freight of $500 on the July 2 purchase.
6. Returned $4,000 of the merchandise purchases on July 2.
13. Sold merchandise on account, $15,000, FOB destination, 1/10, n/30. The cost of merchandise sold was $9,000.
15. Paid freight of $100 for the merchandise sold on July 13.
17. Paid for the purchases of July 2 less the return and discount.
23. Received payment on account for the sale of July 13 less the discount.
Journalize the entries to record the transactions of Burton Company.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Rayne Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:
Aug. 1. Sold merchandise on account to Tomahawk Co., $12,500, terms FOB shipping point, n/eom. The cost of merchandise sold was $7,500.
2. Sold merchandise for $20,000 plus 7% sales tax to retail cash customers. The cost of merchandise sold was $13,100.
5. Sold merchandise on account to Epworth Company, $30,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $19,500.
8. Sold merchandise for $11,500 plus 7% sales tax to retail customers who used VISA cards. The cost of merchandise sold was $7,000.
13. Sold merchandise to customers who used MasterCard cards, $8,000. The cost of merchandise sold was $5,000.
Aug. 14. Sold merchandise on account to Osgood Co., $11,800, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $7,000.
15. Received check for amount due from Epworth Company for sale on August 5.
16. Issued credit memo for $1,800 to Osgood Co. for merchandise returned from sale on August 14. The cost of the merchandise returned was $1,000.
18. Sold merchandise on account to Horton Company, $6,850, terms FOB shipping point, 2/10, n/30. Paid $210 for freight and added it to the invoice. The cost of merchandise sold was $4,100.
24. Received check for amount due from Osgood Co. for sale on August 14 less credit memo of August 16 and discount.
28. Received check for amount due from Horton Company for sale of August 18.
31. Paid Piper Delivery Service $2,100 for merchandise delivered during August to customers under shipping terms of FOB destination.
31. Received check for amount due from Tomahawk Co. for sale of August 1.
Sept. 3. Paid First Federal Bank $980 for service fees for handling MasterCard and VISA sales during August.
10. Paid $1,750 to state sales tax division for taxes owed on sales.
Instructions
Journalize the entries to record the transactions of Rayne Supplies Co.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Artic Company during February of the current year. Artic Company uses the periodic inventory system.
Feb. 2. Purchased $17,500 of merchandise on account, FOB shipping point, terms 2/15, n/30.
5. Paid freight of $300 on the February 2 purchase.
6. Returned $2,000 of the merchandise purchased on February 2.
Feb. 13. Sold merchandise on account, $9,000, FOB destination, 2/10, n/30. The cost of merchandise sold was $6,600.
15. Paid freight of $100 for the merchandise sold on February 13.
17. Paid for the purchase of February 2 less the return and discount.
23. Received payment on account for the sale of February 13 less the discount.
Journalize the entries to record the transactions of Artic Company.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Daffodil Company during March of the current year:
Mar. 1 Purchased merchandise from Fastow Co., $16,000, terms FOB destination, n/30.
3 Purchased merchandise from Moss Co., $9,000, terms FOB shipping point, 2/10, n/eom. Prepaid transportation costs of $150 were added to the invoice.
4 Purchased merchandise from Picadilly Co., $7,500, terms FOB destination, 2/10, n/30.
6 Issued debit memorandum to Picadilly Co. for $1,000 of merchandise returned from purchase on March 4.
13 Paid Moss Co. for invoice of March 3, less discount.
14 Paid Picadilly Co. for invoice of March 4, less debit memorandum of March 6 and discount.
19 Purchased merchandise from Reardon Co., $12,000, terms FOB shipping point, n/eom.
19 Paid transportation charges of $500 on March 19 purchase from Reardon Co.
20 Purchased merchandise from Hatcher Co., $8,000, terms FOB destination, 1/10, n/30.
30 Paid Hatcher Co. for invoice of March 20, less discount.
31 Paid Fastow Co. for invoice of Marth 1.
31 Paid Reardon Co. for invoice of March 19.
Instructions
Journalize the entries to record the transactions of Daffodil Company for March.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Gourmet Company during January of the current year:
Jan. 1. Purchased merchandise from Bearcat Co., $19,000, terms FOB destination, n/30.
3. Purchased merchandise from Alvarado Co., $28,500, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $650 was added to the invoice.
4. Purchased merchandise from Fogel Co., $11,000, terms FOB destination, 2/10, n/30.
6. Issued debit memo to Fogel Co. for $1,000 of merchandise returned from purchase on January 4.
13. Paid Alvarado Co. for invoice of January 3, less discount.
14. Paid Fogel Co. for invoice of January 4, less debit memo of January 6 and discount.
19. Purchased merchandise from Unitrust Co., $32,900, terms FOB shipping point, n/eom.
19. Paid freight of $750 on January 19 purchase from Unitrust Co.
20. Purchased merchandise from Lenn Co., $10,000, terms FOB destination, 1/10, n/30.
30. Paid Lenn Co. for invoice of January 20, less discount.
31. Paid Bearcat Co. for invoice of January 1.
31. Paid Unitrust Co. for invoice of January 19.
Instructions
Journalize the entries to record the transactions of Gourmet Company for January.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Holistic Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers:
Aug. 2 Sold merchandise on account to Runyan Co., $12,800, terms FOB destination, 2/10, n/30. The cost of merchandise sold was $7,600.
3 Sold merchandise for $5,000 plus 7% sales tax to cash customers. The cost of merchandise sold was $3,000.
4 Sold merchandise on account to McNutt Co., $2,800, terms FOB shipping point, n/eom. The cost of merchandise sold was $1,800.
5 Sold merchandise for $4,400 plus 7% sales tax to customers who used MasterCard.
Deposited credit card receipts into the bank. The cost of merchandise sold was $2,500.
12 Received check for amount due from Runyan Co. for sale on August 2.
14 Sold merchandise to customers who used American Express cards, $15,000. The cost of merchandise sold was $9,200.
Aug. 16 Sold merchandise on account to Westpack Co., $12,000, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $7,200.
18 Issued credit memorandum for $3,000 to Westpack Co. for merchandise returned from sale on August 16. The cost of the merchandise returned was $1,800.
19 Sold merchandise on account to DeGroot Co., $9,500, terms FOB shipping point, 1/10, n/30. Added $200 to the invoice for transportation costs prepaid. The cost of merchandise sold was $5,700.
26 Received check for amount due from Westpark Co. for sale on August 16 less credit memorandum of August 18 and discount.
27 Received $7,680 from American Express for $8,000 of sales reported August 1–12.
28 Received check for amount due from DeGroot Co. for sale of August 19.
31 Received check for amount due from McNutt Co. for sale of August 4.
31 Paid Fast Delivery Service $1,050 for delivering merchandise during August to customers under shipping terms of FOB destination.
Sept. 3 Paid First City Bank $850 for service fees for handling MasterCard sales during August.
15 Paid $4,100 to state sales tax division for taxes owed on August sales.
Instructions
Journalize the entries to record the transactions of Holistic Supply Co.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Lorimer Company during August of the current year. Lorimer Company uses the periodic inventory system.
Aug. 3. Purchased $24,500 of merchandise on account, FOB shipping point, terms 2/10, n/30.
4. Paid transportation costs of $475 on the August 3 purchase.
7. Returned $4,000 of the merchandise purchased on August 3.
11. Sold merchandise on account, $12,700, FOB destination, 2/15, n/30. The cost of merchandise sold was $7,600.
12. Paid transportation costs of $300 for the merchandise sold on August 11.
13. Paid for the purchase of August 3 less the return and discount.
26. Received payment on account for the sale of August 11 less the discount.
Journalize the entries to record the transactions of Lorimer Company.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Padre Co. during October of the current year:
Oct. 1. Purchased merchandise from Wood Co., $15,500, terms FOB shipping point, 2/10, n/eom. Prepaid freight of $400 was added to the invoice.
5. Purchased merchandise from Davis Co., $14,150, terms FOB destination, n/30.
10. Paid Wood Co. for invoice of October 1, less discount.
13. Purchased merchandise from Folts Co., $8,000, terms FOB destination, 1/10, n/30.
14. Issued debit memo to Folts Co. for $1,500 of merchandise returned from purchase on October 13.
18. Purchased merchandise from Lakey Company, $12,250, terms FOB shipping point, n/eom.
18. Paid freight of $180 on October 18 purchase from Lakey Company.
19. Purchased merchandise from Noman Co., $11,150, terms FOB destination, 2/10, n/30.
23. Paid Folts Co. for invoice of October 13, less debit memo of October 14 and discount.
29. Paid Noman Co. for invoice of October 19, less discount.
31. Paid Lakey Company for invoice of October 18.
31. Paid Davis Co. for invoice of October 5.
Instructions
Journalize the entries to record the transactions of Padre Co. for October.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Petunia Co. during August of the current year:
Aug. 1 Purchased merchandise from Fisher Co., $8,500, terms FOB shipping point, 2/10, n/eom. Prepaid transportation costs of $250 were added to the invoice.
5 Purchased merchandise from Byrd Co., $10,400, terms FOB destination, n/30.
10 Paid Fisher Co. for invoice of August 1, less discount.
13 Purchased merchandise from Mickle Co., $7,500, terms FOB destination, 1/10, n/30.
14 Issued debit memorandum to Mickle Co. for $2,500 of merchandise returned from purchase on August 13.
18 Purchased merchandise from Lanning Company, $10,000, terms FOB shipping point, n/eom.
18 Paid transportation charges of $150 on August 18 purchase from Lanning Company.
19 Purchased merchandise from Hatcher Co., $7,500, terms FOB destination, 2/10, n/30.
23 Paid Mickle Co. for invoice of August 13, less debit memorandum of August 14 and discount.
29 Paid Hatcher Co. for invoice of August 19, less discount.
31 Paid Lanning Company for invoice of August 18.
31 Paid Byrd Co. for invoice of August 5.
Instructions
Journalize the entries to record the transactions of Petunia Co. for August.
Aug 29, 2021 | Uncategorized
The following selected transactions were completed by Scat Trak Company during July of the current year:
July 1. Purchased merchandise from Kermit Co., $18,750, terms FOB destination, n/30.
3. Purchased merchandise from Basaway Co., $12,150, terms FOB shipping point, 2/10, n/eom. Prepaid transportation costs of $180 were added to the invoice.
4. Purchased merchandise from Phillips Co., $13,800, terms FOB destination, 2/10, n/30.
6. Issued debit memorandum to Phillips Co. for $1,900 of merchandise returned from purchase on July 4.
13. Paid Basaway Co. for invoice of July 3, less discount.
14. Paid Phillips Co. for invoice of July 4, less debit memorandum of July 6 and discount.
19. Purchased merchandise from Cleghorne Co., $18,000, terms FOB shipping point, n/eom.
19. Paid transportation charges of $500 on July 19 purchase from Cleghorne Co.
20. Purchased merchandise from Graham Co., $9,000, terms FOB destination, 1/10, n/30.
30. Paid Graham Co. for invoice of July 20, less discount.
31. Paid Kermit Co. for invoice of July 1.
31. Paid Cleghorne Co. for invoice of July 19.
Instructions
Journalize the entries to record the transactions of Scat Trak Company for July.
Aug 29, 2021 | Uncategorized
John Jefferson is the sales managers for Sunny Greeting Cards, Inc. at the beginning of the year, the organization introduced a new line of humorous birthday cards to the U.S. market. Management held a strategic planning meeting on August 31 to discuss next year’s operating activities. One item on the agenda was to review the success of the new line of cards and decide if there was a need to change the sellig price or to stimulate sales volume in the five sales territories. Jefferson was asked to prepare a report addressing those issues and to present it at the meeting. His report was to include the profits generated in each sales territory by new card line only.
On august 31, Jefferson arrived at the meeting late and immediately distributed his report to the strategic planning team. The report consisted of comments made by seven of Jefferson’s leading sales representatives. The comments were broad in scope and touched only lightly on the success of the new card line. Jefferson was pleased that he had met the deadline for distributing the report, but the other team members were disappointed in the information he provided.
Using the four w’s for report presentation, comment on Jefferson’s effectiveness in preparing his report.
Aug 29, 2021 | Uncategorized
JOURNAL ENTRIES Jean Akins opened a consulting business. Journalize the following transactions that occurred during the month of January of the current year using the modified cash basis and a combination journal. Set up special columns for Consulting Fees (credit) and Wages Expense (debit).
Jan. 1 Invested cash in the business, $10,000.
2 Paid office rent, $500.
3 Purchased office equipment on account from Business Machines, Inc., $1,500.
5 Received cash for services rendered, $750.
8 Paid telephone bill, $65.
10 Paid for a magazine subscription (miscellaneous expense), $15.
11 Purchased office supplies on account from Leo’s Office Supplies, $300.
15 Paid for one year liability insurance policy, $150.
18 Paid part time help, $500.
21 Received cash for services rendered, $350.
25 Paid electricity bill, $85.
27 Withdrew cash for personal use, $100.
29 Paid part time help, $500.
Aug 29, 2021 | Uncategorized
JOURNALIZING AND POSTING TRANSACTIONS AND PREPARING A TRIAL BALANCE Angela McWharton opened an on call nursing services business. She rented a small office space and pays a part time worker to answer the telephone. Her chart of accounts is shown below.
Angela McWharton Nursing Services
Chart of Accounts
Assets………………………………………Revenues
101 Cash……………………………401 Nursing Care Fees
142 Office Supplies
181 Office…………………………..Equipment Expenses
………………………………………511 Wages Expense
Liabilities……………………………512 Advertising Expense
202 Accounts Payable………………521 Rent Expense
………………………………………525 Telephone Expense
Owner’s Equity…………………….526 Transportation Expense
311 Angela McWharton, Capital……533 Electricity Expense
312 Angela McWharton, Drawing…549 Miscellaneous Expense
313 Income Summary
McWharton’s transactions for the first month of business are as follows:
Jan. 1 Invested cash in the business, $10,000.
1 Paid January rent, $500.
2 Purchased office supplies on account from Crestline Office Supplies, $300.
4 Purchased office equipment on account from Office Technology, Inc., $1,500.
6 Received cash for nursing services rendered, $580.
7 Paid telephone bill, $42.
8 Paid electricity bill, $38.
10 Received cash for nursing services rendered, $360.
12 Made payment on account for office supplies previously purchased, $50.
13 Reimbursed part time worker for use of personal automobile (transportation expense), $150.
15 Paid part time worker, $360.
17 Received cash for nursing services rendered, $420.
18 Withdrew cash for personal use, $100.
20 Paid for newspaper advertising, $26.
22 Paid for gas and oil, $35.
24 Paid subscription for journal on nursing care practices (miscellaneous expense), $28.
25 Received cash for nursing services rendered, $320.
27 Made payment on account for office equipment previously purchased, $150.
29 Paid part time worker, $360.
30 Received cash for nursing services rendered, $180.
REQUIRED
1. Journalize the transactions for January using the modified cash basis and page 1 of a combination journal. Set up special columns for Nursing Care Fees (credit),
Wages Expense (debit), and Transportation Expense (debit).
2. Determine the cash balance as of January 12 (using the combination journal).
3. Prove the combination journal.
4. Set up general ledger accounts from the chart of accounts and post the transactions from the combination journal.
5. Prepare a trial balance.
Aug 29, 2021 | Uncategorized
Kay Zembrowski operates a retail variety store. The books include a cash payments journal and an accounts payable ledger. All cash payments (except petty cash) are entered in the cash payments journal. Selected account balances on May 1 are as follows:
General Ledger
Cash ……………………. $40,000
Accounts Payable ……….. 20,000
Accounts Payable Ledger
Cortez Distributors …….. $4,200
Indra & Velga …………… 6,800
Toy Corner ………………. 4,600
Troutman Outlet ………… 4,400
The following transactions are related to cash payments for the month of May:
May 1Issued Check No. 326 in payment of May rent (Rent Expense), $2,600.
4 Issued Check No. 327 to Cortez Distributors in payment of merchandise purchased on account, $4,200, less a 3% discount. Check was written for $4,074.
7 Issued Check No. 328 to Indra & Velga in partial payment of merchandise purchased on account, $6,200. A cash discount was not allowed.
11 Issued Check No. 329 to Toy Corner for merchandise purchased on account, $4,600, less a 1% discount. Check was written for $4,554.
15 Issued Check No. 330 to County Power and Light (Utilities Expense), $1,500.
19 Issued Check No. 331 to Builders Warehouse for a cash purchase of merchandise, $3,500.
25 Issued Check No. 332 to Troutman Outlet for merchandise purchased on account, $4,400, less a 2% discount. Check was written for $4,312.
30 Issued Check No. 333 to Rapid Transit Company for freight charges on merchandise purchased (Freight In), $800.
31 Issued Check No. 334 to City Merchants for a cash purchase of merchandise, $2,350.
REQUIRED
1. Enter the transactions in a cash payments journal. Total, rule, and prove the cash payments journal.
2. Post from the cash payments journal to the general ledger and accounts payable ledger. Use general ledger account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Kristen Montana operates a retail clothing operation. She purchases all merchandise inventory on credit and uses a periodic inventory system. The accounts payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2007, 2008, 2009, and 2010.
Instructions
(a) Calculate cost of goods sold for each of the 2008, 2009, and 2010 fiscal years.
(b) Calculate the gross profit for each of the 2008, 2009, and 2010 fiscal years.
(c) Calculate the ending balance of accounts payable for each of the 2008, 2009, and 2010 fiscal years.
(d) Sales declined in fiscal 2010. Does that mean that profitability, as measured by the gross profit rate, necessarily also declined? Explain, calculating the gross profit rate for each fiscal year to help support your answer. (Round to one decimalplace)
Aug 29, 2021 | Uncategorized
Mr. Lucas has prepared the following list of statements about service companies and merchandisers.
1. Measuring net income for a merchandiser is conceptually the same as for a service company.
2. For a merchandiser, sales less operating expenses is called gross profit.
3. For a merchandiser, the primary source of revenues is the sale of inventory.
4. Sales salaries and wages is an example of an operating expense.
5. The operating cycle of a merchandiser is the same as that of a service company.
6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained.
7. In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting period.
8. A periodic inventory system provides better control over inventories than a perpetual system.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.
Aug 29, 2021 | Uncategorized
Munch Printing Inc. began printing operations on July 1. Jobs 10 and 11 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 12 and 13 are still in process at the end of the month, and all applicable costs except factory overhead have been recorded on the related cost sheets. In addition to the materials and labor charged directly to the jobs, $1,200 of indirect materials and $14,500 of indirect labor were used during the month. The cost sheets for the four jobs entering production during the month are as follows, in summary form:
?
Determine each of the following for July:
a. Direct and indirect materials used.
b. Direct and indirect labor used.
c. Factory overhead applied (a single overhead rate is used based on direct labor cost).
d. Cost of completed Jobs 10 and11.
Aug 29, 2021 | Uncategorized
On December 1, 2012, Shiras Distributing Company had the following account balances.
During December, the company completed the following summary transactions.
Dec. 6 Paid $1,600 for salaries due employees, of which $600 is for December and $1,000 is for November salaries payable.
8 Received $1,900 cash from customers in payment of account (no discount allowed).
10 Sold merchandise for cash $6,300. The cost of the merchandise sold was $4,100.
13 Purchased merchandise on account from Gong Co. $9,000, terms 2/10, n/30.
15 Purchased supplies for cash $2,000.
18 Sold merchandise on account $12,000, terms 3/10, n/30. The cost of the merchandise sold was $8,000.
20 Paid salaries $1,800.
23 Paid Gong Co. in full, less discount.
27 Received collections in full, less discounts, from customers billed on December 18.
Adjustment data:
1. Accrued salaries payable $800.
2. Depreciation $200 per month.
3. Supplies on hand $1,500.
4. Income tax due and unpaid at December 31 is $200.
Instructions
(a) Journalize the December transactions using a perpetual inventory system.
(b) Enter the December 1 balances in the ledger T accounts and post the December transactions. Use Cost of Goods Sold, Depreciation Expense, Salaries and Wages Expense, Sales Revenue, Sales Discounts, Supplies Expense, Income Tax Expense, and Income Taxes Payable.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for December and a classified balance sheet at December31.
Aug 29, 2021 | Uncategorized
On January 1, 2012, Fran started a small flower merchandising business that she named Fran’s Flowers. The company experienced the following events during the first year of operation.
1. Started the business by issuing common stock for $20,000 cash.
2. Paid $28,000 cash to purchase inventory.
3. Sold merchandise that cost $16,000 for $36,000 on account.
4. Collected $30,000 cash from accounts receivable.
5. Paid $7,500 for operating expenses.
Required
a. Organize ledger accounts under an accounting equation and record the events in the accounts.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Since Fran sold inventory for $36,000, she will be able to recover more than half of the $40,000 she invested in the stock. Do you agree with this statement? Why or why not?
Aug 29, 2021 | Uncategorized
On September 1, Samardo Office Supply had an inventory of 30 calculators at a cost of $18 each. The company uses a perpetual inventory system. During September, the following transactions occurred.
Sept. 6 Purchased 80 calculators at $20 each from Samuels Co. for cash.
9 Paid freight of $80 on calculators purchased from Samuels Co.
10 Returned 3 calculators to Samuels Co. for $63 credit (including freight) because they did not meet specifications.
12 Sold 26 calculators costing $21 (including freight) for $31 each to Trent Book Store, terms n/30.
14 Granted credit of $31 to Trent Book Store for the return of one calculator that was not ordered.
20 Sold 30 calculators costing $21 for $32 each to Plaisted’s Card Shop, terms n/30.
Instructions
Journalize the September transactions.
Aug 29, 2021 | Uncategorized
Owens Distributors is a retail business. The following sales, returns, and cash receipts occurred during March 20 . There is an 8% sales tax. Beginning general ledger account balances were Cash, $9,741.00; and Accounts Receivable, $1,058.25. Beginning customer account balances were Thompson Group, $1,058.25.
Mar. 1Sold merchandise to Able & Co., $1,800, plus sales tax. Sale No. 33C.
3 Sold merchandise to R. J. Kalas, Inc., $2,240, plus sales tax. Sale No. 33D.
5 Able & Co. returned merchandise from Sale No. 33C for a credit (Credit Memo No. 66), $30, plus sales tax.
7 Made cash sales for the week, $3,160, plus sales tax.
10 Received payment from Able & Co. for Sale No. 33C less Credit Memo No. 66.
11 Sold merchandise to Blevins Bakery, $1,210, plus sales tax. Sale No. 33E.
13 Received payment from R. J. Kalas for Sale No. 33D.
14 Made cash sales for the week, $4,200, plus sales tax.
16 Blevins Bakery returned merchandise from Sale No. 33E for a credit (Credit Memo No. 67), $44, plus sales tax.
18 Sold merchandise to R. J. Kalas, Inc., $2,620, plus sales tax. Sale No. 33F.
20Received payment from Blevins Bakery for Sale No. 33E less Credit Memo No. 67.
21Made cash sales for the week, $2,400, plus sales tax.
25 Sold merchandise to Blevins Bakery, $1,915, plus sales tax. Sale No. 33G.
27 Sold merchandise to Thompson Group, $2,016, plus sales tax. Sale No. 33H.
28 Made cash sales for the week, $3,500, plus sales tax.
REQUIRED
1. Record the transactions in the sales journal, cash receipts journal, and general journal. Total, verify, and rule the columns where appropriate at the end of the month.
2. Post from the journals to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Pace Distributing Company completed the following merchandising transactions in the month of April. At the beginning of April, the ledger of Pace showed Cash of $9,000 and Owner’s Capital of $9,000.
Apr. 2 Purchased merchandise on account from Monaghan Supply Co. $6,900, terms 1/10, n/30.
4 Sold merchandise on account $6,500, FOB destination, terms 1/10, n/30. The cost of the merchandise sold was $3,900.
5 Paid $240 freight on April 4 sale.
6 Received credit from Monaghan Supply Co. for merchandise returned $500.
11 Paid Monaghan Supply Co. in full, less discount.
13 Received collections in full, less discounts, from customers billed on April 4.
14 Purchased merchandise for cash $3,800.
16 Received refund from supplier for returned goods on cash purchase of April 14, $500.
18 Purchased merchandise from Dominic Distributors $4,500, FOB shipping point, terms 2/10, n/30.
20 Paid freight on April 18 purchase $100.
23 Sold merchandise for cash $7,400. The merchandise sold had a cost of $4,120.
26 Purchased merchandise for cash $2,300.
27 Paid Dominic Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise $90. The returned merchandise had a fair value of $30.
30 Sold merchandise on account $3,700, terms n/30. The cost of the merchandise sold was $2,800.
Pace Distributing Company’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold, and No. 644 Freight out.
Instructions
(a) Journalize the transactions using a perpetual inventory system.
(b) Enter the beginning cash and capital balances, and post the transactions. (Use J1 for the journal reference.)
(c) Prepare the income statement through gross profit for the month of April 2012.
Aug 29, 2021 | Uncategorized
Paul Jackson owns a retail business. The following sales, returns, and cash receipts are for April 20 . There is a 7% sales tax.
Apr. 1 Sold merchandise to O. L. Meyers, $2,100, plus sales tax. Sale No. 111.
3 Sold merchandise to Andrew Plaa, $1,000, plus sales tax. Sale No. 112.
6 O. L. Meyers returned merchandise from Sale No. 111 for a credit (Credit Memo No. 42), $50, plus sales tax.
7 Made cash sales for the week, $3,240, plus sales tax.
9 Received payment from O. L. Meyers for Sale No. 111, less Credit Memo No. 42.
12 Sold merchandise to Melissa Richfield, $980, plus sales tax. Sale No. 113.
14 Made cash sales for the week, $2,180, plus sales tax.
17 Melissa Richfield returned merchandise from Sale No. 113 for a credit (Credit Memo No. 43), $40, plus sales tax.
19 Sold merchandise to Kelsay Munkres, $1,020, plus sales tax. Sale No. 114.
21 Made cash sales for the week, $2,600, plus sales tax.
24 Sold merchandise to O. L. Meyers, $920, plus sales tax. Sale No. 115.
27 Sold merchandise to Andrew Plaa, $1,320, plus sales tax. Sale No. 116.
28 Made cash sales for the week, $2,800, plus sales tax.
Beginning general ledger account balances were as follows:
Cash ………………………. $2,864.54
Accounts Receivable ………. 2,726.25
Beginning customer account balances were as follows:
O. L. Meyers ……………. $2,186.00
K. Munkres …………………. 482.00
M. Richfield ………………….. 58.25
REQUIRED
1. Record the transactions in the sales journal, cash receipts journal, and general journal. Total, verify, and rule the columns where appropriate at the end of the month.
2. Post from the journals to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Presented below are transactions related to Sayid Company.
1. On December 3, Sayid Company sold $570,000 of merchandise to Shephard Co., terms 2/10, n/30, FOB shipping point. The cost of the merchandise sold was $350,000.
2. On December 8, Shephard Co. was granted an allowance of $20,000 for merchandise purchased on December 3.
3. On December 13, Sayid Company received the balance due from Shephard Co.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Sayid Company using a perpetual inventory system.
(b) Assume that Sayid Company received the balance due from Shephard Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2.
Aug 29, 2021 | Uncategorized
Presented below is information related to Chevalier Co.
1. On April 5, purchased merchandise from Paris Company for $22,000, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $800 on merchandise purchased from Paris.
3. On April 7, purchased equipment on account from Wayne Higley Mfg. Co. for $26,000.
4. On April 8, returned merchandise, which cost $4,000, to Paris Company.
5. On April 15, paid the amount due to Paris Company in full.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Chevalier Co. using a periodic inventory system.
(b) Assume that Chevalier Co. paid the balance due to Paris Company on May 4 instead of April 15. Prepare the journal entry to record this payment.
Aug 29, 2021 | Uncategorized
Reza Inc. operates a retail operation that purchases and sells snowmobiles, amongst other outdoor products. The company purchases all merchandise inventory on credit and uses a periodic inventory system. The Accounts Payable account is used for recording inventory purchases only; all other current liabilities are accrued in separate accounts. You are provided with the following selected information for the fiscal years 2010 through 2013, inclusive.
?
Instructions
(a) Calculate the missing amounts.
(b) The vice presidents of sales, marketing, production, and finance are discussing the company’s results with the CEO. They note that sales declined over the 3 year fiscal period, 2011–2013. Does that mean that profitability necessarily also declined? Explain, computing the gross profit rate and the profit margin ratio for each fiscal year to help support your answer.
Aug 29, 2021 | Uncategorized
Sam Santiago operates a retail variety store. The books include a cash payments journal and an accounts payable ledger. All cash payments (except petty cash) are entered in the cash payments journal.
Selected account balances on May 1 are as follows:
General Ledger
Cash $40,000
Accounts Payable 20,000
Accounts Payable Ledger
Fantastic Toys $5,200
Goya Outlet 3,800
Muellers Distributors 3,600
Van Kooning 7,400
The following are the transactions related to cash payments for the month of May:
May 1 Issued Check No. 426 in payment of May rent (Rent Expense), $2,400.
3 Issued Check No. 427 to Muellers Distributors in payment of merchandise purchased on account, $3,600, less a 3% discount. Check was written for $3,492.
7 Issued Check No. 428 to Van Kooning in partial payment of merchandise purchased on account, $5,500. A cash discount was not allowed.
12 Issued Check No. 429 to Fantastic Toys for merchandise purchased on account, $5,200, less a 1% discount. Check was written for $5,148.
15 Issued Check No. 430 to City Power and Light (Utilities Expense), $1,720.
18 Issued Check No. 431 to A 1 Warehouse for a cash purchase of merchandise, $4,800.
26 Issued Check No. 432 to Goya Outlet for merchandise purchased on account, $3,800, less a 2% discount. Check was written for $3,724.
30 Issued Check No. 433 to Mercury Transit Company for freight charges on merchandise purchased (Freight In), $1,200.
31 Issued Check No. 434 to Town Merchants for a cash purchase of merchandise, $3,000.
REQUIRED
1. Enter the transactions in a cash payments journal. Total, rule, and prove the cash payments journal.
2. Post from the cash payments journal to the general ledger and accounts payable ledger. Use general ledger account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Sandy Chen owns a small specialty store, named Chen’s Chattel, whose year end is June 30. Determine the total amount that should be included in Chen’s Chattel’s year end inventory. A physical inventory taken on June 30 reveals the following:
Cost of merchandise on the showroom floor and in the warehouse …………….. $37,800
Goods held on consignment (consignor is National Manufacturer) ……………….. 6,400
Goods that Chen’s Chattel, as the consignor, has for sale at the location of the Grand Avenue Vista ……………………………………………………………………….. 4,600
Sales invoices indicate that merchandise was shipped on June 29, terms FOB shipping point, delivered at buyer’s receiving dock on July 3 ……………………………….. 3,800
Sales invoices indicate that merchandise was shipped on June 25, terms FOB destination, delivered at buyer’s receiving dock on July 5 ……………………………………… 3,100
Aug 29, 2021 | Uncategorized
Sarah Company engaged in the following transactions in July 2010:
July 1 Sold merchandise to Chi Dong on credit, terms n/30, FOB shipping point, $2,100 (cost, $1,260).
3 Purchased merchandise on credit from Angel Company, terms n/30, FOB shipping point, $3,800.
5. Paid Speed Freight for freight charges on merchandise received, $290.
8 Purchased merchandise on credit from Expo Supply Company, terms n/30, FOB shipping point, $3,600, which includes $200 freight costs paid by Expo Supply Company.
12 Returned some of the merchandise purchase on July 3 for credit, $600.
15 Sold merchandise on credit to Tom Kowalski, terms n/30, FOB shipping point, $1,200 (cost, $720).
17 Sold merchandise for cash, $1,000 (cost, $600).
18 Accepted for full credit a return from Chi Dong and returned merchandise to inventory, $200 (cost, $120).
24 Paid Angel Company for purchase of July 3 less return of July 12.
25 Received check from Chi Dong for July 1 purchase less the return on July 18.
Required
1. Prepare entries in journal form to record the transactions, assuming use of the perpetual inventory system. (Use the Review Problem in this chapter as a model.)
2. Most companies call the first line of the income statement net sales. Other companies call in sales. Do you think these terms are equivalent and comparable? What would be the content of net sales? Why might a company use sales instead of net sales?
Aug 29, 2021 | Uncategorized
St. Luke Hospital plans to use activity based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:
Activity ……………………………………Activity Rate
Room and meals………………………….. $170 per day
Radiology………………………………… $240 per image
Pharmacy…………………………………. $40 per physician order
Chemistry lab……………………………… $75 per test
Operating room…………………………… $720 per operating room hour
The records of two representative patients were analyzed, using the activity rates. The activity information associated with the two patients is as follows:
?
a. Determine the activity cost associated with each patient.
b. Why is the total activity cost different for the twopatients?
Aug 29, 2021 | Uncategorized
Brian Marlow recently was hired to prepare Louise Michener Consulting’s year end financial statements. Brian just earned his CPA certificate, and Louise Michener was one of his first clients. Louise employs a bookkeeper, Martha Halling, who does the daily journal entries and prepares a year to date trial balance at the end of each month.
Martha gives the December 31 trial balance to a CPA to make the adjustments and generate the financial statements. As Brian was looking through Louise Michener’s books, he noticed two things. First, in each of the last three years, a different CPA had prepared the financial statements. Second, the amount shown on the December 31 trial balance for miscellaneous expense was quite high this year compared to prior years.
Brian called Martha to find out if she knew why miscellaneous expense had such a high balance. Martha’s response was ?oI just do what Louise tells me to do. If she wants to charge personal expenses to the company, it’s none of my business.??
1. What should Brian do?
2. How might Brian’s decision affect Martha? Has Martha done anything unethical?
3. Write a short letter from Brian to Louise explaining why personal items should not be charged to a business.
4. In small groups, discuss the ethical responsibilities of an accountant relating to a client’s books.
Aug 29, 2021 | Uncategorized
Bud’s Video Store Co. is owned an operated by Jim Budeski. The following is an except from a conversation between Jim Budeski and Ann Pavik, the chief accountant for Bud’s Video Store
Jim; Ann, I’ve got a question about this recent balance sheet.
Ann: Sure, what’s your question?
Jim; Well, as you known, I’m applying for a bank load to finance our new store in Coronado, and I noticed that the accounts payable are listed as $235,000.
Ann: That’s right, Approximately $190,000 of that represents amount due our suppliers, and the remainder is miscellaneous payables to creditors for utilities, office equipment supplies, etc.
Jim; That’s what I thought, But as you known, we normally receive a 2% discount from our suppliers for earlier payment, and we always try to take the discount.
Ann: That’s right. I can’t remember the last time we missed a discount.
Jim; Well, in that case, it seems to me the accounts payable should be listed minus the 2% discount. Let’s list the accounts payable due suppliers as $186,200, rather than $190,000. Every little bit helps. You never know. It might make the difference between getting the loan and not.
How would you respond to Jim Budeski’s request?
Aug 29, 2021 | Uncategorized
Color Florists, a retail business, had the following cash receipts during January 20 . The sales tax is 5%.
Jan. 1 Received payment on account from Ray Boyd, $880.
3 Received payment on account from Clint Hassell, $271.
5 Cash sales for the week were $2,800 plus tax. Bank credit card sales for the week were $1,200 plus tax. Bank credit card fee is 3%.
8 Received payment on account from Jan Sowada, $912.
11 Ray Boyd returned merchandise for a credit, $40 plus tax.
12 Cash sales for the week were $3,100 plus tax. Bank credit card sales for the week were $1,900 plus tax. Bank credit card fee is 3%.
15 Received payment on account from Robert Zehnle, $1,100.
18 Robert Zehnle returned merchandise for a credit, $31 plus tax.
19 Cash sales for the week were $2,230 plus tax.
25 Received payment on account from Dazai Manufacturing, $318.
Beginning general ledger account balances were:
Cash $2,890.75
Accounts Receivable 6,300.00
Beginning customer account balances were:
R. Boyd $1,400
Dazai Manufacturing 318
C. Hassell 815
J. Sowada 1,481
R. Zehnle 2,286
REQUIRED
1. Record the transactions in a general journal.
2. Post from the journal to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Danny Steele owns a small specialty store, named Steele’s Storeroom, whose year end is June 30. Determine the total amount that should be included in Steele’s Storeroom’s year end inventory. A physical inventory taken on June 30 reveals the following:
Cost of merchandise on the showroom floor and in the warehouse ……… $42,600
Goods held on consignment (consignor is Quality Manufacturer) ………….. 7,600
Goods that Steele’s Storeroom, as the consignor, has for sale at the location of Midtown Galleria ………………………………………………………………………. 8,300
Sales invoices indicate that merchandise was shipped on June 28, terms FOB shipping point, delivered at buyer’s receiving dock on July 6 …………………………. 4,350
Sales invoices indicate that merchandise was shipped on June 26, terms FOB destination, delivered at buyer’s receiving dock on July 1 ………………………………… 2,800
Aug 29, 2021 | Uncategorized
Debbie Mueller owns a small retail business called Debbie’s Doll House. The cash account has a balance of $20,000 on July 1. The following transactions occurred during July:
July 1 Issued Check No. 314 for July rent, $1,400.
1 Purchased merchandise on account from Topper’s Toys, Invoice No. 211, $2,500, terms 2/10, n/30.
3 Purchased merchandise on account from Jones & Company, Invoice No. 812, $2,800, terms 1/10, n/30.
5 Returned merchandise purchased from Topper’s Toys receiving a credit memo on the amount owed, $400.
8 Purchased merchandise on account from Downtown Merchants, Invoice No. 159, $1,600, terms 2/10, n/30.
July 11Issued Check No. 315 to Topper’s Toys for merchandise purchased on account, less return of July 5 and less 2% discount.
13 Issued Check No. 316 to Jones & Company for merchandise purchased on account, less 1% discount.
15 Returned merchandise purchased from Downtown Merchants receiving a credit memo on the amount owed, $600.
18 Issued Check No. 317 to Downtown Merchants for merchandise purchased on account, less return of July 15 and less 2% discount.
25 Purchased merchandise on account from Columbia Products, Invoice No. 468, $3,200, terms n/30.
26 Purchased merchandise on account from Topper’s Toys, Invoice No. 395, $1,430, terms 2/10, n/30.
29 Purchased merchandise on account from Jones & Company, Invoice No. 853, $2,970, terms 1/10, n/30.
31 Mueller withdrew cash for personal use, $2,500. Issued Check No. 318.
31 Issued Check No. 319 to Burnside Warehouse for a cash purchase of merchandise, $1,050.
REQUIRED
1. Record the transactions in the purchases journal, cash payments journal, and general journal. Total and rule the purchases and cash payments journals. Prove the cash payments journal.
2. Post from the journals to the general ledger and accounts payable ledger accounts. Use general ledger account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Divino Coffee
Background and Facts
Stephanie Alarico is the owner of Divino Coffee, a specialty coffee machine business she started two years ago. The business is registered for GST.
Stephanie sells 3 types of coffee machines that she purchases from manufacturers. She operates the business herself and employs one person full time to assist her. Stephanie also provides specialty barista training services to private clients on how to make perfect coffee. Divino Coffee uses a perpetual inventory system and uses FIFO (First In First Out).
Divino Coffee is operated from a rented premises and the business pays rent quarterly in advance.
Stephanie has a variety of clients with whom she has built up a strong relationship. She offers them terms of 2/10, net/30. Stephanie submits her Business Activity Statements (BAS) for GST monthly to the Australia Taxation Office on an accrual basis.
Currently, the business uses a manual accounting system but plans to test a MYOB accounting system in September.
Accounting Information
Divino Coffee uses the following specialised and general journals to record business transactions.
- Sales Journal to record all invoices issued for sales of inventory
- Sales Returns Journal to record all credit notes issued for returned inventory
- Purchases Journal to record all credit purchases
- Cash Receipts Journal to record all cash received
- Cash Payments Journal to record all cash payments
- General Journal to record all other transactions
Divino Coffee uses a general ledger in the form of a 4 column running balance (as described on page 78 79 of Horngren
7th edition). An Accounts Receivable and Accounts Payable subsidiary ledger is also used in this format.
Financial Statements are prepared at the end of each month, and the accounts are closed off at the end of each month.
All necessary pro formas are included and are to be used to complete the manual practice set for August. The assignment must be completed manually using the templates provided.
Chart of Accounts
| Account Number |
Account Name |
Opening Balance |
| 110 |
Cash at Bank |
13,346 |
| 120 |
Accounts receivable |
15,640 |
| 121 |
Allowance for Doubtful Debts |
782 |
| 130 |
Prepaid Insurance |
|
| 140 |
Prepaid Rent |
3000 |
| 150 |
Office Supplies |
950 |
| 160 |
Inventory |
31,300 |
| 170 |
Office Equipment |
14,340 |
| 171 |
Accumulated Depreciation – Office Equipment |
9,170 |
| 180 |
Vehicle |
|
| 181 |
Accumulated Depreciation – Vehicle |
|
| 200 |
Accounts Payable |
22,308 |
| 210 |
Unearned Revenue |
|
| 220 |
Wages Payable |
377 |
| 230 |
GST Clearing |
1,045 |
| 240 |
PAYG Payable |
880 |
| 250 |
Superannuation Payable |
756 |
| 280 |
Bank Loan – Non current |
|
| 300 |
Capital |
43,258 |
| 310 |
Drawings |
|
| 350 |
Income Summary |
|
| 410 |
Sales Revenue |
|
| 411 |
Sales Returns and Allowances |
|
| 412 |
Sales Discounts |
|
| 415 |
Services Revenue |
|
| 420 |
Interest Revenue |
|
| 500 |
Cost of Goods Sold |
|
| 510 |
Advertising Expense |
|
| 512 |
Bad and doubtful debts expense |
|
| 515 |
Bank Charges |
|
| 520 |
Depreciation Expense – Office Equipment |
|
| 521 |
Depreciation expense – Delivery Van |
|
| 530 |
Electricity and Gas Expense |
|
| 540 |
Insurance Expense |
|
| 550 |
Interest Expense |
|
| 560 |
Office Supplies Expense |
|
| 565 |
Rent Expense |
|
| 570 |
Superannuation expense |
|
| 580 |
Telephone and Internet Expense |
|
| 590 |
Wages Expense |
|
All account balances at 30th July are normal in
Aug 29, 2021 | Uncategorized
During the month of January 20 2, TJ’s Specialty Shop engaged in the following transactions:
Jan. 1 Sold merchandise on account to Anne Clark, $3,000, plus tax of $150. Sale No. 643.
2 Issued Check No. 818 to Nathen Co. in payment of January 1 balance of $800, less 2% discount.
3 Purchased merchandise on account from West Wholesalers, $1,500. Invoice No. 678, dated January 3, terms 2/15, n/30.
4 Purchased merchandise on account from Owen Enterprises, $2,000. Invoice No. 767, dated January 4, terms 2/10, n/30.
4 Issued Check No. 819 in payment of telephone expense for the month of January, $180.
8 Sold merchandise for cash, $3,600, plus tax of $180.
9 Received payment from Lucy Greene in full settlement of account, $1,491.
10 Issued Check No. 820 to West Wholesalers in payment of January 1 balance of $1,200.
12 Sold merchandise on account to Martha Boyle, $1,000, plus tax of $50. Sale No. 644.
12 Received payment from Anne Clark on account, $2,100.
12Issued Check No. 821 in payment of wages (Wages Expense) for the two week period ending January 11, $1,100.
13 Issued Check No. 822 to Owen Enterprises in payment of January 4 purchase. Invoice No. 767, less 2% discount.
13 Martha Boyle returned merchandise for a credit, $800, plus sales tax of $40.
17Returned merchandise to Evans Essentials for credit, $300.
22 Received payment from John Dempsey on account, $2,121.
Jan. 26 Issued Check No. 823 in payment of wages (Wages Expense) for the two week period ending January 25, $1,100.
27 Issued Check No. 824 in payment of utilities expense for the month of January, $630.
27 Sold merchandise on account to John Dempsey, $2,000, plus tax of $100. Sale No. 645.
Late in January, TJ’s agreed to sell the business to a competitor. To agree on a selling price, financial statements are needed as of January 31 and for the month of January
20 2. To prepare these financial statements, TJ’s must perform the same procedures it normally does at year end.
At the end of January, the following adjustments (a)–(g) need to be made:
(a, b) Merchandise inventory as of January 31, $19,000.
(c) Unused supplies on hand, $115.
(d) Unexpired insurance on January 31, $968.
(e) Depreciation expense on the building for the month, $67.
(f) Depreciation expense on the store equipment for the month, $38.
(g) Wages earned but not paid as of January 31, $330.
REQUIRED—GENERAL JOURNAL
For those not using working papers:
1. If you are not using the working papers, open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of January 1. Enter the January 1 balance of each of the accounts, with a check mark in the Posting Reference column. The beginning balances for Part 2 are the same as the balances from your solution to Part 1 of Comprehensive Problem 2. For working paper users and nonusers:
2. Enter transactions for the month of January in the general journal. Post immediately to the accounts receivable and accounts payable ledgers.
3. Post from the journal to the general ledger.
4. Prepare schedules of accounts receivable and accounts payable.
5. Prepare a month end work sheet, income statement, statement of owner’s equity, and balance sheet. The mortgage payable includes $600 that is due within one year.
6. Journalize and post adjusting entries.
7. Journalize and post closing entries.
8. Prepare a post closing trial balance.
REQUIRED—SPECIAL JOURNALS
For those not using working papers:
1. If you are not using the working papers, open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of January 1. Enter the January 1 balance of each of the accounts, with a check mark in the Posting Reference column. The beginning balances for Part 2 are the same as the balances from your solution to Part 1 of Comprehensive Problem 2.
For working paper users and nonusers:
2. Enter transactions for the month of January in the proper journals. Post immediately to the accounts receivable and accounts payable ledgers.
3. Post from the journals to the general ledger. Post the journals in the following order: general, sales, purchases, cash receipts, and cash payments.
4. Prepare schedules of accounts receivable and accounts payable.
5. Prepare a month end work sheet, income statement, statement of owner’s equity, and balance sheet. The mortgage payable includes $600 that is due within one year.
6. Journalize and post adjusting entries.
7. Journalize and post closing entries.
8. Prepare a post closing trial balance.
Aug 29, 2021 | Uncategorized
Electronics, Inc., is a high volume, wholesale merchandising company. Most of its inventory turns over four or five times a year. The company has had 50 units of a particular brand of computers on hand for over a year. These computers have not sold and probably will not sell unless they are discounted 60 to 70%. The accountant is carrying them on the books at cost and intends to recognize the loss when they are sold. This way, she can avoid a significant write down in inventory on the current year’s financial statements.
1. Is the accountant correct in her treatment of the inventory? Why or why not?
2. If the computers cost $1,000 each and their market value is 40% of their cost, journalize the entry necessary for the write down.
3. In a short paragraph, explain what is meant by conservatism and how it ties in with the lower of cost or market method of accounting for inventory.
4. In groups of three or four, make a list of reasons why inventories of electronic equipment might have to be written down.
Aug 29, 2021 | Uncategorized
Enter the following cash payments transactions in a general journal:
Apr. 5 Issued Check No. 429 to Standard Industries for merchandise purchased March 27, $8,000, terms 2/10, n/30. Payment is made within the discount period.
19 Issued Check No. 430 to Finest Company for merchandise purchased April 10, $5,300, terms 1/10, n/30. A credit memo had been received on April 12 from Finest Company for merchandise returned, $300. Payment is made within the discount period after deduction for the return dated April 12.
21 Issued Check No. 431 to Funny Follies for merchandise purchased March 22, $3,250, terms n/30.
29 Issued Check No. 432 to Classic Data for merchandise purchased April 20, $7,000, terms 2/10, n/30. Payment is made within the discount period.
Aug 29, 2021 | Uncategorized
Enter the following cash payments transactions in a general journal:
Sept. 5 Issued Check No. 318 to Clinton Corp. for merchandise purchased August 28, $6,000, terms 2/10, n/30. Payment is made within the discount period.
12 Issued Check No. 319 to Mitchell Company for merchandise purchased September 2, $7,500, terms 1/10, n/30. A credit memo had been received on September 8 from Mitchell Company for merchandise returned, $500. Payment is made within the discount period after deduction for the return dated September 8.
19 Issued Check No. 320 to Expert Systems for merchandise purchased August 20, $4,100, terms n/30.
27 Issued Check No. 321 to Graphic Data for merchandise purchased September 17, $9,000, terms 2/10, n/30. Payment is made within the discount period.
Aug 29, 2021 | Uncategorized
For apparel manufacturer Ann Taylor, Inc., classify each of the following costs as either a product cost or a period cost:
a. Sales commissions
b. Advertising expenses
c. Fabric used during production
d. Property taxes on factory building and equipment
e. Depreciation on sewing machines
f. Factory janitorial supplies
g. Depreciation on office equipment
h. Wages of sewing machine operators
i. Repairs and maintenance costs for sewing machines
j. Salary of production quality control supervisor
k. Salaries of distribution center personnel
l. Research and development costs
m. Oil used to lubricate sewing machines
n. Corporate controller’s salary
o. Utility costs for office building
p. Travel costs of salespersons
q. Factory supervisors’ salaries
Aug 29, 2021 | Uncategorized
Freddy Flint owns a small retail business called Flint’s Fantasy. The cash account has a balance of $20,000 on July 1. The following transactions occurred during July:
July 1 Issued Check No. 414 in payment of July rent, $1,500.
1 Purchased merchandise on account from Tang’s Toys, Invoice No. 311, $2,700, terms 2/10, n/30.
3 Purchased merchandise on account from Sillas & Company, Invoice No. 812, $3,100, terms 1/10, n/30.
5 Returned merchandise purchased from Tang’s Toys, receiving a credit memo on the amount owed, $500.
8 Purchased merchandise on account from Daisy’s Dolls, Invoice No. 139, $1,900, terms 2/10, n/30.
11 Issued Check No. 415 to Tang’s Toys for merchandise purchased on account, less return of July 5 and less 2% discount.
13 Issued Check No. 416 to Sillas & Company for merchandise purchased on account, less 1% discount.
15 Returned merchandise purchased from Daisy’s Dolls, receiving a credit memo on the amount owed, $400.
18 Issued Check No. 417 to Daisy’s Dolls for merchandise purchased on account, less return of July 15 and less 2% discount.
25 Purchased merchandise on account from Allied Business, Invoice No. 489, $2,450, terms n/30.
26 Purchased merchandise on account from Tang’s Toys, Invoice No. 375, $1,980, terms 2/10, n/30.
29 Purchased merchandise on account from Sillas & Company, Invoice No. 883, $3,460, terms 1/10, n/30.
REQUIRED
1. Enter the transactions in a general journal.
2. Post from the journal to the general ledger and accounts payable ledger accounts. Use general ledger account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
From the choices presented in the parentheses, choose the appropriate term for completing each of the following sentences:
a. Advertising expenses are usually viewed as (period, product) costs.
b. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory).
c. Materials that are an integral part of the manufactured product are classified as (direct materials, materials inventory).
d. An example of factory overhead is (plant depreciation, sales office depreciation).
e. Implementing automatic factory robotics equipment normally (increases, decreases) the factory overhead component of product costs.
f. Direct labor costs combined with factory overhead costs are called (product, conversion) costs.
g. The wages of an assembly worker are normally considered a (period, product) cost.
h. Payments of cash or its equivalent or the commitment to pay cash in the future for the purpose of generating revenues are (costs, expenses).
Aug 29, 2021 | Uncategorized
Greenway Company is a small rug retailer owned and operated by Lorene Greenway. After the accounts have been adjusted on March 31, the following account balances were taken from the ledger:
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,800
Depreciation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100
Lorene Greenway, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Merchandise Inventory, March 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,500
Merchandise Inventory, March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,150
Miscellaneous Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,350
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,000
Purchases Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Purchases Returns and Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925,000
Sales Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Sales Returns and Allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Salaries Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,300
Transportation In . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,400
Journalize the closing entries on March 31.
Aug 29, 2021 | Uncategorized
Hudson Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows:
?
a. Determine the factory overhead rate for Factory 1.
b. Determine the factory overhead rate for Factory 2.
c. Determine the factory overhead applied to production in each factory for June.
d. Determine the balances of the factory accounts for each factory as of June 30, and indicate whether the amounts represent overapplied or underapplied factoryoverhead.
Aug 29, 2021 | Uncategorized
In its income statement for the year ended June 30, 2009, The Clorox Company reported the following condensed data (dollars in millions).
Selling and Research and administrative expenses …….. $ 715
Development expense …………………………………… $ 114
Net sales ………………………………………………… 5,450
Income tax expense ………………………………………. 274
Interest expense …………………………………………… 161
Other expense ………………………..……………………… 46
Advertising expense ………………………………………. 499
Cost of goods sold ………………………………………. 3,104
Instructions
(a) Prepare a multiple step income statement.
(b) Calculate the gross profit rate and the profit margin ratio and explain what each means.
(c) Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)
Aug 29, 2021 | Uncategorized
Information related to Steffens Co. is presented below.
1. On April 5, purchased merchandise from Bryant Company for $25,000 terms 2/10, net/30, FOB shipping point.
2. On April 6 paid freight costs of $900 on merchandise purchased from Bryant.
3. On April 7, purchased equipment on account for $26,000.
4. On April 8, returned damaged merchandise to Bryant Company and was granted a $4,000 credit for returned merchandise.
5. On April 15 paid the amount due to Bryant Company in full.
Instructions
(a) Prepare the journal entries to record these transactions on the books of Steffens Co. under a perpetual inventory system.
(b) Assume that Steffens Co. paid the balance due to Bryant Company on May 4 instead of April 15. Prepare the journal entry to record this payment.
Aug 29, 2021 | Uncategorized
J. B. Speck, owner of Speck’s Galleria, made the following purchases of merchandise on account during the month of September:
Sept. 3 Purchase Invoice No. 415, $2,650, from Smith Distributors
8 Purchase Invoice No. 132, $3,830, from Michaels Wholesaler.
11Purchase Invoice No. 614, $3,140, from J. B. Sanders & Co.
18Purchase Invoice No. 329, $2,250, from Bateman & Jones, Inc.
23 Purchase Invoice No. 867, $4,160, from Smith Distributors.
27 Purchase Invoice No. 744, $1,980, from Anderson Company.
30 Purchase Invoice No. 652, $2,780, from Michaels Wholesaler.
REQUIRED
1. Record the transactions in the purchases journal. Total and rule the journal.
2. Post from the purchases journal to the general ledger and accounts payable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
J. K. Bijan owns a retail business and made the following sales on account during the month of August 20 . There is a 6% sales tax on all sales.
Aug. 1 Sale No. 213 to Jung Manufacturing Co., $1,200 plus sales tax.
3 Sale No. 214 to Hassad Co., $3,600 plus sales tax.
7 Sale No. 215 to Helsinki, Inc., $1,400 plus sales tax. (Open a new account for this customer. Address is 125 Fishers Dr., Noblesville, IN 47870 8867.)
11 Sale No. 216 to Ardis Myler, $1,280 plus sales tax.
18 Sale No. 217 to Hassad Co., $4,330 plus sales tax.
22 Sale No. 218 to Jung Manufacturing Co., $2,000 plus sales tax.
30 Sale No. 219 to Ardis Myler, $1,610 plus sales tax.
REQUIRED
1. Record the transactions in a general journal.
2. Post from the journal to the general ledger and accounts receivable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Jason Tierro, an inventory clerk at Lexmar Company, is responsible for taking a physical count of the goods on hand at the end of the year. He has been performing this duty for several years. This year, Jason was very busy due to a shortage of personnel at the company, so he decided to just estimate the amount of ending inventory instead of doing an accurate count. He reasoned that he could come very close to the true amount because of his past experience working with inventory. Besides, he was sure that the sophisticated computer program that Lexmar had just invested in kept an accurate record of inventory on hand.
1. What is your opinion of Jason’s reasoning?
2. If Jason underestimates the dollar amount of ending inventory, what effect will it have on net income for the current accounting period?
3. Write a short paragraph explaining why a physical inventory should be taken at least once a year.
4. In groups of three or four, make a list of possible reasons that the actual ending inventory might not agree with the ending inventory according to a computer system.
Aug 29, 2021 | Uncategorized
Using the accounting equation to analyze transactions
Requirement
1. Indicate the effects of the following business transactions on the accounting equation of a Viviani Video store. Transaction (a) is answered as a guide.
a. Received cash of $8,000 and issued common stock.
Answer: Increase asset (Cash)
Increase stockholders’ equity (Common stock)
b. Earned video rental revenue on account, $1,800.
c. Purchased office furniture on account, $400.
d. Received cash on account, $600.
e. Paid cash on account, $100.
f. Sold land for $15,000, which was the cost of the land.
g. Rented videos and received cash of $300.
h. Paid monthly office rent of $900.
i. Paid $200 cash to purchase supplies that will be used in the future.
Aug 29, 2021 | Uncategorized
William Murray achieved one of his life long dreams by opening his own business, The Caddie Shack Driving Range, on May 1, 2012. He invested $20,000 of his own savings in the business. He paid $6,000 cash to have a small building constructed to house the operations and spent $800 on golf clubs, golf balls, and yardage signs. Murray leased 4 acres of land at a cost of $1,000 per month. (He paid the first month’s rent in cash.) During the first month, advertising costs totaled $750, of which $150 was unpaid at the end of the month. Murray paid his three nephews $400 for retrieving golf balls. He deposited in the company’s bank account all revenues from customers ($4,700). On May 15, Murray withdrew $800 in cash for personal use. On May 31, the company received a utility bill for $100 but did not immediately pay it. On May 31, the balance in the company bank account was $15,100. Murray is feeling pretty good about results for the first month, but his estimate of profitability ranges from a loss of $4,900 to a profit of $1,650.
Accounting
Prepare a balance sheet at May 31, 2012. Murray appropriately records any depreciation expense on a quarterly basis. How could Murray have determined that the business operated at a profit of $1,650? How could Murray conclude that the business operated at a loss of $4,900?
Analysis
Assume Murray has asked you to become a partner in his business. Under the partnership agreement, after paying him $10,000, you would share equally in all future profits. Which of the two income measures above would be more useful in deciding whether to become a partner? Explain.
Principles
What is income according to GAAP? What concepts do the differences in the three income measures for The Caddie Shack Driving Range illustrate?
Aug 29, 2021 | Uncategorized
You are promoting a rock concert in your area. Your purpose is to earn a profit, and you organize Concert Enterprises as a corporation.
Requirements
1. Make a detailed list of 10 factors you must consider to establish the business.
2. Describe 10 of the items your business must arrange in order to promote and stage the rock concert.
3. Prepare your business’s income statement, statement of retained earnings, and balance sheet on June 30, 20XX, immediately after the rock concert. Use made up amounts, and include a complete heading for each financial statement. For the income statement and the statement of retained earnings, assume the period is the three months ended June 30, 20XX.
4. Assume that you will continue to promote rock concerts if the venture is successful. If it is unsuccessful, you will terminate the business within three months after the concert. Discuss how you will evaluate the success of your venture and how you will decide whether to continue in business.
Aug 29, 2021 | Uncategorized
You begin No Limits Cell Service, Inc., by investing $10,000 of your own money in a business bank account. You receive the company’s common stock. Then the business borrows $5,000 cash by signing a note payable to Summit Bank.
Requirement
1. Following are the steps that you must take to organize the corporation. Place the steps in their proper order.
a. The board elects a chairperson.
b. The first share of stock is issued and the corporation comes into existence.
c. The incorporators pay fees, sign the charter, and file the required documents with the state.
d. Organizers draft a charter that includes authorization for the corporation to issue a certain number of shares of stock.
e. Organizers obtain a charter from the state.
f. The board of directors designates a president.
g. The incorporators agree to a set of bylaws, which act as the constitution for governing the corporation.
h. The stockholders elect the members of the board of directors, which sets policy for the corporation and appoints the officers.
Aug 29, 2021 | Uncategorized
Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with IFRS. She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of terms she has come across related to accounting.
Instructions
Access the IASB Framework at the IASB website (http://eifrs.iasb.org/). When you have accessed the documents, you can use the search tool in your Internet browser to prepare responses to the following items. (Provide paragraph citations.)
(a) How is ?omateriality?? defined in the framework?
(b) Briefly discuss how materiality relates to (1) the relevance of financial information, and (2) completeness.
(c) Your aunt observes that under IFRS, the financial statements are prepared on the accrual basis. According to the framework, what does or ?oaccrual basis?? mean?
Aug 29, 2021 | Uncategorized
Comparative financial statements for Pen Corporation and its subsidiaries, Sir and Tip Corporations, for the year ended December 31, 2011, are as follows (in thousands):
ADDITIONAL INFORMATION
1. Pen acquired its 80 percent interest in Sir Corporation for $420,000 on January 2, 2009, when Sir had capital stock of $400,000 and retained earnings of $100,000. The excess fair value over book value acquired relates to equipment that had a remaining useful life of four years from January 1, 2009.
2. Pen acquired its 50 percent interest in Tip Corporation for $75,000 on July 1, 2009, when Tip’s equity consisted of $100,000 capital stock and $20,000 retained earnings. Sir acquired its 40 percent interest in Tip on December 31, 2010, for $68,000, when Tip’s capital stock was $100,000 and its retained earnings were $45,000. The difference between fair value and book value acquired is due to goodwill.
3. Although Pen and Sir use the equity method in accounting for their investments, they do not apply the method to intercompany profits or to differences between fair value and book value acquired.
4. At December 31, 2010, the inventory of Sir included inventory items acquired from Pen at a profit of $8,000. This merchandise was sold during 2011.
5. Tip sold merchandise that had cost $30,000 to Sir for $50,000 during 2011. All of this merchandise is held by Sir at December 31, 2011. Sir owes Tip $10,000 on this merchandise.
REQUIRED: Prepare a consolidation workpaper for the year ended December 31,2011.
Aug 29, 2021 | Uncategorized
Pal Corporation owns 80 percent each of the voting common stock of Sal and Tea Corporations. Sal owns 60 percent of the voting common stock of Won Corporation and 10 percent of the voting stock of Tea. Tea owns 70 percent of the voting stock of Val and 10 percent of the voting stock of Won.
The affiliates had separate incomes during 2011 as follows:
Pal Corporation …………….. $50,000
Sal Corporation …………….. $30,000
Tea Corporation ……………. $35,000
Won Corporation ……. ($20,000) loss
Val Corporation …………… $40,000
The only intercompany profits included in the separate incomes of the affiliates consisted of $5,000 on merchandise that Pal acquired from Tea and which remained in Pal’s December 31, 2011, inventory.
REQUIRED: Compute controlling and noncontrolling interest shares of consolidated net income.
Aug 29, 2021 | Uncategorized
Bax has been operating under Chapter 11 of the Bankruptcy Code for the past 15 months. On March 31, 2011, just before confirmation of its reorganization plan, Bax’s reorganization value is estimated at $2,000,000. A balance sheet for Bax prepared on the same date is summarized as follows:
Current assets………………………………………….. $ 750,000
Plant assets……………………………………………. 3,000,000
$3,750,000
Postpetition liabilities…………………………………. $1,200,000
Prepetition liabilities subject to compromise * ……….. 1,500,000
Fully secured debt……………………………………… 900,000
Capital stock……………………………………………. 900,000
Deficit………………………………………………….. (750,000)
$3,750,000
* Represents allowed claims. The reorganization plan calls for payment of
$150,000 and issuance of $300,000 notes and $375,000 common stock in settlement of the prepetition liabilities.
REQUIRED
1. Does Bax qualify for fresh start reporting on the basis of the reorganization value?
2. What other conditions must be met for fresh start reporting? Show calculations.
Aug 29, 2021 | Uncategorized
Fabulous Fakes Corporation is being liquidated under Chapter 7 of the bankruptcy act. All assets have been converted into cash, and $374,500 cash is available to pay the following claims:
1. Administrative expenses of preserving and liquidating the debtor
corporation’s estate …………………………………………………… $ 12,500
2. Merchandise creditors……………………………………………… 99,000
3. Local government for property taxes………………………………. 4,000
4. Local bank for unsecured loan (principal is $30,000 and interest
is $4,500) …………………………………………………………….. 34,500
5. State government for gross receipts taxes…………………………. 3,000
6. Employees for unpaid wages during the month before filing
(includes $5,000 for the company president and less than $4,000
for each of the other employees)……………………………………… 48,000
7. Customers for prepaid merchandise that was not delivered………. 1,500
8. Holders of the first mortgage on the company’s real estate
that was sold for $240,000 (includes $220,000 principal
and $8,500 interest)……………………………………………………. 228,500
Assume that all the claims are allowed and that they were timely filed.
REQUIRED
1. Rank the claims according to priority under the bankruptcy act.
2. Show how the available cash will be distributed in final liquidation of the corporation.
Aug 29, 2021 | Uncategorized
Hol is in bankruptcy and is being liquidated by a court appointed trustee. The financial report that follows was prepared by the trustee just before the final cash distribution:
Assets
Cash……………………………………………………. $ 200,000
Approved Claims
Mortgage payable (secured by property that was
sold for $100,000)…………………………………….. $ 160,000
Accounts payable, unsecured…………………………. 100,000
Administrative expenses payable, unsecured………… 16,000
Salaries payable, unsecured…………………………… 4,000
Interest payable, unsecured…………………………… 20,000
Total approved claims………………………………… $ 300,000
The administrative expenses are for trustee fees and other costs of administering the debtor corporation’s estate.
REQUIRED
Show how the $200,000 cash will be distributed to holders of each of the claims.
Aug 29, 2021 | Uncategorized
The balance sheet of Everlast Window Corporation at June 30, 2011, contains the following items:
Assets
Cash…………………………………………. $ 40,000
Accounts receivable—net…………………… 70,000
Inventories…………………………………… 50,000
Land…………………………………………. 30,000
Building—net……………………………….. 200,000
Machinery—net…………………………….. 60,000
Goodwill……………………………………. 50,000
$500,000
Equities
Accounts payable………………………… $110,000
Wages payable…………………………… 60,000
Property taxes payable…………………… 10,000
Mortgage payable……………………… 150,000
Interest on mortgage payable……………… 15,000
Note payable—unsecured…………………. 50,000
Interest payable—unsecured……………….. 5,000
Capital stock………………………………… 200,000
Retained earnings deficit…………………… (100,000)
$500,000
The company is in financial difficulty, and its stockholders and creditors have requested a statement of affairs for planning purposes. The following information is available:
1. The company estimates that $63,000 is the maximum amount collectible for the accounts receivable.
2. Except for 20% of the inventory items that are damaged and worth only $2,000, the cost of the other items is expected to be recovered in full.
3. The land and building have a combined appraisal value of $170,000 and are subject to the $150,000 mortgage and related accrued interest.
4. The appraised value of the machinery is $20,000.
5. Wages payable and property taxes payable are unsecured priority items that do not exceed any limitations of the bankruptcy act.
REQUIRED
1. Prepare a statement of affairs for Ever last Window Corporation as of June 30, 2011.
2. Compute the estimated settlement per dollar of unsecured liabilities.
Aug 29, 2021 | Uncategorized
Ann Benton, owner of Benton’s Galleria, made the following purchases of merchandise on account during the month of October:
Oct. 2 Purchase Invoice No. 321, $1,950, from Boggs Distributors.
7 Purchase Invoice No. 152, $2,915, from Wolfs Wholesaler.
10 Purchase Invoice No. 634, $3,565, from Komuro & Co.
16 Purchase Invoice No. 349, $2,845, from Fritz & McCord, Inc.
24 Purchase Invoice No. 587, $3,370, from Boggs Distributors.
26 Purchase Invoice No. 764, $2,240, from Sanderson Company.
31 Purchase Invoice No. 672, $1,630, from Wolfs Wholesaler.
REQUIRED
1. Record the transactions in the purchases journal. Total and rule the journal.
2. Post from the purchases journal to the general ledger and accounts payable ledger accounts. Use account numbers as shown in the chapter.
Aug 29, 2021 | Uncategorized
Assume that on September 1, Office Depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September, these transactions occurred.
Sept. 6 Purchased calculators from Abacus Co. at a total cost of $1,650, terms n/30.
9 Paid freight of $50 on calculators purchased from Abacus Co.
10 Returned calculators to Abacus Co. for $66 credit because they did not meet specifications.
12 Sold calculators costing $520 for $690 to Union Book Store, terms n/30
14 Granted credit of $45 to Union Book Store for the return of one calculator that was not ordered. The calculator cost $34
20 Sold calculators costing $570 for $760 to Commons Card Shop, terms n/30
Instructions
Journalize the September transactions.
Aug 29, 2021 | Uncategorized
At the beginning of the current season on April 1, the ledger of Five Pines Pro Shop showed Cash $3,000; Merchandise Inventory $4,000; and Irene Tiger, Capital $7,000.These transactions occurred during April 2010.
Apr. 5 Purchased golf bags, clubs, and balls on account from Mickelson Co. $1,200,FOB shipping point, terms 2/10, n/60.
7 Paid freight on Mickelson Co. purchases $50.
9 Received credit from Mickelson Co. for merchandise returned $100.
10 Sold merchandise on account to members $600, terms n/30.
12 Purchased golf shoes, sweaters, and other accessories on account from Dagger Sportswear $340, terms 1/10, n/30.
14 Paid Mickelson Co. in full.
17 Received credit from Dagger Sportswear for merchandise returned $40.
20 Made sales on account to members $600, terms n/30.
21 Paid Dagger Sportswear in full.
27 Granted credit to members for clothing that had flaws $35.
30 Received payments on account from members $650.
The chart of accounts for the pro shop includes Cash; Accounts Receivable, Merchandise Inventory; Accounts Payable; Irene Tiger, Capital; Sales; Sales Returns and Allowances; Purchases; Purchase Returns and Allowances; Purchase Discounts, and Freight in.
Instructions
(a) Journalize the April transactions using a periodic inventory system.
(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions.
(c) Prepare a trial balance on April 30, 2010.
(d) Prepare an income statement through gross profit, assuming merchandise inventory on hand at April 30 is $4,726.
Aug 29, 2021 | Uncategorized
At the beginning of the current season on April 1, the ledger of Ilana Pro Shop showed Cash $3,000; Inventory $4,000; and Owner’s Capital $7,000. These transactions occurred during April 2012.
Apr. 5 Purchased golf bags, clubs, and balls on account from Zuleikha Co. $1,200, FOB shipping point, terms 2/10, n/60.
7 Paid freight on Zuleikha Co. purchases $50.
9 Received credit from Zuleikha Co. for merchandise returned $100.
10 Sold merchandise on account to members $600, terms n/30.
12 Purchased golf shoes, sweaters, and other accessories on account from Libby Sportswear $450, terms 1/10, n/30.
14 Paid Zuleikha Co. in full.
17 Received credit from Libby Sportswear for merchandise returned $50.
20 Made sales on account to members $600, terms n/30.
21 Paid Libby Sportswear in full.
27 Granted credit to members for clothing that had flaws $35.
30 Received payments on account from members $600.
The chart of accounts for the pro shop includes Cash, Accounts Receivable, Inventory, Accounts Payable, Owner’s Capital, Sales Revenue, Sales Returns and Allowances, Purchases, Purchase Returns and Allowances, Purchase Discounts, and Freight in.
Instructions
(a) Journalize the April transactions using a periodic inventory system.
(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions.
(c) Prepare a trial balance on April 30, 2012.
(d) Prepare an income statement through gross profit, assuming merchandise inventory on hand at April 30 is $4,824.
Aug 29, 2021 | Uncategorized
At the beginning of the current season, the ledger of Village Tennis Shop showed Cash $2,500; Merchandise Inventory $1,700; and Angie Wilbert, Capital $4,200.The following transactions were completed during April.
Apr. 4 Purchased racquets and balls from Denton Co. $740, terms 3/10, n/30.
6 Paid freight on Denton Co. purchase $60.
8 Sold merchandise to members $900, terms n/30.
10 Received credit of $40 from Denton Co. for a racquet that was returned.
11 Purchased tennis shoes from Newbee Sports for cash $300.
13 Paid Denton Co. in full.
14 Purchased tennis shirts and shorts from Venus’s Sportswear $600, terms 2/10, n/60.
15 Received cash refund of $50 from Newbee Sports for damaged merchandise that was returned.
17 Paid freight on Venus’s Sportswear purchase $30.
18 Sold merchandise to members $1,000, terms n/30.
20 Received $500 in cash from members in settlement of their accounts.
21 Paid Venus’s Sportswear in full.
27 Granted an allowance of $30 to members for tennis clothing that did not fit properly.
30 Received cash payments on account from members $500.
The chart of accounts for the tennis shop includes Cash; Accounts Receivable; Merchandise
Inventory; Accounts Payable; Angie Wilbert, Capital; Sales; Sales Returns and Allowances;
Purchases; Purchase Returns and Allowances; Purchase Discounts; and Freight in.
Instructions
(a) Journalize the April transactions using a periodic inventory system.
(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions.
(c) Prepare a trial balance on April 30, 2010.
(d) Prepare an income statement through gross profit, assuming merchandise inventory on hand at April 30 is $2,296.
Aug 29, 2021 | Uncategorized
Bell Farm and Garden Equipment reported the following information for 2010:
Net Sales of Equipment $2,450,567
Other Income 6,786
Cost of Goods Sold 1,425,990
Selling, General, and Administrative Expense 325,965
Net Operating Income $ 705,398
Selected information from the balance sheet as of December 31, 2010, follows.
Cash and Marketable Securities $113,545
Inventory 248,600
Accounts Receivable 82,462
Property, Plant, and Equipment—Net 335,890
Other Assets 5,410
Total Assets $785,907
Assume that a major customer returned a large order to Bell on December 31, 2010. The amount of the sale had been $146,800 with a cost of sales of $94,623. The return was recorded in the books on January 1, 2011. The company president does not want to correct the books. He argues that it makes no difference as to whether the return is recorded in 2010 or 2011. Either way, the return has been duly recognized.
Required
a. Assume that you are the CFO for Bell Farm and Garden Equipment Co. Write a memo to the president explaining how omitting the entry on December 31, 2010, could cause the financial statements to be misleading to investors and creditors. Explain how omitting the return from the customer would affect net income and the balance sheet.
b. Why might the president want to record the return on January 1, 2011, instead of December 31, 2010?
c. Would the failure to record the customer return violate the AICPA Code of Professional Conduct?
d. If the president of the company refuses to correct the financial statements, what action should you take?
Aug 29, 2021 | Uncategorized
Block Food’s, a retail grocery store, has agreed to purchase all of its merchandise from Square Wholesalers. In return, Block receives a special discount on purchases. Over recent months, Square noticed that purchases by Block had been falling off. At first, Square simply thought that business might be down for Block and was hopeful that their purchases would pick up. When business with Block did not return to a normal level, Square requested financial statements from Block. Square’s records indicate that Block purchased $300,000 worth of merchandise during 20 1, the most recent year.
Selected information taken from Block’s financial statements is as follows:
Balance Sheet …… 12/31/ 1 … 12/31/ 0
Inventory …… $30,000 …… $20,000
Income Statement
Cost of goods sold ………….. $400,000
REQUIRED
Compute net purchases made by Block during 20 1. Does it appear that Block violated the agreement?
Aug 29, 2021 | Uncategorized
Bob’s Discount Auto Parts receives a cash discount of 2% from Auto Warehouse if it pays an invoice within 10 days. Bob, the owner, consistently sends payments 15 to 20 days after receiving the invoice and still deducts the amount of the discount. Last week, Bob received a call from Auto Warehouse reminding him that in order to get the discount, an invoice must be paid within 10 days. When Bob received the next invoice, he dated the check exactly 10 days from the date of the invoice but didn’t mail the check for another week. The receivables manager from Auto Warehouse called Bob and again reminded him that the check should be mailed by the 10th day in order to receive the 2% discount. When Bob received the next invoice, he mailed it on time but post dated the check for the following week.
1. Are Bob’s attempts to extend the discount period unethical?
2. What alternatives can Auto Warehouse take to prevent Bob’s Discount Auto Parts from stretching the discount period?
3. Write a short note from Auto Warehouse to Bob’s Discount Auto Parts explaining cash discounts and credit terms.
4. In small groups, make a list of the advantages and disadvantages of offering cash discounts.
Aug 29, 2021 | Uncategorized
Boone Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Boone showed Cash of $5,000 and Owner’s Capital of $5,000.
May 1 Purchased merchandise on account from Adewale’s Wholesale Supply $4,200, terms 2/10, n/30.
2 Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the merchandise sold was $1,300.
5 Received credit from Adewale’s Wholesale Supply for merchandise returned $300.
9 Received collections in full, less discounts, from customers billed on sales of $2,100 on
May 2.
10 Paid Adewale’s Wholesale Supply in full, less discount.
11 Purchased supplies for cash $400.
12 Purchased merchandise for cash $1,400.
15 Received refund for poor quality merchandise from supplier on cash purchase $150.
17 Purchased merchandise from Agbaje Distributors $1,300, FOB shipping point, terms 2/10, n/30.
19 Paid freight on May 17 purchase $130.
24 Sold merchandise for cash $3,200. The merchandise sold had a cost of $2,000.
25 Purchased merchandise from Somerhalder, Inc. $620, FOB destination, terms 2/10, n/30.
27 Paid Agbaje Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise $70. The returned merchandise had a fair value of $30.
31 Sold merchandise on account $1,000 terms n/30. The cost of the merchandise sold was $560.
Boone Hardware’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner’s Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.
Instructions
(a) Journalize the transactions using a perpetual inventory system.
(b) Enter the beginning cash and capital balances and post the transactions. (Use J1 for the journal reference.)
(c) Prepare an income statement through gross profit for the month of May 2012.
Aug 29, 2021 | Uncategorized
Ginger Enterprises began the year with total assets of $500,000 and total liabilities of $250,000. Using this information and the accounting equation, answer each of the following independent questions.
1. What was the amount of Ginger’s owners’ equity at the beginning of the year?
2. If Ginger’s total assets increased by $100,000 and its total liabilities increased by $77,000 during the year, what was the amount of Ginger’s owners’ equity at the end of the year?
3. If Ginger’s total liabilities increased by $33,000 and its owners’ equity decreased by $58,000 during the year, what was the amount of its total assets at the end of the year?
4. If Ginger’s total assets doubled to $1,000,000 and its owners’ equity remained the same during the year, what was the amount of its total liabilities at the end of the year?
Aug 29, 2021 | Uncategorized
Harry started a new business on 1 January 2012. The following transactions cover his first three months in business:
1. Harry contributed an amount in cash to start the business.
2. He transferred some of the cash to a business bank account.
3. He paid an amount in advance by cheque for rental of business premises.
4. Bought goods on credit from Paul.
5. Purchased a van paying by cheque.
6. Sold some goods for cash to James.
7. Bought goods on credit from Nancy.
8. Paid motoring expenses in cash.
9. Returned some goods to Nancy.
10. Sold goods on credit to Mavis.
11. Harry withdrew some cash for personal use.
12. Bought goods from David paying in cash.
13. Mavis returns some goods.
14. Sent a cheque to Nancy.
15. Cash received from Mavis.
16. Harry receives a cash discount from Nancy.
17. Harry allows Mavis a cash discount.
18. Cheque withdrawn at the bank in order to open a petty cash account.
Required:
State which account in Harry’s books of account should be debited and which account should be credited for each transaction.
Aug 29, 2021 | Uncategorized
Hector Lopez is the owner and operator of Centillion, a motivational consulting business.
At the end of its accounting period, December 31, 2007, Centillion has assets of $950,000 and liabilities of $300,000. Using the accounting equation and considering each case independently, determine the following amounts:
a. Hector Lopez, capital, as of December 31, 2007.
b. Hector Lopez, capital, as of December 31, 2008, assuming that assets increased by $150,000 and liabilities increased by $90,000 during 2008.
c. Hector Lopez, capital, as of December 31, 2008, assuming that assets decreased by $75,000 and liabilities increased by $27,000 during 2008.
d. Hector Lopez, capital, as of December 31, 2008, assuming that assets increased by $125,000 and liabilities decreased by $48,000 during 2008.
e. Net income (or net loss) during 2008, assuming that as of December 31, 2008, assets were $1,200,000, liabilities were $195,000, and there were no additional investments or withdrawals.
Aug 29, 2021 | Uncategorized
can someone do an annual report for me
Aug 29, 2021 | Uncategorized
La Z Boy Inc. is one of the world’s largest manufacturers of furniture that is best known for its reclining chairs. The following data (in thousands) were adapted from the 2004 annual report of La Z Boy Inc.:
Accounts payable …………………………………$122,576
Accounts receivable ……………………………… 337,770
Accumulated depreciation ………………………… 296,942
Capital stock ……………………………………… 269,316
Cash ………………………………………………. $ 33,882
Intangible assets …………………………………… 96,005
Inventories ………………………………………… 250,568
Debt due within one year* ………………………… 42,563
Long term debt** …………………………………. 181,807
Other assets* ……………………………………… 31,454
Other assets** …………………………………….. 85,078
Other liabilities* ………………………………….. 118,182
Other long term liabilities** ……………………… 60,040
Property, plant, and equipment …………………… 509,681
Retained earnings …………………………………. 253,012
For the preceding items, (*) indicates that the item is current in nature, while (**) indicates that the item is long term in nature. Prepare a classified balance sheet as of April 24, 2004.
Aug 29, 2021 | Uncategorized
Lawlor Lawn Service, Inc., began operations and completed the following transactions during May, 2012:
May 1 Received $1,700 and issued 100 shares of common stock. Deposited this amount in bank account titled Lawlor Lawn Service, Inc.
3 Purchased on account a mower, $1,200, and weed whacker, $240. The equipment is expected to remain in service for four years.
5 Purchased $30 of gas. Wrote check #1 from the new bank account.
6 Performed lawn services for client on account, $150.
8 Purchased $150 of fertilizer that will be used on future jobs. Wrote check #2 from the new bank account.
17 Completed landscaping job for client, received cash $800.
31 Received $100 on account from May 6 sale.
Requirement
1. Analyze the effects of Lawlor Lawn Service transactions on the accounting equation. Use the format of Exhibit 1 6, and include these headings: Cash, Accounts receivable, Lawn supplies, Equipment, Accounts payable, Common stock, and Retained earnings. In Chapter 2, we will account for these same transactions a different way—as the accounting is actually performed in practice.
Aug 29, 2021 | Uncategorized
Let’s examine a case using Greg’s Tunes and another company, Sal’s Silly Songs. It is now the end of the first year of operations, and both owners—Sally Siegman and Greg Moore—want to know how well they came out at the end of the year. Neither business kept complete accounting records and neither business paid out dividends. Moore and Siegman throw together the following data at year end:
Sal’s Silly Songs:
Total assets……………………………. $23,000
Common stock………………………… 8,000
Total revenues………………………… 35,000
Total expenses………………………… 22,000
Greg’s Tunes:
Total liabilities……………………….. $10,000
Common stock……………………….. 6,000
Total expenses……………………….. 44,000
Net income…………………………… 9,000
Working in the music business, Moore has forgotten all the accounting he learned in college. Siegman majored in English literature, so she never learned any accounting. To gain information for evaluating their businesses, they ask you several questions. For each answer, you must show your work to convince Moore and Siegman that you know what you are talking about.
1. Which business has more assets?
2. Which business owes more to creditors?
3. Which business has more stockholders’ equity at the end of the year?
4. Which business brought in more revenue?
5. Which business is more profitable?
6. Which of the foregoing questions do you think is most important for evaluating these two businesses? Why? (Challenge)
7. Which business looks better from a financial standpoint? (Challenge)
Aug 29, 2021 | Uncategorized
Michael McNamee is the sole shareholder of a property management company near the campus of Pensacola State College. The business has cash of $8,000 and furniture that cost $9,000 and has a market value of $13,000. Debts include accounts payable of $6,000. Michael’s personal home is valued at $400,000 and his personal bank account has a balance of $1,200.
Requirements
1. Consider the accounting principles discussed in the chapter and define the principle that best matches the situation:
a. Michael’s personal assets are not recorded on the property management company’s balance sheet.
b. Michael records furniture at its cost of $9,000, not its market value of $13,000.
c. Michael does not make adjustments for inflation.
d. The account payable of $6,000 is documented by a statement from the furniture company showing the business still owes $6,000 on the furniture.
Michael’s friend thinks he should only owe about $5,000. The account payable is recorded at $6,000.
2. How much equity is in the business?
Aug 29, 2021 | Uncategorized
On April 1, Jenny Russo established Matrix Travel Agency. The following transactions were completed during the month.
1. Stockholders invested $10,000 cash in the business in exchange for common stock.
2. Paid $400 cash for April office rent.
3. Purchased office equipment for $2,500 cash.
4. Incurred $300 of advertising costs in the Chicago Tribune, on account.
5. Paid $600 cash for office supplies.
6. Earned $9,500 for services provided: $3,000 cash is received from customers, and the balance of $6,500 is billed to customers on account.
7. Declared and paid a $200 cash dividend.
8. Paid Chicago Tribune amount due in transaction (4).
9. Paid employees’ salaries $2,200.
10. Received $4,000 in cash from customers billed previously in transaction (6).
Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings: Cash, Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Common Stock, and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends). Include margin explanation for any changes in Retained Earnings.
(b) From an analysis of the column Retained Earnings, compute the net income or net loss for April.
Aug 29, 2021 | Uncategorized
Patton Services Company had the following transactions during the month of June:
June 2. Issued Invoice No. 201 to Thomas Corp. for services rendered on account, $290.
3. Issued Invoice No. 202 to Mid States Inc. for services rendered on account, $410.
12. Issued Invoice No. 203 to Thomas Corp. for services rendered on account, $145.
22. Issued Invoice No. 204 to Parker Co. for services rendered on account, $605.
28. Collected Invoice No. 201 from Thomas Corp.
a. Prepare a revenue journal with the following headings to record the June revenue transactions for Patton Services Company.
b. What is the total amount posted to the accounts receivable control and fees earned accounts from the revenue journal for June?
c. What is the June 30 balance of the Thomas Corp. customer account assuming a zero balance on June1?
Aug 29, 2021 | Uncategorized
Poulsen Industries is analyzing an average risk project and the following data have been developed. Unit sales will be constant but the sales price should increase with inflation. Fixed costs will also be constant but variable costs should rise with inflation. The project should last for three years, it will be depreciated on a straight line basis, and there will be no salvage value.
This is just one of many projects for the firm, so any losses can be used to offset gains on other firm projects. The marketing manager does not think it is necessary to adjust for inflation since both the sales price and the variable costs will rise at the same rate but the CFO thinks an adjustment is required. What is the difference in the expected NPV if the inflation adjustment is made vs. if it is not made?
WACC ………………………………………………… 10.00%
Net investment cost (depreciable basis) …………….. $200,000
Units sold ………………………………………………. 50,000
Average price per unit, Year 1 …………………………. $25.00
Fixed operating costs, excl. depreciation (constant) … $150,000
Variable oper.cost per unit, Year 1 …………………….. $20.20
Annual depreciation rate ………………………………. 33.33%
Expected inflation ………………………………………. 4.00%
Tax rate ………………………………………………… 35.00%
Aug 29, 2021 | Uncategorized
Rocky has a full time job as an electrical engineer for the city utility. In his spare time, Rocky repairs TV sets in the basement of his personal residence. Most of his business comes from friends and referrals from former customers, although occasionally he runs an ad in the local suburbia newspaper. Typically, the sets are dropped off at Rocky’s house and later picked up by the owner when notified that the repairs have been made.
The floor space of Rocky’s residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the repair business. Gross income from the business is $12,000, while expenses (other than home office) are $5,000. Expenses relating to the residence are as follows:
Real property taxes ……………………………………….$4,500
Interest on home mortgage …………………………………8,000
Operating expenses of residence …………………………..3,000
Depreciation (based on 20% business use) ………………….500
What is Rocky’s net income from the repair business…………..?
Aug 29, 2021 | Uncategorized
Skivvy Dry Cleaners is owned and operated by Jean Potts. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on November 1, 2008, are as follows: Cash, $17,200; Accounts Receivable, $19,000; Supplies, $3,750; Land, $30,000; Accounts Payable, $8,200. Business transactions during November are summarized as follows:
a. Jean Potts invested additional cash in the business with a deposit of $50,000 in the business bank account.
b. Purchased land for use as a parking lot, paying cash of $45,000.
c. Paid rent for the month, $4,500.
d. Charged customers for dry cleaning sales on account, $15,250.
e. Paid creditors on account, $5,800.
f. Purchased supplies on account, $3,200.
g. Received cash from cash customers for dry cleaning sales, $22,900.
h. Received cash from customers on account, $17,250.
i. Received monthly invoice for dry cleaning expense for November (to be paid on December 10), $16,380.
j. Paid the following: wages expense, $6,200; truck expense, $1,875; utilities expense, $1,575; miscellaneous expense, $850.
k. Determined that the cost of supplies on hand was $2,500; therefore, the cost of supplies used during the month was $4,450.
l. Withdrew $6,000 for personal use.
Instructions
1. Determine the amount of Jean Potts’s capital as of November 1.
2. State the assets, liabilities, and owner’s equity as of November 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for November, a statement of owner’s equity for November, and a balance sheet as of November 30.
4. (Optional). Prepare a statement of cash flows for November.
Aug 29, 2021 | Uncategorized
The board of directors of Xiaping Trading Company is meeting to discuss the past year’s results before releasing financial statements to the public. The discussion includes this exchange:
Wai Lee, company president: ?oThis has not been a good year! Revenue is down and expenses are way up. If we are not careful, we will report a loss for the third year in a row. I can temporarily transfer some land that I own into the company’s name, and that will beef up our balance sheet. Brent, can you shave $500,000 from expenses? Then we can probably get the bank loan that we need.?? Brent Ray, company chief accountant: ?oWai Lee, you are asking too much. Generally accepted accounting principles are designed to keep this sort of thing from happening.??
Requirements
1. What is the fundamental ethical issue in this situation? (Challenge)
2. How do the two suggestions of the company president differ? (Challenge)
Aug 29, 2021 | Uncategorized
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at
http://corporate.marksandspencer.com/documents/publications/2010/Annual_Report_2010.
Instructions
Refer to M&S’s financial statements and the accompanying notes to answer the following questions.
(a) Using the notes to the consolidated financial statements, determine M&S’s revenue recognition policies.
(b) Give two examples of where historical cost information is reported in M&S’s financial statements and related notes. Give two examples of the use of fair value information reported in either the financial statements or related notes.
(c) How can we determine that the accounting principles used by M&S are prepared on a basis consistent with those of last year?
(d) What is M&S’s accounting policy related to refunds and loyalty schemes? Why does M&S include the accounting for refunds and loyalty schemes in its critical accounting estimates and judgments?
Aug 29, 2021 | Uncategorized
The following basic accounting principles and assumptions were discussed in the chapter:
Economic entity
Monetary unit
Cost principle
Going concern
Time period
Fill in each of the blanks with the accounting principle or assumption that is relevant to the situation described.
____________________1. Genesis Corporation is now in its 30th year of business. The founder of the company is planning to retire at the end of the year and turn the business over to his daughter.
_____________________2. Nordic Company purchased a 20 acre parcel of property on which to build a new factory. The company recorded the property on the records at the amount of cash given to acquire it.
_____________________3. Jim Bailey enters into an agreement to operate a new law i?? rm in partnership with a friend. Each partner will make an initial cash investment of $10,000. Jim opens a checking account in the name of the partnership and transfers $10,000 from his personal account into the new account.
_____________________4. Multinational Corp. has a division in Japan. Prior to preparing the financial statements for the company and all of its foreign divisions, Multinational translates the financial statements of its Japanese division from yen to U.S. dollars.
_____________________5.Camden Company has always prepared financial statements annually, with a year end of June 30. Because the company is going to sell its stock to the public for the first time, quarterly financial reports will also be required by the SEC.
Aug 29, 2021 | Uncategorized
The following business scenarios are independent from one another.
1. Mary Poort purchased an automobile from Hayney Bros. Auto Sales for $9,000.
2. John Rodman loaned $15,000 to the business in which he is a stockholder.
3. First State Bank paid interest to Caleb Co. on a certificate of deposit that Caleb Co. has invested at First State Bank.
4. Parkside Restaurant paid the current utility bill of $128 to Gulf Utilities.
5. Gatemore, Inc., borrowed $50,000 from City National Bank and used the funds to purchase land from Morgan Realty.
6. Steven Wong purchased $10,000 of common stock of International Sales Corporation from the corporation.
7. Dan Dow loaned $4,000 cash to his daughter.
8. Mega Service Co. earned $5,000 in cash revenue.
9. McCloud Co. paid $1,500 for salaries to each of its four employees.
10. Shim Inc. paid a cash dividend of $3,000 to its sole shareholder, Marcus Shim.
Required
a. For each scenario, create a list of all of the entities that are mentioned in the description.
b. Describe what happens to the cash account of each entity that you identified in Requirement a.
Aug 29, 2021 | Uncategorized
The partnership of Angel Investor Associates began operations on January 1, 2008, with contributions from two partners as follows:
Jan Strous $36,000 Lisa Lankford 84,000
The following additional partner transactions took place during the year:
1. In early January, Sarah Rogers is admitted to the partnership by contributing $30,000 cash for a 20% interest.
2. Net income of $140,000 was earned in 2008. In addition, Jan Strous received a salary allowance of $25,000 for the year. The three partners agree to an income sharing ratio equal to their capital balances after admitting Rogers.
3. The partners’ withdrawals are equal to half of the increase in their capital balances resulting from income remaining after salary allowances.
Prepare a statement of partnership equity for the year ended December 31, 2008.
Aug 29, 2021 | Uncategorized
The purchases journal for See Thru Window Cleaners Inc. is shown below. The accounts payable control account has a January 1, 2010, balance of $295 of an amount due from Lawson Co. There were no payments made on creditor invoices during January.
a. Prepare a T account for the accounts payable creditor accounts.
b. Post the transactions from the purchases journal to the creditor accounts, and determine their ending balances.
c. Prepare T accounts for the accounts payable control and cleaning supplies accounts. Post control totals to the two accounts, and determine their ending balances.
d. Verify the equality of the sum of the creditor account balances and the accounts payable control accountbalance.
Aug 29, 2021 | Uncategorized
The transactions listed below relate to Ken’s business for the month of November 2012:
1.11.12 Started the business with ?L150,000 in cash.
2.11.12 Transferred ?L14,000 of the cash to a business bank account.
3.11.12 Paid rent of ?L1000 by cheque.
4.11.12 Bought goods on credit from the following suppliers:
Ace ………………….?L5000
Mace ………………..?L6000
Pace …………………?L7000
10.11.12 Sold goods on credit to the following customers:
Main …………………?L2000
Pain …………………?L3000
Vain …………………?L4000
15.11.12 Returned goods costing ?L1000 to Pace.
22.11.12 Pain returned goods sold to him for ?L2000.
25.11.12 Additional goods purchased from the following suppliers:
Ace …………………?L3000
Mace ………………..?L4000
Pace …………………?L5000
26.11.12 Office expenses of ?L2000 paid by cheque.
27.11.12 Cash sales for the month amounted to ?L5000.
28.11.12 Purchases paid for in cash during the month amounted to ?L4000.
29.11.12 Cheques sent to the following suppliers:
Ace …………………?L4000
Mace ……………….?L5000
Pace…………………?L6000
30.11.12 Cheques received from the following customers:
Main …………………?L1000
Pain …………………?L2000
Vain …………………?L3000
30.11.12 The following cash discounts were claimed by Ken:
Ace …………………?L200
Mace …………………?L250
Pace …………………?L300
30.11.12 The following cash discounts were allowed by Ken:
Main …………………?L100
Pain …………………?L200
Vain …………………?L400
30.11.12 Cash transfer to the bank of ?L1000.
Required:
Enter the above transactions in Ken’s ledger accounts.
Aug 29, 2021 | Uncategorized
After the accounts are closed on September 10, 2008, prior to liquidating the partnership, the capital accounts of Mark Nichols, Donna Newby, and Janice Patel are $32,200, $5,400, and $28,400, respectively. Cash and noncash assets total $4,300 and $73,700, respectively.
Amounts owed to creditors total $12,000. The partners share income and losses in the ratio of 1:1:2. Between September 10 and September 30, the noncash assets are sold for $47,300, the partner with the capital deficiency pays his or her deficiency to the partnership, and the liabilities are paid.
Instructions
1. Prepare a statement of partnership liquidation, indicating
(a) The sale of assets and division of loss,
(b) The payment of liabilities,
(c) The receipt of the deficiency (from the appropriate partner),
(d) The distribution of cash.
2. If the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency, explain how the deficiency would be divided between the partners.
Aug 29, 2021 | Uncategorized
Answer the following multiple choice questions.
1. GAAP stands for:
(a) Governmental auditing and accounting practices.
(b) Generally accepted attest principles.
(c) Government audit and attest policies.
(d) Generally accepted accounting principles.
2. Accounting standard setters use the following process in establishing accounting standards:
(a) Research, exposure draft, discussion paper, standard.
(b) Discussion paper, research, exposure draft, standard.
(c) Research, preliminary views, discussion paper, standard.
(d) Research, discussion paper, exposure draft, standard.
3. GAAP is comprised of:
(a) FASB standards, interpretations, and concepts statements.
(b) FASB financial standards.
(c) FASB standards, interpretations, EITF consensuses, and accounting rules issued by FASB predecessor organizations.
(d) any accounting guidance included in the FASB Codification.
4. The authoritative status of the conceptual framework is as follows.
(a) It is used when there is no standard or interpretation related to the reporting issues under consideration.
(b) It is not as authoritative as a standard but takes precedence over any interpretation related to the reporting issue.
(c) It takes precedence over all other authoritative literature.
(d) It has no authoritative status.
5. The objective of financial reporting places most emphasis on:
(a) Reporting to capital providers.
(b) Reporting on stewardship.
(c) Providing specific guidance related to specific needs.
(d) Providing information to individuals who are experts in the field.
6. General purpose financial statements are prepared primarily for:
(a) Internal users.
(b) External users.
(c) Auditors.
(d) Government regulators.
7. Economic consequences of accounting standard setting means:
(a) standard setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.
(b) standard setters must ensure that no new costs are incurred when a new standard is issued.
(c) The objective of financial reporting should be politically motivated to ensure acceptance by the general public.
(d) Accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.
8. The expectations gap is:
(a) What financial information management provides and what users want.
(b) What the public thinks accountants should do and what accountants think they can do.
(c) What the governmental agencies want from standard setting and what the standard setters provide.
(d) What the users of financial statements want from the government and what is provided.
Aug 29, 2021 | Uncategorized
Argon Dry Cleaners is owned and operated by Kerry Ulman. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on July 1, 2008, are as follows: Cash, $8,500; Accounts Receivable, $15,500; Supplies, $1,600; Land, $18,000; Accounts Payable, $5,200. Business transactions during July are summarized as follows:
a. Kerry Ulman invested additional cash in the business with a deposit of $30,000 in the business bank account.
b. Paid $22,000 for the purchase of land as a future building site.
c. Received cash from cash customers for dry cleaning sales, $17,900.
d. Paid rent for the month, $3,000.
e. Purchased supplies on account, $1,550.
f. Paid creditors on account, $4,950.
g. Charged customers for dry cleaning sales on account, $12,350.
h. Received monthly invoice for dry cleaning expense for July (to be paid on August 10), $7,880.
i. Paid the following: wages expense, $5,100; truck expense, $1,200; utilities expense, $800; miscellaneous expense, $950.
j. Received cash from customers on account, $13,200.
k. Determined that the cost of supplies on hand was $1,275; therefore, the cost of supplies used during the month was $1,875.
l. Withdrew $5,000 cash for personal use.
Instructions
1. Determine the amount of Kerry Ulman’s capital as of July 1 of the current year.
2. State the assets, liabilities, and owner’s equity as of July 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for July, a statement of owner’s equity for July, and a balance sheet as of July 31.
4. (Optional). Prepare a statement of cash flows for July.
Aug 29, 2021 | Uncategorized
Arron Woody practiced accounting with a partnership for five years. Recently he opened his own accounting firm, which he operates as a professional corporation. The name of the new entity is Arron Woody, CPA, P.C. Woody experienced the following events during the organizing phase of the new business and its first month of operations. Some of the events were personal and did not affect the business.
Feb 4 Woody received $3 1,000 cash from former accounting partners.*
5 Deposited $40,000 in a new business bank account titled Arron Woody,
CPA, P.C. The business issued common stock to Woo4
6 Paid $200 cash for letterhead stationery for the new office.
7 Purchased office furniture for the office. The business will pay the account payable, $9,500, within three months.
10 Woody sold personal investment in Amazing.com stock, which he had owned for several years, receiving $51,000 cash.*
11 Woody deposited the $51,000 cash from sale of the Amazing.com stock in his personal bank account.*
12 A representative of a large company telephoned Woody and told him of the company’s intention to transfer its accounting business to Woody.
18 Finished tax hearings on behalf of a client and submitted a bill for accounting services, $14,000. Woody expected to collect from this client within two weeks.
25 Paid office rent, $1,900.
28 Paid cash dividends of $8,000.
*Personal transaction of Arron Woody.
Requirements
1. Analyze the effects of the events on the accounting equation of the corporation of Arron Woody, CPA, P.C. Use a format similar to Exhibit 1 6.
2. As of February 28, compute Arron Woody’s
a. total assets.
b. total liabilities.
c. total stockholders’ equity.
d. net income or net loss for February.
Aug 29, 2021 | Uncategorized
As a newly enrolled accounting major, you are anxious to better understand accounting institutions and sources of accounting literature. As a first step, you decide to explore the IASB’s Framework for the Preparation and Presentation of Financial Statements.
Instructions
Access the IASB Framework at the IASB website (http://eifrs.iasb.org/). When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following items. (Provide paragraph citations.)
(a) What is the objective of financial reporting?
(b) What other means are there of communicating information, besides financial statements?
(c) Indicate some of the users and the information they are most directly concerned with in economic decision making.
Aug 29, 2021 | Uncategorized
Assuming the use of a two column (all purpose) general journal, a revenue journal, and a cash receipts journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded:
a. Receipt of cash from sale of office equipment.
b. Sale of office supplies on account, at cost, to a neighboring business.
c. Providing services for cash.
d. Closing of drawing account at the end of the year.
e. Adjustment to record accrued salaries at the end of the year.
f. Receipt of cash refund from overpayment of taxes.
g. Receipt of cash on account from a customer.
h. Receipt of cash for rent.
i. Investment of additional cash in the business by the owner.
j. Providing services on account.
Aug 29, 2021 | Uncategorized
Assuming the use of a two column (all purpose) general journal, a purchases journal, and a cash payments journal as illustrated in this chapter, indicate the journal in which each of the following transactions should be recorded:
a. Payment of six months’ rent in advance.
b. Adjustment to record depreciation at the end of the month.
c. Adjustment to prepaid insurance at the end of the month.
d. Purchase of office equipment for cash.
e. Advance payment of a one year fire insurance policy on the office.
f. Purchase of office supplies for cash.
g. Adjustment to record accrued salaries at the end of the period.
h. Adjustment to prepaid rent at the end of the month.
i. Purchase of office supplies on account.
j. Purchase of services on account.
k. Purchase of an office computer on account.
Aug 29, 2021 | Uncategorized
Barone’s Repair Inc. was started on May 1. A summary of May transactions is presented below.
1. Stockholders invested $10,000 cash in the business in exchange for common stock.
2. Purchased equipment for $5,000 cash.
3. Paid $400 cash for May office rent.
4. Paid $500 cash for supplies.
5. Incurred $250 of advertising costs in the Beacon News on account.
6. Received $5,100 in cash from customers for repair service.
7. Declared and paid a $1,000 cash dividend.
8. Paid part time employee salaries $2,000.
9. Paid utility bills $140.
10. Provided repair service on account to customers $750.
11. Collected cash of $120 for services billed in transaction (10).
Instructions
(a) Prepare a tabular analysis of the transactions, using the following column headings: Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Common Stock, and Retained Earnings (with separate columns for Revenues, Expenses, and Dividends). Include margin explanations for any changes in Retained Earnings. Revenue is called Service Revenue.
(b) From an analysis of the Retained Earnings columns, compute the net income or net loss for May.
Aug 29, 2021 | Uncategorized
Blake Gillis, president of Wayside Enterprises, applied for a $175,000 loan from American National Bank. The bank requested financial statements from Wayside Enterprises as a basis for granting the loan. Blake has told his accountant to provide the bank with a balance sheet. Blake has decided to omit the other financial statements because there was a net loss during the past year. In groups of three or four, discuss the following questions:
1. Is Blake behaving in a professional manner by omitting some of the financial statements?
2. A. What types of information about their businesses would owners be willing to provide bankers? What types of information would owners not be willing to provide?
b. What types of information about a business would bankers want before extending a loan?
c. What common interests are shared by bankers and business owners?
Aug 29, 2021 | Uncategorized
Brian started in business on 1 January 2012. The following is a list of his transactions for his first month of trading:
1.1.12 Opened a business bank account with ?L25,000 obtained from private resources.
2.1.12 Paid one month’s rent of ?L2000 by cheque.
3.1.12 Bought goods costing ?L5000 on credit from Linda.
4.1.12 Purchased motor car from Savoy Motors for ?L4000 on credit.
5.1.12 Purchased goods costing ?L3000 on credit from Sydney.
10.1.12 Cash sales of ?L6000.
15.1.12 More goods costing ?L10 000 purchased from Linda on credit.
20.1.12 Sold goods on credit to Ann for ?L8000.
22.1.12 Returned ?L2000 of goods to Linda.
23.1.12 Paid ?L6000 in cash into the bank.
24.1.12 Ann returned ?L1000 of goods.
25.1.12 Withdrew ?L500 in cash from the bank to open a petty cash account.
26.1.12 Cheque received from Ann for ?L5500; Ann also claimed a cash discount of ?L500.
28.1.12 Office expenses of ?L250 paid out of petty cash.
29.1.12 Sent a cheque to Savoy Motors for ?L4000.
30.1.12 Cheques sent to Linda and Sydney for ?L8000 and ?L2000, respectively. Cash discounts were also claimed from Linda and Sydney of ?L700 and ?L100, respectively.
31.1.12 Paid by cheque another month’s rent of ?L2000.
31.1.12 Brian introduced ?L5000 additional capital into the business by cheque.
Required:
(a) Enter the above transactions in Brian’s ledger accounts for January 2012, balance off the accounts and bring down the balances as at 1 February 2012.
(b) Compile a trial balance as at 31 January 2012.
Aug 29, 2021 | Uncategorized
1. Describe the conditions necessary to develop a stock market in an emerging economy.
2. How do these conditions compare to the situation in China?
3. How likely is China to develop a stock market with fair trading? Why do you say so?
4. Outline a plan of reforms necessary to achieve stock market development in China.
MINI CASE
What conditions are necessary to develop an efficient stock market with fair trading? What role does accounting and financial reporting play in stock market development? Consider the case of China:
Those Chinese who think of themselves as street smart tell a joke about three fools. The first is the boss who plays around with his secretary and ends up her husband. The second is the investor who plays the property market and ends up a homeowner. And the third is the punter who plays the stock market and finds himself a shareholder. This sums up the culture of China’s fledgling capital markets. ?oTrading, not ownership,?? is the approach of China’s investors, says Anthony Neoh, a former head of Hong Kong’s Securities and Futures Commission who is now the chief outside adviser to China’s regulatory body.
?oThat’s what we need to change.??
This marks a shift in China’s capital market reforms. So far, Beijing has focused almost entirely on the ?osupply side?? of the securities market. This has included listing more, and better, companies, and forcing them to adopt better standards of corporate governance and disclosure. Such efforts have a long way to go. |
Aug 29, 2021 | Uncategorized
Chris Lund is the sole stockholder and operator of Saluki, a motivational consulting business. At the end of its accounting period, December 31, 2005, Saluki has assets of $475,000 and liabilities of $200,000. Using the accounting equation and considering each case independently, determine the following amounts:
a. Stockholders’ equity, as of December 31, 2005.
b. Stockholders’ equity, as of December 31, 2006, assuming that assets increased by $75,000 and liabilities increased by $40,000 during 2006.
c. Stockholders’ equity, as of December 31, 2006, assuming that assets decreased by $15,000 and liabilities increased by $27,000 during 2006.
d. Stockholders’ equity, as of December 31, 2006, assuming that assets increased by $125,000 and liabilities decreased by $65,000 during 2006.
e. Net income (or net loss) during 2006, assuming that as of December 31, 2006, assets were $425,000, liabilities were $105,000, and there were no dividends and no additional capital stock was issued.
Aug 29, 2021 | Uncategorized
Cindy Belton opened a law office, Cindy Belton, Attorney at Law, on July 1, 2011. On July 31, the balance sheet showed Cash $4,000, Accounts Receivable $1,500, Supplies $500, Office Equipment $5,000, Accounts Payable $4,200, and Common Stock $6,000, and Retained Earnings $800. During August the following transactions occurred.
1. Collected $1,400 of accounts receivable due from clients.
2. Paid $2,700 cash for accounts payable due.
3. Earned revenue of $9,000 of which $3,000 is collected in cash and the balance is due in September.
4. Purchased additional office equipment for $1,000, paying $400 in cash and the balance on account.
5. Paid salaries $3,000, rent for August $900, and advertising expenses $350.
6. Declared and paid a $750 cash dividend.
7. Received $2,000 from Standard Federal Bank; the money was borrowed on a 4 month note payable.
8. Incurred utility expenses for month on account $250.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. The column headings should be as follows: Cash + Accounts Receivable + Supplies + Office Equipment = Notes Payable + Accounts Payable + Common Stock + Retained Earnings + Revenues – Expenses – Dividends.
(b) Prepare an income statement
Aug 29, 2021 | Uncategorized
Cisco Systems, Inc., pioneered the concept of a “virtual close” of the financial records. A virtual close is described as follows:
The traditional practice of closing a company’s books on a monthly, quarterly, or annual basis is out of sync with the dynamics of the new economy. In the past, the financial close and subsequent report generation was a static, scheduled event. It consumed days, weeks, and months and was based on a “thick black book.” The new paradigm is driven by dynamic information accessible anytime and anywhere. Web based reporting tools allow for real time access to the very latest data and make interaction, summary to detail drill downs, and various data views possible. The result is fast, intuitive, on the fly creation of information views targeted for a specific analytical need to answer a specific question.
Source: Virtual Close A Financial Management Solution, Cisco Systems, Inc., and Bearing point Consulting Solutions Brief, 2001.
Additional information about the virtual close can be found at Cisco’s Web site, which is linked to the text’s Web site at www.thomsonedu.com/accounting/warren.
a. How is a virtual close different from traditional practice?
b. How does the virtual close impact the decision making ability of Cisco’s management?
Aug 29, 2021 | Uncategorized
Consider the following accounting terms and definitions:
TERMS:
1. Accounting Equation
2. Asset
3. Balance Sheet
4. Expense
5. Income Statement
6. Liability
7. Net Income
8. Net Loss
9. Revenue
10. Statement of Cash Flows
11. Statement of Retained Earnings
DEFINITIONS:
A. An economic resource that is expected to be of benefit in the future
B. An economic obligation (a debt) payable to an individual or an organization outside the business
C. Excess of total expenses over total revenues
D. Excess of total revenues over total expenses
E. The basic tool of accounting, stated as Assets = Liabilities + Equity
F. Decrease in equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers
G. Amounts earned by delivering goods or services to customers
H. Report of cash receipts and cash payments during a period
I. Report of an entity’s assets, liabilities, and equity as of a specific date
J. Report of an entity’s revenues, expenses and net income/net loss for the period
K. Report that shows the changes in retained earnings for a period of time
Requirement
1. Match the term to the correct definition.
Aug 29, 2021 | Uncategorized
1. Document the effects of the GAAP differences in the 20F by doing the following:
a. For the current year, calculate the percentage change for net income and for total shareholders’ equity indicated by the reconciliation and using the non U.S. GAAP (i.e., IFRS) numbers as a base.
b. Repeat the same calculations for the preceding year. Are the percentage changes approximately the same? What is significant about your findings?
c. For the current year, identify the two income statement items and the two balance sheet items that exhibit the relatively largest differences. Would you expect other Dutch multinational companies to be subject to similar item by item differences?
2. Should a U.S. reader of non U.S. financial statements find this SEC mandated reconciliation useful?
3. Based on your analysis of the Unilever 2006 limited restatement, do you support the SEC’s decision to exempt companies using IFRS from the reconciliation requirement?
Why or why not?
MINI CASE
| As an analyst for a securities firm, you are aware that accounting practices differ around the world. Yet you wonder whether these differences really have any material effect on companies’ financial statements. You also know that the SEC in the United States requires non U.S. registrants to reconcile key financial data from the GAAP used in their financial statements to U.S. GAAP. However, companies using IFRS were exempt from this reconciliation requirement starting in 2007. You obtain the last reconciliation from Unilever (a Dutch consumer products company) in its 2006 Form 20F SEC filing [www.unilever.com/images/ir_06%20form 20F_tcm13 88525.pdf, pages 124–131]. |
Aug 29, 2021 | Uncategorized
Donna Ahern is the owner and operator of Omega, a motivational consulting business. At the end of its accounting period, December 31, 2009, Omega has assets of $760,000 and liabilities of $240,000. Using the accounting equation and considering each case independently, determine the following amounts:
a. Donna Ahern, capital, as of December 31, 2009.
b. Donna Ahern, capital, as of December 31, 2010, assuming that assets increased by $120,000 and liabilities increased by $72,000 during 2010.
c. Donna Ahern, capital, as of December 31, 2010, assuming that assets decreased by $60,000 and liabilities increased by $21,600 during 2010.
d. Donna Ahern, capital, as of December 31, 2010, assuming that assets increased by $100,000 and liabilities decreased by $38,400 during 2010.
e. Net income (or net loss) during 2010, assuming that as of December 31, 2010, assets were $960,000, liabilities were $156,000, and there were no additional investments or withdrawals.
Aug 29, 2021 | Uncategorized
1. Refer to Exhibit 1 8, which lists factors relevant for choosing an overseas market for listing or raising capital. Which factors might have been relevant in E centives’ decision to raise capital and list on the Swiss Exchange’s New Market?
2. Why do you believe E centives chose not to raise public equity in the United States? What are the potential drawbacks related to E centives’ decision not to raise capital in the U.S. public markets?
3. What are the advantages and disadvantages to E centives of using U.S. GAAP?
4. Should the SWX Swiss Exchange require E centives to prepare its financial statements using Swiss accounting standards?
5. Learn more about the New Market at the SWX Swiss Exchange’s Web site (http://www.swx.com). What are the listing requirements for the New Market? What are the financial reporting requirements? Does E centives appear to fit the profile of the typical New Market company?
MINI CASE
On October 3, 2000, E centives, incorporated in the United States, made an initial public offering on the Swiss Stock Exchange’s New Market. The company raised approximately US$40 million. E centive’s offering circular stated that no offers or sales of the company’s common stock would be made in the United States, and that there would be no public market for the common stock in the United States after the offering.
The Swiss Exchange’s
New Market
The Swiss Exchange launched the New Market in 1999. The New Market is designed to meet the financing needs of rapidly growing companies from Switzerland and abroad. It provides firms with a simplified means of entry to the Swiss capital markets. Listing requirements for the New Market are simple. For example, companies must have an operating track record of 12 months, the initial public listing must involve a capital increase, and to ensure market liquidity, a bank must agree to make a market in the securities.
E centives
E centives, Inc. is a leading online direct marketing infrastructure company. The company offers systems and technologies that enable businesses to build large, rich databases of consumer profiles and interests. In return, consumers receive a free personalized service that provides them with promotional offers based on their interests. At the time of the public offering, E centives maintained over 4.4 million e centives online accounts for members. The company does not charge members a fee for its service. Instead, the company generates revenue primarily from marketers whose marketing matter is delivered to targeted groups of E centives members. E centives currently employs more than 100 people in its Bethesda, Maryland headquarters, and its offices in Redwood City, New York, and Los Angeles. As of the offering date, the company had little revenue and had not been profitable. Revenue for the year ended December 31, 1999, was US$740,000, with a net loss of about US$16 million. As of June 30, 2000, the company had an accumulated deficit of about US$39 million. E centives’ growth strategy is to expand internationally. To date, the company has focused on pursuing opportunities in the United States. E centives intends to expand into Europe and other countries. The company is currently considering expanding into Switzerland, the United Kingdom, and Germany. |
Aug 29, 2021 | Uncategorized
Four different proprietorships, Jupiter, Mercury, Saturn, and Venus, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owner’s equity, are summarized as follows:
?
On the basis of the above data and the following additional information for the year, determine the net income (or loss) of each company for the year.
Jupiter: The owner had made no additional investments in the business and had made no withdrawals from the business.
Mercury: The owner had made no additional investments in the business but had withdrawn $72,000.
Saturn: The owner had made an additional investment of $162,000 but had made no withdrawals.
Venus: The owner had made an additional investment of $162,000 and had withdrawn$72,000.
Aug 29, 2021 | Uncategorized
Frontier Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Frontier Sports is owned and operated by Wally Schnee, a well known sports enthusiast and hunter. Wally’s wife, Helen, owns and operates Blue Sky Boutique, a women’s clothing store. Wally and Helen have established a trust fund to finance their children’s college education. The trust fund is maintained by First Bank in the name of the children, Anna and Conner. For each of the following transactions, identify which of the entities listed should record the transaction in its records.
Entities___________________________
F ……………….Frontier Sports
B ……………….First Bank Trust Fund
S ……………….Blue Sky Boutique
X ……………….None of the above
1. Wally paid a breeder’s fee for an English springer spaniel to be used as a hunting guide dog.
2. Helen paid her dues to the YWCA.
3. Helen purchased two dozen spring dresses from a Denver designer for a special spring sale.
4. Helen deposited a $3,500 personal check in the trust fund at First Bank.
5. Wally paid for an advertisement in a hunters’ magazine.
6. Helen authorized the trust fund to purchase mutual fund shares.
7. Wally paid for dinner and a movie to celebrate their tenth wedding anniversary.
8. Helen donated several dresses from inventory for a local charity auction for the benefit of a women’s abuse shelter.
9. Wally received a cash advance from customers for a guided hunting trip.
10. Wally paid a local doctor for his annual physical, which was required by the workmen’s compensation insurance policy carried by Frontier Sports.
Aug 29, 2021 | Uncategorized
Warranties, Accrual, and Cash Basis Alvarado Company sells a machine for $7,400 under a 12 month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers. With sales being made evenly throughout the year, the company sells 600 machines in 2010 (warranty expense is incurred half in 2010 and half in 2011). As a result of product testing, the company estimates that the warranty cost is $390 per machine ($170 parts and $220 labor). Assuming that actual warranty costs are incurred exactly as estimated, what journal entries would be made relative to the following facts?
(a) Under application of the expense warranty accrual method for:
(1) Sale of machinery in 2010.
(2) Warranty costs incurred in 2010.
(3) Warranty expense charged against 2010 revenues.
(4) Warranty costs incurred in 2011.
(b) Under application of the cash basis method for:
(1) Sale of machinery in 2010.
(2) Warranty costs incurred in 2010.
(3) Warranty expense charged against 2010 revenues.
(4) Warranty costs incurred in 2011.
(c) What amount, if any, is disclosed in the balance sheet as a liability for future warranty costs as of December 31, 2010, under each method?
(d) Which method best reflects the income in 2010 and 2011 of Alvarado Company? Why?
Aug 29, 2021 | Uncategorized
Warranty and Coupon Computation Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2011.
1. Its line of amplifiers carries a 3 year warranty against defects. On the basis of past experience the estimated warranty costs related to dollar sales are: first year after sale—2% of sales; second year after sale—3% of sales; and third year after sale—5% of sales. Sales and actual warranty expenditures for the first 3 years of business were: Compute the amount that Schmitt Company should report as a liability in its December 31, 2011, balance sheet. Assume that all sales are made evenly throughout each year with warranty expenses also evenly spaced relative to the rates above.
2. With some of its products, Schmitt Company includes coupons that are redeemable in merchandise. The coupons have no expiration date and, in the company’s experience, 40% of them are redeemed. The liability for unredeemed coupons at December 31, 2010, was $9,000. During 2011, coupons worth $30,000 were issued, and merchandise worth $8,000 was distributed in exchange for coupons redeemed. Compute the amount of the liability that should appear on the December 31, 2011, balance sheet.
(AICPAadapted)
Aug 29, 2021 | Uncategorized
Assume at the beginning of 2012, the Ashlawn Village Street and Highway Fund (a special revenue fund) has cash of $300,000 offset by assigned fund balance in the same amount.
1. During the year, the State notified the Village that $450,000 for the street and highway fund will be awarded for work performed on several bridges over the next two years. The grant is a cost reimbursement arrangement (no budget entry is necessary).
2. During the year, the Village signed contracts for bridge repairs that amounted to $340,000.
3. The bridge repairs were completed and an invoice was received for $333,000, of which $320,000 was paid in cash.
4. The special revenue fund reimbursed the General Fund for a payment the General Fund made on behalf of the Street and Highway Fund in the amount of $7,000. This amount is not related to the bridge repairs under the state grant.
5. The state government paid the Village $300,000 on work completed under the grant before year end.
a. Prepare the journal entries for the above transactions. Prepare Closing entries for year end.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund.
c. Prepare a Balance Sheet.
Aug 29, 2021 | Uncategorized
Beachfront property owners of the Village of Eden requested a seawall be constructed to protect their beach. The seawall was financed through a note payable, which was to be repaid from taxes raised through a special assessment on their properties. The Village guarantees the debt and accounts for the special assessment through a debt service fund. Assume the special assessments were levied in 2011, recording a special assessment receivable and deferred revenue in the amount of $600,000. Onethird of the assessment is to be collected each year and used to pay the interest and principal on the note. Record the following transactions that occurred in 2012:
1. June 30, $200,000 of the assessments became due and currently receivable.
2. July 31, the $200,000 were collected.
3. September 30, interest of $40,000 and principal of $160,000 were paid.
4. December 31, the books were closed.
Aug 29, 2021 | Uncategorized
Benton County maintains a tax agency fund for use by the County Treasurer to record receivables, collections, and disbursements of all property tax collections to all other units of government in the county. For FY 2011–2012, the following taxes were assessed:
Benton County General Fund …….. $10,500,000
Town of Thomas …………………….. 7,400,000
Town of Hart ……………………….. 3,200,000
Benton County School District ……. 23,900,000
Various Special Districts …………….. 6,300,000
Total ……………………………….. $51,300,000
During the first six months of the fiscal year, the following transactions took place:
1. The tax levy became effective. All units of government provided for an estimated 3 percent in uncollectible taxes.
2. Cash collections of the first installment of taxes amounted to $5,080,000 for the County General Fund and $19,544,000 for the other governments.
3. It was determined that the cash collections pertained to the funds and governmental units in the following amounts. Record the liability to the county General Fund and to the other governmental units, assuming that the county General Fund charges other governments 11/2 percent of all tax collected because the county General Fund incurs all costs of billing, recording, and collecting taxes.
Benton County General Fund ……. $ 5,080,000
Town of Thomas ……………………. 4,070,000
Town of Hart ……………………….. 1,018,000
Benton County School District ……. 11,472,000
Various Special Districts ……………. 2,984,000
Total ………………………………. $24,624,000
4. Cash was paid to the various governmental units.
Required:
Record the transactions on the books of the:
a. Benton County Tax Agency Fund.
b. Benton County General Fund.
c. Town of Thomas.
Aug 29, 2021 | Uncategorized
In December 2011, the Hamilton County Board of Commissioners established the Hamilton County OPEB Trust Fund. Retired employees of Hamilton County can participate in post employment benefits through the Trust. The Trust is a single employer defined benefit plan. The benefits provided are health insurance and life insurance.
In December 2011, the County made a one time contribution to the fund of $23,890,000. No other events took place in 2011. Fiscal Year 2012 transactions were as follows:
1. The County paid its actuarially determined annual contribution of $18,335,000.
2. Member (employee) contributions totaled $4,061,000. Of this, $4,020,000 was collected by December 31st and the remainder will be collected in January 2013.
3. Cash totaling $31,000,000 was invested in U.S. government securities.
4. Interest totaling $1,438,000 was earned on these securities. Of this amount, $1,431,000 was collected during the year.
5. Because the County offers a drug plan to retired employees, the federal government Medicare program provides a subsidy to the County. The County received $498,000 from this subsidy.
6. Benefit claims from employees totaled $10,903,000 for the year. By yearend, $9,575,000 had been paid to employees.
7. Administrative expenses totaled $552,000 (all paid in the current year). Hamilton County operates the Domestic Relations Agency Fund. The fund works with the State Government’s Domestic Relations Court the purpose of which is to establish child support, enforce child support obligations, and locate absent parents to assure noncustodial parents contribute toward the support of their children. The Domestic Relations Agency Fund is used to account for receipts and disbursements of support payments collected by the County, which are ultimately owed to the State Government’s Domestic Relations Court. The County ended the year 2011 with $40,000 of cash.
Fiscal Year 2012 transactions were as follows:
8. The County collected $475,000 from noncustodial parents.
9. The County remitted $477,500 to the State Government’s Domestic Relations Court.
Required:
Use the Excel template provided to complete the following requirements; a separate tab is provided in Excel for each of these steps.
a. Prepare journal entries to record the information described in items 1 to 9.
c. Prepare closing journal entries. Post to the T account provided.
d. Prepare a Statement of Changes in Fiduciary Net Assets for the year ending 2012.
e. Prepare a Statement of Fiduciary Net Assets as of December 31, 2012.
Aug 29, 2021 | Uncategorized
On January 1, 2012, the first day of its fiscal year, the City of Carter received notification that a federal grant in the amount of $650,000 was approved. The grant was restricted for the payment of wages to teenagers for summer employment. The terms of the grant permitted reimbursement only after qualified expenditures have been made; the grant could be used over a two year period in equal amounts of $325,000 each. The following data pertain to operations of the Summer Employment Grant Fund, a special revenue fund of the City of Carter, during the year ended December 31, 2012. Show entries in general journal form to record the following events and transactions in the accounts of the Summer Employment Grant Fund:
1. The budget was recorded. It provided for Estimated Revenues for the year in the amount of $325,000, and for Appropriations in the amount of $325,000.
2. A temporary loan of $325,000 was received from the General Fund.
3. During the year, teenagers earned and were paid $312,000 under terms of the Summer Employment program. An additional $5,000 is accrued as payable on December 31. Recognize the receivable and revenue (include the $5,000 of wages payable).
4. Each month a properly documented request for reimbursement was sent to the federal government; checks for $298,000 were received.
5. Necessary closing entries were made.
Aug 29, 2021 | Uncategorized
On July 1, 2011, the City of Belvedere accepted a gift of cash in the amount of $3,000,000 from a number of individuals and foundations and signed an agreement to establish a private purpose trust. The $3,000,000 and any additional gifts are to be invested and retained as principal. Income from the trust is to be distributed to community nonprofit groups as directed by a Board consisting of city officials and other community leaders. The agreement provides that any increases in the market value of the principal investments are to be held in trust; if the investments fall below the gift amounts, then earnings are to be withheld until the principal amount is reestablished.
a. The following events and transactions occurred during the fiscal year ended June 30, 2012. Record them in the Belvedere Community Trust Fund.
(1) On July 1, the original gift of cash was received.
(2) On July 1, $2,000,000 in XYZ Company bonds were purchased at par plus accrued interest. The bonds pay an annual rate of 6 percent interest semiannually on April 1 and October 1.
(3) On July 2, $950,000 in ABC Company common stock was purchased.
ABC normally declares and pays dividends semiannually, on January 31 and July 31.
(4) On October 1, the first semiannual interest payment was received from XYZ Company. Note that part of this is for accrued interest due at the time of purchase; the remaining part is an addition that may be used for distribution.
(5) On January 31, a cash dividend was received from ABC Company in the amount of $38,000.
(6) On March 1, the ABC stock was sold for $960,000. On the same day, DEF Company stock was purchased for $965,000.
(7) On April 1, the second semiannual interest payment was received from XYZ Company.
(8) During the month of June, distributions were approved by the Board and paid in cash in the amount of $104,000.
(9) Administrative expenses were recorded and paid in the amount of $7,500.
(10) An accrual for interest on the XYZ bonds was made as of June 30, 2012.
(11) As of June 30, 2012, the fair value of the XYZ bonds, exclusive of accrued interest, was determined to be $2,002,000. The fair value of the DEF stock was determined to be $960,000.
(12) Closing entries were prepared.
b. Prepare, in good form,
(1) A Statement of Changes in Fiduciary Net Assets for the Belvedere Community Trust Fund and
(2) A Statement of Fiduciary Net Assets.
Aug 29, 2021 | Uncategorized
On July 1, 2011, the Morgan County School District received a $30,000 gift from a local civic organization with the stipulation that, on June 30 of each year, $2,000 plus any interest earnings on the unspent principal be awarded as a college scholarship to the high school graduate with the highest academic average. A private purpose trust fund, the Civic Scholarship Fund, was created.
a. Record the following transactions on the books of the Civic Scholarship Fund:
(1) On July 1, 2011, the gift was received and immediately invested.
(2) On June 30, 2012, $3,000 of the principal was converted into cash. In addition, $1,800 of interest was received.
(3) On June 30, the $4,800 was awarded to Ann Korner, who had maintained a 4.0 grade point average throughout each of her four years.
(4) The nominal accounts were closed.
b. Prepare a Statement of Changes in Fiduciary Net Assets for the Civic Scholarship Fund for the Year Ended June 30, 2012.
Aug 29, 2021 | Uncategorized
The City of Sandwich purchased a swimming pool from a private operator as of April 1, 2012, for $500,000. Of the $500,000, $250,000 was provided by a one time contribution from the General Fund, and $250,000 was provided by a loan from the First National Bank, secured by a note. The loan has an annual interest rate 6 percent, payable semiannually on October 1 and April 1; principal payments of $100,000 are to be made annually, beginning on April 1, 2013. The city has a calendar year as its fiscal year. During the year ended December 31, 2012, the following transactions occurred, related to the City of Sandwich Swimming Pool:
1. The amounts were received from the City General Fund and the First National Bank.
2. A short term loan was provided in the amount of $100,000 from the Water Utility Fund.
3. The purchase of the pool was recorded. Based on an appraisal, it was decided to allocate $100,000 to the land, $300,000 to improvements other than buildings (the pool), and $100,000 to the building. There is a 10 year life for both the pool and the building, and depreciation is to be recorded annually, based on monthly allocations (do not record depreciation until entry 10).
4. Charges to patrons during the season amounted to $340,000, all received in cash.
5. Salaries paid to employees amounted to $200,000, all paid in cash, of which $170,000 was cost of services, and $30,000 was administration.
6. Supplies purchased amounted to $40,000; all but $5,000 was used. Cash was paid for the supplies, all of which was for cost of sales and services.
7. Administrative expenses amounted to $12,000, paid in cash.
8. The first interest payment was made to the First National Bank.
9. The short term loan was repaid to the Water Utility Fund.
10. Depreciation was accrued for the year. Record 9/12 of the annual amounts.
11. Interest was accrued for the year.
12. Closing entries were prepared.
Required:
a. Prepare entries to record the transactions.
b. Prepare a Statement of Revenues, Expenses, and Changes in Fund Net Assets for the Year Ended December 31, 2012, for the City of Sandwich Swimming Pool Fund.
c. Prepare a Statement of Net Assets as of December 31, 2012, for the City of Sandwich Swimming Pool Fund.
d. Prepare a Statement of Cash Flows for the Year Ended December 31, 2012, for the City of Sandwich Swimming Pool Fund.
Aug 29, 2021 | Uncategorized
The City of Sharpesburg received a gift of $950,000 from a local resident on June 1, 2012, and signed an agreement that the funds would be invested permanently and that the income would be used to purchase books for the city library. The following transactions took place during the year ended December 31, 2012:
1. The gift was recorded on June 1.
2. On June 1, ABC Company bonds were purchased as investments in the amount of $950,000 (par value). The bonds carry an annual interest rate of 6 percent, payable semiannually on December 1 and June 1.
3. On December 1, the semiannual interest payment was received.
4. From December 1 through December 31, $27,700 in book purchases were made; full payment was made in cash.
5. On December 31, an accrual was made for interest.
6. Also, on December 31, a reading of the financial press indicated that the ABC bonds had a fair value of $966,000, exclusive of accrued interest.
7. The books were closed.
Required:
a. Record the transactions on the books of the Library Book Permanent Fund.
b. Prepare a separate Statement of Revenues, Expenditures, and Changes in Fund Balances for the Library Book Permanent Fund for the Year Ended December 31, 2012.
Aug 29, 2021 | Uncategorized
The following transactions relate to Newport City’s special revenue fund.
1. In 2012, Newport City created a special revenue fund to help fund the 911 emergency call center. The center is to be funded through a legally restricted tax on cellular phones. No budget is recorded.
2. During the first year of operations, revenues from the newly imposed tax totaled $450,000. Of this amount, $380,000 has been received in cash and the remainder will be received within 60 days of the end of the fiscal year.
3. Expenditures (salaries) incurred through the operation of the 911 emergency call center totaled $370,000. Of this amount, $320,000 was paid before year end.
4. During the year the state government awarded Newport City a grant to reimburse the City’s costs (not to exceed $150,000) for the purpose of training new 911 operators. During the year, the City paid $147,500 (not reflected in the expenditures above) to train new operators for the 911 emergency call center and billed the state government.
5. $134,000 of the amount billed to the state had been received by yearend.
a. Prepare the journal entries for the above transactions. It is not necessary to use control accounts and subsidiary ledgers. Prepare Closing entries for year end.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund.
c. Prepare a Balance Sheet, assuming there are no committed or assigned net resources.
Aug 29, 2021 | Uncategorized
The Town of Frostbite self insures for some of its liability claims and purchases insurance for others. In an effort to consolidate its risk management activities, the Town recently decided to establish an internal service fund, the Risk Management Fund. The Risk Management Fund’s purpose is to obtain liability coverage for the Town, to pay claims not covered by the insurance, and to charge individual departments in amounts sufficient to cover currentyear costs and to establish a reserve for losses.
The Town reports proprietary fund expenses by object classification using the following accounts: Personnel services (salaries), Contractual services (for the expired portion of prepaid service contracts), Depreciation, and Insurance Claims. The following transactions relate to the year ended December 31, 2012, the first year of the Risk Management Fund’s operations.
1. The Risk Management Fund is established through a transfer of $500,000 from the General Fund and a long term advance from the water utility enterprise fund of $250,000.
2. The Risk Management Fund purchased (prepaid) insurance coverage through several commercial insurance companies for $200,000. The policies purchased require the Town to self insure for $25,000 per incident.
3. Office Equipment is purchased for $10,000.
4. $450,000 is invested in marketable securities.
5. Actuarial estimates were made in the previous fiscal year to determine the amount necessary to attain the goal of accumulating sufficient funds to cover current year claims and to establish a reserve for losses. It was determined that the General Fund and water utility be assessed a fee of 6 percent of total wages and salaries (Interfund premium). Wages and salaries by department are as follows:
Public Safety …………………………… 5,000,000
General Administrative Operations ……. 1,500,000
Education ………………………………. 1,500,000
Water Utility …………………………… 2,500,000
Total ………………………………….. 10,500,000
6. Cash received in payment of interfund premiums from the General Fund totaled $275,000 and cash received from the Water Utility totaled $100,000.
7. Interest and dividends received totaled $27,000.
8. Salaries for the Risk Management Fund amounted to $200,000 (all paid during the year).
9. Claims paid under self insurance totaled $150,000 during the year.
10. The office equipment is depreciated on the straight line basis over 5 years.
11. At year end, $190,000 of the insurance policies purchased in January had expired.
12. The market value of investments at December 31 totaled $456,000
13. In addition to the claims paid in entry 9 above, estimates for the liability for the Town’s portion of known claims since the inception of the Town’s self insurance program totaled $90,000.
Required:
a. Prepare the journal entries (including closing entries) to record the transactions.
b. Prepare a Statement of Revenues, Expenses, and Changes in Fund Net Assets for the year ended December 31, 2012, for the Risk Management Fund.
c. Prepare a Statement of Net Assets as of December 31, 2012, for the Risk Management Fund.
d. Prepare a Statement of Cash Flows for the year ended December 31, 2012, for the Risk Management Fund. Assume $10,000 of the transfer from the General Fund was for the purchase of the equipment. Further, assume the remainder of the transfer from the General Fund and all of the advance from the enterprise fund are to establish working capital (noncapital related financing).
e. Comment on whether the interfund premium of 6 percent of wages and salaries is adequate.
Aug 29, 2021 | Uncategorized
The Town of Quincy’s fiscal year ends on June 30. The following data relate to the property tax levy for the fiscal year ended June 30, 2012. Prepare journal entries for each of the dates as indicated.
a. The balance in deferred property tax revenue was $182,000 at the end of the previous year. This was recognized as revenue in the current year in a reversing journal entry.
b. On July 1, 2011, property taxes in the amount of $10,000,000 were levied. It was estimated that 3 percent would be uncollectible. The property taxes were intended to finance the expenditures for the year ended June 30, 2012.
c. October 31, $4,600,000 in property taxes were collected.
d. December 31, $4,800,000 in additional property taxes were collected.
e. Receivables totaling $12,000 were deemed to be uncollectible and written off.
f. On June 30, $175,000, was transferred from Revenues Control to Deferred Revenues, because it was not expected to be collected within 60 days.
Aug 29, 2021 | Uncategorized
The Village of Budekville, which has a fiscal year July 1 to June 30, sold $3,000,000 in 6 percent tax supported bonds at par to construct an addition to its police station. The bonds were dated and issued on July 1, 2011. Interest is payable semiannually on January 1 and July 1, and the first of 10 equal annual principal payments will be made on July 1, 2012. The village used a capital projects fund to account for the project, and a debt service fund was created to make interest and principal payments.
1. The bonds were sold on July 1, 2011.
2. The General Fund transferred an amount equal to the first interest payment on December 31, 2011. The Debt Service Fund made the payment as of January 1, 2012.
3. The project was completed on June 15, 2012. Expenditures totaled $2,989,000. You may omit encumbrance entries.
4. The remaining balance was transferred to the Debt Service Fund from the Capital Projects Fund for the eventual payment of principal.
Required:
a. Prepare journal entries for the capital projects fund based on the aforementioned information. Include a closing entry.
b. Prepare journal entries for the debt service fund based on the information presented above. Include a closing entry.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended June 30, 2012, for the governmental funds
Assume the General Fund reports the following: property tax revenues $500,000, other revenues $200,000, public safety expenditures $450,000, general government expenditures $150,000, other financing sources—transfers out $125,000, and beginning fund balance $120,000.
Aug 29, 2021 | Uncategorized
The Village of Harris issued $5,000,000 in 6 percent general obligation, taxsupported bonds on July 1, 2011, at 101. A fiscal agent is not used. Resources for principal and interest payments are to come from the General Fund. Interest payment dates are December 31 and June 30. The first of 20 annual principal payments is to be made June 30, 2012. Harris has a calendar fiscal year.
1. A capital projects fund transferred the premium ($50,000) to the debt service fund.
2. On December 31, 2011, funds in the amount of $150,000 were received from the General Fund and the first interest payment was made.
3. The books were closed for 2011.
4. On June 30, 2012, funds in the amount of $350,000 were received from the General Fund, and the second interest payment ($150,000) was made along with the first principal payment ($250,000).
5. On December 31, 2012, funds in the amount of $142,500 were received from the General Fund and the third interest payment was made ($142,500).
6. The books were closed for 2012.
a. Prepare journal entries to record the events above in the debt service fund.
b. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2011.
c. Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance for the debt service fund for the year ended December 31, 2012.
Aug 29, 2021 | Uncategorized
(Conceptual Framework—General) The Financial Accounting Standards Board (FASB) has developed
a conceptual framework for financial accounting and reporting. The FASB has issued seven Statements of Financial Accounting Concepts. These statements are intended to set forth objectives and fundamentals that will be the basis for developing financial accounting and reporting standards. The objectives identify the goals and purposes of financial reporting. The fundamentals are the underlying concepts of financial accounting—concepts that guide the selection of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating them to interested parties. The purpose of Statement of Financial Accounting Concepts No. 2, ?oQualitative Characteristics of Accounting Information,?? is to examine the characteristics that make accounting information useful. The characteristics or qualities of information discussed in SFAC No. 2 are the ingredients that make information useful and the qualities to be sought when accounting choices are made.
(a) Identify and discuss the benefits that can be expected to be derived from the FASB’s conceptual
framework study.
(b) What is the most important quality for accounting information as identified in Statement of Financial
Accounting Concepts No. 2? Explain why it is the most important.
(c) Statement of Financial Accounting Concepts No. 2 describes a number of key characteristics or qualities for accounting information. Briefly discuss the importance of any three of these qualities for financial reporting purposes.
(CMA adapted)
Aug 29, 2021 | Uncategorized
(Transaction Analysis—Service Company) Beverly Crusher is a licensed CPA. During the first month of operations of her business (a sole proprietorship), the following events and transactions occurred.
April 2 Invested $32,000 cash and equipment valued at $14,000 in the business.
2 Hired a secretary receptionist at a salary of $290 per week payable monthly.
3 Purchased supplies on account $700. (Debit an asset account.)
7 Paid office rent of $600 for the month.
11 Completed a tax assignment and billed client $1,100 for services rendered. (Use Service Revenue account.)
12 Received $3,200 advance on a management consulting engagement.
17 Received cash of $2,300 for services completed for Ferengi Co.
21 Paid insurance expense $110.
30 Paid secretary receptionist $1,160 for the month.
30 A count of supplies indicated that $120 of supplies had been used.
30 Purchased a new computer for $6,100 with personal funds. (The computer will be used exclusively for business purposes.)
Aug 29, 2021 | Uncategorized
A summary of cash flows for Webster Consulting Group for the year ended July 31, 2008, is shown below.
Cash receipts:
Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $495,000
Cash received from additional investment of owner . . . . . . . . . . . . . 20,000
Cash payments:
Cash paid for operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,500
Cash paid for land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Cash paid to owner for personal use . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
The cash balance as of August 1, 2007, was $46,750.
Prepare a statement of cash flows for Webster Consulting Group for the year ended July 31, 2008.
Aug 29, 2021 | Uncategorized
A Plus Learning Centers was established on March 20, 2008, to provide educational services.
The services provided during the remainder of the month are as follows:
Mar. 21. Issued Invoice No. 1 to J. Dunlop for $70 on account.
22. Issued Invoice No. 2 to K. Thorne for $310 on account.
24. Issued Invoice No. 3 to T. Morris for $95 on account.
25. Provided educational services, $125, to K. Thorne in exchange for educational supplies.
27. Issued Invoice No. 4 to F. Mintz for $190 on account.
28. Issued Invoice No. 5 to D. Bennett for $175 on account.
30. Issued Invoice No. 6 to K. Thorne for $105 on account.
31. Issued Invoice No. 7 to T. Morris for $115 on account.
Instructions
1. Journalize the transactions for March, using a single column revenue journal and a two column general journal. Post to the following customer accounts in the accounts receivable ledger, and insert the balance immediately after recording each entry: D. Bennett;
J. Dunlop; F. Mintz; T. Morris; K. Thorne.
2. Post the revenue journal and the general journal to the following accounts in the general ledger, inserting the account balances only after the last postings:
12 ………….Accounts Receivable
13 ………….Supplies
41 ………….Fees Earned
3. a. What is the sum of the balances of the accounts in the subsidiary ledger at March 31?
b. What is the balance of the controlling account at March 31?
4. Assume that on April 1, the state in which A Plus operates begins requiring that sales tax be collected on educational services. Briefly explain how the revenue journal may be modified to accommodate sales of services on account that require the collection of a state sales tax.
Aug 29, 2021 | Uncategorized
Effect of Transactions on Financial Statements and Ratios the transactions listed below relate to Wainwright Inc. You are to assume that on the date on which each of the transactions occurred the corporation’s accounts showed only common stock ($100 par) outstanding, a current ratio of 2.7:1, and a substantial net income for the year to date (before giving effect to the transaction concerned). On that date the book value per share of stock was $151.53. Each numbered transaction is to be considered completely independent of the others, and its related answer should be based on the effect(s) of that transaction alone. Assume that all numbered transactions occurred during 2011 and that the amount involved in each case is sufficiently material to distort reported net income if improperly included in the determination of net income. Assume further that each transaction was recorded in accordance with generally accepted accounting principles and, where applicable, in conformity with the all inclusive concept of the income statement. For each of the numbered transactions you are to decide whether it:
a. Increased the corporation’s 2011 net income.
b. Decreased the corporation’s 2011 net income.
c. Increased the corporation’s total retained earnings directly (i.e., not via net income).
d. Decreased the corporation’s total retained earnings directly.
e. Increased the corporation’s current ratio.
f. Decreased the corporation’s current ratio.
g. Increased each stockholder’s proportionate share of total stockholders’ equity.
h. Decreased each stockholder’s proportionate share of total stockholders’ equity.
i. Increased each stockholder’s equity per share of stock (book value).
j. Decreased each stockholder’s equity per share of stock (book value).
k. Had none of the foregoing effects.
List the numbers 1 through 9. Select as many letters as you deem appropriate to reflect the effect(s) of each transaction as of the date of the transaction by printing beside the transaction number the letter(s) that identifies that transaction’s effect(s).
Transactions
_____ 1. In January the board directed the write off of certain patent rights that had suddenly and unexpectedly become worthless.
_____ 2. The corporation sold at a profit land and a building that had been idle for some time. Under the terms of the sale, the corporation received a portion of the sales price in cash immediately, the balance maturing at 6 month intervals.
_____ 3. Treasury stock originally repurchased and carried at $127 per share was sold for cash at $153 per share.
_____ 4. The corporation wrote off all of the unamortized discount and issue expense applicable to bonds that it refinanced in 2011.
_____ 5. The corporation called in all its outstanding shares of stock and exchanged them for new shares on a 2 for 1 basis, reducing the par value at the same time to $50 per share.
_____ 6. The corporation paid a cash dividend that had been recorded in the accounts at time of declaration.
_____ 7. Litigation involving Wainwright Inc. as defendant was settled in the corporation’s favor, with the plaintiff paying all court costs and legal fees. In 2008 the corporation had appropriately established a special contingency for this court action. (Indicate the effect of reversing the contingency only.)
_____ 8. The corporation received a check for the proceeds of an insurance policy from the company with which it is insured against theft of trucks. No entries concerning the theft had been made previously, and the proceeds reduce but do not cover completely the loss.
_____ 9. Treasury stock, which had been repurchased at and carried at $127 per share, was issued as a stock dividend. In connection with this distribution, the board of directors of Wainwright Inc. had authorized a transfer from retained earnings to permanent capital of an amount equal to the aggregate market value ($153 per share) of the shares issued. No entries relating to this dividend had been made previously.
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Extended Warranties Dos Passos Company sells televisions at an average price of $900 and also offers to each customer a separate 3 year warranty contract for $90 that requires the company to perform periodic services and to replace defective parts. During 2010, the company sold 300 televisions and 270 warranty contracts for cash. It estimates the 3 year warranty costs as $20 for parts and $40 for labor and accounts for warranties separately. Assume sales occurred on December 31, 2010, income is recognized on the warranties, and straight line recognition of warranty revenues occurs.
(a) Record any necessary journal entries in 2010.
(b) What liability relative to these transactions would appear on the December 31, 2010, balance sheet and how would it be classified? In 2011, Dos Passos Company incurred actual costs relative to 2010 television warranty sales of $2,000 for parts and $4,000 for labor.
(c) Record any necessary journal entries in 2011 relative to 2010 television warranties.
(d) What amounts relative to the 2010 television warranties would appear on the December 31, 2011, balance sheet and how would they be classified?
Aug 29, 2021 | Uncategorized
Financial Statement Impact of Liability Transactions Presented below is a list of possible transactions.
1. Purchased inventory for $80,000 on account (assume perpetual system is used).
2. Issued an $80,000 note payable in payment on account (see item 1 above).
3. Recorded accrued interest on the note from item 2 above.
4. Borrowed $100,000 from the bank by signing a 6 month, $112,000, zero interest bearing note.
5. Recognized 4 months’ interest expense on the note from item 4 above.
6. Recorded cash sales of $75,260, which includes 6% sales tax.
7. Recorded wage expense of $35,000. The cash paid was $25,000; the difference was due to various amounts withheld.
8. Recorded employer’s payroll taxes.
9. Accrued accumulated vacation pay.
10. Recorded an asset retirement obligation.
11. Recorded bonuses due to employees.
12. Recorded sales of product and related warranties (assume sales warranty approach).
13. Accrued warranty expense (assume expense warranty approach).
14. Paid warranty costs that were accrued in item 13 above.
15. Recorded a contingent loss on a lawsuit that the company will probably lose.
16. Paid warranty costs under contracts from item 12.
17. Recognized warranty revenue (see item 12).
18. Recorded estimated liability for premium claims outstanding. Set up a table using the format shown below and analyze the effect of the 18 transactions on the financial statement categories indicated. Use the following code:
I: Increase D: Decrease NE: No neteffect
Aug 29, 2021 | Uncategorized
Liability Entries and Adjustments Listed below are selected transactions of Schultz Department Store for the current year ending December 31.
1. On December 5, the store received $500 from the Jackson Players as a deposit to be returned after certain furniture to be used in stage production was returned on January 15.
2. During December, cash sales totaled $798,000, which includes the 5% sales tax that must be remitted to the state by the fifteenth day of the following month.
3. On December 10, the store purchased for cash three delivery trucks for $120,000. The trucks were purchased in a state that applies a 5% sales tax.
4. The store determined it will cost $100,000 to restore the area surrounding one of its store parking lots, when the store is closed in 2 years. Schultz estimates the fair value of the obligation at December 31 is $84,000. Prepare all the journal entries necessary to record the transactions noted above as they occurred and any adjusting journal entries relative to the transactions that would be required to present fair financial statements at December 31. Date each entry. For simplicity, assume that adjusting entries are recorded only once a year on December 31.
Aug 29, 2021 | Uncategorized
Loss Contingencies: Entries and Essay on November 24, 2010, 26 passengers on Windsor Airlines Flight No. 901 were injured upon landing when the plane skidded off the runway. Personal injury suits for damages totaling $9,000,000 were filed on January 11, 2011, against the airline by 18 injured passengers. The airline carries no insurance. Legal counsel has studied each suit and advised Windsor that it can reasonably expect to pay 60% of the damages claimed. The financial statements for the year ended December 31, 2010, were issued February 27, 2011.
(a) Prepare any disclosures and journal entries required by the airline in preparation of the December 31, 2010, financial statements.
(b) Ignoring the Nov. 24, 2010, accident, what liability due to the risk of loss from lack of insurance coverage should Windsor Airlines record or disclose? During the past decade the company has experienced at least one accident per year and incurred average damages of $3,200,000. Discuss fully.
Aug 29, 2021 | Uncategorized
Loss Contingency Presented below is a note disclosure for Matsui Corporation. Litigation and Environmental: The Company has been notified, or is a named or a potentially responsible party in a number of governmental (federal, state and local) and private actions associated with environmental matters, such as those relating to hazardous wastes, including certain sites which are on the United States EPA National Priorities List (?oSuperfund??). These actions seek clean up costs, penalties and/or damages for personal injury or to property or natural resources. In 2010, the Company recorded a pre tax charge of $56,229,000, included in the ?oOther expense (income)—net?? caption of the Company’s consolidated income statements, as an additional provision for environmental matters. These expenditures are expected to take place over the next several years and are indicative of the Company’s commitment to improve and maintain the environment in which it operates. At December 31, 2010, environmental accruals amounted to $69,931,000 of which $61,535,000 are considered noncurrent and are included in the ?oDeferred credits and other liabilities?? caption of the Company’s consolidated balance sheets. While it is impossible at this time to determine with certainty the ultimate outcome of environmental matters, it is management’s opinion, based in part on the advice of independent counsel (after taking into account accruals and insurance coverage applicable to such actions) that when the costs are finally determined they will not have a material adverse effect on the financial position of the Company. Answer the following questions.
(a) What conditions must exist before a loss contingency can be recorded in the accounts?
(b) Suppose that Matsui Corporation could not reasonably estimate the amount of the loss, although it could establish with a high degree of probability the minimum and maximum loss possible. How should this information be reported in the financial statements?
(c) If the amount of the loss is uncertain, how the loss contingency would be reported in the financial statements?
Aug 29, 2021 | Uncategorized
On February 25, 2009, Gabriel Madway wrote an article titled Apple Investors Get No Satisfaction on Jobs” which appeared on Reuters.com. The article raises concerns about Steve Jobs’s health and the possible reoccurrence of his pancreatic cancer. The following excerpt is taken from the article: Jobs—who co founded Apple and is credited with transforming it into a consumer juggernaut after returning as CEO a decade ago—announced in January he would take a five month leave of absence, handing over the reins of the firm and saying his health problems were “more complex” than originally thought. Answer the following questions:
1. Is the article favorable, neutral, or unfavorable regarding future prospects for Apple Inc.?
2. Assuming you owned stock in Apple Inc., would you sell your stock based only upon this article? If not, what additional information would you want?
3. Would it be a prudent investment strategy to only rely upon published financial statements in deciding to invest in a company’s stock?
4. What sources do you think financial analysts use in making investment decisions and recommendations?
Aug 29, 2021 | Uncategorized
Payroll Tax Entries Below is a payroll sheet for Otis Import Company for the month of September
2010. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% F.I.C.A. tax on employee and employer on a maximum of $102,000. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $102,000 per employee.
(a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
(b) Make the entry to record the payroll tax expenses of Otis Import Company.
(c) Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of eachmonth.
Aug 29, 2021 | Uncategorized
Payroll Tax Entries Cedarville Company pays its office employee payroll weekly. Below is a partial list of employees and their payroll data for August. Because August is their vacation period, vacation pay is also listed. Assume that the federal income tax withheld is 10% of wages. Union dues withheld are 2% of wages. Vacations are taken the second and third weeks of August by Robbins, Kirk, and Sprouse. The state unemployment tax rate is 2.5% and the federal is 0.8%, both on a $7,000 maximum. The F.I.C.A. rate is 7.65% on employee and employer on a maximum of $102,000 per employee. In addition, a 1.45% rate is charged both employer and employee for an employee’s wages in excess of $102,000. Make the journal entries necessary for each of the four August payrolls. The entries for the payroll and for the company’s liability are made separately. Also make the entry to record the monthly payment of accrued payrollliabilities.
Aug 29, 2021 | Uncategorized
Payroll Tax Entries the payroll of Delaney Company for September 2010 is as follows. Total payroll was $480,000, of which $140,000 is exempt from Social Security tax because it represented amounts paid in excess of $102,000 to certain employees. The amount paid to employees in excess of $7,000 was $410,000. Income taxes in the amount of $80,000 were withheld, as was $9,000 in union dues. The state unemployment tax is 3.5%, but Delaney Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current F.I.C.A. tax is 7.65% on an employee’s wages to $102,000 and 1.45% in excess of $102,000. No employee for Delaney makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit. Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately.
Aug 29, 2021 | Uncategorized
Premium Entries and Financial Statement Presentation Sycamore Candy Company offers a CD single as a premium for every five candy bar wrappers presented by customers together with $2.50. The candy bars are sold by the company to distributors for 30 cents each. The purchase price of each CD to the company is $2.25; in addition it costs 50 cents to mail each CD. The results of the premium plan for the years 2010 and 2011 are as follows. (All purchases and sales are for cash.)
(a) Prepare the journal entries that should be made in 2010 and 2011 to record the transactions related to the premium plan of the Sycamore Candy Company.
(b) Indicate the account names, amounts, and classifications of the items related to the premium plan that would appear on the balance sheet and the income statement at the end of 2010 and2011.
Aug 29, 2021 | Uncategorized
Premiums Presented below are three independent situations.
1. Mar quart Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Mar quart’s past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Mar quart’s liability for stamp redemptions was $13,000,000 at December 31, 2009. Additional information for 2010 is as follows.
Stamp service revenue from stamps sold to licensees $9,500,000
Cost of redemptions (stamps sold prior to 1/1/10) 6,000,000
If all the stamps sold in 2010 were presented for redemption in 2011, the redemption cost would be $5,200,000. What amount should Mar quart report as a liability for stamp redemptions at December 31, 2010?
2. In packages of its products, Wiseman Inc. includes coupons that may be presented at retail stores to obtain discounts on other Wiseman products. Retailers are reimbursed for the face amount of coupons redeemed plus 10% of that amount for handling costs. Wiseman honors requests for coupon redemption by retailers up to 3 months after the consumer expiration date. Wiseman estimates that 60% of all coupons issued will ultimately be redeemed. Information relating to coupons issued by Wiseman during 2010 is as follows.
Consumer expiration date 12/31/10
Total face amount of coupons issued $850,000
Total payments to retailers as of 12/31/10 330,000
What amount should Wiseman report as a liability for unredeemed coupons at December 31, 2010?
3. Newell Company sold 600,000 boxes of pie mix under a new sales promotional program. Each box contains one coupon, which submitted with $4.00, entitles the customer to a baking pan. Newell pays $6.00 per pan and $0.50 for handling and shipping. Newell estimates that 70% of the coupons will be redeemed, even though only 250,000 coupons had been processed during 2010. What amount should Newell report as a liability for unredeemed coupons at December 31, 2010?
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Ratio Computations and Effect of Transactions Presented below is information related to Leland Inc.
(a) Compute the following ratios or relationships of Leland Inc. Assume that the ending account balances are representative unless the information provided indicates differently.
(1) Current ratio.
(2) Inventory turnover.
(3) Receivables turnover.
(4) Earnings per share.
(5) Profit margin on sales.
(6) Rate of return on assets on December 31, 2010.
(b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Leland Inc. at December 31, 2010.
(1) Write off an uncollectible account receivable, $2,200.
(2) Repurchase capital stock for cash.
(3) Pay $40,000 on notes payable (short term).
(4) Collect $23,000 on accounts receivable.
(5) Buy equipment on account.
(6) Give an existing creditor a short term note in settlement ofaccount.
Aug 29, 2021 | Uncategorized
Refinancing of Short Term Debt Dumars Corporation reports in the current liability section of its balance sheet at December 31, 2010 (its year end), short term obligations of $15,000,000, which includes the current portion of 12% long term debt in the amount of $10,000,000 (matures in March 2011). Management has stated its intention to refinance the 12% debt whereby no portion of it will mature during 2011. The date of issuance of the financial statements is March 25, 2011.
(a) Is management’s intent enough to support long term classification of the obligation in this situation?
(b) Assume that Dumars Corporation issues $13,000,000 of 10 year debentures to the public in January 2011 and that management intends to use the proceeds to liquidate the $10,000,000 debt maturing in March 2011. Furthermore, assume that the debt maturing in March 2011 is paid from these proceeds prior to the issuance of the financial statements. Will this have any impact on the balance sheet classification at December 31, 2010? Explain your answer.
(c) Assume that Dumars Corporation issues common stock to the public in January and that management intends to entirely liquidate the $10,000,000 debt maturing in March 2011 with the proceeds of this equity securities issue. In light of these events, should the $10,000,000 debt maturing in March 2011 be included in current liabilities at December 31, 2010?
(d) Assume that Dumars Corporation, on February 15, 2011, entered into a financing agreement with a commercial bank that permits Dumars Corporation to borrow at any time through 2012 up to $15,000,000 at the bank’s prime rate of interest. Borrowings under the financing agreement mature three years after the date of the loan. The agreement is not cancelable except for violation of a provision with which compliance is objectively determinable. No violation of any provision exists at the date of issuance of the financial statements. Assume further that the current portion of long term debt does not mature until August 2011. In addition, management intends to refinance the $10,000,000 obligation under the terms of the financial agreement with the bank, which is expected to be financially capable of honoring the agreement.
(1) Given these facts, should the $10,000,000 be classified as current on the balance sheet at December 31, 2010?
(2) Is disclosure of the refinancing method required?
Aug 29, 2021 | Uncategorized
Refinancing of Short Term Debt On December 31, 2010, Santana Company has $7,000,000 of short term debt in the form of notes payable to Golden State Bank due in 2011. On January 28, 2011, Santana enters into a refinancing agreement with Golden that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables are expected to range between a low of $5,000,000 in May to a high of $8,000,000 in October during the year 2011. The interest cost of the maturing short term debt is 15%, and the new agreement calls for a fluctuating interest rate at 1% above the prime rate on notes due in 2015. Santana’s December 31, 2010, balance sheet is issued on February 15, 2011. Prepare a partial balance sheet for Santana at December 31, 2010, showing how its $7,000,000 of short term debt should be presented, including footnote disclosure.
Aug 29, 2021 | Uncategorized
Reporting of Subsequent Events In June 2010, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company’s year end (December 31, 2010) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31 the bonds will not affect the ratios until December 31, 2011. They will have to report the issuance as a subsequent event which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2011 ratios should be better.
(a) What are the ethical issues involved?
(b) Should McElroy agree to the delay?
Aug 29, 2021 | Uncategorized
Sally Fleming operates her own catering service. Summary financial data for February are presented in equation form as follows. Each line designated by a number indicates the effect of a transaction on the balance sheet. Each increase and decrease in stockholders’ equity, except transaction (4), affects net income.
a. Describe each transaction.
b. What is the amount of net decrease in cash during the month?
c. What is the amount of net increase in retained earnings during the month?
d. What is the amount of the net income for the month?
e. How much of the net income for the month was retained in the business?
f. What is the amount of net cash flows from operating activities?
g. What is the amount of net cash flows from investing activities?
h. What is the amount of net cash flows from financingactivities?
Aug 29, 2021 | Uncategorized
The following amounts were taken from the accounting records of Bontancia Services, Inc., as of August 31, 2011. Bontancia Services began its operations on September 1, 2010.
Capital stock$ 23,000
Cash 50,000
Dividends 13,000
Fees earned 300,000
Interest expense 2,500
Land 100,000
Miscellaneous expense 7,500
Notes payable 30,000
Rent expense 28,000
Salaries expense 90,000
Taxes expense 22,000
Utilities expense 40,000
Instructions
1. Prepare an income statement for the year ending August 31, 2011.
2. Prepare a retained earnings statement for the year ending August 31, 2011.
3. Prepare a balance sheet as of August 31, 2011.
4. Prepare a statement of cash flows for the year ending August 31, 2011.
Aug 29, 2021 | Uncategorized
Treatment of Various Interim Reporting Situations the following statement is an excerpt from the FASB pronouncement related to interim reporting. Interim financial information is essential to provide investors and others with timely information as to the progress of the enterprise. The usefulness of such information rests on the relationship that it has to the annual results of operations. Accordingly, the Board has concluded that each interim period should be viewed primarily as an integral part of an annual period. In general, the results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year. The Board has concluded, however, that certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period. Listed on page 1375 are six independent cases on how accounting facts might be reported on an individual company’s interim financial reports. For each of these cases, state whether the method proposed to be used for interim reporting would be acceptable under generally accepted accounting principles applicable to interim financial data. Support each answer with a brief explanation.
(a) J. D. Long Company takes a physical inventory at year end for annual financial statement purposes. Inventory and cost of sales reported in the interim quarterly statements are based on estimated gross profit rates, because a physical inventory would result in a cessation of operations.
Long Company does have reliable perpetual inventory records.
(b) Rockford Company is planning to report one fourth of its pension expense each quarter.
(c) Republic Company wrote inventory down to reflect lower of cost or market in the first quarter.
At year end the market exceeds the original acquisition cost of this inventory. Consequently, management plans to write the inventory back up to its original cost as a year end adjustment.
(d) Gansner Company realized a large gain on the sale of investments at the beginning of the second quarter. The company wants to report one third of the gain in each of the remaining quarters.
(e) Fredonia Company has estimated its annual audit fee. It plans to pro rate this expense equally over all four quarters.
(f) LaBrava Company was reasonably certain it would have an employee strike in the third quarter. As a result, it shipped heavily during the second quarter but plans to defer the recognition of the sales in excess of the normal sales volume. The deferred sales will be recognized as sales in the third quarter when the strike is in progress. LaBrava Company management thinks this is more representative of normal second and third quarter operations.
Aug 29, 2021 | Uncategorized
Warranties and Loss Contingencies the following two independent situations involve loss contingencies.
Part 1
Benson Company sells two products, Grey and Yellow. Each carries a one year warranty.
1. Product Grey—Product warranty costs, based on past experience, will normally be 1% of sales.
2. Product Yellow—Product warranty costs cannot be reasonably estimated because this is a new product line. However, the chief engineer believes that product warranty costs are likely to be incurred. How should Benson report the estimated product warranty costs for each of the two types of merchandise above? Discuss the rationale for your answer. Do not discuss disclosures that should be made in Benson’s financial statements or notes.
Part 2
Constantine Company is being sued for $4,000,000 for an injury caused to a child as a result of alleged negligence while the child was visiting the Constantine Company plant in March 2010. The suit was filed in July 2010. Constantine’s lawyer states that it is probable that Constantine will lose the suit and be found liable for a judgment costing anywhere from $400,000 to $2,000,000. However, the lawyer states that the most probable judgment is $1,000,000.
How should Constantine report the suit in its 2010 financial statements? Discuss the rationale for your answer. Include in your answer disclosures, if any that should be made in Constantine’s financial statements or notes.
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Depreciation Changes On January 1, 2006, McElroy Company purchased a building and equipment that have the following useful lives, salvage values, and costs.
Building, 40 year estimated useful life, $50,000 salvage value, $1,200,000 cost
Equipment, 12 year estimated useful life, $10,000 salvage value, $130,000 cost
The building has been depreciated under the double declining balance method through 2009. In 2010, the company decided to switch to the straight line method of depreciation. McElroy also decided to change the total useful life of the equipment to 9 years, with a salvage value of $5,000 at the end of that time. The equipment is depreciated using the straight line method.
Instructions
(a) Prepare the journal entry(ies) necessary to record the depreciation expense on the building in 2010.
(b) Compute depreciation expense on the equipment for 2010.
Aug 29, 2021 | Uncategorized
Error Corrections and Accounting Changes Penn Company is in the process of adjusting and correcting its books at the end of 2010. In reviewing its records, the following information is compiled.
1. Penn has failed to accrue sales commissions payable at the end of each of the last 2 years, as follows.
December 31, 2009 $3,500
December 31, 2010 $2,500
2. In reviewing the December 31, 2011, inventory, Penn discovered errors in its inventory taking procedures that have caused inventories for the last 3 years to be incorrect, as follows.
December 31, 2008 Understated $16,000
December 31, 2009 Understated $19,000
December 31, 2010 Overstated $ 6,700
Penn has already made an entry that established the incorrect December 31, 2010, inventory amount.
3. At December 31, 2010, Penn decided to change the depreciation method on its office equipment from double declining balance to straight line. The equipment had an original cost of $100,000 when purchased on January 1, 2008. It has a 10 year useful life and no salvage value. Depreciation expense recorded prior to 2010 under the double declining balance method was $36,000. Penn has already recorded 2010 depreciation expense of $12,800 using the double declining balance method.
4. Before 2010, Penn accounted for its income from long term construction contracts on the completed contract basis. Early in 2010, Penn changed to the percentage of completion basis for accounting purposes. It continues to use the completed contract method for tax purposes. Income for 2010 has been recorded using the percentage of completion method. The following information is available. Prepare the journal entries necessary at December 31, 2010, to record the above corrections and changes. The books are still open for 2010. The income tax rate is 40%. Penn has not yet recorded its 2010 income tax expense and payable amounts so current year tax effects may be ignored. Prior year tax effects must be considered in item4.
Aug 29, 2021 | Uncategorized
Error Corrections you have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2010. You discover the following situations.
1. Depreciation of $3,200 for 2010 on delivery vehicles was not recorded.
2. The physical inventory count on December 31, 2009, improperly excluded merchandise costing $19,000 that had been temporarily stored in a public warehouse. Zarle uses a periodic inventory system.
3. A collection of $5,600 on account from a customer received on December 31, 2010, was not recorded until January 2, 2011.
4. In 2010, the company sold for $3,700 fully depreciated equipment that originally cost $25,000. The company credited the proceeds from the sale to the Equipment account.
5. During November 2010, a competitor company filed a patent infringement suit against Zarle claiming damages of $220,000. The company’s legal counsel has indicated that an unfavorable verdict is probable and a reasonable estimate of the court’s award to the competitor is $125,000. The company has not reflected or disclosed this situation in the financial statements.
6. Zarle has a portfolio of trading securities. No entry has been made to adjust to market. Information on cost and market value is as follows.
Cost Market
December 31, 2009 $95,000 $95,000
December 31, 2010 $84,000 $82,000
7. At December 31, 2010, an analysis of payroll information shows accrued salaries of $12,200. The Accrued Salaries Payable account had a balance of $16,000 at December 31, 2010, which was unchanged from its balance at December 31, 2009.
8. A large piece of equipment was purchased on January 3, 2010, for $40,000 and was charged to Repairs Expense. The equipment is estimated to have a service life of 8 years and no residual value. Zarle normally uses the straight line depreciation method for this type of equipment.
9. A $12,000 insurance premium paid on July 1, 2009, for a policy that expires on June 30, 2012, was charged to insurance expense.
10. A trademark was acquired at the beginning of 2009 for $50,000. No amortization has been recorded since its acquisition. The maximum allowable amortization period is 10 years. Assume the trial balance has been prepared but the books have not been closed for 2010. Assuming all amounts are material, prepare journal entries showing the adjustments that are required. (Ignore income tax considerations.)
Aug 29, 2021 | Uncategorized
In preparation for significant international operations, ABC Co. has adopted a plan to gradually shift to the same accounting methods as used by its international competitors. Part of this plan includes a switch from LIFO inventory accounting to FIFO (recall that IFRS does not allow LIFO). ABC decides to make the switch to FIFO at January 1, 2012. The following data pertains to ABC’s 2012 financial statements.
Sales ………………………………. $550
Inventory purchases ………………… 350
12/31/12 inventory (using FIFO) …… 580
Compensation expense ……………… 17
All sales and purchases were with cash. All of 2012’s compensation expense was paid with cash.
(Ignore taxes.) ABC’s property, plant, and equipment cost $400 and has an estimated useful life of 10 years with no salvage value.
ABC Co. reported the following for fiscal 2011 (in millions of dollars):
Accounting
Prepare ABC’s December 31, 2012, balance sheet and an income statement for the year ended December 31, 2012. In columns beside 2012’s numbers, include 2011’s numbers as they would appear in the 2012 financial statements for comparative purposes.
Analysis
Compute ABC’s inventory turnover for 2011 and 2012 under both LIFO and FIFO. Assume averages are equal to year end balances where necessary. What causes the differences in this ratio between LIFO and FIFO?
Principles
Briefly explain, in terms of the principles discussed in Chapter 2, why GAAP requires that companies that change accounting methods recast prior year’s financial statementdata.
Aug 29, 2021 | Uncategorized
The following information relates to depreciable assets of Strata Technologies.
(a) Machine A was purchased for $80,000 on January 1, 2006. The entire cost was erroneously expensed in the year of purchase. The machine had a 16 year useful life and no residual value.
(b) Machine B cost $220,000 and was purchased January 1, 2007. The straight line method of depreciation was used. At the time of purchase, the expected useful life was 10 years with no residual value. In 2011, it was estimated that the total useful life of the asset would be only seven years and that there would be a $12,000 residual value.
(c) Building C was purchased January 1, 2008, for $950,000. The straight line method of depreciation was originally chosen. The building was expected to be useful for 25 years and to have zero residual value. On January 1, 2011, a change was made from the straight line depreciation method to the sum of the years’ digits method. Estimates relating to the useful life and residual value remained the same.
Income before depreciation expense was $620,000 for 2011. Depreciation on assets other than those described totaled $65,000.
Instructions:
1. Compute total depreciation expense for 2011.
2. Prepare the statement of retained earnings for 2011. The beginning Retained Earnings balance, before considering items (a) through (c) above, was $890,000. For this problem, assume that only the statements for 2011 are presented, so any prior period adjustment to retained earnings is done as of January 1, 2011. Strata declared and paid dividends totaling $210,000 in 2011.
3. Make the January 1, 2011, correcting journal entry necessary with respect to item (a), the erroneous expensing of the machine cost.
Aug 29, 2021 | Uncategorized
You have been asked by a client to review the records of Roberts Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting records. Your examination reveals the following information.
1. Roberts Company commenced business on April 1, 2010, and has been reporting on a fiscal year ending March 31. The company has never been audited, but the annual statements prepared by the bookkeeper reflect the following income before closing and before deducting income taxes.
Year Ended Income
March 31 Before Taxes
2011 $ 71,600
2012 111,400
2013 103,580
2. A relatively small number of machines have been shipped on consignment. These transactions have been recorded as ordinary sales and billed as such. On March 31 of each year, machines billed and in the hands of consignees amounted to:
2011 $6,500
2012 none
2013 5,590
Sales price was determined by adding 25% to cost. Assume that the consigned machines are sold the following year.
3. On March 30, 2012, two machines were shipped to a customer on a C.O.D. basis. The sale was not entered until April 5, 2012, when cash was received for $6,100. The machines were not included in the inventory at March 31, 2012. (Title passed on March 30, 2012.)
4. All machines are sold subject to a 5 year warranty. It is estimated that the expense ultimately to be incurred in connection with the warranty will amount to ?1 of 1% of sales. The company has charged an expense account for warranty costs incurred.
Sales per books and warranty costs were as follows.
?
5. Bad debts have been recorded on a direct write off basis. Experience of similar enterprises indicates that losses will approximate ?1 of 1% of sales. Bad debts written off were:
?
6. The bank deducts 6% on all contracts financed. Of this amount, 1/2% is placed in a reserve to the credit of Roberts Company that is refunded to Roberts as finance contracts are paid in full. The reserve established by the bank has not been reflected in the books of Roberts. The excess of credits over debits (net increase) to the reserve account with Roberts on the books of the bank for each fiscal year were as follows.
2011 $ 3,000
2012 3,900
2013 5,100
$12,000
7. Commissions on sales have been entered when paid. Commissions payable on March 31 of each year were as follows.
2011 $1,400
2012 900
2013 1,120
8. A review of the corporate minutes reveals the manager is entitled to a bonus of 1% of the income before deducting income taxes and the bonus. The bonuses have never been recorded or paid.
Instructions
(a) Present a schedule showing the revised income before income taxes for each of the years ended March 31, 2011, 2012, and 2013. Make computations to the nearest whole dollar.
(b) Prepare the journal entry or entries you would give the bookkeeper to correct the books. Assume the books have not yet been closed for the fiscal year ended March 31, 2013. Disregard correction of incometaxes.
Aug 29, 2021 | Uncategorized
8 Purchased 18 boxes of Ping Pong Balls from Sport Borders for $168 each, terms net 30.
10 Paid the full amount owing to Sports ‘R Us, Check No. 776. Payment fell outside discount period.
10 Sold 11 NX Snooker Sets to Balls ‘n All for $176 each, Invoice No. 815.
11 Paid sales staff wages of $1,971 for the week up to and including yesterday, Check No. 777.
12 Paid the full amount owing to Extreme Sports Inc, Check No. 778. Payment fell outside discount period.
12 Mick’s Sporting Goods paid the full amount owing on their account. Since Mick’s Sporting Goods has been a loyal customer from the day the business commenced, a 5% discount was given for this early repayment.
14 Paid the full amount owing to Addax Sports, Check No. 779.
14 Made cash sale of 26 boxes of Golf Balls for $312 each.
Aug 29, 2021 | Uncategorized
Analysis of Given Ratios Robbins Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3 year period 2009–2011. The firm’s total assets at the end of 2011 amounted to $850,000. The president of Robbins Company has asked the controller to prepare a report that summarizes the financial aspects of the company’s operations for the past 3 years. This report will be presented to the board of directors at their next meeting. In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios which can assist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated the following ratios for the 3 year period 2009–2011. In preparation of the report, the controller has decided first to examine the financial ratios independent of any other data to determine if the ratios themselves reveal any significant trends over the 3 year period.
(a) The current ratio is increasing while the acid test (quick) ratio is decreasing. Using the ratios provided, identify and explain the contributing factor(s) for this apparently divergent trend.
(b) In terms of the ratios provided, what conclusion(s) can be drawn regarding the company’s use of financial leverage during the 2009–2011 period?
(c) Using the ratios provided, what conclusion(s) can be drawn regarding the company’s net investment in plant andequipment?
Aug 29, 2021 | Uncategorized
Asset Retirement Obligation Bassinger Company purchases an oil tanker depot on January 1, 2010, at a cost of $600,000. Bassinger expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $70,000 to dismantle the depot and remove the tanks at the end of the depot’s useful life.
(a) Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2010. Based on an effective interest rate of 6%, the fair value of the asset retirement obligation on January 1, 2010, is $39,087.
(b) Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2010. Bassinger uses straight line depreciation; the estimated residual value for the depot is zero.
(c) On December 31, 2019, Bassinger pays a demolition firm to dismantle the depot and remove the tanks at a price of $80,000. Prepare the journal entry for the settlement of the asset retirement obligation.
Aug 29, 2021 | Uncategorized
Bryan Segota is the sole stockholder and operator of Thatch, a motivational consulting business. At the end of its accounting period, December 31, 2010, Thatch has assets of $760,000 and liabilities of $240,000. Using the accounting equation and considering each case independently, determine the following amounts:
a. Stockholders’ equity, as of December 31, 2010.
b. Stockholders’ equity, as of December 31, 2011, assuming that assets increased by $120,000 and liabilities increased by $72,000 during 2011.
c. Stockholders’ equity, as of December 31, 2011, assuming that assets decreased by $60,000 and liabilities increased by $21,600 during 2011.
d. Stockholders’ equity, as of December 31, 2011, assuming that assets increased by $100,000 and liabilities decreased by $38,400 during 2011.
e. Net income (or net loss) during 2011, assuming that as of December 31, 2011, assets were $960,000, liabilities were $156,000, and there were no dividends and no additional capital stock was issued.
Aug 29, 2021 | Uncategorized
Contingencies Presented below are three independent situations. Answer the question at the end of each situation.
1. During 2010, Maverick Inc. became involved in a tax dispute with the IRS. Maverick’s attorneys have indicated that they believe it is probable that Maverick will lose this dispute. They also believe that Maverick will have to pay the IRS between $800,000 and $1,400,000. After the 2010 financial statements were issued, the case was settled with the IRS for $1,200,000. What amount, if any, should be reported as a liability for this contingency as of December 31, 2010?
2. On October 1, 2010, Holmgren Chemical was identified as a potentially responsible party by the Environmental Protection Agency. Holmgren’s management along with its counsel has concluded that it is probable that Holmgren will be responsible for damages, and a reasonable estimate of these damages is $6,000,000. Holmgren’s insurance policy of $9,000,000 has a deductible clause of $500,000. How should Holmgren Chemical report this information in its financial statements at December 31, 2010?
3. Shin obi Inc. had a manufacturing plant in Darfur, which was destroyed in the civil war. It is not certain who will compensate Shin obi for this destruction, but Shin obi has been assured by governmental officials that it will receive a definite amount for this plant. The amount of the compensation will be less than the fair value of the plant, but more than its book value. How should the contingency be reported in the financial statements of Shin obi Inc.?
Aug 29, 2021 | Uncategorized
Dividend Policy Analysis Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations.
(a) Suggest factors to be considered by the board of directors in establishing a dividend policy.
(b) Compute the rate of return on assets, profit margin on sales, earnings per share, price earnings ratio, and current ratio for each of the 5 years for Matheny Inc.
(c) Comment on the appropriateness of declaring a cash dividend at this time, using the ratios computed in part (b) as a major factor in youranalysis.
Aug 29, 2021 | Uncategorized
Yancy’s Hardware has three stores. Each store manager is paid a salary plus a bonus on the sales made by his or her store. On January 5, 2010, Bill Slick, manager of one of the stores, resigned. Bill’s store had doubled its expected December 2009 sales, producing a bonus for Bill of $8,000 in December alone. Charles Brook, an assistant manager at another store, was assigned as manager of Bill Slick’s store. Upon examination of the store’s accounting records, Charles reports to Yancy that the store’s records indicated sales returns and allowances of $110,000 in the first four days of January 2010, an amount equal to about half of December 2009 sales.
Required:
1. Explain what the large amount of sales returns and allowances suggest that Bill Slick might have done.
2. Determine how Yancy could protect itself from a manager who behaved as Bill Slick did.
Aug 29, 2021 | Uncategorized
Zero Interest Bearing Note Receivable On September 30, 2009, Rolen Machinery Co. sold a machine and accepted the customer’s zero interest bearing note. Rolen normally makes sales on a cash basis. Since the machine was unique, its sales price was not determinable using Rolen’s normal pricing practices. After receiving the first of two equal annual installments on September 30, 2010, Rolen immediately sold the note with recourse. On October 9, 2011, Rolen received notice that the note was dishonored, and it paid all amounts due. At all times prior to default, the note was reasonably expected to be paid in full.
(a) (1) How should Rolen determine the sales price of the machine?
(2) How should Rolen report the effects of the zero interest bearing note on its income statement for the year ended December 31, 2009? Why is this accounting presentation appropriate?
(b) What are the effects of the sale of the note receivable with recourse on Rolen’s income statement for the year ended December 31, 2010, and its balance sheet at December 31, 2010?
(c) How should Rolen account for the effects of the note being dishonored?
Aug 29, 2021 | Uncategorized
Charles Chadwick opened a business called Charlie’s Detective Service in January 20 . Set up T accounts for the following accounts: Cash; Accounts Receivable; Office Supplies; Computer Equipment; Office Furniture; Accounts Payable; Charles Chadwick, Capital; Charles Chadwick, Drawing; Professional Fees; Rent Expense; and Utilities Expense. The following transactions occurred during the first month of business. Record these transactions in T accounts. After all transactions are recorded, foot and balance the accounts if necessary.
(a) Invested cash in the business, $30,000.
(b) Bought office supplies for cash, $300.
(c) Bought office furniture for cash, $5,000.
(d) Purchased computer and printer on account, $8,000.
(e) Received cash from clients for services, $3,000.
(f) Paid cash on account for computer and printer purchased in transaction (d), $4,000.
(g) Earned professional fees on account during the month, $9,000.
(h) Paid cash for office rent for January, $1,500.
(i) Paid utility bills for the month, $800.
(j) Received cash from clients billed in transaction (g), $6,000.
(k) Withdrew cash for personal use, $3,000.
Aug 29, 2021 | Uncategorized
Harold Long started a business in May 20 called Harold’s Home Repair. Long hired a part time college student as an assistant. Long has decided to use the following accounts for recording transactions:
Assets Owner’s Equity
Cash Harold Long, Capital
Accounts Receivable Harold Long, Drawing
Office Supplies Revenue
Prepaid Insurance Service Fees
Equipment Expenses
Van Rent Expense
Liabilities Wages Expense
Accounts Payable Telephone Expense
Gas and Oil Expense
The following transactions occurred during May:
(a) Invested cash in the business, $20,000.
(b) Purchased a used van for cash, $7,000.
(c) Purchased equipment on account, $5,000.
(d) Received cash for services rendered, $6,000.
(e) Paid cash on account owed from transaction (c), $2,000.
(f) Paid rent for the month, $900.
(g) Paid telephone bill, $200.
(h) Earned revenue on account, $4,000.
(i) Purchased office supplies for cash, $120.
(j) Paid wages to student, $600.
(k) Purchased a one year insurance policy, $1,200.
(l) Received cash from services performed in transaction (h), $3,000.
(m) Paid cash for gas and oil expense on the van, $160.
(n) Purchased additional equipment for $3,000, paying $1,000 cash and spreading the remaining payments over the next 10 months.
(o) Earned service fees for the remainder of the month of $3,200: $1,800 in cash and $1,400 on account.
(p) Withdrew cash at the end of the month, $2,800.
REQUIRED
1. Enter the transactions in T accounts, identifying each transaction with its corresponding letter.
2. Foot and balance the accounts where necessary.
3. Prepare a trial balance as of May 31, 20 .
Aug 29, 2021 | Uncategorized
Change from Fair Value to Equity Method On January 3, 2009, Martin Company purchased for $500,000 cash a 10% interest in Renner Corp. On that date the net assets of Renner had a book value of $3,700,000. The excess of cost over the underlying equity in net assets is attributable to undervalued depreciable assets having a remaining life of 10 years from the date of Martin’s purchase. The fair value of Martin’s investment in Renner securities is as follows: December 31, 2009, $560,000, and December 31, 2010, $515,000. On January 2, 2011, Martin purchased an additional 30% of Renner’s stock for $1,545,000 cash when the book value of Renner’s net assets was $4,150,000. The excess was attributable to depreciable assets having a remaining life of 8 years. During 2009, 2010, and 2011 the following occurred.
Renner Dividends Paid by
Net Income Renner to Martin
2009 $350,000 $15,000
2010 450,000 20,000
2011 550,000 70,000
On the books of Martin Company prepare all journal entries in 2009, 2010, and 2011 that relate to its investment in Renner Corp., reflecting the data above and a change from the fair value method to the equity method.
Aug 29, 2021 | Uncategorized
Change in Principle—Inventory—Periodic the management of Utrillo Instrument Company had concluded, with the concurrence of its independent auditors, that results of operations would be more fairly presented if Utrillo changed its method of pricing inventory from last in, first out (LIFO) to average cost in 2010. Given below is the 5 year summary of income under LIFO and a schedule of what the inventories would be if stated on the average cost method. Prepare comparative statements for the 5 years, assuming that Utrillo changed its method of inventory pricing to average cost. Indicate the effects on net income and earnings per share for the years involved. Utrillo Instruments started business in 2005. (All amounts except EPS are rounded up to the nearestdollar.)
Aug 29, 2021 | Uncategorized
Comprehensive Accounting Change and Error Analysis Problem Botticelli Inc. were organized in late 2008 to manufacture and sell hosiery. At the end of its fourth year of operation, the company has been fairly successful, as indicated by the following reported net incomes.
2008 $140,000a 2010 $205,000
2009 160,000b 2011 276,000
a Includes a $10,000 increase because of change in bad debt experience rate.
b Includes extraordinary gain of $30,000.
The company has decided to expand operations and has applied for a sizable bank loan. The bank officer has indicated that the records should be audited and presented in comparative statements to facilitate analysis by the bank. Botticelli Inc. therefore hired the auditing firm of Check & Double check Co. and has provided the following additional information.
1. In early 2009, Botticelli Inc. changed its estimate from 2% to 1% on the amount of bad debt expense to be charged to operations. Bad debt expense for 2008, if a 1% rate had been used, would have been $10,000. The company therefore restated its net income for 2008.
2. In 2011, the auditor discovered that the company had changed its method of inventory pricing from LIFO to FIFO. The effect on the income statements for the previous years is as follows.
2008 2009 2010 2011
Net income unadjusted—LIFO basis$140,000 $160,000 $205,000 $276,000
Net income unadjusted—FIFO basis 155,000 165,000 215,000 260,000
$ 15,000 $ 5,000 $ 10,000 ($ 16,000)
3. In 2011 the auditor discovered that:
a. The company incorrectly overstated the ending inventory by $14,000 in 2010.
b. A dispute developed in 2009 with the Internal Revenue Service over the deductibility of entertainment expenses. In 2008, the company was not permitted these deductions, but a tax settlement was reached in 2011 that allowed these expenses. As a result of the court’s finding, tax expenses in 2011 were reduced by $60,000.
(a) Indicate how each of these changes or corrections should be handled in the accounting records. Ignore income tax considerations.
(b) Present comparative income statements for the years 2008 to 2011, starting with income before extraordinary items. Ignore income tax considerations.
Aug 29, 2021 | Uncategorized
Comprehensive Error Analysis on March 5, 2011, you were hired by Hemingway Inc., a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2009 and 2010, you discover that no adjustments have yet been made for the items listed below. Items
1. Interest income of $14,100 was not accrued at the end of 2009. It was recorded when received in February 2010.
2. A computer costing $4,000 was expensed when purchased on July 1, 2009. It is expected to have a 4 year life with no salvage value. The company typically uses straight line depreciation for all fixed assets.
3. Research and development costs of $33,000 were incurred early in 2009. They were capitalized and were to be amortized over a 3 year period. Amortization of $11,000 was recorded for 2009 and $11,000 for 2010.
4. On January 2, 2009, Hemingway leased a building for 5 years at a monthly rental of $8,000. On that date, the company paid the following amounts, which were expensed when paid.
Security deposit $20,000
First month’s rent 8,000
Last month’s rent 8,000
$36,000
5. The company received $36,000 from a customer at the beginning of 2009 for services that it is to perform evenly over a 3 year period beginning in 2009. None of the amount received was reported as unearned revenue at the end of 2009.
6. Merchandise inventory costing $18,200 was in the warehouse at December 31, 2009, but was incorrectly omitted from the physical count at that date. The company uses the periodic inventory method.
Indicate the effect of any errors on the net income figure reported on the income statement for the year ending December 31, 2009, and the retained earnings figure reported on the balance sheet at December 31, 2010. Assume all amounts are material, and ignore income tax effects. Using the following format, enter the appropriate dollar amounts in the appropriate columns. Consider each item independent of the other items. It is not necessary to total the columns on thegrid.
Aug 29, 2021 | Uncategorized
The book balance in the checking account of Lyle’s Salon as of November 30 is $3,282.95. The bank statement shows an ending balance of $2,127.00. By examining last month’s bank reconciliation, comparing the deposits and checks written per books and per bank in November, and noting the service charges and other debit and credit memos shown on the bank statement, the following were found:
(a) An ATM withdrawal of $150.00 on November 18 by Lyle for personal use was not recorded on the books.
(b) A bank debit memo issued for an NSF check from a customer of $19.50.
(c) A bank credit memo issued for interest of $19.00 earned during the month.
(d) On November 30, a deposit of $1,177.00 was made, which is not shown on the bank statement.
(e) A bank debit memo issued for $17.50 for bank service charges.
(f) Checks No. 549, 561, and 562 for the amounts of $185.00, $21.00, and $9.40, respectively, were written during November but have not yet been received by the bank.
(g) The reconciliation from the previous month showed outstanding checks totaling $271.95. One of those checks, No. 471 for $18.65, has not yet been received by the bank.
(h) Check No. 523 written to a creditor in the amount of $372.90 was recorded in the books as $327.90.
REQUIRED
1. Prepare a bank reconciliation as of November 30.
2. Prepare the required journal entries.
Aug 29, 2021 | Uncategorized
The book balance in the checking account of Tori’s Health Center as of April 30 is $4,690.30. The bank statement shows an ending balance of $3,275.60. By examining last month’s bank reconciliation, comparing the deposits and checks written per books and per bank in April, and noting the service charges and other debit and credit memos shown on the bank statement, the following were found:
(a) An ATM withdrawal of $200.00 on April 20 by Tori for personal use was not recorded on the books.
(b) A bank debit memo issued for an NSF check from a customer of $29.10.
(c) A bank credit memo issued for interest of $28.00 earned during the month.
(d) On April 30, a deposit of $1,592.00 was made, which is not shown on the bank statement.
(e) A bank debit memo issued for $24.50 for bank service charges.
(f) Checks No. 481, 493, and 494 for the amounts of $215.00, $71.00, and $24.30, respectively, were written during April but have not yet been received by the bank.
(g) The reconciliation from the previous month showed outstanding checks totaling $418.25. One of these checks, No. 397 for $38.60, has not yet been received by the bank.
(h) Check No. 422 written to a creditor in the amount of $217.90 was recorded in the books as $271.90.
REQUIRED
1. Prepare a bank reconciliation as of April 30.
2. Prepare the required journal entries.
Aug 29, 2021 | Uncategorized
The financial statements of P&G are presented in Appendix 5B or can be accessed at the book’s companion website, www.wiley.com/college/kieso.
Instructions
Refer to P&G’s financial statements and the accompanying notes to answer the following questions.
(a) What alternative formats could P&G have adopted for its balance sheet? Which format did it adopt?
(b) Identify the various techniques of disclosure P&G might have used to disclose additional pertinent financial information. Which technique does it use in its financials?
(c) In what classifications are P&G’s investments reported? What valuation basis does P&G use to report its investments? How much working capital did P&G have on June 30, 2009? On June 30, 2008?
(d) What were P&G’s cash flows from its operating, investing, and financing activities for 2009? What were its trends in net cash provided by operating activities over the period 2007 to 2009? Explain why the change in accounts payable and in accrued and other liabilities is added to net income to arrive at net cash provided by operating activities.
(e) Compute P&G’s (1) current cash debt coverage ratio, (2) cash debt coverage ratio, and (3) free cash flow for 2009. What do these ratios indicate about P&G’s financial condition?
Aug 29, 2021 | Uncategorized
The First Fence Company sells merchandise on credit. During the fiscal year ended July 31, the company had net sales of $1,150,000. At the end of the year, it had Accounts Receivable of $300,000 and a debit balance in Allowance for Uncollectible Accounts of $1,700. In the past, approximately 1.4 percent of net sales have proved to be uncollectible. Also, an aging analysis of accounts receivable reveals that $15,000 of the receivables appears to be uncollectible. Prepare entries in journal form to record uncollectible accounts expense using
(a) The percentage of net sales method and
(b) The accounts receivable aging method. What is the resulting balance of Allowance for Uncollectible Accounts under each method? How would your answers under each method change if Allowance for Uncollectible Accounts had a credit balance of $1,700 instead of a debit balance? Why do the methods result in different balances?
Aug 29, 2021 | Uncategorized
The following data were associated with the accounts receivable and uncollectible accounts of Julia Jay, Inc., during 2012:
a. The opening credit balance in Allowance for Bad Debts was $600,000 at January 1, 2012.
b. During 2012, the company realized that specific accounts receivable totaling $630,000 had gone bad and had been written off.
c. An account receivable of $35,000 was collected during 2012. This account had previously been written off as a bad debt in 2011.
d. The company decided that Allowance for Bad Debts would be $650,000 at the end of 2012.
1. Prepare journal entries to show how these events would be recognized in the accounting system using the allowance method.
2. Discuss the advantages of the allowance method when compared to the direct method with respect to the matching principle.
Aug 29, 2021 | Uncategorized
The following selected transactions were taken from the records of Lights of the West Company for the first year of its operations ending December 31, 2010:
Jan. 24. Wrote off account of J. Huntley, $3,000.
Feb. 17. Received $1,500 as partial payment on the $4,000 account of Karlene Solomon. Wrote off the remaining balance as uncollectible.
May 29. Received $3,000 from J. Huntley, which had been written off on January 24.
Reinstated the account and recorded the cash receipt.
Nov.30. Wrote off the following accounts as uncollectible (record as one journal entry):
Don O’Leary $2,000
Kim Snider 1,500
Jennifer Kerlin 900
Tracy Lane 1,250
Lynn Fuqua 450
Dec. 31. Lights of the West Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, 11/2% of credit sales are expected to be uncollectible. Lights of the West Company recorded $975,000 of credit sales during 2010.
a. Journalize the transactions for 2010 under the direct write off method.
b. Journalize the transactions for 2010 under the allowance method.
c. How much higher (lower) would Lights of the West Company’s net income have been under the direct write off method than under the allowance method?
Aug 29, 2021 | Uncategorized
The following summarized data were provided by the records of Slate, Incorporated, for the year ended December 31, 2010:
Sales of merchandise for cash ………………………………$223,000
Sales of merchandise on credit ……………………………… 40,000
Cost of goods sold ………………………………………….. 143,000
Selling expense ……………………………………………… 45,200
Administrative expense ……………………………………… 20,000
Sales returns and allowances ………………………………… 8,000
Items not included in above amounts:
Estimated bad debt loss, 3% of credit sales
Average income tax rate, 30%
Number of shares of common stock outstanding 4,000
Required:
1. Based on these data, prepare an income statement (showing both gross profit and income from operations). Include a percentage analysis column.
2. What was the amount of gross profit margin? What was the gross profit percentage ratio? Explain what these two amounts mean.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by Mair Co. during the current year. Mair Co. sells and installs home and business security systems.
Jan. 10. Loaned $12,000 cash to Jas Caudel, receiving a 90 day, 8% note.
Feb. 4. Sold merchandise on account to Periman & Co., $28,000. The cost of the merchandise sold was $16,500.
13. Sold merchandise on account to Centennial Co., $30,000. The cost of merchandise sold was $17,600.
Mar. 6. Accepted a 60 day, 6% note for $28,000 from Periman & Co. on account.
14. Accepted a 60 day, 12% note for $30,000 from Centennial Co. on account.
Apr. 10. Received the interest due from Jas Caudel and a new 90 day, 10% note as a renewal of the loan of January 10. (Record both the debit and the credit to the notes receivable account.)
May 5. Received from Periman & Co. the amount due on the note of March 6.
13. Centennial Co. dishonored its note dated March 14.
June 12. Received from Centennial Co. the amount owed on the dishonored note, plus interest for 30 days at 12% computed on the maturity value of the note.
July 9. Received from Jas Caudel the amount due on his note of April 10.
Aug.10. Sold merchandise on account to Lindenfield Co., $13,600. The cost of the merchandise sold was $8,000.
20. Received from Lindenfield Co. the amount of the invoice of August 10, less 1% discount.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed during the current year by Bonita Co., an appliance wholesale company:
Jan. 20. Sold merchandise on account to Wilding Co., $30,750. The cost of merchandise sold was $18,600.
Mar. 3. Accepted a 60 day, 8% note for $30,750 from Wilding Co. on account.
May 2. Received from Wilding Co. the amount due on the note of March 3.
June 10. Sold merchandise on account to Foyers for $13,600. The cost of merchandise sold was $8,200.
June 15. Loaned $18,000 cash to Michele Hobson, receiving a 30 day, 6% note.
20. Received from Foyers the amount due on the invoice of June 10, less 2% discount.
July 15. Received the interest due from Michele Hobson and a new 60 day, 9% note as a renewal of the loan of June 15. (Record both the debit and the credit to the notes receivable account.)
Sept.13. Received from Michele Hobson the amount due on her note of July 15.
13. Sold merchandise on account to Rainbow Co., $20,000. The cost of merchandise sold was $11,500.
Oct. 12. Accepted a 60 day, 6% note for $20,000 from Rainbow Co. on account.
Dec. 11. Rainbow Co. dishonored the note dated October 12.
26. Received from Rainbow Co. the amount owed on the dishonored note, plus interest for 15 days at 12% computed on the maturity value of the note.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by Hunter Co. during the current year. Hunter Co. sells and installs home and business security systems.
Jan. 15. Loaned $6,000 cash to Dan Hough, receiving a 90 day, 8% note.
Feb. 6. Sold merchandise on account to Kent and Son, $16,000. The cost of the merchandise sold was $9,000.
13. Sold merchandise on account to Centennial Co., $30,000. The cost of merchandise sold was $15,750.
Mar. 5. Accepted a 60 day, 6% note for $16,000 from Kent and Son on account.
14. Accepted a 60 day, 12% note for $30,000 from Centennial Co. on account.
Apr. 15. Received the interest due from Dan Hough and a new 90 day, 10% note as a renewal of the loan of January 15. (Record both the debit and the credit to the notes receivable account.) May 4. Received from Kent and Son the amount due on the note of March 5.
13. Centennial Co. dishonored its note dated March 14.
June 12. Received from Centennial Co. the amount owed on the dishonored note, plus interest for 30 days at 12% computed on the maturity value of the note.
July 14. Received from Dan Hough the amount due on his note of April 15.
Aug. 10. Sold merchandise on account to Conover Co., $10,000. The cost of the merchandise sold was $6,500.
20. Received from Conover Co. the amount of the invoice of August 10, less 1% discount.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed during the current year by Indigo Co., an appliance wholesale company:
Jan. 13. Sold merchandise on account to Boylan Co., $32,000. The cost of merchandise sold was $19,200.
Mar. 10. Accepted a 60 day, 6% note for $32,000 from Boylan Co. on account.
May 9. Received from Boylan Co. the amount due on the note of March 10.
June 10. Sold merchandise on account to Holen for $18,000. The cost of merchandise sold was $10,000.
15. Loaned $24,000 cash to Angie Jones, receiving a 30 day, 7% note.
20. Received from Holen the amount due on the invoice of June 10, less 2% discount.
July 15. Received the interest due from Angie Jones and a new 60 day, 9% note as a renewal of the loan of June 15. (Record both the debit and the credit to the notes receivable account.)
Sept. 13. Received from Angie Jones the amount due on her note of July 15.
13. Sold merchandise on account to Aztec Co., $40,000. The cost of merchandise sold was $25,000.
Oct. 12. Accepted a 60 day, 6% note for $40,000 from Aztec Co. on account.
Dec. 11. Aztec Co. dishonored the note dated October 12.
26. Received from Aztec Co. the amount owed on the dishonored note, plus interest for 15 days at 12% computed on the maturity value of the note.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The following were selected from among the transactions completed by Sorento Co. during the current year. Sorento Co. sells and installs home and business security systems.
Jan. 5. Loaned $17,500 cash to Marc Jager, receiving a 90 day, 8% note.
Feb. 4. Sold merchandise on account to Tedra & Co., $19,000. The cost of the merchandise sold was $11,000.
13. Sold merchandise on account to Centennial Co., $30,000. The cost of merchandise sold was $17,600.
Mar. 6. Accepted a 60 day, 6% note for $19,000 from Tedra & Co. on account.
14. Accepted a 60 day, 9% note for $30,000 from Centennial Co. on account.
Apr. 5. Received the interest due from Marc Jager and a new 120 day, 9% note as a renewal of the loan of January 5. (Record both the debit and the credit to the notes receivable account.)
May 5. Received from Tedra & Co. the amount due on the note of March 6.
13. Centennial Co. dishonored its note dated March 14.
July 12. Received from Centennial Co. the amount owed on the dishonored note, plus interest for 60 days at 12% computed on the maturity value of the note.
Aug. 3. Received from Marc Jager the amount due on his note of April 5.
Sept. 7. Sold merchandise on account to Lock It Co., $9,000. The cost of the merchandise sold was $5,000.
17. Received from Lock It Co. the amount of the invoice of September 7, less 1% discount.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
The information below is from the 2008 financial statements and accompanying notes of The Scotts Company, a major manufacturer of lawn care products.
?
THE SCOTTS COMPANY
Notes to the Financial Statements
Note 19. Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. The Company sells its consumer products to a wide variety of retailers, including mass merchandisers, home centers, independent hardware stores, nurseries, garden outlets, warehouse clubs, food and drug stores and local and regional chains. Professional products are sold to commercial nurseries, greenhouses, landscape services and growers of specialty agriculture crops. Concentrations of accounts receivable at September 30, net of accounts receivable pledged under the terms of the New MARP Agreement whereby the purchaser has assumed the risk associated with the debtor’s financial inability to pay ($146.6 million and $149.5 million for 2008 and 2007, respectively), were as follows:
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The remainder of the Company’s accounts receivable at September 30, 2008 and 2007, were generated from customers located outside of North America, primary retailers, distributors, nurseries and growers in Europe. No concentrations of customers of individual customers within this group account for more than 10% of the Company’s accounts receivable at either balance sheet date.
The Company’s three largest customers are reported within the Global Consumer segment, and are the only customers that individually represent more than 10% of reported consolidated net sales for each of the last three fiscal years. These three customers accounted for the following percentages of consolidated net sales for the fiscal years ended September 30:
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Instructions
Answer each of the following questions.
(a) Calculate the receivables turnover ratio and average collection period for 2008 for the company.
(b) Is accounts receivable a material component of the company’s total 2008 current assets?
(c) Scotts sells seasonal products. How might this affect the accuracy of your answer to part (a)?
(d) Evaluate the credit risk of Scotts’ 2008 concentrated receivables.
(e) Comment on the informational value of Scotts’ Note 19 on concentrations of credit risk.
Aug 29, 2021 | Uncategorized
The MGM Mirage owns and operates casinos including the MGM Grand and the Bellagio in Las Vegas, Nevada. As of December 31, 2009, The MGM Mirage reported accounts and notes receivable of $465,580,000 and allowance for doubtful accounts of $97,106,000.
Johnson & Johnson manufactures and sells a wide range of health care products including Band Aids and Tylenol. As of December 31, 2009, Johnson & Johnson reported accounts receivable of $9,979,000,000 and allowance for doubtful accounts of $333,000,000.
a. Compute the percentage of the allowance for doubtful accounts to the accounts and notes receivable as of December 31, 2009, for The MGM Mirage. Round to one decimal place.
b. Compute the percentage of the allowance for doubtful accounts to the accounts receivable as of December 31, 2009, for Johnson & Johnson. Round to one decimal place.
c. Discuss possible reasons for the difference in the two ratios computed in (a) and (b).
Aug 29, 2021 | Uncategorized
The trial balance of Sparkling Jewelry Company at the end of its 2012 fiscal year included the following account balances:
Account
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $66,400
Allowance for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300 (debit balance)
The company has not yet recorded any bad debt expense for 2012.
Determine the amount of bad debt expense to be recognized by Sparkling Jewelry Company for 2012, assuming the following independent situations:
1. An aging accounts receivable analysis indicates that probable uncollectible accounts receivable at year end amount to $3,900.
2. Company policy is to maintain a provision for uncollectible accounts receivable equal to 4% of outstanding accounts receivable.
3. Company policy is to estimate uncollectible accounts receivable as equal to 1% of the previous year’s annual sales, which were $350,000.
Aug 29, 2021 | Uncategorized
Tutor Tots performs tutoring services on account, so virtually all cash receipts arrive by mail and are then placed in the petty cash box for a week. Average daily cash receipts are $24,000. Jennifer Swanson, the owner, has just returned from a meeting with new ideas for the business. Among other things, Swanson plans to institute stronger internal controls over cash receipts from customers.
Requirements
1. What types of receivables are most likely to be collected by Tutor Tots?
2. List the following procedures in the correct order.
a. Another person, such as the owner or the manager, compares the amount of the bank deposit to the total of the customer credits posted by the accountant. This gives some assurance that the day’s cash receipts went into the bank and that the same amount was posted to customer accounts.
b. The person who handles cash should not prepare the bank reconciliation.
c. An employee with no access to the accounting records deposits the cash in the bank immediately.
d. The remittance slips go to the accountant, who uses them for posting credits to the customer accounts.
e. Someone other than the accountant opens the mail. This person separates customer checks from the accompanying remittance slips.
Aug 29, 2021 | Uncategorized
BE7 3 Use the info in 7 2, assuming Restin Co. uses the net method to account for cashdiscounts. Prepare the required journal entries for Restin Co.
June 1 Accounts Receivable……………………………………….. 48,500
*Sales Revenue…………………………………………. 48,500
June 12 Cash………………………………………………………….. 48,500
Accounts Receivable…………………………… 48,500
Aug 29, 2021 | Uncategorized
BE 7 5 Use the info in 7 4 for Wilton, Inca) instead of estimating the uncollectible at 2% of net sales, assume that 10% of accountsreceivables will prove to be uncollectible. Prepare the entry to collect bad debt expenseb)Instead of estimating uncollectable at 2% of net sales, assume Wiltonprepares an agingschedule that estimates total uncollectible accounts at $24,600. Prepare the entry to recordbad debt expense.(a)Bad Debt Expense………………………………………………………….22,600Allowance for Doubtful Accounts[(10% X $250,000) – $2,400]…………………………….22,600(b)Bad Debt Expense………………………………………………………….22,200Allowance for Doubtful Accounts($24,600 – $2,400)…………………………………………….22,200
Aug 29, 2021 | Uncategorized
Use the Target Corporation’s annual report in Appendix B to answer the following questions. related to Target’s 2009 fiscal year.
Required
a. What percentage of Target’s total assets was comprised of credit card receivables?
b. Approximately what percentage of credit card receivables did the company think will not be collected in 2009 and 2008?
c. What is Target’s policy regarding when to write off credit card receivables?
d. What percentage of Target’s total assets was comprised of inventory?
e. What cost flow method did Target use to account for its inventory?
f. Target had arrangements with some of its vendors such that it does not purchase or pay for merchandise inventory until the merchandise is sold to outside customers. Was the cost of these goods ever included in the Inventory account?
Aug 29, 2021 | Uncategorized
Williams & Hendricks Distributors uses the direct write off method in accounting for uncollectible accounts.
20 1
Feb. 18 Sold merchandise on account to Merry Merchants, $17,500.
Mar. 22 Sold merchandise on account to Utter Unicorns, $14,300.
June 3 Received $10,000 from Merry Merchants and wrote off the remainder owed on the sale of February 18 as uncollectible.
Sept. 9 Received $8,000 from Utter Unicorns and wrote off the remainder owed on the sale of March 22 as uncollectible.
Nov. 13 Reinstated the account of Merry Merchants, which had been written off on June 3, and received $7,500 cash in full settlement.
20 2
Jan. 17 Reinstated the account of Utter Unicorns, which had been written off on September 9 of the previous year, and received $6,300 cash in full settlement.
REQUIRED
Record these transactions in general journal form.
Aug 29, 2021 | Uncategorized
On January 1, 2012, Moline Company had Accounts Receivable $154,000; Notes Receivable of $12,000; and Allowance for Doubtful Accounts of $13,200. The note receivable is from Hartwig Company. It is a 4 month, 9% note dated December 31, 2011.
Moline Company prepares financial statements annually. During the year, the following selected transactions occurred.
Jan. 5 Sold $10,000 of merchandise to Flint Company, terms n/15.
20 Accepted Flint Company’s $10,000, 3 month, 9% note for balance due.
Feb. 18 Sold $4,000 of merchandise to Zinck Company and accepted Zinck’s $4,000, 6 month, 8% note for the amount due.
Apr. 20 Collected Flint Company note in full.
30 Received payment in full from Hartwig Company on the amount due.
May 25 Accepted Aberd Inc.’s $9,000, 6 month, 8% note in settlement of a past due balance on account.
Aug. 18 Received payment in full from Zinck Company on note due.
Sept. 1 Sold $5,000 of merchandise to Cosier Company and accepted a $5,000,
6 month, 9% note for the amount due.
Instructions
Journalize the transactions. (Omit cost of goods sold entries.)
Aug 29, 2021 | Uncategorized
On July 1, 2008, Agincourt Inc. made two sales.
1. It sold land having a fair market value of $700,000 in exchange for a 4 year zero interest bearing promissory note in the face amount of $1,101,460. The land is carried on Agincourt’s books at a cost of $590,000.
2. It rendered services in exchange for a 3%, 8 year promissory note having a face value of $400,000 (interest payable annually).
Agincourt Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Instructions
(a) Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2008. (Round to the nearest dollar.)
(b) Assume that Agincourt uses the fair value option for the note issued in exchange for the land. Prepare the entry at December 31, 2008, if the fair value of the note is $720,000.
Aug 29, 2021 | Uncategorized
Orange Peel, a U.S. company, sold 140,000 cases of tropical fruit to Hanoi Foods, a Vietnamese firm, for 4.25 billion Vietnamese dong. The sale was made on November 17, 2012, when one U.S. dollar equaled 17,000 dong. Payment of 4.25 billion Vietnamese dong was due to Orange Peel on January 16, 2013. At December 31, 2012, one U.S. dollar equaled 17,600 dong, and on January 16, 2013, one U.S. dollar equaled 18,200 dong.
1. What will be the value of the accounts receivable on December 31, 2012, in Vietnamese dong?
2. What will be the value of the accounts receivable on December 31, 2012, in U.S. dollars?
3. Will Orange Peel recognize an exchange gain or loss at December 31, 2012? Explain.
4. Will Orange Peel recognize an exchange gain or loss on January 16, 2013? Explain.
5. In connection with this sale, what amount will Orange Peel report as Sales Revenue in its income statement for 2012?
6. In connection with this sale, what amount will Orange Peel report as Cash Collected from Customers in its statement of cash flows for 2013?
Aug 29, 2021 | Uncategorized
Parry Company has accounts receivable of $95,400 at March 31, 2012. An analysis of the accounts shows these amounts.
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Credit terms are 2/10, n/30. At March 31, 2012, there is a $2,100 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimates of bad debts are as shown below.
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Instructions
(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31, 2012, to record bad debts expense.
(c) Discuss the implications of the changes in the aging schedule from 2011 to 2012.
Aug 29, 2021 | Uncategorized
Porter Corporation’s balance sheet at December 31, 2011, is presented below.
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During January 2012, the following transactions occurred. Porter uses the perpetual inventory method.
Jan. 1 Porter accepted a 4 month, 8% note from Anderko Company in payment of Anderko’s $1,200 account.
3 Porter wrote off as uncollectible the accounts of Elrich Corporation ($450) and Rios Company ($280).
8 Porter purchased $17,200 of inventory on account.
11 Porter sold for $25,000 on account inventory that cost $17,500.
15 Porter sold inventory that cost $700 to Fred Berman for $1,000.
Berman charged this amount on his Visa First Bank card. The service fee charged Porter by First Bank is 3%.
17 Porter collected $22,900 from customers on account.
21 Porter paid $16,300 on accounts payable.
24 Porter received payment in full ($280) from Rios Company on the account written off on January 3.
27 Porter purchased advertising supplies for $1,400 cash.
31 Porter paid other operating expenses, $3,218.
Adjustment data:
1. Interest is recorded for the month on the note from January 1.
2. Bad debts are expected to be 6% of the January 31, 2012, accounts receivable.
3. A count of advertising supplies on January 31, 2012, reveals that $560 remains unused.
4. The income tax rate is 30%. (Hint: Prepare the income statement up to ?oIncome before taxes?? and multiply by 30% to compute the amount; round to whole dollars.)
Instructions
(You may want to set up T accounts to determine ending balances.)
(a) Prepare journal entries for the transactions listed above and adjusting entries.
(Include entries for cost of goods sold using the perpetual system.)
(b) Prepare an adjusted trial balance at January 31, 2012.
(c) Prepare an income statement and a retained earnings statement for the month ending January 31, 2012, and a classified balance sheet as of January 31,2012.
Aug 29, 2021 | Uncategorized
Prepare a bank reconciliation for Bend Company at January 31, 2012, using the information shown.
1. Cash per the accounting records at January 31 amounted to $228,909; the bank statement on this same date showed a balance of $204,008.
2. The canceled checks returned by the bank included a check written by DeVoe Company for $6,987 that had been deducted from Bend’s account in error.
3. Deposits in transit as of January 31, 2012, amounted to $33,442.
4. The following amounts were adjustments to Bend Company’s account on the bank statement:
a. Service charges of $64.
b. An NSF check of $4,100.
c. Interest earned on the account, $110.
5. Checks written by Bend Company that have not yet cleared the bank include four checks totaling $19,582.
Aug 29, 2021 | Uncategorized
Presented below is an aging schedule for Zillmann Company.
At December 31, 2010, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000.
Instructions
(a) Journalize and post the adjusting entry for bad debts at December 31, 2010.
(b) Journalize and post to the allowance account the following events and transactions in the year 2011.
(1) On March 31, a $1,000 customer balance originating in 2010 is judged uncollectible.
(2) On May 31, a check for $1,000 is received from the customer whose account was written off as uncollectible on March 31.
(c) Journalize the adjusting entry for bad debts on December 31, 2011, assuming that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $800 and the aging schedule indicates that total estimated bad debts will be$28,600.
Aug 29, 2021 | Uncategorized
Recording, Reporting, and Evaluating a Bad Debt Estimate
During 2011, Dorothy’s Ceramics Shop had sales revenue of $70,000, of which $25,000 was on credit. At the start of 2011, Accounts Receivable showed a $4,000 debit balance, and the Allowance for Doubtful Accounts showed a $300 credit balance. Collections of accounts receivable during 2011 amounted to $19,000.
Data during 2011 follows:
a. On December 31, 2011, an Account Receivable (Toby’s Gift Shop) of $700 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt.
b. On December 31, 2011, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2.5 percent of credit sales for the year.
Required:
1. Give the required journal entries for the two items on December 31, 2011 (end of the accounting period).
2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for 2011. Disregard income tax considerations.
3. On the basis of the data available, does the 2.5 percent rate appear to be reasonable? Explain.
Aug 29, 2021 | Uncategorized
| Relaxing Recliner Chairs completed the following selected transactions: |
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Received a $7,000, 90 day, 12% note on account from Dark Star Music. |
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Made an adjusting entry to accrue interest on the Dark Star Music note. |
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Made a closing entry for interest revenue. |
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Collected the maturity value of the Dark Star Music note. |
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Loaned $11,000 cash to Love Joy Music, receiving a six month, 11% note. |
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Received a $2,400, 60 day, 11% note for a sale to Voice Publishing. Ignore cost of goods sold. |
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Voice Publishing dishonored its note at maturity; wrote off the note as |
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uncollectible, debiting Allowance for uncollectible accounts. |
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Collected the maturity value of the Love Joy Music note. |
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Journalize all transactions for Jo Jo Music. Round all amounts to the nearest |
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dollar. (For notes stated in days, use a 360 day year.)
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Aug 29, 2021 | Uncategorized
Reporting Net Sales with Credit Sales, Sales Discounts, and Credit Card Sales
The following transactions were selected from the records of OceanView Company:
July 12 Sold merchandise to Customer R, who charged the $3,000 purchase on his Visa credit card. Visa charges OceanView a 2 percent credit card fee.
15 Sold merchandise to Customer S at an invoice price of $9,000; terms 3/10, n/30.
20 Sold merchandise to Customer T at an invoice price of $4,000; terms 3/10, n/30.
23 Collected payment from Customer S from July 15 sale.
Aug. 25 Collected payment from Customer T from July 20 sale.
Required:
Assuming that Sales Discounts and Credit Card Discounts are treated as contra revenues, compute net sales for the two months ended August 31.
Aug 29, 2021 | Uncategorized
Reporting Net Sales with Credit Sales, Sales Discounts, Sales Returns, and Credit Card Sales The following transactions were selected from among those completed by Cadence Retailers in 2011:
Nov. 20 Sold 20 items of merchandise to Customer B at an invoice price of $5,500 (total); terms
3/10, n/30.
25 Sold two items of merchandise to Customer C, who charged the $400 sales price on her Visa credit card. Visa charges Cadence Retailers a 2 percent credit card fee.
28 Sold 10 identical items of merchandise to Customer D at an invoice price of $9,000 (total); terms 3/10, n/30.
29 Customer D returned one of the items purchased on the 28th; the item was defective, and credit was given to the customer.
Dec. 6 Customer D paid the account balance in full.
20 Customer B paid in full for the invoice of November 20, 2011.
Required:
Assume that Sales Returns and Allowances, Sales Discounts, and Credit Card Discounts are treated as contra revenues; compute net sales for the two months ended December 31, 2011.
Aug 29, 2021 | Uncategorized
Sale of Notes Receivable Corrs Wholesalers Co. sells industrial equipment for a standard 3 year note receivable. Revenue is recognized at time of sale. Each note is secured by a lien on the equipment and has a face amount equal to the equipment’s list price. Each note’s stated interest rate is below the customer’s market rate at date of sale. All notes are to be collected in three equal annual installments beginning one year after sale. Some of the notes are subsequently sold to a bank with recourse, some are subsequently sold without recourse, and some are retained by Corrs. At year end, Corrs evaluates all outstanding notes receivable and provides for estimated losses arising from defaults.
(a) What is the appropriate valuation basis for Corrs’s notes receivable at the date it sells equipment?
(b) How should Corrs account for the sale, without recourse, of a February 1, 2010, note receivable sold on May 1, 2010? Why is it appropriate to account for it in this way?
(c) At December 31, 2010, how should Corrs measure and account for the impact of estimated losses resulting from notes receivable that it
(1) Retained and did not sell?
(2) Sold to bank with recourse?
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Smoot Company’s accounts receivable reveal the following balances:
Age of Accounts Receivable Balance
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $720,000
1–30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,000
31–60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000
61–90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,000
91–120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000
The credit balance in Allowance for Bad Debts is now $42,000. After a thorough analysis of its collection history, the company estimates that the following percentages of receivables will eventually prove uncollectible:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5%
1–30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0
31–60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.0
61–90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.5
91–120 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.0
Prepare an aging schedule for the accounts receivable, and give the journal entry for recording the necessary change in the allowance for bad debts account.
Aug 29, 2021 | Uncategorized
Sterling Company’s bank statement for the month of March included the following information:
Ending balance, March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,046
Bank service charge for March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Interest paid by bank to Sterling for March . . . . . . . . . . . . . . . . . . . . . 107
In comparing the bank statement to its own cash records, Sterling found the following:
Deposits made but not yet recorded by the bank . . . . . . . . . . . . . . . . . $3,689
Checks written and mailed but not yet recorded by the bank . . . . . . . . 6,530
In addition, Sterling discovered that it had erroneously recorded a check for $46 that should have been recorded for $64. What is Sterling’s correct Cash balance at March 31?
Aug 29, 2021 | Uncategorized
Sue and Sam Ristic own Club Fab. From its inception, Club Fab has sold merchandise on either a cash or credit basis, but no credit cards have been accepted. During the past several months, the Ristics have begun to question their credit sales policies. First, they have lost some sales because of their refusal to accept credit cards. Second, representatives of two metropolitan banks have convinced them to accept their national credit cards. One bank, City National Bank, has stated that
(1) Its credit card fee is 4% and
(2) It pays the retailer 96 cents on each $1 of sales within 3 days of receiving the credit card billings.
The Ristics decide that they should determine the cost of carrying their own credit sales. From the accounting records of the past 3 years, they accumulate these data:
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Credit and collection expenses as a percentage of net credit sales are as follows: Uncollectible accounts 1.6%, billing and mailing costs .5%, and credit investigation fee on new customers .2%. Sue and Sam also determine that the average accounts receivable balance outstanding during the year is 5% of net credit sales. The Ristics estimate that they could earn an average of 10% annually on cash invested in other business opportunities.
Instructions
With the class divided into groups, answer the following.
(a) Prepare a tabulation for each year showing total credit and collection expenses in dollars and as a percentage of net credit sales.
(b) Determine the net credit and collection expenses in dollars and as a percentage of sales after considering the revenue not earned from other investment opportunities. (Note: The income lost on the cash held by the bank for 3 days is considered to be immaterial.)
(c) Discuss both the financial and nonfinancial factors that are relevant to the decision.
Aug 29, 2021 | Uncategorized
Suppose The Right Rig Dealership is opening a regional office in Omaha. Cary Regal, the office manager, is designing the internal control system. Regal proposes the following procedures for credit checks on new customers, sales on account, cash collections, and write offs of uncollectible receivables: The credit department runs a credit check on all customers who apply for credit. When an account proves uncollectible, the credit department authorizes the write off of the account receivable. Cash receipts come into the credit department, which separates the cash received from the customer remittance slips. The credit department lists all cash receipts by customer name and amount of cash received. The cash goes to the treasurer for deposit in the bank. The remittance slips go to the accounting department for posting to customer accounts. The controller compares the daily deposit slip to the total amount posted to customer accounts. Both amounts must agree.
Requirement
1. Recall the components of internal control you learned in Chapter 7. Identify the internal control weakness in this situation, and propose a way to correct it.
Aug 29, 2021 | Uncategorized
The accounting department supplied the following data in reconciling the September
30 bank statement for Clegg Auto.
Ending cash balance per bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,972.67
Ending cash balance per books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,697.76
Deposits in transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,251.42
Bank service charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.00
Outstanding checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,163.51
Note collected by bank including $50 interest (Clegg not yet notified) . . . . . . . . 2,150.00
Error by bank—check drawn by Gregg Corp. was charged to Clegg’s account . . 713.18
A sale and deposit of $1,628.00 were entered in the sales journal and cash receipts journal as $1,682.00.
1. Prepare the September 30 bank reconciliation.
2. Give the journal entries required on the books to adjust the cash account.
Aug 29, 2021 | Uncategorized
The accounting records of Clear Photography, Inc., reflected the following balances as of
January 1, 2012:
Cash …………………….. $18,000
Beginning inventory …….. 13,500 (150 units @ $90)
Common stock ………….. 15,000
Retained earnings ……….. 16,500
The following five transactions occurred in 2012:
1. First purchase (cash) 120 units @ $92
2. Second purchase (cash) 200 units @ $100
3. Sales (all cash) 300 units @ $185
4. Paid $15,000 cash for operating expenses.
5. Paid cash for income tax at the rate of 40 percent of income before taxes.
Required
a. Compute the cost of goods sold and ending inventory, assuming
(1) FIFO cost flow,
(2) LIFO cost flow, and
(3) weighted average cost flow.
b. Use a vertical model to prepare the 2012 income statement, balance sheet, and statement of cash flows under FIFO, LIFO, and weighted average.
Aug 29, 2021 | Uncategorized
The accounts receivable clerk for Summit Industries prepared the following partially completed aging of receivables schedule as of the end of business on November 30:
The following accounts were unintentionally omitted from the aging schedule and not included in the subtotals above:
Customer Balance Due Date
Cottonwood Industries $14,300 July 6
Fargo Company 17,700 September 17
Garfield Inc. 8,500 October 17
Sadler Company 10,000 November 2
Twitty Company 25,000 December 23
a. Determine the number of days past due for each of the preceding accounts.
b. Complete the aging of receivables schedule by including the omittedaccounts.
Aug 29, 2021 | Uncategorized
The August 31, 2009, issue of the Wall Street Journal includes an article by Serena Ng and Cari Tuna entitled ?oBig Firms Are Quick to Collect, Slow to Pay.??
Instructions
Read the article and answer the following questions.
(a) How many days did InBev tell its suppliers that it was going to take to pay? How many days did it take previously?
(b) What steps did General Electric take to free up cash? How much cash did it free up?
(c) On average, how many days did companies with more than $5 billion take to pay suppliers, and how many days did they take to collect from their customers? How did this compare to companies with less than $500 million in sales?
(d) Are there any risks involved with being too tough in negotiating delayed payment terms with suppliers?
Aug 29, 2021 | Uncategorized
Lee and Chen Distributors uses the direct write off method in accounting for uncollectible accounts.
20 1
Feb. 16 Sold merchandise on account to Biggs and Daughters, $16,000.
Mar. 23 Sold merchandise on account to Lloyd Place, $12,800.
June 8 Received $12,000 from Biggs and Daughters and wrote off the remainder owed on the sale of February 16 as uncollectible.
Sept. 27 Received $7,000 from Lloyd Place and wrote off the remainder owed on the sale of March 23 as uncollectible.
Nov. 18 Reinstated the account of Biggs and Daughters, which had been written off on June 8, and received $4,000 cash in full settlement.
20 2
Jan. 11 Reinstated the account of Lloyd Place, which had been written off on September 27 of the previous year, and received $5,800 cash in full settlement.
REQUIRED
Record these transactions in general journal form.
Aug 29, 2021 | Uncategorized
Lewis Warehouse used the allowance method to record the following transactions, adjusting entries, and closing entries during the year ended December 31, 20 :
Feb. 7 Received 70% of the $8,000 balance owed by Luxury Sofas, a bankrupt business, and wrote off the remainder as uncollectible.
May 26 Reinstated the account of Sandy Johnson, which had been written off in the preceding year, and received $3,725 cash in full settlement.
Aug. 15 Wrote off the $9,350 balance owed by Izumi Goto as uncollectible.
Oct. 6 Reinstated the account of Doreen Woods, which had been written off in the preceding year, and received $4,320 cash in full settlement.
Dec. 29 Wrote off the following accounts as uncollectible, in compound entry form: Schmidt & Yeager, $13,945; Economy Homes, $15,830; Davis Industries, $11,865.
31 Based on an aging analysis of the $1,175,000 of accounts receivable, it was estimated that $67,150 will be uncollectible. Made the adjusting entry.
31 Made the entry to close the appropriate account to Income Summary.
Selected accounts and beginning balances on January 1, 20 , are as follows:
122.1 Allowance for Bad Debts $49,850 credit
313 Income Summary ––
532 Bad Debt Expense––
REQUIRED
1. Open the three selected accounts.
2. Enter the transactions and the adjusting and closing entries in a general journal. After each entry, post to the three accounts named.
3. Determine the net realizable value as of December 31, 20 .
Aug 29, 2021 | Uncategorized
Loan Impairment Entries On January 1, 2010, Botosan Company issued a $1,200,000, 5 year, zero interest bearing note to National Organization Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2011 Botosan fell into financial trouble due to increased competition. After reviewing all available evidence on December 31, 2011, National Organization Bank decided that the loan was impaired. Botosan will probably pay back only $800,000 of the principal at maturity.
(a) Prepare journal entries for both Botosan Company and National Organization Bank to record the issuance of the note on January 1, 2010. (Round to the nearest $10)
(b) Assuming that both Botosan Company and National Organization Bank use the effective interest method to amortize the discount, prepare the amortization schedule for the note.
(c) Under what circumstances can National Organization Bank consider Botosan’s note to be impaired?
(d) Compute the loss National Organization Bank will suffer from Botosan’s financial distress on December 31, 2011. What journal entries should be made to record this loss?
Aug 29, 2021 | Uncategorized
Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year end adjustments, the balance in Manilow’s Accounts Receivable account was $555,000 and the Allowance for Doubtful Accounts had a credit balance of $40,000. The year end balance reported in the balance sheet for Allowance for Doubtful Accounts will be based on the aging schedule shown below.
Instructions
(a) What is the appropriate balance for Allowance for Doubtful Accounts at year end?
(b) Show how accounts receivable would be presented on the balance sheet.
(c) What is the dollar effect of the year end bad debt adjustment on the before tax income?
(CMAadapted)
Aug 29, 2021 | Uncategorized
Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment six months after issuance. Consider the following transactions, which describe Marydale’s experience with two such notes:
a. On October 31, Marydale accepts a six month, 12 percent note from customer A in lieu of a $3,600 cash payment for merchandise delivered on that day.
b. On February 28, Marydale accepts a six month, $2,400, 12 percent note from customer B in lieu of a $2,400 cash payment for merchandise delivered on that day.
c. On April 30, customer A pays the entire note plus interest in cash.
d. On August 31, customer B pays the entire note plus interest in cash.
Required:
Prepare the necessary journal and adjusting entries required to record transactions a through d in Marydale’s records.
Aug 29, 2021 | Uncategorized
Messtopper Corporation is a recently formed business selling the ?oWorld’s Best Doormat.?? The corporation is selling doormats faster than Messtopper can make them. It has been selling the product on a credit basis, telling customers to ?opay when they can.?? Oddly, even though sales are tremendous, the company is having trouble paying its bills.
Instructions
Write a memo to the president of Messtopper Corporation discussing these questions:
(a) What steps should be taken to improve the company’s ability to pay its bills?
(b) What accounting steps should be taken to measure its success in improving collections and in recording its collection success?
(c) If the corporation is still unable to pay its bills, what additional steps can be taken with its receivables to ease its liquidity problems?
Aug 29, 2021 | Uncategorized
Multiple Choice Questions
1. If a company uses the direct write off method of accounting for bad debts,
a. It is applying the matching principle.
b. It will record bad debt expense only when an account is determined to be uncollectible.
c. It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts.
d. It will report accounts receivable in the balance sheet at their net realizable value.
2. Which of the following best describes the objective of estimating bad debt expense with the credit sales method?
a. To determine the amount of actual bad debt during a given period
b. To estimate the amount of bad debt expense based on an aging of accounts receivable
c. To estimate bad debt expense based on a percentage of credit sales made during the period
d. To facilitate the use of the direct write off method
3. Which of the following best describes the concept of the aging method of receivables?
a. An accurate estimate of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period.
b. The precise amount of bad debt expense may be arrived at by multiplying historical bad debt rates by the amount of credit sales made during a period.
c. Accounts receivable should be directly written off when the due date arrives and the customers have not paid the bill.
d. Estimating the appropriate balance for the allowance for doubtful accounts results in the appropriate value for net accounts receivable on the balance sheet.
4. The aging method is closely related to the:
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. Statement of retained earnings
5. The credit sales approach is closely related to the:
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. statement of retained earnings
6. The process by which firms package factored receivables as financial instruments or securities and sell them to investors is known as:
a. Credit extension
b. Aging of accounts receivable
c. Bundling
d. Securitization
7. Which one of the following statements is true if a company’s collection period for accounts receivable is unacceptably long?
a. The company may need to borrow to acquire operating cash.
b. The company may offer trade discounts to lengthen the collection period.
c. Cash flows from operations may be higher than expected for the company’s sales.
d. The company should expand operations with its excess cash.
8. Zenephia Corp. accepted a nine month note receivable from a customer on October 1, 2008. If Zenephia has an accounting period which ends on December 31, 2008, when would it most likely recognize interest revenue from the note?
a. On December 31, 2008 only
b. On July 1, 2009 only
c. On December 31, 2008 and June 30, 2009
d. On October 1, 2008
9. The ?~?~principal’’ of a note receivable refers to:
a. The amount of interest due
b. The present value of the note
c. The financing company that is lending the money
d. the amount of cash borrowed
10. Net profit margin percentage is calculated by:
a. Dividing net income by (net) sales
b. Dividing operating income by (net) sales
c. Subtracting operating income from (net) sales
d. Subtracting net income from (net) sales
Aug 29, 2021 | Uncategorized
Multiple Choice Questions
1. Which of the following is not one of the criteria for revenue recognition?
a. Delivery has occurred or services have been provided.
b. The seller’s price to the buyer is fixed and determinable.
c. Collectability is certain.
d. Persuasive evidence of an arrangement exists.
2. Food to go is a local catering service. Conceptually, when should Food to go recognize revenue from its catering service?
a. At the date the customer places the order
b. At the date the meals are served
c. At the date the invoice is mailed to the customer
d. At the date the customer’s payment is received
3. When is revenue from the sale of merchandise normally recognized?
a. When the customer takes possession of the merchandise
b. When the customer pays for the merchandise
c. Either on the date the customer takes possession of the merchandise or the date on which the customer pays
d. When the customer takes possession of the merchandise, if sold for cash, or when payment is received, if sold on credit
4. What does the phrase, ?~?~Revenue is recognized at the point of sale’’ mean?
a. Revenue is recorded in the accounting records when the cash is received from a customer, and reported on the income statement when sold to the customer.
b. Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer.
c. Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer.
d. Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer.
5. On August 31, 2009, Montana Corporation signed a four year contract to provide services for Minefield Company at $30,000 per year. Minefield will pay for each year of services on the first day of each service year, starting with September 1, 2009. Using the accrual basis of accounting, when should Montana Corporation recognize revenue?
a. On the first day of each year when the cash is received
b. On THE last day of each year after the services have been provided
c. Equally throughout the year as services are earned
d. Only at the end of the entire contract
6. Under the gross method, the seller records discounts taken by the buyer
a. At the end of the period in question
b. Never; discounts are irrelevant under the gross method
c. After the receivable is collected
d. In a contra revenue account
7. On April 20, McLean Company sells merchandise on account to Tazwell Corporation for $3,000 with terms 1/10, n/30. On April 28, Tazwell pays for half of the merchandise and on May 19 it pays for the other half. What is the total amount of cash McLean received?
a. $3,000
b. $2,985
c. $2,970
d. $2,700
8. Which of the following statements concerning internal control procedures for merchandise sales is not correct?
a. A sale and its associated receivable are recorded only when the order, shipping, and billing documents are all present.
b. Shipping and billing documents are prepared based on the order document.
c. The order document is not necessary for the buyer to be obligated to accept and pay for the ordered goods.
d. Accounting for a sale begins with the receipt of a purchase order or some similar document from a customer.
9. All of the following are ways in which receivables are distinguished except:
a. Accounts or notes receivable
b. Collectible or uncollectible
c. Trade or nontrade receivable
d. Current or noncurrent
10. Which one of the following best describes the allowance for doubtful accounts?
a. Contra account
b. Liability account
c. Income statement account
d. Cash flow account
Aug 29, 2021 | Uncategorized
Note Transactions at Unrealistic Interest Rates On July 1, 2010, Rantoul Inc. made two sales. 1. It sold land having a fair market value of $900,000 in exchange for a 4 year zero interest bearing promissory note in the face amount of $1,416,163. The land is carried on Rantoul’s books at a cost of $590,000.
2. It rendered services in exchange for a 3%, 8 year promissory note having a face value of $400,000 (interest payable annually).
Rantoul Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest. Record the two journal entries that should be recorded by Rantoul Inc. for the sales transactions above that took place on July 1, 2010.
Aug 29, 2021 | Uncategorized
Notes Receivable with Unrealistic Interest Rate On December 31, 2009, Hurly Co. performed environmental consulting services for Cascade Co. Cascade was short of cash, and Hurly Co. agreed to accept a $300,000 zero interest bearing note due December 31, 2011, as payment in full. Cascade is somewhat of a credit risk and typically borrows funds at a rate of 10%. Hurly is much more creditworthy and has various lines of credit at 6%.
(a) Prepare the journal entry to record the transaction of December 31, 2009, for the Hurly Co.
(b) Assuming Hurly Co.’s fiscal year end is December 31, prepare the journal entry for December 31, 2010.
(c) Assuming Hurly Co.’s fiscal year end is December 31, prepare the journal entry for December 31, 2011.
(d) Assume that Hurly Co. elects the fair value option for this note. Prepare the journal entry at December 31, 2010, if the fair value of the note is $320,000.
Aug 29, 2021 | Uncategorized
Occidental Petroleum Corporation reported the following information in a recent annual report.
Instructions
(a) What items other than coin and currency may be included in ?ocash???
(b) What items may be included in ?ocash equivalents???
(c) What are compensating balance arrangements, and how should they be reported in financial statements?
(d) What are the possible differences between cash equivalents and short term (temporary) investments?
(e) Assuming that the sale agreement meets the criteria for sale accounting, cash proceeds were $345 million, the carrying value of the receivables sold was $360 million, and the fair value of the recourse liability was $15 million, what was the effect on income from the sale of receivables?
(f) Briefly discuss the impact of the transaction in (e) on Occidental’sliquidity.
Aug 29, 2021 | Uncategorized
OK International wrote off the following accounts receivable as uncollectible for the year ending December 31, 2010:
Customer Amount
Eva Fry $ 6,500
Lance Landau 11,200
Marcie Moffet 3,800
Jose Reis 3,500
Total $25,000
The company prepared the following aging schedule for its accounts receivable on December 31, 2010:
a. Journalize the write offs for 2010 under the direct write off method.
b. Journalize the write offs and the year end adjusting entry for 2010 under the allowance method, assuming that the allowance account had a beginning balance of $22,500 on January 1, 2010, and the company uses the analysis of receivablesmethod.
Aug 29, 2021 | Uncategorized
On April 1, 2008, Rasheed Company assigns $400,000 of its accounts receivable to the Third National Bank as collateral for a $200,000 loan due July 1, 2008. The assignment agreement calls for Rasheed Company to continue to collect the receivables. Third National Bank assesses a finance charge of 2% of the accounts receivable, and interest on the loan is 10% (a realistic rate of interest for a note of this type).
Instructions
(a) Prepare the April 1, 2008, journal entry for Rasheed Company.
(b) Prepare the journal entry for Rasheed’s collection of $350,000 of the accounts receivable during the period from April 1, 2008, through June 30, 2008.
(c) On July 1, 2008, Rasheed paid Third National all that was due from the loan it secured on April 1, 2008.
Prepare the journal entry to record this payment.
Aug 29, 2021 | Uncategorized
On August 31, 2012, Daisy Floral Supply had a $155,000 debit balance in Accounts receivable and a $6,200 credit balance in Allowance for uncollectible accounts. During September, Daisy made
Sales on account, $590,000.
Collections on account, $627,000.
Write offs of uncollectible receivables, $7,000.
Requirements
1. Journalize all September entries using the allowance method. Uncollectible account expense was estimated at 3% of credit sales. Show all September activity in Accounts receivable, Allowance for uncollectible accounts, and Uncollectible account expense (post to these T accounts).
2. Using the same facts, assume instead that Daisy used the direct write off method to account for uncollectible receivables. Journalize all September entries using the direct write off method. Post to Accounts receivable and Uncollectible account expense and show their balances at September 30, 2012.
3. What amount of uncollectible account expense would Daisy report on its September income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
4. What amount of net accounts receivable would Daisy report on its September 30, 2012 balance sheet under each of the two methods? Which amount is more realistic? Give your reason.
Aug 29, 2021 | Uncategorized
On December 31, 2008, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $200,000 zero interest bearing note due December 31, 2010, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%.
Instructions
(a) Prepare the journal entry to record the transaction of December 31, 2008, for the Ed Abbey Co.
(b) Assuming Ed Abbey Co.’s fiscal year end is December 31, prepare the journal entry for December 31, 2009.
(c) Assuming Ed Abbey Co.’s fiscal year end is December 31, prepare the journal entry for December 31, 2010.
(d) Assume that Ed Abbey Co. elects the fair value option for this note. Prepare the journal entry at December 31, 2009, if the fair value of the note is $185,000.
Aug 29, 2021 | Uncategorized
On January 1, 2008, Fountain Valley Realty sold a tract of land to three doctors as an investment. The land, purchased 10 years ago, was carried on Fountain Valley’s books at a value of $190,000. Fountain Valley received a non interest bearing note for $250,000 from the doctors. The note is due December 31, 2009.There is no readily available market value for the land, but the current market rate of interest for comparable notes is 10%.
Instructions:
1. Give the journal entry to record the sale of land on Fountain Valley’s books.
2. Prepare a schedule of discount amortization for the note with amounts rounded to the nearest dollar.
3. Give the adjusting entries to be made at the end of 2008 and 2009 to record the effective interest earned.
Aug 29, 2021 | Uncategorized
On January 1, 2009, Hungryman, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:
Accounts Receivable …………………………………………$363,000
Allowance for Doubtful Accounts (a credit balance) ……….. 44,000
During 2009, Hungryman had $3,100,000 of credit sales, collected $2,915,000 of accounts receivable, and wrote off $50,000 of accounts receivable as uncollectible. At year end, Hungryman performs an aging of its accounts receivable balance and estimates that $15,000 will be uncollectible.
Required:
1. Calculate Hungryman’s preadjustment balance in accounts receivable on December 31, 2009.
2. Calculate Hungryman’s preadjustment balance in allowance for doubtful accounts on December 31, 2009.
3. Prepare the necessary adjusting entry for 2009.
Aug 29, 2021 | Uncategorized
On January 1, 2010, Moxley Company had Accounts Receivable $154,000; Notes Receivable of $11,000; and Allowance for Doubtful Accounts of $13,200. The note receivable is from Hoelter Company. It is a 4 month, 9% note dated December 31, 2009. Moxley Company prepares financial statements annually. During the year the following selected transactions occurred. (Moxley Company uses a periodic inventory system.)
Jan. 5 Sold $10,000 of merchandise to Frizell Company, terms n/15.
20 Accepted Frizell Company’s $10,000, 3 month, 9% note for balance due.
Feb. 18 Sold $4,000 of merchandise to Zheng Company and accepted Zheng’s $4,000, 6 month, 10% note for the amount due.
Apr. 20 Collected Frizell Company note in full.
30 Received payment in full from Hoelter Company on the amount due.
May 25 Accepted Ardan Inc.’s $9,000, 6 month, 8% note in settlement of a past due balance on account.
Aug. 18 Received payment in full from Zheng Company on note due.
Sept. 1 Sold $8,000 of merchandise to Charles Company and accepted an $8,000, 6 month, 10% note for the amount due.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
On January 1, 2010, Sands Company had Accounts Receivable of $54,200 and Allowance for Doubtful Accounts of $3,700. Sands Company prepares financial statements annually and uses a perpetual inventory system. During the year the following selected transactions occurred.
Jan. 5 Sold $7,000 of merchandise to Norris Company, terms n/30. Cost of the merchandise sold was $4,000.
Feb. 2 Accepted a $7,000, 4 month, 9% promissory note from Norris Company for balance due.
12 Sold $9,000 of merchandise costing $5,000 to Loflin Company and accepted Loflin’s $9,000, 2 month, 10% note for the balance due.
26 Sold $5,200 of merchandise costing $3,300 to Hossfeld Co., terms n/10.
Apr. 5 Accepted a $5,200, 3 month, 8% note from Hossfeld Co. for balance due.
12 Collected Loflin Company note in full.
June 2 Collected Norris Company note in full.
15 Sold $2,000 of merchandise costing $1,500 to Madrid Inc. and accepted a $2,000, 6 month, 12% note for the amount due.
Instructions
Journalize the transactions.
Aug 29, 2021 | Uncategorized
On January 1, 2010, Smith, Inc., has the following balances for accounts receivable and allowance for doubtful accounts:
Accounts Receivable …………………………………………..$273,000
Allowance for Doubtful Accounts (a credit balance) …………. 4,600
During 2010, Smith had $2,175,000 of credit sales, collected $2,235,000 of accounts receivable, and wrote off $4,000 of accounts receivable as uncollectible. At year end, Smith performs an aging of its accounts receivable balance and estimates that $4,500 will be uncollectible.
Required:
1. Calculate Smith’s preadjustment balance in accounts receivable on December 31, 2010.
2. Calculate Smith’s preadjustment balance in allowance for doubtful accounts on December 31, 2010.
3. Prepare the necessary adjusting entry for 2010.
Aug 29, 2021 | Uncategorized
Consider the following January transactions for Shine King Cleaning:
Jan 1 Performed cleaning services for Debbie’s D list for $8,000 on terms 3/10, n/20.
3 Shine King decides to adopt the allowance method. Uncollectible account expense is estimated at 2% of credit sales.
10 Borrowed money from North Spot Bank, $10,000, 7% for 180 days.
12 After discussions with Pierre’s Wig Stand, Shine King has determined that $225 of the receivable owed will not be collected. Write off this portion of the receivable.
15 Sold goods to Watertown for $4,000 on terms 4/10, n/30. Cost of goods sold was $600.
15 Recorded uncollectible account expense estimate for Watertown sale.
28 Sold goods to Bridget, Inc., for cash of $1,200 (cost $280).
28 Collected from Pierre’s Wig Stand $225 of receivable previously written off. Reinstated the remaining balance of Pierre’s receivable.
29 Paid cash for utilities of $350.
31 Created an aging schedule for Shine King for accounts receivable. Shine King determined that accounts 1–20 days old were 2% uncollectible and accounts over 20 days old were 15% uncollectible. Prepared an aging schedule and adjusted the Allowance for uncollectible accounts to the aging schedule.
31 Shine King prepared all other adjusting entries necessary for January.
Requirements
1. Prepare all required journal entries and post them to Shine King’s ledger.
2. Reconcile the Accounts receivable control account to the Accounts receivable subsidiary ledger.
Aug 29, 2021 | Uncategorized
Consider the following transactions for Jo Jo Music.
2011
Dec 6 Received a $7,000, 90 day, 12% note on account from Dark Star Music.
31 Made an adjusting entry to accrue interest on the Dark Star Music note.
31 Made a closing entry for interest revenue.
2012
Mar 4 Collected the maturity value of the Dark Star Music note.
Jun 30 Loaned $11,000 cash to Love Joy Music, receiving a six month, 11% note.
Oct 2 Received a $2,400, 60 day, 11% note for a sale to Voice Publishing. Ignore cost of goods sold.
Dec 1 Voice Publishing dishonored its note at maturity; wrote off the note as uncollectible, debiting Allowance for uncollectible accounts.
30 Collected the maturity value of the Love Joy Music note.
Requirement
1. Journalize all transactions for Jo Jo Music. Round all amounts to the nearest dollar. (For notes stated in days, use a 360 day year.)
Aug 29, 2021 | Uncategorized
Consider the following transactions for Rural Beginnings.
2011
Dec 6 Received a $4,000, 90 day, 9% note on account from AM Publishing.
31 Made an adjusting entry to accrue interest on the AM Publishing note.
31 Made a closing entry for interest revenue.
2012
Mar 4 Collected the maturity value of the AM Publishing note.
Jun 30 Loaned $15,000 cash to Johnathon’s Publishing, receiving a six month, 8% note.
Oct 2 Received a $2,000, 60 day, 8% note for a sale to Ying Yang Music. Ignore cost of goods sold.
Dec 1 Ying Yang Music dishonored its note at maturity; wrote off the note as uncollectible, debiting Allowance for uncollectible accounts.
30 Collected the maturity value of the Johnathon’s Publishing note.
Requirement
1. Journalize all transactions for Rural Beginnings. Round all amounts to the nearest dollar. (For notes stated in days, use a 360 day year.)
Aug 29, 2021 | Uncategorized
Cutthroat Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Cutthroat prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 2009:
The following accounts were unintentionally omitted from the aging schedule:
Customer Due Date Balance
AAA Sports & Flies June 14, 2009 $2,850
Blackmon Flies Aug. 30, 2009 1,200
Charlie’s Fish Co. Sept. 30, 2009 1,800
Firehole Sports Oct. 17, 2009 600
Green River Sports Nov. 7, 2009 950
Smith River Co. Nov. 28, 2009 2,200
Wintson Company Dec. 1, 2009 2,250
Wolfe Bug Sports Jan. 6, 2010 6,550
Cutthroat Company has a past history of uncollectible accounts by age category, as follows:
Age Class Percent Uncollectible
Not past due 2%
1–30 days past due 5
31–60 days past due 10
61–90 days past due 25
91–120 days past due 45
Over 120 days past due 90
Instructions
2. Complete the aging of receivables schedule.
3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
4. Assume that the allowance for doubtful accounts for Cutthroat Company has a debit balance of $1,370 before adjustment on December 31, 2009. Journalize the adjusting entry for uncollectibleaccounts.
Aug 29, 2021 | Uncategorized
Determining Cash Balance The controller for Weinstein Co. is attempting to determine the amount of cash and cash equivalents to be reported on its December 31, 2010, balance sheet. The following information is provided.
1. Commercial savings account of $600,000 and a commercial checking account balance of $800,000 are held at First National Bank of Olathe.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Weinstein to write checks on this balance, $5,000,000.
3. Travel advances of $180,000 for executive travel for the first quarter of next year (employee to reimburse through salary reduction).
4. A separate cash fund in the amount of $1,500,000 is restricted for the retirement of long term debt.
5. Petty cash fund of $1,000.
6. An I.O.U. from Marianne Koch, a company customer, in the amount of $150,000.
7. A bank overdraft of $110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates of deposit, each totaling $500,000. These CDs have a maturity of 120 days.
9. Weinstein has received a check that is dated January 12, 2011, in the amount of $125,000.
10. Weinstein has agreed to maintain a cash balance of $500,000 at all times at First National Bank of Olathe to ensure future credit availability.
11. Weinstein has purchased $2,100,000 of commercial paper of Sergio Leone Co. which is due in 60 days.
12. Currency and coin on hand amounted to $7,700.
(a) Compute the amount of cash to be reported on Weinstein Co.’s balance sheet at December 31,
2010.
(b) Indicate the proper reporting for items that are not reported as cash on the December 31, 2010, balance sheet.
Aug 29, 2021 | Uncategorized
During 2011, Lacee Enterprises had gross sales of $247,000. At the end of 2011, Lacee had accounts receivable of $83,000 and a credit balance of $5,600 in Allowance for Bad Debts. Lacee has used the percentage of sales method to estimate the bad debt expense. For the past several years, the amount estimated to be uncollectible has been 3%.
Instructions:
1. Using the percentage of gross sales method, estimate the bad debt expense and make any necessary adjusting entries.
2. Assuming that 6% of receivables are estimated to be uncollectible and that Lacee decides to use the percentage of receivables method to estimate the bad debt expense, estimate the bad debt expense and make any adjusting entries.
3. Which of the two methods more accurately reflects the net realizable value of receivables? Explain.
Aug 29, 2021 | Uncategorized
During 2012, Slainge Corporation had a total of $8,000,000 in sales, of which 85% were on credit. At year end, the Accounts Receivable balance showed a total of $3,600,000, which had been aged as follows:
Age Amount
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,100,000
1–30 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
31–60 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
61–90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Over 90 days past due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
$3,600,000
Prepare the journal entry required at year end to record the bad debt expense under each of the following independent conditions. Assume, where applicable, that Allowance for Bad Debts had a credit balance of $9,500 immediately before these adjustments.
Required:
1. Based on experience, uncollectible accounts existing at year end are estimated to be 2.5% of total accounts receivable.
2. Based on experience, uncollectible accounts are estimated to be the sum of:
1% of current accounts receivable
7% of accounts 1–30 days past due
12% of accounts 31–60 days past due
21% of accounts 61–90 days past due
35% of accounts over 90 days past due
Aug 29, 2021 | Uncategorized
During its second year of operations, Shank Corporation found itself in financial difficulties. Shank decided to use its accounts receivable as a means of obtaining cash to continue operations. On July 1, 2011, Shank sold $75,000 of accounts receivable for cash proceeds of $69,500. No bad debt allowance was associated with these accounts. On December 17, 2011, Shank assigned the remainder of its accounts receivable, $250,000 as of that date, as collateral on a $125,000, 12% annual interest rate loan from Sandy Finance Company. Shank received $125,000 less a 2% finance charge. Additional information is as follows:
Allowance for Bad Debts, 12/31/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,200 (credit)
Estimated Uncollectibles, 12/31/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3% of Accounts Receivable
Accounts Receivable (not including factored and assigned accounts), 12/31/11 . $50,000
None of the assigned accounts has been collected by the end of the year.
Instructions:
1. Prepare the journal entries to record the receipt of cash from the (a) sale and
(b) Assignment of the accounts receivable.
2. Prepare the journal entry necessary to record the adjustment to Allowance for Bad Debts.
3. Prepare the Accounts Receivable section of Shank’s balance sheet as it would appear after the above transactions.
4. What entry would be made on Shank’s books when the sold accounts have been collected?
Aug 29, 2021 | Uncategorized
Emery Nurseries used the allowance method to record the following transactions, adjusting entries, and closing entries during the year ended December 31, 20 :
Feb. 9 Received 60% of the $5,000 balance owed by Patty’s Petunias, a bankrupt business, and wrote off the remainder as uncollectible.
May 28 Reinstated the account of Danielle Bell, which had been written off in the preceding year, and received $2,400 cash in full settlement.
Aug. 16 Wrote off the $8,200 balance owed by Rich Bouie as uncollectible.
Oct. 5 Reinstated the account of Bonnie McCelland, which had been written off in the preceding year, and received $3,600 cash in full settlement.
Dec. 28 Wrote off the following accounts as uncollectible, in compound entry form: Bloudeck & Rhodes, $14,450; Creative Landscapers, $16,100; Ramona Randol, $12,750.
31 Based on an aging analysis of the $980,000 of accounts receivable, it was estimated that $58,700 will be uncollectible. Made the adjusting entry.
31 Made the entry to close the appropriate account to Income Summary.
Selected accounts and beginning balances on January 1, 20 , are as follows:
122.1 Allowance for Bad Debts $52,000 credit
313 Income Summary ––
532 Bad Debt Expense ––
REQUIRED
1. Open the three selected accounts.
2. Enter the transactions and the adjusting and closing entries in a general journal. After each entry, post to the three accounts named.
3. Determine the net realizable value as of December 31.
Aug 29, 2021 | Uncategorized
Finding Financial Information
Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book.
Required:
1. What does the company include in its category of cash and cash equivalents? How close do you think the disclosed amount is to actual fair market value?
2. What expenses does American Eagle Outfitters subtract from net sales in the computation of gross profit? How does this differ from Deckers’s practice and how might it affect the manner in which you interpret the gross profit percentage?
3. Compute American Eagle Outfitters’s receivables turnover ratio for the current year. What characteristics of its business might cause it to be so high?
4. Does the company report an allowance for doubtful accounts on the balance sheet or in the notes?
Explain why it does or does not.
Aug 29, 2021 | Uncategorized
Fuente Office Supply sells all merchandise on credit with terms 2/10, n/30 using the gross method to record sales. Fuente engaged in the following transactions:
a. May 1: Fuente sold 50 staplers to Aaron Enterprises at a list price of $12 per stapler.
b. May 5: Fuente accepted four staplers returned by Aaron Enterprises.
c. May 10: Aaron paid for the 46 staplers they kept.
d. May 11: Fuente sold 25 filing cabinets to Buckles Corporation at a list price of $70 per cabinet.
e. May 23: Buckles returned five filing cabinets that it did not need.
f. June 4: Buckles paid for the 20 filing cabinets they kept.
Required:
Prepare journal entries for each of these transactions assuming Fuente records sales using the gross method.
Aug 29, 2021 | Uncategorized
Here is information related to Schellhamer Company for 2010.
Total credit sales ……………………… $1,500,000
Accounts receivable at December 31 …… 840,000
Bad debts written off …………………….. 41,000
Instructions
(a) What amount of bad debts expense will Schellhamer Company report if it uses the direct write off method of accounting for bad debts?
(b) Assume that Schellhamer Company decides to estimate its bad debts expense based on 3% of accounts receivable. What amount of bad debts expense will the company record if Allowance for Doubtful Accounts has a credit balance of $3,000?
(c) Assume the same facts as in part (b), except that there is a $1,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Schellhamer record?
(d) What is a weakness of the direct write off method of reporting bad debts expense?
Aug 29, 2021 | Uncategorized
High Performance Cell Phones sold $23,000 of merchandise to Anthony Trucking Company on account. Anthony fell on hard times and paid only $8,000 of the account receivable. After repeated attempts to collect, High Performance finally wrote off its accounts receivable from Anthony. Six months later High Performance received Anthony’s check for $15,000 with a note apologizing for the late payment.
Requirements
1. Journalize for High Performance:
a. Sale on account, $23,000. (Ignore cost of goods sold.)
b. Collection of $8,000 on account.
c. Write off of the remaining portion of Anthony’s account receivable. High Performance uses the direct write off method for uncollectibles.
d. Reinstatement of Anthony’s account receivable.
e. Collection in full from Anthony, $15,000.
2. Show how High Performance would report receivables on its balance sheet after all entries have been posted.
Aug 29, 2021 | Uncategorized
Indicate whether each of the following actions is primarily related to
(a) Managing cash needs,
(b) Setting credit policies,
(c) Financing receivables, or
(d) Ethically reporting accounts receivable:
1. Buying a U.S. Treasury bill with cash that is not needed for a few months
2. Comparing receivable turnovers for two years
3. Setting a policy that allows customers to buy on credit
4. Selling notes receivable to a financing company
5. Making careful estimates of losses from uncollectible accounts
6. Borrowing funds for short term need in a period when sales are low
7. Changing the terms for credit sales in an effort to reduce the day’s sales uncollected
8. Revising estimated credit losses in a timely manger when conditions change
9. Establishing a department whose responsibility is to approve customer’s credit
Aug 29, 2021 | Uncategorized
Information related to Jordan Schlansky Company for 2012 is summarized below.
Total credit sales $2,200,000
Accounts receivable at December 31 825,000
Bad debts written off 33,000
Instructions
(a) What amount of bad debts expense will Jordan Schlansky Company report if it uses the direct write off method of accounting for bad debts?
(b) Assume that Jordan Schlansky Company estimates its bad debts expense to be 2% of credit sales. What amount of bad debts expense will Jordan Schlansky record if it has an Allowance for Doubtful Accounts credit balance of $4,000?
(c) Assume that Jordan Schlansky Company estimates its bad debts expense based on 6% of accounts receivable. What amount of bad debts expense will Jordan Schlansky record if it has an Allowance for Doubtful Accounts credit balance of $3,000?
(d) Assume the same facts as in (c), except that there is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Jordan Schlansky record?
(e) What is the weakness of the direct write off method of reporting bad debts expense?
Aug 29, 2021 | Uncategorized
Ingles Company has accounts receivable of $93,100 at March 31. An analysis of the accounts shows the information.
Month of Sale Balance, March 31
March …………………$60,000
February ……………… 17,600
January ……………….. 8,500
Prior to January ………. 7,000
$93,100
Credit terms are 2/10, n/30. At March 31, Allowance for Doubtful Accounts has a credit balance of $1,200 prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company’s estimate of bad debts is as follows.
Estimated Percentage
Age of Accounts Uncollectible
1–30 days…………….…. 2.0%
31–60 days……………… 5.0%
61–90 days……………… 30.0%
Over 90 days……………. 50.0%
Instructions
(a) Determine the total estimated uncollectibles.
(b) Prepare the adjusting entry at March 31 to record bad debts expense.
Aug 29, 2021 | Uncategorized
James Dee Company cleans the outside walls of buildings. The average job generates revenue of $800,000 and takes about two weeks to complete. Customers are required to pay for a job within 30 days after its completion. James Dee Company guarantees its work for five years—if the building walls get dirty within five years, James Dee will clean them again at no charge. James Dee is considering recognizing revenue using one of the following methods:
a. Recognize revenue when James Dee signs the contract to do the job.
b. Recognize revenue when James Dee begins the work.
c. Recognize revenue immediately after the completion of the job.
d. Recognize revenue 30 days after the completion of the job when the cash is collected.
e. Wait until the five year guarantee period is over before recognizing any revenue.
Which revenue recognition option would you recommend to James Dee? Explain your answer.
Aug 29, 2021 | Uncategorized
Journalize the following transactions in the accounts of Dimitrious Co., which operates a riverboat casino:
Apr. 1 Received a $10,000, 30 day, 6% note dated April 1 from Wilcox Co. on account.
18 Received a $12,000, 30 day, 9% note dated April 18 from Aaron Co. on account.
May 1 The note dated April 1 from Wilcox Co. is dishonored, and the customer’s account is charged for the note, including interest.
June 17 The note dated April 18 from Aaron Co. is dishonored, and the customer’s account is charged for the note, including interest.
July 30 Cash is received for the amount due on the dishonored note dated April 1 plus interest for 90 days at 8% on the total amount debited to Wilcox Co. on May 1.
Sept. 3 Wrote off against the allowance account the amount charged to Aaron Co. on June 17 for the dishonored note dated April 18.
Aug 29, 2021 | Uncategorized
Journalize the following transactions in the accounts of Jamba Co., which operates a riverboat casino:
Mar. 1. Received an $80,000, 60 day, 6% note dated March 1 from Tomekia Co. on account.
18. Received a $75,000, 60 day, 8% note dated March 18 from Mystic Co. on account.
Apr. 30. The note dated March 1 from Tomekia Co. is dishonored, and the customer’s account is charged for the note, including interest.
May 17. The note dated March 18 from Mystic Co. is dishonored, and the customer’s account is charged for the note, including interest.
July 29. Cash is received for the amount due on the dishonored note dated March 1 plus interest for 90 days at 8% on the total amount debited to Tomekia Co. on April 30.
Aug. 23. Wrote off against the allowance account the amount charged to Mystic Co. on
May 17 for the dishonored note dated March 18.
Aug 29, 2021 | Uncategorized
Journalizing Various Receivable Transactions the trial balance before adjustment for Sinatra Company shows the following balances. Using the data above, give the journal entries required to record each of the following cases. (Each situation is independent.)
1. To obtain additional cash, Sinatra factors without recourse $20,000 of accounts receivable with Stills Finance. The finance charge is 10% of the amount factored.
2. To obtain a one year loan of $55,000, Sinatra assigns $65,000 of specific receivable accounts to Ruddin Financial. The finance charge is 8% of the loan; the cash is received and the accounts turned over to Ruddin Financial. 3. The company wants to maintain the Allowance for Doubtful Accounts at 5% of gross accounts receivable.
4. The company wishes to increase the allowance account by 11/2% of net sales.
Aug 29, 2021 | Uncategorized
At December 31, 2010, the trial balance of Liquid Snake Company contained the following amounts before adjustment.
Instructions
(a) Prepare the adjusting entry at December 31, 2010, to record bad debts expense under each of the following independent assumptions.
(1) An aging schedule indicates that $12,500 of accounts receivable will be uncollectible.
(2) The company estimates that 2% of sales will be uncollectible.
(b) Repeat part (a) assuming that instead of a credit balance, there is a $1,100 debit balance in Allowance for Doubtful Accounts.
(c) During the next month, January 2011, a $3,200 account receivable is written off as uncollectible. Prepare the journal entry to record the write off.
(d) Repeat part (c) assuming that Liquid Snake Company uses the direct write off method instead of the allowance method in accounting for uncollectible accounts receivable.
(e) What are the advantages of using the allowance method in accounting for uncollectible accounts as compared to the direct write offmethod?
Aug 29, 2021 | Uncategorized
At December 31, 2010, the trial balance of Worcester Company contained the following amounts before adjustment.
Instructions
(a) Based on the information given, which method of accounting for bad debts is Worcester Company using—the direct write off method or the allowance method? How can you tell?
(b) Prepare the adjusting entry at December 31, 2010, for bad debts expense under each of the following independent assumptions.
(1) An aging schedule indicates that $11,750 of accounts receivable will be uncollectible.
(2) The company estimates that 1% of sales will be uncollectible.
(c) Repeat part (b) assuming that instead of a credit balance there is an $2,000 debit balance in Allowance for Doubtful Accounts.
(d) During the next month, January 2011, a $3,000 account receivable is written off as uncollectible. Prepare the journal entry to record the write off.
(e) Repeat part (d) assuming that Worcester uses the direct write off method instead of the allowance method in accounting for uncollectible accounts receivable.
(f) What type of account is Allowance for Doubtful Accounts? How does it affect how accounts receivable is reported on the balance sheet at the end of the accountingperiod?
Aug 29, 2021 | Uncategorized
At September 30, 2012, Windy Mountain Flagpoles had Accounts receivable of $34,000 and Allowance for uncollectible accounts had a credit balance of $3,000. During October 2012, Windy Mountain Flagpoles recorded the following:
Sales of $189,000 ($165,000 on account; $24,000 for cash).
Collections on account, $133,000.
Uncollectible account expense, estimated as 1% of credit sales.
Write offs of uncollectible receivables, $2,800.
Requirements
1. Journalize sales, collections, uncollectible account expense using the allowance method (percent of sales method), and write offs of uncollectibles during October 2012.
2. Prepare T accounts to show the ending balances in Accounts receivable and
Allowance for uncollectible accounts. Compute net accounts receivable at October 31. How much does Windy Mountain expect to collect?
3. Show how Windy Mountain Flagpoles will report net Accounts receivable on its October 31, 2012 balance sheet.
Aug 29, 2021 | Uncategorized
At the beginning of 2011, the balance for Accounts Receivable and Allowance for Uncollectible Accounts were $430,000 and $31,400 (credit), respectively. During the year, credit sales were $3,200,000 and collections on account were $2,950,000. In addition, $35,000 in uncollectible accounts was written off. Using T accounts, determine the year end balances of Accounts Receivable and Allowance for Uncollectible Accounts, Then prepare the year end adjusting entry to record the uncollectible accounts expenses under each of the following conditions. Also show the year end balance sheet presentation of accounts receivable and allowance for uncollectible accounts.
a. Management estimates the percentage of uncollectible credit sales to be 1.4 percent of total credit sales.
b. Based on an again of accounts receivable, management estimates the end of year uncollectible accounts receivable to be $38,700.
Post the results of each of the entries to the T account for Allowance for Uncollectible Accounts.
Aug 29, 2021 | Uncategorized
At the beginning of the current period, Emler Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $800,000 and collections of $763,000. It wrote off as uncollectible accounts receivable of $7,000. However, a $3,000 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $25,000 at the end of the period.
Instructions
(a) Prepare the entries to record sales and collections during the period.
(b) Prepare the entry to record the write off of uncollectible accounts during the period.
(c) Prepare the entries to record the recovery of the uncollectible account during the period.
(d) Prepare the entry to record bad debts expense for the period.
(e) Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts.
(f) What is the net realizable value of the receivables at the end of the period?
Aug 29, 2021 | Uncategorized
At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for Yang’s Gift Shop was $30,000. Credit sales for the year were $355,200.
REQUIRED
Make the necessary adjusting entry in general journal form under each of the following assumptions. Show calculations for the amount of each adjustment and the resulting net realizable value.
1. Allowance for Bad Debts has a credit balance of $330.
(a) The percentage of sales method is used and uncollectible accounts are estimated to be 2.0% of credit sales.
(b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of $6,950 in uncollectible accounts.
2. Allowance for Bad Debts has a debit balance of $400.
(a) The percentage of sales method is used and uncollectible accounts are estimated to be 1.5% of credit sales.
(b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of $5,685 in uncollectible accounts.
Aug 29, 2021 | Uncategorized
At the end of the current year, the accounts receivable account has a debit balance of $650,000, and net sales for the year total $5,500,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:
a. The allowance account before adjustment has a credit balance of $3,175. Bad debt expense is estimated at 1/4 of 1% of net sales.
b. The allowance account before adjustment has a credit balance of $4,600. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $17,500.
c. The allowance account before adjustment has a debit balance of $8,100. Bad debt expense is estimated at 1/2 of 1% of net sales.
d. The allowance account before adjustment has a debit balance of $8,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $24,650.
Aug 29, 2021 | Uncategorized
At what point should revenue be recognized in each of the following independent cases?
Case A. For Christmas presents, a McDonald’s restaurant sells coupon books for $10. Each of the $1 coupons may be used in the restaurant any time during the following 12 months. The customer must pay cash when purchasing the coupon book.
Case B. Howard Land Development Corporation sold a lot to Quality Builders to construct a new home. The price of the lot was $50,000. Quality made a down payment of $100 and agreed to pay the balance in six months. After making the sale, Howard learned that Quality Builders often entered into these agreements but refused to pay the balance if it did not find a customer who wanted a house built on the lot.
Case C. Driscoll Corporation has always recorded revenue at the point of sale of its refrigerators. Recently, it has extended its warranties to cover all repairs for a period of seven years. One young accountant with the company now questions whether Driscoll has completed its earning process when it sells the refrigerators. She suggests that the warranty obligation for seven years means that a significant amount of additional work must be performed in the future.
Aug 29, 2021 | Uncategorized
Bad Debt Reporting Issues Valasquez Company sells office equipment and supplies to many organizations in the city and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of the invoice date. The number of customers taking the full 30 days to pay has increased within the last year. Current indications are that less than 60% of the customers are now taking the discount. Bad debts as a percentage of gross credit sales have risen from the 1.5% provided in past years to about 4% in the current year. The controller has responded to a request for more information on the deterioration in collections of accounts receivable with the report reproduced below.
?
(a) Prepare an accounts receivable aging schedule for Valasquez Company using the age categories identified in the controller’s report to the finance committee showing:
(1) The amount of accounts receivable outstanding for each age category and in total.
(2) The estimated amount that is uncollectible for each category and in total.
(b) Compute the amount of the year end adjustment necessary to bring Allowance for Doubtful Accounts to the balance indicated by the age analysis. Then prepare the necessary journal entry to adjust the accounting records.
(c) In a recessionary environment with tight credit and high interest rates:
(1) Identify steps Valasquez Company might consider to improve the accounts receivable situation.
(2) Then evaluate each step identified in terms of the risks and costs involved.
(CMAadapted)
Aug 29, 2021 | Uncategorized
Bank Reconciliation and Adjusting Entries Aragon Company has just received the August 31, 2010, bank statement, which is summarized below. The general ledger Cash account contained the following entries for the month of August. Deposits in transit at August 31 are $3,800, and checks outstanding at August 31 total $1,550. Cash on hand at August 31 is $310. The bookkeeper improperly entered one check in the books at $146.50 which was written for $164.50 for supplies (expense); it cleared the bank during the month of August.
(a) Prepare a bank reconciliation dated August 31, 2010, proceeding to a correct balance.
(b) Prepare any entries necessary to make the books correct and complete.
(c) What amount of cash should be reported in the August 31 balancesheet?
Aug 29, 2021 | Uncategorized
Bank Reconciliation and Adjusting Entries Presented below is information related to Haselhof Inc. Balance per books at October 31, $41,847.85; receipts $173,523.91; disbursements $164,893.54. Balance per bank statement November 30, $56,274.20.
The following checks were outstanding at November 30.
1224 $1,635.29
1230 2,468.30
1232 2,125.15
1233 482.17
Included with the November bank statement and not recorded by the company were a bank debit memo for $27.40 covering bank charges for the month, a debit memo for $372.13 for a customer’s check returned and marked NSF, and a credit memo for $1,400 representing bond interest collected by the bank in the name of Haselhof Inc. Cash on hand at November 30 recorded and awaiting deposit amounted to $1,915.40.
(a) Prepare a bank reconciliation (to the correct balance) at November 30, for Haselhof Inc. from the information above.
(b) Prepare any journal entries required to adjust the cash account at November 30.
Aug 29, 2021 | Uncategorized
Bank Reconciliation and Adjusting Entries the cash account of Aguilar Co. showed a ledger balance of $3,969.85 on June 30, 2010. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined.
1. There were bank service charges for June of $25.
2. A bank memo stated that Bao Dai’s note for $1,200 and interest of $36 had been collected on June 29, and the bank had made a charge of $5.50 on the collection. (No entry had been made on Aguilar’s books when Bao Dai’s note was sent to the bank for collection.)
3. Receipts for June 30 for $3,390 were not deposited until July 2.
4. Checks outstanding on June 30 totaled $2,136.05.
5. The bank had charged the Aguilar Co.’s account for a customer’s uncollectible check amounting to $253.20 on June 29.
6. A customer’s check for $90 had been entered as $60 in the cash receipts journal by Aguilar on June 15.
7. Check no. 742 in the amount of $491 had been entered in the cash journal as $419, and check no. 747 in the amount of $58.20 had been entered as $582. Both checks had been issued to pay for purchases of equipment.
(a) Prepare a bank reconciliation dated June 30, 2010, proceeding to a correct cash balance.
(b) Prepare any entries necessary to make the books correct and complete.
Aug 29, 2021 | Uncategorized
Ben Thomas works as a teller for First National Bank. When he arrived at work on Friday, the branch manager, Frank Mills, asked him to get his cash drawer out early because the head teller, Naomi Ray, was conducting a surprise cash count for all the tellers. Surprise cash counts are usually done four or five times a year by the branch manager or the head teller and once or twice a year by internal auditors. Ben’s drawer was $100.00 short and his reconciliation tape showed that he was in balance on Thursday night. Naomi asked Ben for an explanation, and Ben immediately took $100.00 out of his pocket and handed it to her. He went on to explain he needed the cash to buy prescriptions for his son and pay for groceries and intended to put the $100.00 back in his cash drawer on Monday, which was pay day. He also told Naomi that this was the first time he had ever ?oborrowed?? money from his cash drawer and that he would never do it again.
1. What are the ethical considerations in this case from both Ben’s and Naomi’s perspectives?
2. What options does Naomi have to address this problem?
3. Assume Naomi chooses to inform the branch manager. Write a short incident report describing the findings.
4. In small groups, come up with as many ideas as possible on how to safeguard cash on hand in a bank (petty cash, teller drawer cash, and vault cash) from employee theft and mismanagement.
Aug 29, 2021 | Uncategorized
Caldwell Interiors, a successful retail furniture company, is located in an affluent suburb where a major insurance company has just announced a restructuring that will lay off 4,000 employees. Caldwell Interiors sell quality furniture, usually on credit. Accounts Receivable is one of its major assets. Although the company’s annual uncollectible accounts losses are not out of line, they represent a sizable amount. The company depends on bank loans for its financing. Sales and net income have declined in the past year, and some customers are falling behind in paying their accounts. Abby Caldwell, the owner of the business, knows that the bank’s loan officer likes to see a steady performance. She has therefore instructed the company’s controller to underestimate the uncollectible accounts this year to show a small growth in earnings. Caldwell believes this action is justified because earnings in future years will average out the losses, and since the company has a history of success, she believes the adjustments are meaningless accounting measures anyway. Are Caldwell’s actions ethical? Would any parties be harmed by her actions? How important is it to try to be accurate in estimating losses from uncollectible accounts?
Aug 29, 2021 | Uncategorized
Carolyn Keene, Inc. decided to establish a petty cash fund to help ensure internal control over its small cash expenditures. The following information is available for the month of April.
1. On April 1, it established a petty cash fund in the amount of $200.
2. A summary of the petty cash expenditures made by the petty cash custodian as of April 10 is as follows.
Delivery charges paid on merchandise purchased …… $60
Supplies purchased and used ………………………….. 25
Postage expense ……………………………………….. 33
I.O.U. from employees ………………………………… 17
Miscellaneous expense ………………………………… 36
The petty cash fund was replenished on April 10. The balance in the fund was $27.
3. The petty cash fund balance was increased $100 to $300 on April 20.
Instructions
Prepare the journal entries to record transactions related to petty cash for the month of April.
Aug 29, 2021 | Uncategorized
Classic Auto Parts sells new and used auto parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2012, its first year of operations, Classic
Auto Parts experienced the following:
Sales on account …………………………………………$280,000
Cash sales ……………………………………………….. 650,000
Collections of accounts receivable ……………………… 265,000
Uncollectible accounts charged off during the year ……. 1,200
Required
Assume that Classic Auto Parts uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions:
a. What is the Accounts Receivable balance at December 31, 2012?
b. What is the ending balance of the Allowance for Doubtful Accounts at December 31, 2012, after all entries and adjusting entries are posted?
c. What is the amount of uncollectible accounts expense for 2012?
d. What is the net realizable value of accounts receivable at December 31, 2012?
Aug 29, 2021 | Uncategorized
Classify each of the following items as: (A) Accounts Receivable, (B) Notes Receivable, (C) Trade Receivables, (D) Nontrade Receivables, or (E) Other (indicate nature of item). Because the classifications are not mutually exclusive, more than one classification may be appropriate. Also indicate whether the item would normally be reported as a current or noncurrent asset assuming a 6 month operating cycle.
1. MasterCard or VISA credit card sale of merchandise to customer
2. Overpayment to supplier for inventory purchased on account
3. Insurance claim on automobile accident
4. Charge sale to regular customer
5. Advance to sales manager
6. Interest due on 5 year note from company president, interest payable annually
7. Acceptance of 3 year note on sale of land held as investment
8. Acceptance of 6 month note for past due account arising from the sale of inventory
9. Claim for a tax refund from last year
10. Prepaid insurance—four months remaining in the policy period
11. Overpayment by customer of an account receivable
Aug 29, 2021 | Uncategorized
Company G received a bank statement at the end of the month. The statement contained the following:
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,000
Bank service charge for the month . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Interest earned and added by the bank to the account balance. . . . . . . . 195
In comparing the bank statement to its own cash records, the company found the following:
Deposits made but not yet recorded by the bank. . . . . . . . . . . . . . . . . . . . $14,300
Checks written and mailed but not yet recorded by the bank . . . . . . . . . . 26,700
Before making any adjustments suggested by the bank statement, the cash balance according to the books is $48,680. What is the correct cash balance as of the end of the month? Verify this amount by reconciling the bank statement with the cash balance on the books.
Aug 29, 2021 | Uncategorized
CompuCredit is a credit card issuer in Atlanta. It prides itself on making credit cards available to almost anybody in a matter of seconds over the Internet. The cost to the consumer is an interest rate of 28 percent, about double that of companies that provide cards only to customers with good credit. Despite its high interest rate, CompuCredit has been successful, reporting 1.9 million accounts and an income of approximately $100 million. To calculate its income, the company estimates that 10 percent of its $1.3 billion in accounts receivable will not be paid; the industry average is 7 percent. Some analysts have been critical of CompuCredit for being too optimistic in its projections of losses. Why are estimates necessary in account for receivables? If CompuCredit were to use the same estimate of losses as other companies in its industry, what would its income have been for the year? How would one determine if CompuCredit’s estimate of losses is reasonable?
Aug 29, 2021 | Uncategorized
(Computing Bad Debts and Preparing Journal Entries) The trial balance before adjustment of Estefan Inc. shows the following balances.
|
|
Dr.
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Cr.
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Accounts Receivable
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$80,000
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|
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Allowance for Doubtful Accounts
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1,750
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Sales, Net Revenue (all on credit)
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$580,000
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Instructions
Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 1% of net sales.
Aug 29, 2021 | Uncategorized
Costs of Acquisition the invoice price of a machine is $50,000. Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, and special base, and soon amount to $7,500 The machine has an estimated life of 10 years, with no residual value at the end of that period. The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons.
1. If the machine should be sold, these costs cannot be recovered in the sales price.
2. The inclusion of the $7,500 in the machinery account on the books will not necessarily result in a closer approximation of the market price of this asset over the years, because of the possibility of changing demand and supply levels.
3. Charging the $7,500 to expense immediately will reduce federal income taxes. Discuss each of the points raised by the owner of the business.
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Dispositions, Including Condemnation, Demolition, and Trade in Presented below are a schedule of property dispositions for Hollerith Co. The following additional information is available.
Land
On February 15, a condemnation award was received as consideration for unimproved land held primarily as an investment, and on March 31, another parcel of unimproved land to be held as an investment was purchased at a cost of $35,000.
Building
On April 2, land and building were purchased at a total cost of $75,000, of which 20% was allocated to the building on the corporate books. The real estate was acquired with the intention of demolishing the building, and this was accomplished during the month of November. Cash proceeds received in November represent the net proceeds from demolition of the building.
Warehouse
On June 30, the warehouse was destroyed by fire. The warehouse was purchased January 2, 2007, and had depreciated $16,000. On December 27, the insurance proceeds and other funds were used to purchase a replacement warehouse at a cost of $90,000.
Machine
On December 26, the machine was exchanged for another machine having a fair market value of $6,300 and cash of $900 was received. (The exchange lacks commercial substance.)
Furniture
On August 15, furniture was contributed to a qualified charitable organization. No other contributions were made or pledged during the year.
Automobile
On November 3, the automobile was sold to Jared Winger, a stockholder. how these items would be reported on the income statement of Hollerith Co.
(AICPAadapted)
Aug 29, 2021 | Uncategorized
Durler Company purchased equipment on January 2, 2008, for $112,000. The equipment had an estimated useful life of 5 years with an estimated salvage value of $12,000. Durler uses straight line depreciation on all assets. On January 2, 2012, Durler exchanged this equipment plus $12,000 in cash for newer equipment. The old equipment has a fair value of $50,000.
Accounting
Prepare the journal entry to record the exchange on the books of Durler Company. Assume that the exchange has commercial substance.
Analysis
How will this exchange affect comparisons of the return on asset ratio for Durler in the year of the exchange compared to prior years?
Principles
How does the concept of commercial substance affect the accounting and analysis of this exchange?
Aug 29, 2021 | Uncategorized
Entries for Equipment Acquisitions Chopin Engineering Corporation purchased conveyor equipment with a list price of $15,000. Presented below are three independent cases related to the equipment. (Round to nearest dollar.)
(a) Chopin paid cash for the equipment 8 days after the purchase. The vendor’s credit terms are 2/10, n/30. Assume that equipment purchases are recorded gross.
(b) Chopin traded in equipment with a book value of $2,000 (initial cost $8,000), and paid $14,200 in cash one month after the purchase. The old equipment could have been sold for $400 at the date of trade. (The exchange has commercial substance.)
(c) Chopin gave the vendor a $16,200 zero interest bearing note for the equipment on the date of purchase. The note was due in one year and was paid on time. Assume that the effective interest rate in the market was 9%. Prepare the general journal entries required to record the acquisition and payment in each of the independent cases above. Round to the nearest dollar
Aug 29, 2021 | Uncategorized
Nonmonetary Exchange McArthur Inc. has negotiated the purchase of a new piece of automatic equipment at a price of $7,000 plus trade in, f.o.b. factory. McArthur Inc. paid $7,000 cash and traded in used equipment. The used equipment had originally cost $62,000; it had a book value of $42,000 and a secondhand market value of $45,800, as indicated by recent transactions involving similar equipment. Freight and installation charges for the new equipment required a cash payment of $1,100.
(a) Prepare the general journal entry to record this transaction, assuming that the exchange has commercial substance.
(b) Assuming the same facts as in (a) except that fair value information for the assets exchanged is not determinable. Prepare the general journal entry to record this transaction.
Aug 29, 2021 | Uncategorized
Nonmonetary Exchanges During the current year, Marshall Construction trades an old crane that has a book value of $90,000 (original cost $140,000 less accumulated depreciation $50,000) for a new crane from Brigham Manufacturing Co. The new crane cost Brigham $165,000 to manufacture and is classified as inventory. The following information is also available.
Marshall Const. Brigham Mfg. Co.
Fair value of old crane $ 82,000
Fair value of new crane $200,000
Cash paid 118,000
Cash received 118,000
(a) Assuming that this exchange is considered to have commercial substance, prepare the journal entries on the books of
(1) Marshall Construction and
(2) Brigham Manufacturing.
(b) Assuming that this exchange lacks commercial substance for Marshall, prepare the journal entries on the books of Marshall Construction.
(c) Assuming the same facts as those in (a), except that the fair value of the old crane is $98,000 and the cash paid is $102,000, prepare the journal entries on the books of
(1) Marshall Construction and
(2) Brigham Manufacturing.
(d) Assuming the same facts as those in (b), except that the fair value of the old crane is $97,000 and the cash paid $103,000, prepare the journal entries on the books of
(1) Marshall Construction and
(2) Brigham Manufacturing.
Aug 29, 2021 | Uncategorized
Nonmonetary Exchanges You has two clients that are considering trading machinery with each other. Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance. Your clients would prefer that the exchange be deemed to have commercial substance, to allow them to record gains. Here are the facts:
Client A Client B
Original cost $100,000 $150,000
Accumulated depreciation 40,000 80,000
Fair value 80,000 100,000
Cash received (paid) (20,000) 20,000
(a) Record the trade in on Client A’s books assuming the exchange has commercial substance.
(b) Record the trade in on Client A’s books assuming the exchange lacks commercial substance.
(c) Write a memo to the controller of Company A indicating and explaining the dollar impact on current and future statements of treating the exchange as having versus lacking commercial substance.
(d) Record the entry on Client B’s books assuming the exchange has commercial substance.
(e) Record the entry on Client B’s books assuming the exchange lacks commercial substance.
(f) Write a memo to the controller of Company B indicating and explaining the dollar impact on current and future statements of treating the exchange as having versus lacking commercial substance.
Aug 29, 2021 | Uncategorized
Purchase of Equipment with Zero Interest Bearing Debt Sterling Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2010, to expand its production capacity to meet customers’ demand for its product. Sterling issues a $900,000, 5 year, zero interest bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $180,000 installments due at the end of each year over the life of the note.
(a) Prepare the journal entry (ies) at the date of purchase. (Round to nearest dollar in all computations.)
(b) Prepare the journal entry (ies) at the end of the first year to record the payment and interest, assuming that the company employs the effective interest method.
(c) Prepare the journal entry (ies) at the end of the second year to record the payment and interest.
(d) Assuming that the equipment had a 10 year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year. (Straight line depreciation is employed.)
Aug 29, 2021 | Uncategorized
Your client is in the planning phase for a major plant expansion, which will involve the construction of a new warehouse. The assistant controller does not believe that interest cost can be included in the cost of the warehouse, because it is a financing expense. Others on the planning team believe that some interest cost can be included in the cost of the warehouse, but no one could identify the specific authoritative guidance for this issue. Your supervisor asks you to research this issue.
Instructions
If your school has a subscription to the FASB Codification, go to http://aaahq.org/asclogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses.
(a) Is it permissible to capitalize interest into the cost of assets? Provide authoritative support for your answer.
(b) What are the objectives for capitalizing interest?
(c) Discuss which assets qualify for interest capitalization.
(d) Is there a limit to the amount of interest that may be capitalized in a period?
(e) If interest capitalization is allowed, what disclosures are required?
Aug 29, 2021 | Uncategorized
1. A business combination in which a new corporation is formed to take over the assets and operations of two or more separate business entities, with the previously separate entities being dissolved, is a/an:
a Consolidation
b Merger
c Pooling of interests
d Acquisition
2. In a business combination, the direct costs of registering and issuing equity securities are:
a Added to the parent/investor company’s investment account
b Charged against other paid in capital of the combined entity
c Deducted from income in the period of combination
d None of the above
3. An excess of the fair value of net assets acquired in a business combination over the price paid is:
a Reported as a gain from a bargain purchase
b Applied to a reduction of noncash assets before negative goodwill may be reported
c Applied to reduce noncurrent assets other than marketable securities to zero before negative goodwill may be reported
d Applied to reduce goodwill to zero before negative goodwill may be reported
4. Cork Corporation acquires Dart Corporation in a business combination. Which of the following would be excluded from the process of assigning fair values to assets and liabilities for purposes of recording the acquisition?
(Assume Dart Corporation is dissolved.)
a Patents developed by Dart because the costs were expensed under GAAP
b Dart’s mortgage payable because it is fully secured by land that has a market value far in excess of the mortgage
c An asset or liability amount for over or underfunding of Dart’s defined benefit pension plan d None of the above
Aug 29, 2021 | Uncategorized
Enron Corporation, headquartered in Houston, Texas, provides products and services for natural gas, electricity, and communications to wholesale and retail customers. Enron’s operations are conducted through a variety of subsidiaries and affiliates that involve transporting gas through pipelines, transmitting electricity, and managing energy commodities. The following data were taken from Enron’s December 31, 2000, financial statements.
In millions
Total revenues ………………………………………..$100,789
Total costs and expenses …………………………….. 98,836
Operating income …………………………………….. 1,953
Net income …………………………………………… 979
Total assets …………………………………………… 65,503
Total liabilities ……………………………………….. 54,033
Total stockholders’ equity …………………………… 11,470
Net cash flows from operating activities …………….. 4,779
Net cash flows from investing activities ……………… (4,264)
Net cash flows from financing activities ……………… 571
Net increase in cash …………………………………… 1,086
At the end of 2000, the market price of Enron’s stock was approximately $83 per share. As of April 17, 2005, Enron’s stock was selling for $0.03 per share. Review the preceding financial statement data and search the Internet for articles on Enron Corporation. Briefly explain why Enron’s stock dropped so dramatically in such a short time.
Aug 29, 2021 | Uncategorized
The amounts of the assets and liabilities of Chickadee Travel Service at April 30, 2006, the end of the current year, and its revenue and expenses for the year are listed below. The retained earnings were $35,000, and the capital stock was $15,000 at May 1, 2005, the beginning of the current year. Dividends of $30,000 were paid during the current year.
Accounts payable ………………………$ 12,200
Accounts receivable …………………… 31,350
Cash …………………………………… 53,050
Fees earned …………………………… 263,200
Miscellaneous expense ……………….. 2,950
Rent expense …………………………. 37,800
Supplies ………………………………. 3,350
Supplies expense ……………………… 7,100
Taxes expense ………………………… 5,600
Utilities expense ……………………… 22,500
Wages expense ……………………….. 131,700
Instructions
1. Prepare an income statement for the current year ended April 30, 2006.
2. Prepare a retained earnings statement for the current year ended April 30, 2006.
3. Prepare a balance sheet as of April 30, 2006.
Aug 29, 2021 | Uncategorized
1. At December 31, 2011, Kale Co. had the following balances in the accounts it maintains at First State Bank:
Checking account No. 001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $175,000
Checking account No. 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,000)
Money market account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
90 day certificate of deposit, due February 28, 2012 . . . . . . . . . . . . . . 50,000
180 day certificate of deposit, due March 15, 2012 . . . . . . . . . . . . . . . 80,000
Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, 2011, balance sheet, what amount should Kale report as cash and cash equivalents?
(a) $190,000
(b) $200,000
(c) $240,000
(d) $320,000
2. When the allowance method of recognizing uncollectible accounts is used, the entry to record the write off of a specific account would:
(a) Decrease both accounts receivable and the allowance for uncollectible accounts.
(b) Decrease accounts receivable and increase the allowance for uncollectible accounts.
(c) Increase the allowance for uncollectible accounts and decrease net income.
(d) Decrease both accounts receivable and net income.
3. Gar Co. factored its receivables without recourse with Ross Bank. Gar received cash as a result of this transaction, which is best described as a:
(a) Loan from Ross collateralized by Gar’s accounts receivable.
(b) Loan from Ross to be repaid by the proceeds from Gar’s accounts receivable.
(c) Sale of Gar’s accounts receivable to Ross, with the risk of uncollectible accounts retained by Gar.
(d) Sale of Gar’s accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross.
Aug 29, 2021 | Uncategorized
A On January 1, 2012, Sather Company had Accounts Receivable of $54,200 and Allowance for Doubtful Accounts of $3,700. Sather Company prepares financial statements annually. During the year, the following selected transactions occurred.
Jan. 5 Sold $4,000 of merchandise to Noel Company, terms n/30.
Feb. 2 Accepted a $4,000, 4 month, 9% promissory note from Noel Company for balance due.
12 Sold $12,000 of merchandise to Lima Company and accepted Lima’s $12,000, 2 month, 10% note for the balance due.
26 Sold $5,200 of merchandise to Hubbard Co., terms n/10.
Apr. 5 Accepted a $5,200, 3 month, 8% note from Hubbard Co. for balance due.
12 Collected Lima Company note in full.
June 2Collected Noel Company note in full.
15Sold $2,000 of merchandise to Matthews Inc. and accepted a $2,000, 6 month, 12% note for the amount due.
Instructions
Journalize the transactions. (Omit cost of goods sold entries.)
Aug 29, 2021 | Uncategorized
Alonzo Saunders owns a small training services company that is experiencing growing pains. The company has grown rapidly by offering liberal credit terms to its customers. Although his competitors require payment for services within 30 days, Saunders permits his customers to delay payment for up to 90 days. Saunders’ customers thereby have time to fully evaluate the training that employees receive before they must pay for that training. Saunders guarantees satisfaction. If a customer is unhappy, the customer does not have to pay. Saunders works with reputable companies, provides top quality training, and rarely encounters dissatisfied customers. The long collection period, however, has created a cash flow problem. Saunders has a $100,000 accounts receivable balance, but needs cash to pay current bills. He has recently negotiated a loan agreement with National Bank of Brighton County that should solve his cash flow problems. The loan agreement requires that Saunders pledge the accounts receivable as collateral for the loan. The bank agreed to loan Saunders 70 percent of the receivables balance, thereby giving him access to $70,000 cash. Saunders is satisfied with this arrangement because he estimates he needs approximately $60,000. On the day Saunders was to execute the loan agreement, he heard a rumor that his biggest customer was experiencing financial problems and might declare bankruptcy. The customer owed Saunders $45,000. Saunders promptly called the customer’s chief accountant and learned ?ooff the record?? that the rumor was true. The accountant told Saunders that the company’s net worth was negative and most of its assets were pledged as collateral for bank loans. In his opinion, Saunders was unlikely to collect the balance due. Saunders’ immediate concern was the impact the circumstances would have on his loan agreement with the bank. Saunders uses the direct write off method to recognize uncollectible accounts expense. Removing the $45,000 receivable from the collateral pool would leave only $55,000 of receivables, reducing the available credit to $38,500 ($55,000 A? 0.70). Even worse, recognizing the uncollectible accounts expense would so adversely affect his income statement that the bank might further reduce the available credit by reducing the percentage of receivables allowed under the loan agreement. Saunders will have to attest to the quality of the receivables at the date of the loan but reasons that since the information he obtained about the possible bankruptcy was ?ooff the record?? he is under no obligation to recognize the uncollectible accounts expense until the receivable is officially uncollectible.
Required
a. How are income and assets affected by the decision not to act on the bankruptcy information?
b. Review the AICPA’s Articles of Professional Conduct (see Chapter 4) and comment on any of the standards that would be violated by the actions Saunders is contemplating.
c. How do the elements of the fraud triangle (see Chapter 4) apply to this case?
Aug 29, 2021 | Uncategorized
Arias Company uses the aging approach to estimate bad debt expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due $60,000, (2) up to 180 days past due $12,000, and (3) more than 180 days past due $4,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year end due to uncollectability is (1) 3 percent, (2) 15 percent, and (3) 35 percent, respectively. At December 31, 2011 (end of the current year), the Allowance for Doubtful Accounts balance was $200 (credit) before the end of period adjusting entry is made.
Required:
1. Prepare the appropriate bad debt expense adjusting entry for the year 2011.
2. Show how the various accounts related to accounts receivable should be shown on the December 31, 2011 balance sheet.
Aug 29, 2021 | Uncategorized
Art World Industries, Inc., was incorporated in 1986 in Delaware, although it is located in Los Angeles. The company prints, publishes, and sells limited edition graphics and reproductive prints in the wholesale market.
The company’s balance sheet at the end of a recent year showed an allowance for doubtful accounts of $175,477. The allowance was set up against certain Japanese accounts receivable that average more than one year in age. The Japanese acknowledge the amount due, but with the slow economy in Japan, they lack the resources to pay at this time.
Instructions
(a) Which method of accounting for uncollectible accounts does Art World Industries use?
(b) Explain the difference between the direct write off and percentage of receivables methods. Based on Art World’s disclosure above, what important factor would you have to consider in arriving at appropriate percentages to apply for the percentage of receivables method?
(c) What are the implications for a company’s receivables management of selling its products internationally?
Aug 29, 2021 | Uncategorized
Assigned Accounts Receivable—Journal Entries Salen Company finances some of its current operations by assigning accounts receivable to a finance company. On July 1, 2010, it assigned, under guarantee, specific accounts amounting to $150,000. The finance company advanced to Salen 80% of the accounts assigned (20% of the total to be withheld until the finance company has made its full recovery), less a finance charge of 1/2% of the total accounts assigned. On July 31 Salen Company received a statement that the finance company had collected $80,000 of these accounts and had made an additional charge of 1/2% of the total accounts outstanding as of July 31. This charge is to be deducted at the time of the first remittance due Salen Company from the finance company. On August 31, 2010, Salen Company received a second statement from the finance company, together with a check for the amount due. The statement indicated that the finance company had collected an additional $50,000 and had made a further charge of 1/2% of the balance outstanding as of August 31. Make all entries on the books of Salen Company that are involved in the transactions above.
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Assume that Dominum Company had the following balances in its receivable accounts on December 31, 2011:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $640,000
Allowance for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,600 (credit balance)
Transactions during 2012 were as follows:
Gross credit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,100,000
Collections of accounts receivable
($1,840,000 less cash discounts of $32,000) . . . . . . . . . . . . . . . . . 1,808,000
Sales returns and allowances (from credit sales) . . . . . . . . . . . . . . 24,000
Accounts receivable written off as uncollectible . . . . . . . . . . . . . . 9,400
Balance in Allowance for Bad Debts on December 31, 2012
(based on percent of total accounts receivable) . . . . . . . . . . . . . . . 21,800
Required:
1. Prepare entries for the 2012 transactions.
2. What amount will Dominum Company report for:
a. Net sales on its 2012 income statement?
b. Total accounts receivable on its balance sheet of December 31, 2012?
Aug 29, 2021 | Uncategorized
At December 31, 2009, Dill Imports reported the following information on its balance sheet.
Accounts receivable………………………. $250,000
Less: Allowance for doubtful accounts……. 15,000
During 2010, the company had the following transactions related to receivables.
1. Sales on account………………………………………………… $2,400,000
2. Sales returns and allowances…………………………………….45,000
3. Collections of accounts receivable……………………………… 2,250,000
4. Write offs of accounts receivable deemed uncollectible……….. 12,000
5. Recovery of bad debts previously written off as uncollectible….. 3,000
Instructions
(a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable.
(b) Enter the January 1, 2010, balances in Accounts Receivable and Allowance for Doubtful Accounts. Post the entries to the two accounts (use T accounts), and determine the balances.
(c) Prepare the journal entry to record bad debts expense for 2010, assuming that an aging of accounts receivable indicates that estimated bad debts are $22,000.
(d) Compute the accounts receivable turnover ratio for the year 2010.
Aug 29, 2021 | Uncategorized
I download a file that suppose to have an answer to problem 3($20). The file does’t answer the question in the problem.
Aug 29, 2021 | Uncategorized
..1__ Virgin S’
7:17 PM 60% CO
Acquisition of Saban Ltd On 1. January 2010, Habiki Ltd acquired 90% of the share capital (ex div) of Saban Ltd for $14,500,000. At this date, the accounts of Saban Ltd included the following balances: Share capital shares) $:T0;00000o Retained profits 1,050,000 Dividends payable 900,000
All of the identifiable net assets of Saban Ltd were recorded at fair value except for Patents which had a fair value of $1,180,000 above the carrying amount. Adjustments for the differences are made on consolidation and tax effect entries are needed.
On the 15 June 2011, Saban Ltd paid a cash dividend of $450,000 (appropriated from acquisition profits). This amount was recognised as revenue by Habiki Ltd. The Financial Controller of Habiki Ltd felt that the dividend had impaired the value of the company’s investment in Saban Ltd and subsequently records an impairment of the Investment in Saban Account for the applicable amounts received as a dividend.
The following is a list of the transactions between the companies for the year ended December 2014:
(a) On 1. October 2014, Saban sold inventory to Habil,. Ltd for $1,350,000, at a mark up of 20%. At 31. December 2014, $778,000 of this inventory was still on hand (b) On 28. November 2013, Habiki Ltd sold some inventory to Saban Ltd 10,980,000, at a profit before tax of $530,000. This was still on hand in Saban Ltd at 31. December 2013, but was all sold by 31. December 2014. (c) On 1. July 2014, Saban Ltd sold an item of equipment to Habiki Ltd for $2,680,000 at a before tax loss of $985,000. The equipment has a useful life of 5 years and is depreciated using the straight line method by both companies. (d) During the year Habiki Ltd paid $165,000 of Staff Training Fees to Saban Ltd. This amount is disclosed under General Administrative Expenses by Habiki Ltd. (e) Habiki Ltd extended a loan of $700,000 to Saban Ltd. This loan was issued on the 1. March 2012 payable over 10 years, with an interest rate on the loan of 5.596 pa. Interest is paid on the 1. April and 1′ October every year. (0 A goodwill impairment test in December 2014 revealed the need to impair goodwill by $221,600. No other impairment of goodwill has been recorded. For consolidation purposes the partial goodwill method is used. (g) All dividends are recognised before receipt of cash. (h) The corporate income tax rate is 30% and the companies in the group have financial years from 1. January to 31. December.
Consolidate Habiki Ltd and Saban Ltd:
(a) Prepare the consolidation joumal entries, with narrations, and the csoLszli,c1LattdeidovrTlecsyhezt(using3Eixceleor similar) to consolidate HAWK! Ltd and ended December 2014.
Aug 29, 2021 | Uncategorized
| Exercise 21 5 |
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Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $3.91 and $4.80, respectively. Normal production is 31,200 table lamps per year.
A supplier offers to make the lamp shades at a price of $13.20 per unit. If Schopp Inc. accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $40,610 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.
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Aug 29, 2021 | Uncategorized
HiTech Products manufactures three types of remote control devices: Economy, Standard, and Deluxe. The company, which uses activity based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.
Aug 29, 2021 | Uncategorized
Pre Contribution Balance Sheets and Fair Values June 30, 20X9
(in thousands of $)
Swag Co. Perk Ltd.
|
Pre
Contribution |
Fair
Value |
Pre
Contribution |
Fair
Value |
| Assets: |
|
|
|
|
| Cash and cash equivalents |
1,645 |
1,645 |
840 |
840 |
| Accounts receivable |
1,400 |
1,400 |
1,260 |
1,260 |
| Land |
3,500 |
5,950 |
|
|
| Building (net) |
9,450 |
7,700 |
5,880 |
7,700 |
| Equipment (net) |
420 |
525 |
2,170 |
2,800 |
| Total assets |
16,415 |
|
10,150 |
|
|
|
|
|
|
Liabilities and
shareholders’ equity: |
|
|
|
|
| Accounts payable |
455 |
455 |
770 |
770 |
| Long term debt |
1,400 |
1,400 |
700 |
630 |
| Total liabilities |
1,855 |
|
1,470 |
|
| Common shares |
10,500 |
|
4,865 |
|
| Retained earnings |
4,060 |
|
3,815 |
|
| Total shareholders’ equity |
14,560 |
|
8,680 |
|
Total liabilities and
shareholders’ equity |
16,415 |
|
10,150 |
|
Swag Co. acquired Perk on June 30, 20X9. Both companies have June 30 year ends. Before the combination, Swag and Perk had, respectively, 840,000 and 525,000 common shares, issued and outstanding.
Required:
Prepare Swag’s consolidated balance sheet under each of the following independent situations:
a) Swag purchased the assets and assumed the liabilities of Perk by
paying $1,400,000 in cash and issuing a $12,600,000 note.
(6 marks)
b) Swag issued 280,000 common shares in exchange for all of
Perk’s outstanding shares. The fair value of the Swag shares
was $14,000,000.
(10 marks)
c) In exchange for all of Perk’s outstanding shares, Swag paid
$700,000 cash and issued 189,000 common shares with a
market value of $9,450,000.
(12 marks)
Problem 2 (50 marks)
Balance Sheets
December 31, 20X3
|
Green Tower
Ltd. |
Blue Loft
Ltd. |
| Assets: |
|
|
| Current assets: |
|
|
| Cash |
$ 156,000 |
$ 143,000 |
| Accounts receivable |
195,000 |
175,500 |
| Inventory |
312,000 |
253,500 |
| Total current assets |
663,000 |
572,000 |
| Land |
923,000 |
|
| Equipment |
897,000 |
1,183,000 |
| Accumulated amortization |
(663,000) |
(416,000) |
| Investment in Blue Loft |
1,409,200 |
|
| Goodwill* |
98,800 |
__ ____ |
| Total assets |
3,328,000 |
1,339,000 |
| Liabilities and shareholders’ equity: |
|
|
| Liabilities: |
|
|
| Accounts payable |
184,600 |
78,000 |
| Bonds payable |
780,000 |
260,000 |
| Total liabilities |
964,600 |
338,000 |
| Shareholders’ equity: |
|
|
| Common shares |
650,000 |
325,000 |
| Retained earnings |
1,713,400 |
676,000 |
| Total shareholders’ equity |
2,363,400 |
1,001,000 |
| Total liabilities and shareholders’ equity |
$3,328,000 |
$1,339,000 |
*from an acquisition prior to Blue Loft
Income Statements
Year Ended December 31, 20X3
|
Green Tower
Ltd. |
Blue Loft
Ltd. |
| Sales revenue |
$1,560,000 |
$1,283,100 |
| Cost of goods sold |
1,040,000 |
845,000 |
|
520,000 |
438,100 |
| Gain on sale of land |
___ ___ |
273,000 |
|
520,000 |
711,100 |
| Operating expense |
305,500 |
464,100 |
| Net income |
214,500 |
247,000 |
Statements of Retained Earnings
Year Ended December 31, 20X3
|
Green Tower
Ltd. |
Blue Loft
Ltd. |
| Retained earnings, December 31, 20X2 |
$1,498,900 |
$ 429,000 |
| Net income |
214,500 |
247,000 |
| Retained earnings, December 31, 20X3 |
$1,713,400 |
$ 676,000 |
Blue Loft Ltd.
Carrying and Fair Values
January 1, 20X2
|
Carrying
Value |
Fair
Value |
| Cash |
$ 104,000 |
$ 104,000 |
| Accounts receivable |
128,700 |
128,700 |
| Inventory |
231,400 |
253,500 |
| Land |
650,000 |
811,000 |
| Equipment |
390,000 |
151,000 |
| Accumulated amortization |
(260,000) |
|
| Accounts payable |
91,000 |
91,000 |
| Bonds payable |
260,000 |
260,000 |
| Common shares |
325,000 |
|
| Retained earnings |
568,100 |
|
- On January 1, 20X2, Green Tower Ltd. acquired all the outstanding common shares of Blue Loft Ltd. for $1,409,200 cash.
- At December 31, 20X2, Green Tower’s inventory included goods that it had purchased from Blue Loft for $58,500. The intercompany profit on these goods was $15,600. All these goods were sold to third parties in 20X3.
- During 20X3, Green Tower purchased goods from Blue Loft for $195,000. Blue Loft earned a gross profit of $65,000 on this sale. At December 31, 20X3, Green Tower still had 40% of these goods in its inventory.
- During 20X3, Green Tower sold goods to Blue Loft for $507,000. Green Tower earned a gross profit of $117,000 on this sale. At December 31, 20X3, Blue Loft still had 20% of these goods in its inventory.
- In December, 20X3, Blue Loft sold a tract of land to Green Tower for $923,000. Blue Loft had purchased the land 8 years ago for $650,000.
- At the time of Green Tower’s acquisition, Blue Loft’s equipment had a remaining estimated useful life of 3 years. Blue Loft uses the straight line method of amortization, with no residual value.
Required:
Prepare the consolidated financial statements for 20X3 using the direct method.
Problem 3 (22 marks)
Cox Ltd. acquired 70% of the common shares of March Co. at the beginning of 20X7. At the acquisition date, March’s shareholders’ equity consisted of the following:
Common shares $720,000
Retained earnings 360,000
The only acquisition differential pertained to goodwill.
Cox’s “Investment in March” general ledger account is as follows:
| 1/2/X7 Cost $ 781,200 |
12/31/X7 Dividends $33,600 |
| 12/31/X7 Investment Income 62,160 |
12/31/X8 Dividends 42,000 |
| 12/31/X8 Investment Income 76,440 |
12/31/X9 Dividends 50,400 |
| 12/31/X9 Investment income 94,080 |
|
|
|
| Balance $ 887,880 |
|
March usually declares half of its profits as dividends.
Cox uses the entity theory method to consolidate its subsidiary.
Required:
- Calculate the total amount of dividends declared by March for 20X7. (1 mark)
- Calculate March’s profit for 20X8. (2 marks)
- Calculate the non controlling interest amounts for Cox’s 20X9
- consolidated income statement, and (3 marks)
- consolidated balance sheet. (3 marks)
- Calculate the amount of goodwill that should appear on Cox’s 20X9 consolidated balance sheet. (13 marks)
Aug 29, 2021 | Uncategorized
- Explain what is meant by break even analysis. NB. This is not asking for a definition of break even point.
- Calculate the break even point from the information in the Saturn Ltd case study by completing the table below.
Aug 29, 2021 | Uncategorized
Write a report containing the following:
- Explain what is meant by break even analysis. NB. This is not asking for a definition of break even point.
Break even analysis is a technique widely used by production management and management accountants. It is based on categorising production costs between those which are “variable” (costs that change when the production output changes) and those that are “fixed” (costs not directly related to the volume of production).
- Calculate the break even point from the information in the Saturn Ltd case study by completing the table below.
Aug 29, 2021 | Uncategorized
Analysis of Subsequent Expenditures Accardo Resources Group has been in its plant facility for 15 years. Although the plant is quite functional, numerous repair costs are incurred to maintain it in sound working order. The company’s plant asset book value is currently $800,000, as indicated below.
Original cost $1,200,000
Accumulated depreciation 400,000
Book value $800,000
During the current year, the following expenditures were made to the plant facility.
(a) Because of increased demands for its product, the company increased its plant capacity by building a new addition at a cost of $270,000.
(b) The entire plant was repainted at a cost of $23,000.
(c) The roof was an asbestos cement slate. For safety purposes it was removed and replaced with a wood shingle roof at a cost of $61,000. Book value of the old roof was $41,000.
(d) The electrical system was completely updated at a cost of $22,000. The cost of the old electrical system was not known. It is estimated that the useful life of the building will not change as a result of this updating.
(e) A series of major repairs were made at a cost of $47,000, because parts of the wood structure were rotting. The cost of the old wood structure was not known. These extensive repairs are estimated to increase the useful life of the building. Indicate how each of these transactions would be recorded in the accounting records.
Aug 29, 2021 | Uncategorized
Analysis of Subsequent Expenditures Plant assets often requires expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years. For each of the following items, indicate whether the expenditure should be capitalized (C) or expensed (E) in the period incurred.
(a) __________ Improvement.
(b) __________ Replacement of a minor broken part on a machine.
(c) __________ Expenditure that increases the useful life of an existing asset.
(d) __________ Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its salvage value.
(e) __________ Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset’s salvage value.
(f) __________ Ordinary repairs.
(g) __________ Improvement to a machine that increased its fair market value and its production capacity by 30% without extending the machine’s useful life.
(h) __________ Expenditure that increases the quality of the output of the productive asset.
Aug 29, 2021 | Uncategorized
At December 31, 2011, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances.
Land$230,000
Buildings 890,000
Leasehold improvements 660,000
Equipment 875,000
During 2012, the following transactions occurred.
1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000.
2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs.
Excavation fees $38,000
Architectural design fees 11,000
Building permit fee2,500
Imputed interest on funds used
during construction (stock financing) 8,500
The building was completed and occupied on September 30, 2012.
3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale.
4. During December 2012, costs of $89,000 were incurred to improve leased office space. The related lease will terminate on December 31, 2014, and is not expected to be renewed. (Hint: Leasehold improvements should be handled in the same manner as land improvements.)
5. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $87,000, freight costs were $3,300, installation costs were $2,400, and royalty payments for 2012 were $17,500.
Instructions
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2012.
Land Leasehold improvements
Buildings Equipment
Disregard the related accumulated depreciation accounts.
(b) List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan’s financial statements.
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Capitalization of Interest Langer Airline is converting from piston type planes to jets. Delivery time for the jets is 3 years, during which substantial progress payments must be made. The multimillion dollar cost of the planes cannot be financed from working capital; Langer must borrow funds for the payments. Because of high interest rates and the large sum to be borrowed, management estimates that interest costs in the second year of the period will be equal to one third of income before interest and taxes, and one half of such income in the third year. After conversion, Langer’s passenger carrying capacity will be doubled with no increase in the number of planes, although the investment in planes would be substantially increased. The jet planes have a 7 year service life. Give your recommendation concerning the proper accounting for interest during the conversion period. Support your recommendation with reasons and suggested accounting treatment. (Disregard income tax implications.)
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Capitalization of Interest Laserwords Inc. is a book distributor that had been operating in its original facility since 1985. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for Laserwords since 2005. Laserwords’ original facility became obsolete by early 2010 because of the increased sales volume and the fact that Laserwords now carries tapes and disks in addition to books. On June 1, 2010, Laserwords contracted with Black Construction to have a new building constructed for $4,000,000 on land owned by Laserwords. The payments made by Laserwords to Black Construction are shown in the schedule below.
Date Amount
July 30, 2010 $ 900,000
January 30, 2011 1,500,000
May 30, 2011 1,600,000
Total payments $4,000,000
Construction was completed and the building was ready for occupancy on May 27, 2011. Laserwords had no new borrowings directly associated with the new building but had the following debt outstanding at May 31, 2011, the end of its fiscal year. 10%, 5 year note payable of $2,000,000, dated April 1, 2007, with interest payable annually on April 1. 12%, 10 year bond issue of $3,000,000 sold at par on June 30, 2003, with interest payable annually on June 30. The new building qualifies for interest capitalization. The effect of capitalizing the interest on the new building, compared with the effect of expensing the interest, is material.
(a) Compute the weighted average accumulated expenditures on Laserwords’ new building during the capitalization period.
(b) Compute the avoidable interest on Laserwords’ new building.
(c) Some interest cost of Laserwords Inc. is capitalized for the year ended May 31, 2011.
(1) Identify the items relating to interest costs that must be disclosed in Laserwords’ financial statements.
(2) Compute the amount of each of the items that must be disclosed.
(CMA adapted)
Aug 29, 2021 | Uncategorized
Capitalization of Interest McPherson Furniture Company started construction of a combination office and warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2010. McPherson expected to complete the building by December 31, 2010. McPherson has the following debt obligations outstanding during the construction period.
Construction loan—12% interest, payable semiannually, issued
December 31, 2009 $2,000,000
Short term loan—10% interest, payable monthly, and principal payable
at maturity on May 30, 2011 1,600,000
Long term loan—11% interest, payable on January 1 of each
year. Principal payable on January 1, 2014 1,000,000
(Carry all computations to two decimal places.)
(a) Assume that McPherson completed the office and warehouse building on December 31, 2010, as planned at a total cost of $5,200,000, and the weighted average of accumulated expenditures was $3,800,000. Compute the avoidable interest on this project.
(b) Compute the depreciation expense for the year ended December 31, 2011. McPherson elected to depreciate the building on a straight line basis and determined that the asset has a useful life of 30 years and a salvage value of $300,000.
Aug 29, 2021 | Uncategorized
Capitalization of Interest On December 31, 2009, Hurston Inc. borrowed $3,000,000 at 12% payable annually to finance the construction of a new building. In 2010, the company made the following expenditures related to this building: March 1, $360,000; June 1, $600,000; July 1, $1,500,000; December 1, $1,200,000. Additional information is provided as follows.
1. Other debt outstanding
10 year, 11% bond, December 31, 2003, interest payable annually $4,000,000
6 year, 10% note, dated December 31, 2007, interest payable annually $1,600,000
2. March 1, 2010, expenditure included land costs of $150,000
3. Interest revenue earned in 2010 $49,000
(a) Determine the amount of interest to be capitalized in 2010 in relation to the construction of the building.
(b) Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2010.
Aug 29, 2021 | Uncategorized
Capitalization of Interest on July 31, 2010, Bismarck Company engaged Duval Tooling Company to construct a special purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2010. To help finance construction, on July 31 Bismarck issued a $400,000, 3 year, 12% note payable at Wellington National Bank, on which interest is payable each July 31. $300,000 of the proceeds of the note was paid to Duval on July 31. The remainder of the proceeds was temporarily invested in short term marketable securities (trading securities) at 10% until November 1. On November 1, Bismarck made a final $100,000 payment to Duval. Other than the note to Wellington, Bismarck’s only outstanding liability at December 31, 2010, is a $30,000, 8%, 6 year note payable, dated January 1, 2007, on which interest is payable each December 31.
(a) Calculate the interest revenue, weighted average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2010. Round all computations to the nearest dollar
(b) Prepare the journal entries needed on the books of Bismarck Company at each of the following dates.
(1) July 31, 2010.
(2) November 1, 2010.
(3) December 31, 2010.
Aug 29, 2021 | Uncategorized
Capitalization of Interest the following three situations involve the capitalization of interest.
Situation I
On January 1, 2010, Columbia, Inc. signed a fixed price contract to have Builder Associates construct a major plant facility at a cost of $4,000,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2010, to finance the construction cost, Columbia borrowed $4,000,000 payable in 10 annual installments of $400,000, plus interest at the rate of 10%. During 2010, Columbia made deposit and progress payments totaling $1,500,000 under the contract; the weighted average amount of accumulated expenditures was $900,000 for the year. The excess borrowed funds were invested in short term securities, from which Columbia realized investment income of $250,000.What amount should Columbia report as capitalized interest at December 31, 2010?
Situation II
During 2010, Evander Corporation constructed and manufactured certain assets and incurred the following interest costs in connection with those activities.
Interest Costs
Incurred
Warehouse constructed for Evander’s own use $30,000
Special order machine for sale to unrelated customer, produced according
to customer’s specifications 9,000
Inventories routinely manufactured, produced on a repetitive basis 8,000 all of these assets required an extended period of time for completion. Assuming the effect of interest capitalization is material, what is the total amount of interest costs to be capitalized?
Situation III
Antonio, Inc. has a fiscal year ending April 30. On May 1, 2010, Antonio borrowed $10,000,000 at 11% to finance construction of its own building. Repayments of the loan are to commence the month following completion of the building. During the year ended April 30, 2011, expenditures for the partially completed structure totaled $6,000,000. These expenditures were incurred evenly throughout the year. Interest earned on the unexpended portion of the loan amounted to $650,000 for the year. How much should be shown as capitalized interest on Antonio’s financial statements at April 30, 2011?
(CPA adapted)
Aug 29, 2021 | Uncategorized
Capitalization of Interest Vania Magazine Company started construction of a warehouse building for its own use at an estimated cost of $5,000,000 on January 1, 2009, and completed the building on December 31, 2009. During the construction period, Vania has the following debt obligations outstanding.
Construction loan—12% interest, payable semiannually,
issued December 31, 2008 $2,000,000
Short term loan—10% interest, payable monthly, and
principal payable at maturity, on May 30, 2010 1,400,000
Long term loan—11% interest, payable on January 1 of
each year. Principal payable on January 1, 2012 1,000,000
Total cost amounted to $5,200,000, and the weighted average of accumulated expenditures was $3,500,000. Jane Esplanade, the president of the company, has been shown the costs associated with this construction project and capitalized on the balance sheet. She is bothered by the ?oavoidable interest?? included in the cost. She argues that, first, all the interest is unavoidable—no one lends money without expecting to be compensated for it. Second, why can’t the company use all the interest on all the loans when computing this avoidable interest? Finally, why can’t her company capitalize all the annual interest that accrued over the period of construction? You are the manager of accounting for the company. In a memo, explain what avoidable interest is, how you computed it (being especially careful to explain why you used the interest rates that you did), and why the company cannot capitalize all its interest for the year. Attach a schedule supporting any computations that you use.
Aug 29, 2021 | Uncategorized
Classification of Costs and Interest Capitalization On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building. Blair paid a real estate broker’s commission of $36,000, legal fees of $6,000, and title guarantee insurance of $18,000. The closing statement indicated that the land value was $500,000 and the building value was $100,000. Shortly after acquisition, the building was razed at a cost of $54,000. Blair entered into a $3,000,000 fixed price contract with Slatkin Builders, Inc. on March 1, 2010, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2011. Additional construction costs were incurred as follows.
Plans, specifications, and blueprints $21,000
Architects’ fees for design and supervision 82,000
The building is estimated to have a 40 year life from date of completion and will be depreciated using the 150% declining balance method. To finance construction costs, Blair borrowed $3,000,000 on March 1, 2010. The loan is payable in 10 annual installments of $300,000 plus interest at the rate of 10%. Blair’s weighted average amounts of accumulated building construction expenditures were as follows.
For the period March 1 to December 31, 2010 $1,300,000
For the period January 1 to September 30, 2011 1,900,000
(a) Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of September 30, 2011.
(b) Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2011. Show supporting computations in good form
(AICPA adapted)
Aug 29, 2021 | Uncategorized
Correction of Improper Cost Entries Plant acquisitions for selected companies are presented below
1. Natchez Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Vivace Co., for a lump sum price of $680,000. At the time of purchase, Vivace’s assets had the following book and appraisal values.
Book Values Appraisal Values
Land $200,000 $150,000
Buildings 230,000 350,000
Equipment 300,000 300,000
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land 150,000
Buildings 230,000
Equipment 300,000
Cash 680,000
2. Arawak Enterprises purchased store equipment by making a $2,000 cash down payment and signing a 1 year, $23,000, 10% note payable. The purchase was recorded as follows.
Store Equipment 27,300
Cash 2,000
Note Payable 23,000
Interest Payable 2,300
3. Ace Company purchased office equipment for $20,000, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Office Equipment 20,000
Cash 19,600
Purchase Discounts 400
4. Paunee Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $27,000. The company made no entry to record the land because it had no cost basis.5. Mohegan Company built a warehouse for $600,000. It could have purchased the building for $740,000. The controller made the following entry.
Warehouse 740,000
Cash 600,000
Profit on Construction 140,000
Prepare the entry that should have been made at the date of each acquisition.
Aug 29, 2021 | Uncategorized
Cost of Land vs. Building—Ethics Tones Company purchased a warehouse in a downtown district where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Noting that depreciation can be taken only on the building, Carter favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she says, net income is negatively impacted by additional depreciation and will cause the company’s stock price to go down. Answer the following questions.
(a) What stakeholder interests are in conflict?
(b) What ethical issues does Carter face?
(c) How should these costs be allocated?
Aug 29, 2021 | Uncategorized
The SEC submitted to Congress its Study Pursuant to Section 108(d) of the Sarbanes Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles Based Accounting System in July 2003. A year later, FASB issued its reply, FASB Response to the SEC Study on the Adoption of a Principles Based Accounting System (July 2004). The SEC recommended that FASB when setting standards “avoid the use of percentage tests (‘bright lines’) that allow financial engineers to achieve technical compliance with the standard while evading the intent of the standard.”
Identify where bright lines currently exist in the statement of financial position, areas in which we might expect revisions in the future. What is the argument for use of brightline tests?
Aug 29, 2021 | Uncategorized
The accountant for amide Crusts Ltd.. a bakery specializing In pizza crusts for the fast food trade, is working on the yearend accounting for the company. For each item below, decide what (if anything) needs to be done and prepare any journal ems• needed to implement your decision. Use whatever account titles you like, but be clear where on the statements the accounts would be located and write clear explanations for your entries. This is the company’s first year of existence. a. The company paid $1,120 for cleaning and office supplies, all of which have been expensed. The accountant discovered that another $114 is owing but not recorded and that supplies costing $382 arc still on hand and usable at the end of the year. b. The company’s sales are all on credit because its customers are restaurants. storm and instinnions, such as hospitals. All cash collections have been recorded as sales revenue. The accountant added up the customer,’ bills still not collected and got a total of $11,621. c. All purchases of flour and other raw materials have been expensed, and there is no significant inventory of finished products at the end of the year because each night’s production is shipped in the morning to ensure maximum freshness. However. usable raw materials costing $6,210 are on hand at the end of the year. zo d. Purchases of small tools and pans (still on hand) totalling $238 were charged to expenses during the year. c. The eztountant found an unpaid intone for SSW for atherusing services on behalf of the company. The advertising campaign had been planned and advertising contracts signed before the year end, but the campaign took place just after the year end. f. The president of the company directed that $2.316 originally included in repairs and maintenance expense be capitalized to recognize the creation of valuable equipment and fixtures. This is unusual for the company, but the repairs were so good that the useful life of the assets involved had been extended by several years more than originally expected. g. All payments on the company’s building mortgage had been made on time. Since the last payment. $187 of mortgage interest (the accountant’s estimate) had accumulated, but the next regular payment was nor due for ten days.
Aug 29, 2021 | Uncategorized
ASSIGNMENT:
The overarching objective of GPFR is decision usefulness, supported by relevance, reliability and comparability. The desire to achieve comparability and (by implication) consistency over time is the reason to have reporting standards (Schipper 2003). There has however, been widespread and longstanding criticism that accounting rules fail to disclose information, or present it in ways that users are unable to incorporate in their decision making processes (Mackintosh, 2006; Pozen, 2007). Too often accountants and researchers operate within the parameters set by the standard setters, rather than questioning and challenging them.
This criticism became more pronounced in the wake of the Global Financial Crisis (GFC) when a number of reports, including those from the Financial Stability Forum (2008), the Turner Review (2009), and the Congressional Oversight Panel (2009) warned that accounting rules facilitated various forms of off balance sheet financing (OBF). These reports linked the GFC to OBF as regulators and other equity market stakeholders were misled regarding the level of risk faced by reporting entities.
Leases are a significant financial commitment to an entity, but the fact that they are currently not reflected on balance sheets can present a misleading picture about leverage and the assets that the lessee uses in its operations. AASB117 has been heavily criticised for its inconsistent treatment regarding leases. The current distinction between finance and operating leases provides incentives to structure some transactions as operating leases, which has led to a significant increase in off balance sheet financing.
The AASB and IASB issued an exposure draft on leases in May 2013 (ED242 and ED/2013/6 respectively). The exposure draft proposes that all leases, except for short term leases, be included on the balance sheet.
Critically evaluate and discuss whether the exposure draft is an improvement on AASB117 in terms of decision usefulness.
Your response should include a review of the current literature relating to leases and off balance sheet financing. You should refer to Statements of Accounting Concepts, the Framework, other relevant accounting standard(s), IFRIC and UIG.
In addition to your literature review, you are required to determine the nature and extent of the current accounting treatments and disclosure of leases within financial statements for two companies:
Monadelphous Group Ltd and
UGL Ltd from Industrial sector listed on the Australian Stock Exchange for the financial years ended 2010, 2011 and 2012 (i.e. 3 years) and show how these leases will be reported under the requirements of the exposure draft. You need to consider:
- how the companies classify leases
- how they account for the leases
- how leases are disclosed
- using relevant ratios, indicate the impact this has on the financial reports.
You need to develop an argument using the literature and then use the data from the company’s annual reports to support your argument. It is also your job to identify the ratios and the variables of interest and how they would be reported under the exposure draft, etc.
Presentation
- The research and technical component of the assignment is to be typed.
- Your group report should be approximately 1500 words, plus any attachments/appendices.
- In addition, an executive summary of no more than one page should be submitted.
- The assignment is to be appropriately referenced using the Harvard method.
Aug 29, 2021 | Uncategorized
Principles of Accounting
BAP 11
Assignment 2, 2013
Semester 2
Class Day/Time: ________________
Due Date: Week 11 Friday
Time: 5 PM
Weight: 15%
This is an individual assignment.
The assignment consists of 5 questions all of which are to be attempted. Each question is worth 15 marks.
Question 1.
The following questions are required to be answered relate to the course text
Questions
- Statement of Cash flows direct method Chapter 18 ;
Required
- Prepare a cash flow statement using the direct method for operating cash flows
- Prepare a reconciliation of the [profit and cash provided by the operations
- Bank reconciliation
- Note: Cheque no 216 was also incorrectly posted to the general ledger.
Required prepare a bank reconciliation for the Month ended the 31 March
- Accounting for Shares
Demons Ltd issued a prospectus for the issue of 100,000 $5.00 shares on 1 January2012.The prospectus required payment of $3.00 per share on application and $2.00 to be paid when called.
The company received applications for 120,000 shares by the closing date of 28February 2012.100,000 shares were issued on 1 March 2012 with excess application money being refunded.
On 30 April 2012 the company called the balance of $2.00 on the shares. All call money was received by 15 May 2012.On 30 June 2012 Demons Ltd declared and paid a dividend of 5 cents per share.
Required:
Prepare the journal entries for the year ended 30 June 2012 to account for the above transactions.
- Accounting for Liabilities
Easy Company Ltd issues a debenture at a premium for a period of 10 years the company pays interest on 31 December and 1 July. The debenture has a par value of $1,000,000.00 and is issued at premium of 105 at an interest rate of 9%
Prepare journal entries to reflect the following;
- issue of debentures on 1 Jul
- payment of interest on 1 January
- accrual on 31 March
- Accounting for Invento
Aug 29, 2021 | Uncategorized
HI5028 TAXATION
T2, 2013 ASSIGNMENT 1
Due date: Friday 30
th August
Instructions:
This assignment is to be submitted by the due date in both soft copy (Safeassign – Bb) and hard copy.
The assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook
It is the responsibility of the student submitting the work to ensure that the work is in fact his/her own work. Ensure that when incorporating the works of others into your submission that it appropriately acknowledged.
Maximum marks: 20 (20%)
Assignment 1: You should attempt both parts to this assignment
Note: you should incorporate all sections of the various Acts/regulations where appropriate.
Part 1: Case study
Janet (taxpayer) residing in Australia is named as the sole beneficiary of a property (1.85 hectares) with a large homestead as a result of the death of a relative on 7/10/2009. The property is not used for commercial purposes and at the date of death, the property was valued at $1.45million. Settlement took place on 21/12/2009. After moving into the homestead shortly after taking ownership, she planned to take a one year trip which she had been planning for some time in late 2010. The taxpayer felt that the homestead was far too large for her (she is single), applied to the ATO for an exemption for ABN registration and some fourteen months later (16/2/2011), she obtained council approval to subdivide the property into three, with the intention of building three units, one she will take up as her own residence, the other two will be sold. Work commenced some weeks after approval and on 12
th December that same year, the taxpayer returned and moved into one of the apartments. The other two were sold in March/April in 2012, one selling for $1.35m (24/3/2012), the other for $1.45m (9/4/2012).
You are to consider the CGT implications both from the relevant sections (ITAA), rulings, etc. and from the values (if/where applicable). Assume that the blocks are subdivided equally. For each determination that you make, you should clarify. You should also clarify what Capital Gains and CGT is in your answer (15 marks)
Part 2: Question
Explain using examples and relevant sections of the act, what the differences between Ordinary Income and Statutory income are. Use your own examples (not from MTG or Barkoczy text) (5 marks)
Aug 29, 2021 | Uncategorized
- Describe the situation facing Mensa at the time of the case. This should include the major issues facing the company and the decisions that need to be made. You are to spend no time on corporate history. You must consider the past, but your analysis and recommendations should be forward looking.
- List your specific recommendations for the firm in detail. Explain why each recommendation was made including the information used and the logic (or analysis) applied to reach your conclusion. As you prepare your analysis, remember that no decision is complete until the financial impact of the decisions is determined. Don’t forget to use cash flow analysis and Net Present Value techniques when analyzing the four divisions within Mensa, Inc.
- If your recommendation(s) need to be taken in a particular sequence, be sure to indicate the proper sequence and the reasons for that sequence.
Discuss the events or uncertainties that are most likely to cause trouble in the implementation of your recommendations and how you would re
Aug 29, 2021 | Uncategorized
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Salter Mining Company purchased the Northern Tier Mine for $68,000,000 cash. The mine was estimated to contain 7,500,000 tons of ore and to have a residual value of $7,700,000.
|
During the first year of mining operations at the Northern Tier Mine, 335,000 tons of ore were mined, of which 40,000 tons were sold.
| a. |
Prepare a journal entry to record depletion during the year.(Round your per tone valueto 2 decimal places and final answer to nearest whole number. Omit the “$” sign in your response.)
| b. |
Show how the Northern Tier Mine, and its accumulated depletion, would appear in Salter Mining Company’s balance sheet after the first year of operations.(Round your per tone valueto 2 decimal places and final answer to nearest whole number.Input all amounts as positive values. Omit the “$” sign in your response.)
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1. This assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook.
2. It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another’s work or ideas into one’s own work without appropriate acknowledgement is an academic offence. Students can submit all assignments for plagiarism checking (self check) on Blackboard before final submission in the subject. For further details, please refer to the Subject Outline and Student Handbook
3. Maximum marks available: 20 marks.
4. Due date of submission: Friday 30
th August, 2013. Requires both soft copy (SafeAssign) and hard copy to be submitted
ASSIGNMENT QUESTION
The following are independent situations and you should refer to APES (
Accounting Professional and Ethical Standards 110 “Code of Ethics for Professional Accountants”) and the Corporations Act 2001 as a minimum for each situation. You need to identify any breaches (under what section) and why. You should also consider any remedy or alternative course of action that should have been considered for each where appropriate.
There is no word limit set for this assignment but it is expected that each question will be well covered and considered. Guidelines would be that each question should be of between 400 600 words
1) Rodney Brick is completing a Master of Accounting part time and has taken on a role as an auditing assistant with an audit/accounting firm and his first job is to assist with auditing the books of Daffey Jones Ltd, a major retailer. Whilst undertaking the audit, Rodney comes across certain financial information that he believes will assist him in completing one of the auditing assignments he is currently working on so he copies the information and uses it in the assignment, although he is careful by removing all reference to Daffey Jones in order to preserve the client’s confidentiality.
Question: Has Rodney breached any auditing standards/regulations and if so, what and why? (6 marks)
2) Bertha Bigga has been the engagement audit partner on the Wait Alert Limited (“WA”) account for a number of years. Roughly one year ago, WA’s long standing company secretary resigned and the company took almost nine months to find a replacement. At WA’s request, Bertha performed company secretarial duties during this period of time.
Question: Do you have any concerns and are there any breaches that have occurred here? (4 marks)
3) John Bartram is the son of the factory manager of one of your firm’s major audit clients, John Worst Foods Limited. John is studying accounting, with a specialisation in auditing at Holmes Institute. John applied for work during the summer where he could both earn money as well as gain first hand experience in his area of interest. He is assigned to the audit of John Worst’s Foods Limited where part of his audit work consisted of testing the internal controls of the cash payments and cash receipts system.
Q: What is the issue in this situation and what sections of the Act are bought into question? Is there something that should be in place with the audit firm? (4 marks)
(4) Ocean Adventures Limited is a large importer/wholesaler of luxury cruise boats and is currently experiencing financial difficulties. Their audit firm is PVC Partners but they have not paid the audit fees for the past three years. The audit partner recently threatened to resign from the audit if the outstanding fees were not paid. To prevent this occurring, Ocean Adventures offered to supply AUDITRUS with a nine metre cruise boat as payment. The partner accepted this offer in full consideration of the outstanding fees, even though the boat was only worth 75% of the balance.
As a gift, Ocean Adventures also gave the partner a 15% shareholding in an unrelated company. At present these shares are worth $21,500.
Q: What if any, issues exist in this situation? Should PVC have accepted boat and the gift (consider each one separately in your answer). (6 marks)
Aug 29, 2021 | Uncategorized
Coffee Maker’s Incorporated (CMI).
Two divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The intercompany transactions have remained constant for several years.
Recently, outside suppliers have lowered their prices, but Division C is not lowering its prices. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties to lower cost and increase profitability.
The current pattern is that Division A purchases 3,000 units of product part 101 from Division C (the supplying division) and another 1,000 units from an external supplier. The market price for Part 101 is $900 per unit. Division B purchases 1,000 units of Part 201 from Division C and another 1,000 units from an external supplier. Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.
The managers for divisions A and B are preparing a new proposal for consideration.
• Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to found for these products in the short term given that supply is greater than demand in the market.
• Division C will manufacture 2,000 units of Part 101 for the Division A and 500 units of Part 201 for the Division B.
• Division A will buy 2,000 units of Part 101 from Division C and 2,000 units from an external supplier at $900 per unit.
• Division B will buy 500 units of Part 201 from Division C and 1,500 units from an external supplier at $1,900 per unit.
Division C Data 2012 Based on the Current Agreement
Part 101 201
Direct materials $200 $300
Direct labor $200 $300
Variable overhead $300 $600
Transfer price $1,000 $2,000
Annual Volume 3,000 units 1,000 units
Required:
• Calculate the increase or decrease in profits for the three divisions and the company as a whole (four separate computations) if the agreement is enforced. Explain your thought process, comment on the situation, and make a suggestion based on the computations you have made.
• Evaluate and discuss the implications of the following transfer pricing policies:
? Transfer price = cost plus a mark up for the selling division
? Transfer price = fair market value
? Transfer price = price negotiated by the managers
• Why is transfer pricing such a significant issue both from a financial and managerial perspective?
Modular Case Assignment Expectations
It is important to answer the questions as posed. The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.
Approaches and Purpose of Transfer Pricing Policies
The fundamental objective in setting transfer prices is to motivate managers to act in the best interests of the organization, and not just their division. A good transfer price is one that encourages division managers to do whatever is in the best interest of the entire organization.
There are three primary approaches to setting transfer prices, namely (1) negotiated transfer prices, (2) transfers at market price transfers, and (3) transfers at cost (or cost plus set profit) to the selling division.
The objectives of domestic transfer pricing include:
• Creating greater divisional autonomy.
• Providing greater motivation for managers.
• Enabling better performance evaluation.
• Establishing better goal congruence.
The objectives of international transfer pricing include:
• Lowering taxes, duties, and tariffs.
• Lowering foreign exchange risks.
• Improving competitive position.
• Improving relations with foreign governments.
Aug 29, 2021 | Uncategorized
The purpose of Part I is to perform preliminary analytical procedures as part of the audit planning process. You have been asked to focus your attention on two purposes of analyti cal procedures: obtain an understanding about the client’s business and indicate where there is an increased likelihood of misstatements. squired a. Refer to the financial statement data in Figure 8 9 for the current year and prior two years. Analyze the year to year change in account balance for at least five financial statement line items. Document the trend analysis in a format similar to the following: % Change % Change Account Balance 2010 2011 2009 2010
Net sales b. Calculate at least five common ratios shown on pages 232 233 and document them in a format similar to the following: Ratio 2011 2010 2009
Current ratio c. Based on the analytical procedures calculated in parts a. and b., summarize your observations about Pinnacle’s business, including your assessment of the client’s business risk.
Aug 29, 2021 | Uncategorized
Just 4 Kids
Bill Travis owns two Just 4 Kids stores in Florence, South Carolina. He believes that the stores have been successful and he wants to open a new store in Sumter about 30 miles west of Florence. Bill has been in the retail line for over 20 years, and he worked at his uncle’s hobby shop while in high school and college before starting his own store at the age of 25.
Two big secrets to a successful toy store operation are good location and product selection. Bill’s first store is located in downtown Florence. Since Bill had been born and raised in Florence, he attracted a good customer base that remained loyal to his store after some of the giant chain related toy stores began to move into the area. About 10 years ago, Bill saw the change in customer shopping habits and purchased a second store near an interchange to Interstate 95 in a rapidly growing retail area. Lots of new families had moved into the area, and Bill could not totally rely on the “good old boy” market alone to sustain his market share. This second store catered to the younger more mobile generation that shopped at or near malls.
Bill now was looking into other markets. Sumter was not located on the interstate, but the area was growing because of its proximity to the state capital of Columbia, which was just 30 miles to its west. Bill believed that the people of Sumter who commuted to work in Columbia would prefer to limit their driving for shopping activities to the immediate Sumter area. Also, since Bill was a respected citizen of Florence, his reputation as an honest businessman had spread to Sumter. He believed he could quickly build up a new customer base in that location. The big chain type stores also did not seem as interested in the Sumter area, preferring instead to locate in the larger metropolitan areas of Columbia and Florence.
The appropriate toy items to feature in his stores were very important. Bill felt that his area of influence was strictly regional, and he did not have to carry much of the standard inventory of the national chain type of toy stores. His toy lines were more a reflection of local interest; thus NASCAR related items were hot sellers. Bill’s clientele also seemed interested in computer action games and a new line of Ya’ll talking dolls.
Bill went to the Florence National Bank to inquire about funding for the new store location. He had found an abandoned furniture store in downtown Sumter along Main Street that was up for sale for $280,000. The store seemed to be the right size and at a good location. A grocery store was in the same block with ample off street parking. Bill brought his balance sheet for the last two years and an income statement for the last operating year to the bank to support his request for a retail loan of $250,000. (Copies of the financial statements are listed at the end of the case.)
Nick Tightwad, the local bank loan vice president had been a friend of Bill’s for many years. He was a customer at Bill’s toy store on close out sales, and his bank had underwritten the funding for the second store. Nick was excited about Bill’s expansion goals and the prospect of another business loan with his friend. At the same time, Nick had to live up to his reputation. He was not about to approve a loan unless he was almost 100 percent sure that the borrower would not default. Bill’s past success had alleviated much of Nick’s concern, but he still wanted to complete a detailed analysis of the financial performance of Just 4 Kids during the last calendar year. Upon reviewing the balance sheet, Nick noticed a drop in cash during the last year even though Bill showed a strong profitable performance. The current financial statements did not seem to give enough information to answer Nick’s questions and he asked Bill to prepare a statement of cash flows for the year ending December 31, 20×7.
Just 4 Kids
Balance Sheet
December 31, 20×6
| ASSETS |
|
|
|
| Cash |
|
$ 38,500 |
|
| Accounts Receivable |
|
43,000 |
|
| Inventory |
|
126,000 |
|
| Other Current Assets |
|
17,500 |
|
| Total Current Assets |
|
|
$225,000 |
| Land |
|
$100,000 |
|
| Furnishings, Fixtures & Vehicles |
$150,000 |
|
|
| Less Accumulated Depreciation |
30,000 |
|
|
| Furnishings, Fixtures & Vehicles (net) |
|
120,000 |
|
| Building |
400,000 |
|
|
| Less Accumulated Depreciation |
175,000 |
|
|
| Building (net) |
|
225,000 |
|
| Total Long Term Assets |
|
|
445,000 |
| Total Assets |
|
|
$670,000 |
|
|
|
|
| LIABILITIES |
|
|
|
| Accounts Payable |
|
$ 57,500 |
|
| Short Term Notes Payable |
|
20,000 |
|
| Other Current Liabilities |
|
13,000 |
|
| Total Current Liabilities |
|
|
$ 90,500 |
| Long Term Notes Payable |
|
|
400,000 |
| Total Liabilities |
|
|
$490,500 |
| EQUITIES |
|
|
|
| Capital |
|
$100,000 |
|
| Retained Earnings |
|
79,500 |
|
| Total Equities |
|
|
$179,500 |
| Total Liabilities and Equity |
|
|
$670,000 |
Just 4 Kids
Income Statement
For the Year Ended December 31, 20×7
| Sales Revenue |
|
$600,000 |
| Less Cost of Goods Sold |
|
310,000 |
| Gross Margin |
|
290,000 |
| Less Operating Expenses |
|
|
| Selling and Administrative |
$106,200 |
|
| Depreciation |
20,000 |
|
| Total Operating Expenses |
|
126,200 |
| Operating Income |
|
163,800 |
| Interest Expense |
$50,000 |
|
| Loss on Vehicle Sale |
2,500 |
|
| Total Other Expenses |
|
52,500 |
| Net Income Before Taxes |
|
111,300 |
| Less Income Taxes |
|
39,300 |
| Net Income |
|
$72,000 |
Just 4 Kids
Balance Sheet
December 31, 20×7
| ASSETS |
|
|
|
| Cash |
|
$2,600 |
|
| Accounts Receivable |
|
71,000 |
|
| Inventory |
|
193,000 |
|
| Other Current Assets |
|
18,900 |
|
| Total Current Assets |
|
|
$285,500 |
| Land |
|
$100,000 |
|
| Furnishings, Fixtures & Vehicles |
$166,000 |
|
|
| Less Accumulated Depreciation |
28,500 |
|
|
| Furnishings, Fixtures & Vehicles (net) |
|
137,500 |
|
| Building |
400,000 |
|
|
| Less Accumulated Depreciation |
190,000 |
|
|
| Building (net) |
|
210,000 |
|
| Total Long Term Assets |
|
|
447,500 |
| Total Assets |
|
|
$733,000 |
|
|
|
|
| LIABILITIES |
|
|
|
| Accounts Payable |
|
$ 91,500 |
|
| Short Term Notes Payable |
|
35,000 |
|
| Other Current Liabilities |
|
7,000 |
|
| Total Current Liabilities |
|
|
$133,500 |
| Long Term Notes Payable |
|
|
388,000 |
| Total Liabilities |
|
|
$521,500 |
| EQUITIES |
|
|
|
| Capital |
|
$100,000 |
|
| Retained Earnings |
|
111,500 |
|
| Total Equities |
|
|
$211,500 |
| Total Liabilities and Equity |
|
|
$733,000 |
Required (utilizing Excel):
1. Develop a Statement of Cash Flows for Just 4 Kids for the year ending December 31, 20×7.
2. Analyze the performance of Just 4 Kids based on the financial statements.
3. If you were Bill, how would you explain the issues, which could be brought up from the analysis completed in parts 1 & 2?
4. If you were Nick, would you approve the loan for Bill? Why or why not?
Aug 29, 2021 | Uncategorized
Longs Jewelers
Discussion Questions
- Complete a financial analysis of Longs Jewelers including a cash flow statement and ratio analysis and discuss your findings.
- Identify critical non quantitative issues that should be considered in the decision process.
- What risk factors should Bob be most concerned about regarding his decision?
- Identify possible ethical or values based issues that could impact any decision.
- What should Bob and Bonnie do?
Aug 29, 2021 | Uncategorized
Page | 1 Taxation (ACC3TAX) Group Assignment Semester 2, 2013 The assessment task requires you to correctly calculate taxable income, income tax payable and complete an income tax return for a mixed business/sub newsagency called ALLNews. It gives you the opportunity to: • Demonstrate an understanding of legal principles and their application, specifically in relation to taxation and case law. • Interpret the relevant legislation and common law principles and make informed judgements on issues relating to the application of these as they pertain to sole traders.
Aug 29, 2021 | Uncategorized
1 Sola Systems Sola Systems, a company focussed on clean, energy products assembles and sells two types of solar panels, Panel A and Panel B. The company’s sales occur in two regions – One is called Northern and incorporates Queensland, New South Wales and the Northern Territory. The other is called Southern and incorporates Victoria, Tasmania, South Australia, and Western Australia. Sola Systems has used a cost and performance measurement system based on monthly profit reports for each product and for each region as described below.
Aug 29, 2021 | Uncategorized
Final Examination Booklet Managerial Accounting 1 Managerial Accounting Examination Examination Note: You should complete all lesson exams before you take the final exam. Complete the following exam by answering the questions and compiling your answers into a word processing document. When you’re ready to submit your answers, refer to the instructions at the end of your exam booklet. Be certain to indicate the proper question number before each of your answers. Remember to show your work if an answer requires a mathematical solution. Answer each of the following 20 questions. Each answer is worth 5 points. 1. The work in process inventory account of a manufacturing company shows a balance of $3,000 at the end of an accounting period. The job cost sheets of the two incomplete jobs show charges of $500 and $300 for direct materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate as a percentage of direct labor costs. What percentage is the rate? 2. The break even point in dollar sales for Rice Company is $480,000 and the company’s contribution margin ratio is 40 percent. If Rice Company desires a profit of $84,000, how much would sales have to total? 3. Williams Company’s direct labor cost is 25 percent of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct material cost was $25,000, how much is the direct labor cost? EXAMINATION NUMBER: 06168501 2 Final Examination 4. Grading Company’s cash and cash equivalents consist of cash and marketable securities. Last year the company’s cash account decreased by $16,000 and its marketable securities account increased by $22,000. Cash provided by operating activities was $24,000. Net cash used for financing activities was $20,000. Based on this information, was the net cash flow from investing activities on the statement of cash flows a net increase or decrease? By how much? 5. Gladstone Footwear Corporation’s flexible budget cost formula for supplies, a variable cost, is $2.82 per unit of output. The company’s flexible budget performance report for last month showed an $8,140 unfavorable spending variance for supplies. During that month, 21,250 units were produced. Budgeted activity for the month had been 20,900 units. What is the actual cost per unit for indirect materials? 6. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $60,000 for Division A, and had a contribution margin ratio of 30 percent in Division B, when sales in Division B were $240,000. Net operating income for the company was $22,000 and traceable fixed expenses were $45,000. How much were Lyons Company’s common fixed expenses? 7. Atlantic Company produces a single product. For the most recent year, the company’s net operating income computed by the absorption costing method was $7,800, and its net operating income computed by the variable costing method was $10,500. The company’s unit product cost was $15 under variable costing and $24 under absorption costing. If the ending inventory consisted of 1,460 units, how many units must have been in the beginning inventory? Final Examination 3 8. Black Company uses the weighted average method in its process costing system. The company’s ending work inprocess inventory consists of 6,000 units, 75 percent complete with respect to materials and 50 percent complete with respect to labor and overhead. If the total dollar value of the inventory is $80,000 and the cost per equivalent unit for labor and overhead is $6.00, what is the cost per equivalent unit for materials? 9. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine hours. The performance report for July showed that actual maintenance costs totaled $11,315 and that the associated rate variance was $146 unfavorable. If 7,300 machine hours were actually worked during July, what is the budgeted maintenance cost per machine hour? 10. The cost of goods sold in a retail store totaled $650,000. Fixed selling and administrative expenses totaled $115,000 and variable selling and administrative expenses were $420,000. If the store’s contribution margin totaled $590,000, how much were the sales? 11. Denny Corporation is considering replacing a technologically obsolete machine with a new state of the art numerically controlled machine. The new machine would cost $600,000 and would have a 10 year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $20,000 per year to operate and maintain, but would save $125,000 per year in labor and other costs. The old machine can be sold now for scrap for $50,000. What percentage is the simple rate of return on the new machine rounded to the nearest tenth of a percent? (Ignore income taxes in this problem.) 4 Final Examination 12. Lounsberry Inc. regularly uses material O55P and currently has in stock 375 liters of the material, for which it paid $2,700 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $6.35 per liter. New stocks of the material can be purchased on the open market for $7.20 per liter, but it must be purchased in lots of 1,000 liters. You’ve been asked to determine the relevant cost of 900 liters of the material to be used in a job for a customer. What is the relevant cost of the 900 liters of material O55P? 13. Harwichport Company has a current ratio of 3.0 and an acid test ratio of 2.8. Current assets equal $210,000, of which $5,000 consists of prepaid expenses. The remainder of current assets consists of cash, accounts receivable, marketable securities, and inventory. What is the amount of Harwichport Company’s inventory? 14. Tolla Company is estimating the following sales for the first six months of next year: January $350,000 February $300,000 March $320,000 April $410,000 May $450,000 June $470,000 Sales at Tolla are normally collected as 70 percent in the month of sale, 25 percent in the month following the sale, and the remaining 5 percent being uncollectible. Also, customers paying in the month of sale are given a 2 percent discount. Based on this information, how much cash should Tolla expect to collect during the month of April? Final Examination 5 15. Trauscht Corporation has provided the following data from its activity based costing system: The company makes 360 units of product P23F a year, requiring a total of 725 machine hours, 85 orders, and 45 inspection hours per year. The product’s direct materials cost is $42.30 per unit and its direct labor cost is $14.55 per unit. The product sells for $132.10 per unit. According to the activity based costing system, what is the product margin for product P23F? 16. Williams Company’s direct labor cost is 30 percent of its conversion cost. If the manufacturing overhead for the last period was $59,500 and the direct materials cost was $37,000, what is the direct labor cost? 17. In a recent period, 13,000 units were produced, and there was a favorable labor efficiency variance of $23,000. If 40,000 labor hours were worked and the standard wage rate was $13 per labor hour, what would be the standard hours allowed per unit of output? 18. The balance in White Company’s work in process inventory account was $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labor cost during August and requisitioned $25,000 in raw materials (all direct material). If the sum of the debits to the manufacturing overhead account total $28,000 for the month, and if the sum of the credits totaled $30,000, then was Finished Goods debited or credited? By how much? Activity Cost Pool Total Cost Total Activity Assembly $704,880 44,000 machine hours Processing orders $91,428 1,900 orders Inspection $117,546 1,950 inspection hours 6 Final Examination 19. A company has provided the following data: Sales 4,000 units Sales price $80 per unit Variable cost $50 per unit Fixed cost $30,000 If the dollar contribution margin per unit is increased by 10 percent, total fixed cost is decreased by 15 percent, and all other factors remain the same, will net operating income increase or decrease? By how much? 20. For the current year, Paxman Company incurred $175,000 in actual manufacturing overhead cost. The manufacturing overhead account showed that overhead was overapplied in the amount of $9,000 for the year. If the predetermined overhead rate was $8.00 per direct labor hour, how many hours were worked during the year? Final Examination 7 Submitting Your Assignment Submit your final exam online. 1. On your computer, save a revised and corrected version of your answers. 2. Go to http://www.takeexamsonline.com and log in. 3. Go to My Courses. 4. Click on Take Exam next to the lesson you’re working on. 5. Enter your e mail address in the box provided. (Note: This information is required for online submission.) 6. Attach your file or files as follows: a. Click on the Browse box. b. Locate the file you wish to attach. c. Double click on the file. d. Click on Upload File. e. If you have more than one file to attach, repeat steps a–d. 7. Click on Submit Files. Be sure to keep a backup copy of your completed assignment.
Aug 29, 2021 | Uncategorized
From which one of the following evidence gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories? Select one: a. Observation of physical inventory counts. b. Auditor’s re computation of inventory extensions. c. Confirmation of inventories in a public warehouse d. Written inventory representations from management. 2) When designing audit procedures, the direction of tests is a crucial http://moodle.aih.nsw.edu.au/mod/quiz/attempt.php?attempt=134&page=1step in satisfying the: Select one: a. Valuation objective. b.
Aug 29, 2021 | Uncategorized
Cost Accounting2 questions :
Answer each of the following questions in two to four sentences.
1) An employee who manufactures goods for her employer earns $14 an hour for regular wages. She’s paid time and a half for all hours worked in excess of 40 hours per week. In a recent week she worked 48 hours.
a. How much of her gross pay that week was direct labor?
b. How much was indirect labor?
2) A company has $50,000 in fixed costs and sells one product with a selling price of $15 per unit. If variable costs are $5 per unit, what is this company’s break even sales in units?
Business Law 1 (4 questions )
1) Anne is under an employment agreement with Ellen. Jack is an old business acquaintance of Anne, and contacts Anne asking her if she would be interested in working for his company. Jack offers Anne three times her salary with Ellen, although Jack doesn’t know what Anne’s salary is with Ellen, or even that Anne is under contract with Ellen. Anne jumps at the deal and leaves Ellen. Has the tort of wrongful interference occurred? Why or why not ?
2) Nika enters an agreement with Tricia in which Nika agrees to lease electronic equipment from Tricia. Is there a body of statutory law that will govern the terms of this agreement, and if so, what’s the body of statutory law?
3) Ethan and Leigh Ann enters an agreement in which Ethan agrees to sell Leigh Ann exercise equipment. The terms of the agreement are delivery ex ship. Ethan places the exercise equipment on a ship to Europe, where Leigh Ann resides. While on the Atlantic, a storm destroys the exercise equipment. Who bears the risk of loss? Why?
4) XYZ Company is trying to persuade Allison to come and work for the company. One of the high level executives of ZYZ Company tells Allison that she will absolutely be in an executive position within two years, even though the executive knows that it will be at least five years before Allison is in an executive position. Based upon this promise, Allison leaves her job in Boston and moves to California to work at XYZ Company. When Allison realizes the executive lied, she tries to get her old job back, but her former employer had already hired someone else. What tort has XYZ Company committed through its executive? Discuss how the elements o this tort are met in this instance.
Aug 29, 2021 | Uncategorized
| Date |
Activities |
Units Acquired at Cost |
Units Sold at Retail |
|
Mar. |
1 |
|
Beginning inventory |
|
50 |
units |
@ $50/unit |
|
|
|
|
|
Mar. |
5 |
|
Purchase |
|
200 |
units |
@ $55/unit |
|
|
|
|
|
Mar. |
9 |
|
Sales |
|
|
|
|
|
210 |
units |
@ $85/unit |
|
Mar. |
18 |
|
Purchase |
|
60 |
units |
@ $60/unit |
|
|
|
|
|
Mar. |
25 |
|
Purchase |
|
100 |
units |
@ $62/unit |
|
|
|
|
|
Mar. |
29 |
|
Sales |
|
|
|
|
|
80 |
units |
@ $95/unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
410 |
units |
|
|
290 |
units |
|
|
|
|
|
|
|
|
Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average. (Due to rounding, the sum of Cost of Goods Sold and Ending inventory may not equal the Cost of Good available for sales. Round yourper unit costs to 3 decimal places and inventory balances to the nearestdollar amount. Omit the “$” sign in your response.)
|
|
|
|
|
Aug 29, 2021 | Uncategorized
The following is a December 31, 2013, post closing trial balance for Almway Corporation.
| Account Title |
Debits |
Credits |
| Cash |
|
85,000 |
|
|
|
|
| Investments |
|
150,000 |
|
|
|
|
| Accounts receivable |
|
80,000 |
|
|
|
|
| Inventories |
|
220,000 |
|
|
|
|
| Prepaid insurance |
|
8,000 |
|
|
|
|
| Land |
|
130,000 |
|
|
|
|
| Buildings |
|
440,000 |
|
|
|
|
| Accumulated depreciation—buildings |
|
|
|
|
120,000 |
|
| Equipment |
|
130,000 |
|
|
|
|
| Accumulated depreciation—equipment |
|
|
|
|
80,000 |
|
| Patents (net of amortization) |
|
30,000 |
|
|
|
|
| Accounts payable |
|
|
|
|
115,000 |
|
| Notes payable |
|
|
|
|
190,000 |
|
| Interest payable |
|
|
|
|
40,000 |
|
| Bonds payable |
|
|
|
|
260,000 |
|
| Common stock |
|
|
|
|
360,000 |
|
| Retained earnings |
|
|
|
|
108,000 |
|
|
|
|
|
|
|
|
| Totals |
|
1,273,000 |
|
|
1,273,000 |
|
|
|
|
|
|
|
|
|
Additional information:
| 1. |
The investment account includes an investment in common stock of another corporation of $50,000 which management intends to hold for at least three years. The balance of these investments is intended to be sold in the coming year.
|
| 2. |
The land account includes land which cost $45,000 that the company has not used and is currently listed for sale.
|
| 3. |
The cash account includes $35,000 set aside in a fund to pay bonds payable that mature in 2016 and $43,000 set aside in a three month Treasury bill.
|
| 4. |
The notes payable account consists of the following: |
|
a. |
a $50,000 note due in six months. |
|
b. |
a $70,000 note due in six years. |
|
c. |
a $70,000 note due in 5 annual installments of $14,000 each, with the next installment due February 15, 2014.
|
| 5. |
The $80,000 balance in accounts receivable is net of an allowance for uncollectible accounts of $5,000. |
| 6. |
The common stock account represents 120,000 shares of no par value common stock issued and outstanding. The corporation has 500,000 shares authorized.
|
|
Prepare a classified balance sheet for the Almway Corporation at December 31, 2013.
|
|
Aug 29, 2021 | Uncategorized
I just realised I won’t have time to do this assignment. Can somebody help me? thanks
Aug 29, 2021 | Uncategorized
Farman Appliance Mart began operations on May 1. It uses a perpetual inventory system. During May, the company had the following purchases and sales for its Model 25 Sureshot camera.
|
|
|
Purchases
|
|
|
|
|
|
Date
|
|
Units
|
|
Unit Cost
|
|
Sales Units
|
|
May 1
|
|
308
|
|
$146
|
|
|
|
May 4
|
|
|
|
|
|
176
|
|
May 8
|
|
352
|
|
$166
|
|
|
|
May 12
|
|
|
|
|
|
220
|
|
May 15
|
|
264
|
|
$181
|
|
|
|
May 20
|
|
|
|
|
|
132
|
|
May 25
|
|
|
|
|
|
176
|
Determine the ending inventory under a perpetual inventory system using (1) FIFO, (2) moving average cost, and (3) LIFO. (Round answers to 0 decimal places, e.g. $2,150.)
Aug 29, 2021 | Uncategorized
| On 1 July 2011 Martin Ltd acquired all of the shares of Lewis Ltd for |
| At the 1 July 2011 the statement of financial position of Lewis Ltd was as follows: |
|
|
|
|
|
|
Aug 29, 2021 | Uncategorized
ACL FIles can be found on
www.usq.edu.authen clickUconnectType in Id u1017503Password Welcome2013 (enter)
Then ClickULearn
Then Click Auditing Practising
then Under Module 6 you can see ACL Files
Thanks
Aug 29, 2021 | Uncategorized
You are to prepare a submission to satisfy your client’s requirements as outlined below. You are
required to investigate the issues at Pressure Hydraulics and provide a feasibility study into the
improvement to their current business processes. You will need to conduct an investigation into the
client’s problems and evaluate a solution to meet their business needs.
Overview – Pressure Hydraulics
Pressure Hydraulics is a locally owned business that currently has three service centres; Newcastle,
Toronto and Maitland. Each service centre provides maintenance and specialised servicing of
hydraulic systems as used in cars, trucks and earth moving equipment. The Maitland service centre
also provides a specialty service to the mining industry where two purpose built trucks go onsite to
service a range of mining equipment.
The business has become quite profitable in the past years and its owner, Allan Taylor, has devised
plans to expand by opening service centres at Coffs Harbour and Gosford. Allan has future plans for
other service centres along the east coast of NSW. He also feels that the time is right to look at how IT
can support the existing business and enable his future business plans.
Currently, Allan spends a portion of each day at each service centre to monitor its operations. This is
leaving little time to continue developing his business and he realises he will not be able to spend the
same sort of time in the Coffs Harbour and Gosford service centres.
Aug 29, 2021 | Uncategorized
Case Study: Case of the Pricing Predicament
This case study represents loyalty and integrity issue beyond fixed or variable prices. Scott, the salesman at Standard Machines has made a bid based upon the fix price established by his company at $429K. In this case, the company of Occidental Aerospace is taking bid from companies to earn the rights to their contract. Since Standard Machines was a loyal long time standing customer, Joan from Occidental Aerospace noticed that Scott’s bid was not in the ball park of what they were looking for. She then told Scott how much to lower his bid by to be competitive. Of course, since Scott had already established a fixed price with his company he has to readdress the fixed price with his boss.
I look at this case study and noted a couple of interesting facts. One can view the inside track of letting Scott know how and what the competition is bidding but yet it offers him to make a lower bid than what he originally proposed. This bid could be a lost for his company depending on the work being performed. However, Joan advised Scott that there could be work in the future with new facilities
being built but not guaranteeing the contract for his company. I have noticed that bid that Scott has proposed at $429K was over $29K more than the next bid but Joan wanted him to cut his price by another $22K. For some reason this seems a little strange to me maybe they like Scott’s business and wanted him to work certain price or they were pencil whipping the bids at a number to which they wanted to accept. After all, Scott doesn’t know how accurate the “inside” information is.
A couple of things has changed for Standard Machine and Occidental Aerospace businesses. You can look at the conversation as a contract from Joan to Scott by saying he could win the contract by lowering his bid. Joan could be referencing that by lowering your bid and taking this contract it will give you future business because of the two new facilities being built in the next four years. All these factors mentioned in the conversation gives Scott reason and justification to talk to his boss in order to change his original price. However, if Scott’s boss feel as though the price is fixed and not variable due to cost analysis of taking the job he won’t
budge from his original bid and possibly losing the job.
In a case like this depending on the relationship I have with Occidental Aerospace, the reliability of the source, and the cost analysis of lowering my bid I would have to re evaluate the terms. I would need some guarantee of getting the bid before even addressing my boss about changing our bid. If it was a sure thing with strong possible contracts in the future then the sacrifice of lowering our bid today could be a plus in the future. On the other end I would have to look at the numbers based upon other contracts or jobs and see how the prices ranges as to not be taken advantage of by Occidental Aerospace. Who says that Joan could be playing a numbers game trying to get the cheapest and best service for her company and knowing the work that Scott’s company conduct she could be playing with numbers in order to get his bid cheaper. All these factors have a bearing on how I would proceed forward. In this case based upon the information provided I would take the risks of lowering our bid building a work relationship to obtain future business from Occidental Aerospace.
Case Analysis: Case of the Pricing Predicament
I. Major Facts
A. Scott is a salesman for Standard Machine
B. Scott received a call from Joann, the purchasing agent at Occidental Aerospace
C. Occidental is Standard’s largest and most loyal account
D. Scott followed Standard’s fixed price policy and submitted a bid of $429K
E. Joann informed him that two competitors submitted bids of “under 390K” and another bid of “a little over 400K”
F. Scott needs to cut his bid by an additional 22K to win the contract
G. Joann informs Scott that Occidental will be building two new plants over the next four years, representing “a lot of potential business.”
H. Scott goes to Tony, the sales manager, to ask for an exception to the fixed price policy
II. Major Problem
A. The dilemma for Standard Machine is whether it needs to uphold its fixed price policy or adjust it to maintain the mutually rewarding relationship with Occidental.
III. Possible Solutions/Alternatives
A. Standard Machine could leave the fixed price policy in place. For many years Standard and Occidental have been doing business with each other and it has been a mutually rewarding relationship.
B. Since the milling machine is for Occidental’s new training center, Standard Machine could just give the machine to Occidental for a joint learning pilot where Standard Machine’s machine operators
could be trained on its use. After a few years, Occidental could return the machine or purchase it for half of the original price.
C. Standard Machine could withdraw their bid. Tony could argue the fact Standard would have to cut corners on the product thus causing Occidental to not get the quality that they are used to.
IV. Advantages and Disadvantages
A. The advantages to alternative number one:
1. Tony could take over the negotiations and play on Standard and Occidental’s long term relationship and emphasize Standards high level of quality in its products and customer service. It is apparent that Occidental prefers Standard’s package over the other two competitors.
2. Standard would maintain a pricing policy that has been critical to its success over the years.
3. Standard’s stance would bring the focus back on value and not pricing.
B. The disadvantages to alternative number one:
1. Standard could lose the contract to the foreign competitors and allow another company to gain a foothold into Occidental’s business
2. Standard erode their long term relationship with Occidental because they will be viewed as rigid and not open to other alternatives or compromise.
C. The advantages to alternative number two:
1. Standard would win the contract and future contracts with Occidental. This strategy would be mutually beneficial for all parties involved.
Standard could train their machine operators there alongside Occidental employees.
2. This strategy would demonstrate Standard’s commitment to maintaining its solid relationship with Occidental. Occidental would feel that their business is valued.
D. The disadvantages to alternative number two:
1. Standard would lose a significant amount of capital with this strategy. Standard would lose out on 429 thousand dollars for the equipment. Also, Standard would have to invest thousands of dollars to send the machine operators to training and provide new training materials.
2. This is a win lose strategy. Occidental wins because it is receiving needed new equipment at no cost. Occidental will be able to train and use this equipment for its benefit for several years.
3. Standard would never recoup the $429K. Occidental could return the equipment or purchase for half of the original price.
4. Occidental’s perception of Standard’s fixed price policy would change. With each possible contract, Occidental would try and make Standard “adjust or give in” to a lower price to maintain their relationship.
E. The advantages to alternative number three:
1. Standard would remain true to the fixed price policy that has been critical to its success for many years.
2. Occidental could refocus on the mutually beneficial relationship with Standard and the quality products it
has received over the years.
F. The disadvantages to alternative number three:
1. Standard would run the risk of allowing foreign competition to erode its relationship with Occidental.
2. Standard could potentially lose Occidental’s future business from the new plants due to their rigid pricing policy
3. Occidental is Standard Machine’s largest accounts. Standard stands to lose millions in capital gain if it loses this account completely.
V. Choice and Rationale
I choose alternative number three. Standard Machine has to remain true to a policy that has assisted them in maintaining high capital gains and a competitive edge in the industry. Companies that do business with Standard Machine understand that they will always receive the high quality products that fit their needs. Joann, the purchasing agent, called Scott because Occidental wants to award the contract to Standard Machine. Occidental would rather do business with Standard because of their positive past history. But, Joann has to try and sync Standard Machine’s price to Occidental’s new purchasing policies. Standard realizes that global competition is a real threat and the economy landscape has changed. Yet, Standard Machine also realizes that value, quality and superior customer service plays a huge part in what another company is willing to pay. So by withdrawing the bid, it will force Occidental to refocus on
the quality service that they always receive from Standard. Occidental would question if it is beneficial to go with a supplier that they never did any business with or go with a supplier that over the years has given them superior service? The answer is easy. Occidental will make an exception to their new purchasing policies when dealing with Standard. They know that maintaining the relationship with Standard Machine is a win win situation.
VI. Implementation/The Action Plan
1. Standard needs to thoroughly train their sales force to research their prospects and become knowledgeable of that company’s problems, its needs and strategy. If the sales force becomes that intimate with their prospects, no other competitor could win a contract from Standard based on price alone.
2. Tony will meet with headquarters to establish mandatory sales training when a person joins the sales staff. Also, mandatory training will be established for existing sales personnel to maintain their skill level.
3. Tony will also establish weekly sales meetings to receive updates and feedback on each prospect and the research the sales rep has completed on the company.
4. To prevent any future damage control, headquarters will develop a policy that will hold the sales rep and sales team liable it a rep starts negotiations with a company without being fully armed with all the necessary company information.
Aug 29, 2021 | Uncategorized
| Raw Materials |
| Beginning Balance |
|
$11,000 |
|
|
|
|
|
|
????? |
|
|
|
|
|
|
|
|
$70,000 |
|
|
| Ending Balance |
|
$13,000 |
|
|
|
|
| Work in Process |
| Beginning Balance |
|
$16,000 |
|
|
|
|
| Direct Material |
|
????? |
|
|
|
|
| Direct Labor |
|
48,000 |
|
|
|
|
| Overhead |
|
73,000 |
|
|
|
|
|
|
|
|
$????? |
|
|
| Ending Balance |
|
$23,000 |
|
|
|
|
| Finished Goods |
| Beginning Balance |
|
$26,000 |
|
|
|
|
|
|
????? |
|
|
|
|
|
|
|
|
$????? |
|
|
| Ending Balance |
|
$18,000 |
|
|
|
|
(a) Calculate the amount of raw materials purchased during the period.
| Raw materials purchased |
|
$ |
(b) Calculate the direct materials used in production during the period.
| Direct materials used in production |
|
$ |
(c) Calculate the total manufacturing cost for the period.
| Total manufacturing cost |
|
$ |
(d) Calculate the cost of goods manufactured for the period.
| Cost of goods manufactured |
|
$ |
(e) Calculate the cost of goods sold for the period.
Aug 29, 2021 | Uncategorized
| AE4 14 |
 |
(Comprehensive Income)
Armstrong Corporation reported the following for 2012: net sales $1,201,300; cost of goods sold $777,800; selling and administrative expenses $339,500; and an unrealized holding gain on available for sale securities $24,200.
Prepare a statement of comprehensive income, using the two income statement format. Ignore income taxes and earnings per share.(Enter all amounts as positive amounts and subtract where necessary.)
Aug 29, 2021 | Uncategorized
334
PART 2 COSTS AND COSTING SYSTEMS
Required: 1 Calculate the cost per unit under variable and absorption costing. 2 Prepare income statements for the current year using: (a) Absorption costing. (b) Variable costing. 3 Reconcile the profit reported under the two methods by listing the two key areas where the income statements differ. 4 Reconcile the profit reported under the two methods using the short cut method. 5 Construct an Excel® spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following information changes: the selling price and the direct material cost per unit are $16.00 and $4.50, respectively.
P7.42 (appendix) Normal costing; profit under absorption and variable costing: manufacturer Furry Pillows Pty Ltd’s planned production for the current year was 10000 units. This production level was achieved, but only 9 000 units were sold at $40 each. Other data are as follows:
[L011]
Direct materials used Direct labour cost incurred Fixed manufacturing overhead (actual and planned) Variable manufacturing overhead (actual and planned) Fixed selling and administrative expenses Variable selling and administrative expenses Finished goods inventory, 1 January
$80000 40 000 50 000 24000 60 000 9 000 None
The company uses normal costing. There were no work in process inventories at the beginning or end of the year. Required: 1 Prepare an income statement for Furry Pillows for the current year using: (a) Absorption costing. (b) Variable costing. 2 Which costing method, absorption costing or variable costing, shows a higher operating profit? Why? 3 What would be Furry Pillows’ finished goods inventory cost on 31 December, under: (a) Variable costing? (b) Absorption costing? 4 Which costing method, variable or absorption, would you recommend to Furry Pillows’ management? Explain.
Cases
(CPA, adapte
acre I
Selected problems are available in McGraw Hill Connect Plus
C7.43 [L03] [L04] [L06] [L010]
Support department cost allocation; plantwide versus departmental overhead rates; product costing; cost drivers: manufacturer Rising Fast Pty Ltd manufactures a complete line of fibreglass attaché cases and suitcases. The firm has three manufacturing departments: Moulding, Component and Assembly. There are also two support departments: Power and Maintenance. The sides of the cases are manufactured in the Moulding Department. The frames, hinges and locks are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials and time are required to manufacture each type of case.
IL
CHAPTER 7 A CLOSER LOOK AT OVERHEAD COSTS
Rising Fast has always used a plantwide overhead rate. Direct labour hours are used to assign overhead to products. The predetermined overhead rate is calculated by dividing the company’s total estimated overhead by the total estimated direct labour hours to be worked in the three manufacturing departments. Liam Bolt, manager of cost accounting, has recommended that Rising Fast use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Bolt and are presented by department in the following schedules. (All numbers are in thousands.)
Departmental activity measures: Direct labour hours Machine hours Departmental costs: Direct material Direct labour Manufacturing overhead Total departmental costs
Maintenance:
Manufacturing departments
Moulding Component Assembly 500 2 000 1 500 875 125 0 $12 400 $30 000 $ 1 250 3 500 20 000 12 000 21 000 16 200 22 600 $36 900 $66 200 $35 850
Use of support departments Moulding Component Assembly
Estimated usage in labour hours for the coming year 90 25 10 Power (in kilowatt hours): Estimated usage for the coming year 360 320 120
Departmental activity measures: Estimated usage for the coming year Departmental costs: Materials and supplies (variable) Variable labour Fixed overhead Total support department costs
Support departments Power Maintenance
800 kWh 125 labour hours
$5 000 1 400
$1 500 2 250
12 000 250 $18400 $4 000
Required: 1 (a) Calculate the plantwide overhead rate for Rising Fast for the coming year using the same method as used in the past. (b) Estimate the overhead cost of an Elite attaché case that requires 4 direct labour hours and 5 machine hours in the Moulding Department, 3 direct labour hours in the Component Department and 2 direct labour hours in the Assembly Department. 2 Liam Bolt has been asked to develop departmental overhead rates for comparison with the plantwide rate. The following steps are to be followed in developing the departmental rates: (a) Allocate the total Maintenance Department costs to the three manufacturing departments, using the direct method. (b) Allocate the Power Department costs to the three manufacturing departments, using the direct method.
335
Aug 29, 2021 | Uncategorized
Assume that three accountants have been selected to measure the income of a firm under two different income measurement systems. The results for the first income system (M1) were incomes of $3,000, $2,600, and $2,200. Under the second system (M2), results were $5,000, $4,000, and $3,000. Assume that users of accounting data believe that dividends of a year are equal to 75 percent of income determined by M1 for the previous year. Users also believe that dividends of a year are equal to 60 percent of income determined by M2 for the previous year. Actual dividends for the year following the income measurements were $3,000. Determine the objectivity and bias of each of the two measurement systems for the year under consideration. On the basis of your examination, which of the two systems would you prefer?
Aug 29, 2021 | Uncategorized
J & J Enterprises is formed on December 31, 2000. At that point it buys one asset costing $2,487. The asset has a three year life with no salvage value and is expected to generate cash flows of $1,000 on December 31 in the years 2001, 2002, and 2003. Actual results are exactly the same as plan. Depreciation is the firm’s only expense. All income is to be distributed as dividends on the three dates mentioned. Other information:
· The price index stands at 100 on December 31, 2000. It goes up to 104 and 108 on January 1, 2002 and 2003, respectively.
· Net realizable value of the asset on December 31 in the years 2001, 2002, and 2003 is $1,500, $600, and 0, respectively.
· Replacement cost for a new asset of the same type is $2,700, $3,000, and $3,300 on the last day of the year in 2001, 2002, and 2003, respectively.
· Revenue is $1,000 per year and the internal rate of return is 10% and all cash flows are received (and distributed) on December 31.
Required :
Income statements for the years 2001, 2002, and 2003 under:
1. Historical costing
2. General price level adjustment
3. Exit valuation
4. Replacement cost
5. Discounted cash flows
Aug 29, 2021 | Uncategorized
Objectivity (also called “verifiability”) and bias (usefulness) are two extremely important characteristics of accounting. Discuss each of the following situations in terms of how you believe they would impact upon objectivity and bias.
(a) The latest standard on troubled debt restructuring, SFAS No. 114, calls for newly restructured receivables to be discounted at the original or historical discount rate. Two board members disagreed with the majority position because they thought the discount rate should be the current discount rate, given the terms of the note and the borrower’s credit standing.
(b) SFAS No. 115 requires marketable equity securities to be carried at fair value (market value). Its predecessor, SFAS No. 12, required marketable equity securities to be carried at lower of cost or market.
(c) Assume that a new standard would allow only FIFO in inventory and cost of goods sold accounting with weighted average and LIFO being eliminated (you may ignore income tax effects).
Aug 29, 2021 | Uncategorized
During its long tenure, the CAP produced a total of 51 ARBs. While the CAP was in existence, another committee, the Committee on Terminology of the American Institute of Accountants (the previous name of the AICPA), prepared certain definitions. Assess their definitions of assets and liabilities (see Chapter 11 for the definitions). Do you see any problems with one committee preparing rules and another making definitions?
Read Chapter 15 of ARB 43 on unamortized discount, issue cost, and redemption premium on bonds refunded. Why do you think these issues concerned the committee?
What were the two acceptable alternatives for dealing with the costs of any issue? Why would the definition of assets be helpful in analyzing a situation of this type? Are there any other situations that might be somewhat analogous to the bond redemption situation?
Aug 29, 2021 | Uncategorized
Benston (1982, p. 102), in an analysis of corporate social accounting and reporting (CSAR), says: “The social responsibility of accountants can be expressed by their forebearing from social responsibility accounting.” However, in a critique of Benston’s analysis, Schreuder and Ramanathan (1984, p. 414) state:
The comments . . . do not purport to convey the message that there is no value at all in analyzing the potential of CSAR from a shareholder perspective and proceeding from the (implicit) assumption of perfect and complete markets. We do, however, wish to point out that this may not be the most appropriate perspective as (1) CSAR is addressed toward a more inclusive group of stakeholders and (2) one of its main objectives is to include in the accounting system those aspects of corporate behavior that are decidedly not handled well by the market. Therefore, the perspective implied in Benston’s analysis is of very limited value at best.
Required:
CSAR assumes there is a legitimate interest or “stake” in the corporation beyond the stockholders’ interests, and that these other stakeholders’ interests are not well served by traditional financial statements. Therefore, it follows that within a broad political economy of accounting, CSAR is an important policy making issue. Critically evaluate this proposition and indicate your agreement or disagreement and the underlying reasons for your position.
Aug 29, 2021 | Uncategorized
Discuss the economic consequences issues that are present in each of the following transaction situations.
(a) SFAS No. 13 allows lease contracts to be set up so that the transaction can usually be set up as an operating lease rather than a capital lease.
(b) When SFAS No. 19 was passed, medium sized petroleum exploration firms campaigned hard to set it aside. SFAS No. 19 would have allowed successful efforts only, whereas the lobbying firms wanted an unrestricted choice between full costing and successful efforts.
(c) A securities industry group objected to part of APB Opinion No. 10, which would have required that all convertible debt be broken down into debt and equity portions at the time of issue. The debt portion (bonds payable plus premium or minus discount) would be booked at the effective rate without the conversion privilege with the equity portion credited to paid in capital. The industry group was pleased by APB Opinion No. 14, which did not break out the equity portion of convertible debt except if detachable stock warrants were issued. Why was the securities industry group (which represented investment bankers who floated large loans for industry) unhappy with Opinion No. 10 and pleased with Opinion No. 14?
(d) SFAS No. 87 does not show the full pension obligation or liability in the balance sheet (although a “minimum” liability may be present).
(e) SFAS No. 96 made it much more difficult to recognize deferred tax assets as opposed to deferred tax liability (a more even handed treatment was used in recognizing deferred tax assets and liabilities in SFAS No. 109, which superceded SFAS No. 96).
(f) The FASB tried to include the cost of stock options as an expense but they were prevented from doing so by vociferous opposition from the business community, although it now is going to happen under SFAS No. 123R.
Aug 29, 2021 | Uncategorized
Assume the following for the year 2000 for the Staubus company:
|
Revenues
|
|
$1,000,000
|
|
Operating expenses
|
|
|
|
Cost of goods sold
|
$400,000
|
|
|
Depreciation
|
100,000
|
|
|
Salaries and wages
|
200,000
|
|
|
Bond interest (8% Debentures sold at maturity value
of $1,000,000)
|
|
80,000
|
|
Dividends declared on 6% Preferred Stock (par value
$500,000)
|
|
30,000
|
|
Dividends declared of $5 per share on Common Stock
(20,000 shares outstanding a par value of $100 per
share)
|
|
100,000
|
(a) Determine the income under each of the following equity theories:
Proprietary theory
Entity theory (orthodox view)
Entity theory (unorthodox view)
Residual equity
Would any of your answers change if the preferred stock is convertible at any time at the ratio of 2 preferred shares for 1 share of common stock?
Aug 29, 2021 | Uncategorized
A few years ago both Halliburton Corporation, a large construction company, and its auditor, Arthur Andersen, were chided for allowing Halliburton to book a percentage of cost overruns that Halliburton has attempted to collect from customers after projects are completed but before both agreed settlements with customers and, of course, collection thereof. The practice of trying to collect cost overruns in the construction industry is certainly not uncommon. Until 1998 cost overrun collections were not booked until received. Since that time Halliburton “began guessing how much of a disputed surcharge would ultimately get paid and crediting itself in advance.”
Required:
(a) Is there a case that can be made for allowing Halliburton to book these overruns? What arguments, if any, support Halliburton’s accounting methods?
(b) What situations should prevent Halliburton from booking these overruns prior to collection?
Aug 29, 2021 | Uncategorized
Assume that an asset is being examined and it is determined that its cash flows would be $10,000 per year for four years (assume that all cash flows are received at the end of the year). The carrying value of the asset is $35,000 and its replacement cost is $30,000. The firm’s cost of capital is 10 percent.
Required:
a. What would be the amount, if any, that should be written off because the asset is impaired under SFAS No. 121?
b. Why is your answer in part (a) anomalous and how does SFAS No. 121 justify it?
c. Would your answer to part (a) be different if the cash flows were $8,000 rather than $10,000? Explain.
d. Is there anything unusual about your answer to part (c) since accounting rules are frequently concerned with conservatism?
Aug 29, 2021 | Uncategorized
Assets A, B, and C comprise an asset group. Asset B is considered to be the principal asset in this group. Asset B has a three year estimated life and A and C have remaining lives of four years. Data on the expected undiscounted cash flows of the three assets, their book values (carrying values), and their fair values less costs to dispose are shown below:
|
Undiscounted cash
flows by year
|
A
|
B
|
C
|
|
1
|
$18,000
|
$80,000
|
$12,000
|
|
2
|
15,000
|
70,000
|
10,000
|
|
3
|
12,000
|
65,000
|
9,000
|
|
4
|
10,000
|
|
6,000
|
|
Book value
|
$60,000
|
$220,000
|
$20,000
|
|
Fair value less Disposal costs
|
$65,000
|
$18,000
|
$25,000
|
Required:
a. Determine the amount of impairment according to SFAS Nos. 121 and 144.
b. By how much should each of the assets be written down?
c. What theoretical problems do you see with the application of SFAS Nos. 121 and 144 to asset impairments?
Aug 29, 2021 | Uncategorized
Leeson Company entered into an interest rate swap with Morley Corporation on January 1, 2003. The notional amount of the swap is $20,000,000. Leeson will pay Morley a fixed annual rate of 8 percent. Morley will pay Leeson LIBOR plus 1 percent. Settlement is to be made every six months and the contract lasts for three years. The annual variable rates based on LIBOR plus 1 percent are:
|
July 1, 2003
|
8.26%
|
|
January 1, 2004
|
8.32%
|
|
July 1, 2004
|
8.18%
|
|
January 1, 2005
|
7.92%
|
|
July 1, 2005
|
7.90%
|
|
January 1, 2006
|
8.06%
|
Required:
a. Set up a schedule showing the net receipts or payments for Leeson.
b. Why would Leeson enter into a strategy of this type?
c. Has Leeson benefited from this transaction?
What dangers are present?
Aug 29, 2021 | Uncategorized
On January 1, 2000, $1,000,000 of 10 percent debenture bonds were acquired by Means Corporation at $927,908, which would yield a 12 percent rate of return. The bonds mature on December 31, 2004. Interest is paid annually on December 31. Means Corporation classifies these securities as available for sale securities. Shown below are the effective interest rate and market value of the securities at various dates.
|
Date
|
Effective Interest
|
Market Value
|
|
December 31, 2000
|
11%
|
$968,975
|
|
December 31, 2001
|
9%
|
$1,025,310
|
|
December 31, 2002
|
12%
|
$966,195
|
|
December 31, 2003
|
9%
|
$1,009,173
|
Required:
(a) Using the method suggested by Kathryn Means (i.e., use the current interest rate for the recognition of income and determination of fair value with the holding gain component going to owners’ equity), determine the income and unrealized holding gain components for the years 2000 through 2004 (assume that the interest rate change occurs on each December 31).
(b) Make the entries that result from assuming that these debenture bonds were Means Corporation’s only available for sale securities.
Aug 29, 2021 | Uncategorized
A mortgage banker is originating a level payment mortgage with the following terms:
|
Annual interest rate:
|
9 percent
|
|
Loan term:
|
15 years
|
|
Payment frequency:
|
Monthly
|
|
Loan amount:
|
$160,000
|
|
Total up front financing costs (including discount points):
|
$4,000
|
|
Discount points to lender:
|
$2,000
|
a. Calculate the annual percentage rate (APR) for Truth in Lending purposes.
b. Calculate the lender’s yield with no prepayment.
c. Calculate the lender’s yield with prepayment is five years.
d. Calculate the effective borrowing costs with prepayment in five years.
Aug 29, 2021 | Uncategorized
A prospective tenant has presented two lease proposals to the owner of an office building. The first alternative has a five year term and a contract rate of $16.00 per square foot in the first year of the lease. The rental rate then steps up 3 percent per year over the remainder of the lease term. So, for example, the rental rate in year 2 (months 13 – 24) would be $16.48. The second lease alternative is also a five year lease with an initial contract rate of $16.00 per square foot. However, the rental rate on this lease is indexed to inflation with adjustment made at the beginning of each year based on the actual rate of inflation in the previous year. The owner of the office property projects that inflation will run at a rate of 3 percent per year over the five year lease term.
a. What are the owner’s projected payments over the five year term for the two alternatives?
b. Which option is the owner likely to prefer and why?
Aug 29, 2021 | Uncategorized
1. This assignment is to be submitted in accordance with assessment policy stated in the Subject Outline and Student Handbook.
2. It is the responsibility of the student who is submitting the work, to ensure that the work is in fact her/his own work. Incorporating another’s work or ideas into one’s own work without appropriate acknowledgement is an academic offence. Students can submit all assignments for plagiarism checking (self check) on Blackboard before final submission in the subject. For further details, please refer to the Subject Outline and Student Handbook.
3. Maximum marks available: 20 marks.
4. Due date of submission: Friday Week 8
5. Assignment should be of 2,000 words. Please use “wordcount” and include in report.
Guidelines for Literature Critiques
Students must submit a critique of an academic article deemed to be seminal to their main area of research. Details about the format, structure and assessment criteria for the critique are presented below. Remember that the critique is due in weeks 8.
FORMAT: 2000 words (maximum)
The critique submission should be typed. Work should be double spaced with a 2.4cm margin on all sides. Use only one side of each sheet of paper.
STRUCTURE:
While there is room for being innovative, most critiques should include the following:
- Cover Page
- Synopsis
- Introduction: Introducing the topic, stating the aims of the critique, outlining the main argument to be presented and an overview of the paper and the structure of the paper to follow.
- Summary of the Article: Focusing on its main argument, including its aims, its overall findings and its theoretical arguments and contribution.
- Research Question: Identifying the article’s research question(s) or hypotheses and discussing its value, explaining whether and how it flowed from the literature review.
- Theoretical Framework: Identifying and discussing the theoretical framework or theoretical substance of the paper leading to the research element.
- The Significance and Limitations of the Article: Use the literature to discuss the limitations of the theory and methodology used. Does the author acknowledge these limitations? Does the author draw theoretical conclusions from the research that are justified by the methodology? How do these limitations affect the significance of the article and the contribution it makes to the discipline, particularly the findings set against the research method?
- Conclusions: Summarising the main points and drawing implications of your critique.
Aug 29, 2021 | Uncategorized
You have been approached by a Robin Hood, a client (law firm) who employs around 80 staff and as a result of a successful year, in recognising the efforts of staff is considering holding a luncheon (and will be for the entire afternoon on the Friday of September 20
th 2013 (could be either on site or off site). He is also considering giving gifts to his employees as well. At this point, he is considering the following options;
- Current employees only attend;
- Current employees and their associates attend at a cost of $180 per head (to the firm)
- Current employees, their associates and some clients attend at a cost of $365 per head.
You are to advise Robin of any FBT implications for the three considered options as well as the implications of income tax deductions.
Q1b: Errol provides his employee with the use of a car for 183 days during the FBT year ending 30
th June 2013. During this time, the car travelled 16,000km. Errol purchased the car the previous year for $50,000. The employee contributed $1,000 towards the running costs of the vehicle and has provided Errol with relevant evidence.
Calculate the taxable value of the FBT for the car applying the statutory formula.
Q2a: Bridgette owns and runs a small licensed (alcohol) café. Her refrigerator broke down and she contacted an old client and friend of hers, Eddie (electrician) to repair it. Eddie’s normal charge out rate is $100 per hour and it took 2 .75 hours to repair ($275) but instead, they agree that Eddie could have food and beverages to that amount instead of a cash payment. Both Bridgette and Eddie are registered for GST. What are the GST considerations for each party in regard to this arrangement (considering “supply”)?
Q2b: Bob the Builder is registered for GST and has recently completion the construction of a residence on a vacant block of land he purchased in Kingston. He employed a number of sub contractors to build the house such as electricians, roof tilers, plumbers, etc. all of whom included GST in their billings. Only a matter of weeks after the residence was completed, Bob sold the property to Thomas who in turns plans to rent out the property (tenancy). You are required to explain how GST (law) affects both Bob and Thomas.
Aug 29, 2021 | Uncategorized
Budgeting is an important internal activity. Preparing budgets involves forecasting sales and estimating costs. For this SLP, you will prepare a flexible budget for next year for Raytheon Corporation. The budget needs to be realistic and based on corporate and economic trends.
Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we’re limiting our budgeting to the absorption approach. Don’t forget that the presentation of the information is important.
Set up the flexible budget showing three different growth rates. Use the financial statements and do research on the company of your choice to determine growth trends. Explain your estimates and prepare a flexible budget showing the low, the average, and the high revenues and adjust all other line items in the income statement to reflect the revised revenue assumptions.
- What is the growth rate in sales for the past three years?
- Are revenues and expenses growing at the same rate? What was the experience in the past few years?
- What is the current growth rate in the economy?
- How are the competitors doing?
- Current interest rates and tax burdens.
Discuss the implications of the information after you have completed the flexible budget.
- How does the flexible budget differ from a static budget?
- Budgets are used for planning and control. Discuss how you can use the information derived for these two purposes?
- Comment on using this information for performance evaluations.
Aug 29, 2021 | Uncategorized
Tonya Larsen is being investigated by law enforcement and Southern Appalachian Insurance Company. Just before closing on March 2, 2011, the branch manager of Bank of Lawrenceville called Jennifer Anderson, MD, the CEO of Anderson Internal Medicine, to inform her that the medical practice’s checking account was overdrawn by $347.19 and the bank had returned four checks totaling $6,159.75 ($1,534.73, $1,783.83, $1,341.19, and $1,500.00). Dr. Anderson spoke with Tonya Larsen when she arrived the next morning.
Aug 29, 2021 | Uncategorized
| A local Chevrolet dealership carries the following types of vehicles: |
| Inventory Items |
Quantity |
Cost per
Unit |
Market
(replacement cost)
per Unit |
| Vans |
3 |
$22,000 |
$20,000 |
| Trucks |
6 |
17,000 |
16,000 |
| 2 door sedans |
2 |
12,000 |
14,000 |
| 4 door sedans |
7 |
16,000 |
19,000 |
| Sports cars |
3 |
32,000 |
35,000 |
| SUVs |
5 |
28,000 |
23,000 |
|
| Because of recent increases in gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks. |
references
5.value:
2.00 points
Problem 6 4A Part 1
| Required: |
| 1. |
Compute the total cost of the entire inventory.(Omit the “$” sign in your response.) |
check my workeBook Linkreferences
6.value:
2.00 points
Problem 6 4A Part 2
| 2. |
Determine whether each inventory item would be reported at cost or market and then determine the total cost of the entire inventory items.(Omit the “$” sign in your response.) |
| Inventory Items |
Lower of Cost
or Market |
Total |
| Vans |
$ |
$ |
| Trucks |
|
|
| 2 door sedans |
|
|
| 4 door sedans |
|
|
| Sports cars |
|
|
| SUVs |
|
|
|
|
|
| Total |
|
$ |
|
|
|
|
check my workeBook Linkreferences
7.value:
1.00 points
Problem 6 4A Part 3
| 3. |
Prepare necessary entry to write down inventory from cost to market value.(Omit the “$” sign in your response.) |
| General Journal |
Debit |
Credit |
| (Click to select)Cost of goods soldPurchases freight inInterest expensePurchase returnsCashAccounts payableSales returnsInventory |
|
|
| (Click to select)CashCost of goods soldSales returnsPurchases freight inPurchase returnsAccounts payableInterest expenseInventory |
|
|
|
check my workeBook Linkreferences
Aug 29, 2021 | Uncategorized
Tax 231 Written Assessment
Worth 15%
Monday 7th October @ 5pm
Henry told us in his guide to the Institutional Framework of Taxation in Australia that the Australian Taxation System is one of the most complex in the world and is made up of approximately 125 taxes including taxes such as Income Tax, Capital Gains Tax, Fringe Benefits Tax and Goods and Services Tax just to name a few. He also mentioned that there are many different organisations that play different and varied roles within this system to ensure its integrity and all Australians are equally treated with equity.
The Australian Taxation System is embedded in the way of life for all Australian taxpayers, we pay tax on our income, we pay tax when we purchase goods and use services, we pay tax when we sell assets and this is just to name a few.
It is important that you as a future tax professional understand how this system impacts on yourself and those around you and this can be seen from paying attention to media reports.
This assessment is in two parts –
Part One
You are required from week 1 to week 8 to review Australian newspapers such as the West Australian, Financial Review, The Australian, Sunday Times and various others for articles on Australian Tax. Please cut them out as they will need to be handed in with your assignment. If you do not have access to Australian Newspapers for examples you are an overseas student or have financial issues then you may use the Factiva Database within the Curtin Library. A factsheet on how to use this database in attached.
5 marks will be allocated for this task.
Part Two
After spending 8 weeks reading newspapers on the Australian Taxation System, you should have started to develop your own view of the system and how the system is used for different purposes.
For example many consider that it is used as a political tool by governments and other political parties, that it is far too complex and the average Australian does not fully understand their taxation obligations, that the organisations that are responsible for administrating the system are overloaded already. Whilst others have a strong view that the system is one of the best in the world and that its function is to raise money for public goods and without tax we do not have a civilised society. These are just a few observations and there are many more and if you speak to a number of different people you will get very wide ranging opinions.
But this assignment is based on your opinion of the Australian Taxation System.
The requirements of the assignment for part two is to produce a 1000 to 1500 word essay on your opinion of the Australian Taxation System which is based on your findings from the Australian newspapers and any other research you may want to undertake.
10 marks will be allocated for this task.
Criteria for Marking Assignments
This gives you an idea of what we are looking for when marking the assessments
Cover Page
Unit Title, assignment number, due date
Lecturers name, Student name and ID
Contact Address and Email Address
Structure
Introduction to assignment
Content of body (detailed)
Conclusion to assignment
Appropriate sentence structure
Correct grammar, spelling and punctuation
Appropriate use of language
Paragraph sizes appropriate
Font size readability
Appropriate line spacing
Appropriate headings and sub headings
Pagination
Consistent format
Content
Evidence of appropriate reading on the areas required
Shows an understanding of the topics
Shows conceptual understanding of the issued involved in the assignment
Shows ability to analyse the issues involved in the assignment
Shows ability to convey to marker an understanding of the issues
Shows an understanding of the legal issues involved
Shows an ability to think broadly
Includes understanding of relevant legislation, rulings, etc
Includes all relevant documentation and attachments that is required within the assignment to back up theory
Referencing
Refers to sections of legislation (where appropriate)
Refers to legal cases (where appropriate)
Uses correct method of citing legislation and cases
References appropriate and current
Uses references to identify sources of information and acknowledges such sources
Bibliography at the end indicating materials read/used
Assignment Submission Process
Please read the submission process carefully. Students should understand that compliance with instructions in relation to an assessment task is critical. Students MUST be aware that non compliance with these instructions can result in a mark of ZERO.
All assignments must be submitted by 5pm (western standard time) on the Monday of the week the assignment is due.
Students will also be required to submit their assignment to Blackboard. The assignment will automatically be submitted to the plagiarism detection programme, Turnitin.
What is Turnitin?
Turnitin is an electronic text matching system that compares text in a student’s assignment against electronic text on the Internet, in published works, on commercial databases, and in assignments previously submitted to Turnitin by students in universities all over the world, including assignments obtained from ‘paper mills’ (Internet sites which sell student papers).
Students and Turnitin
Turnitin is a fantastic resource to assist students with their referencing. Students are given the option to submit a draft assignment into Turnitin (via Blackboard) to retrieve an originality report of their assignment. The originality report is a tool to help locate potential sources of unoriginal work in submitted documents by highlighting similarities between the submitted text and the data in the Turinitin database.
Submitting a draft assignment and reviewing the originality reports provides students with the opportunity to ensure their assignment is referenced appropriately, and to make any necessary changes.
Please note that the similarity percentage that an originality report generates is not a measure of plagiarism, provided students have referenced the relevant primary sources which they obtained their information and ideas from correctly.
Submitting a draft assignment to view originality report
1. Log into the Taxation 231 Blackboard site. Open the ‘Assessment’ folder.
.
2. Click on the ‘Written Assessment: Revision 1’ link.
3. i. Complete the relevant information in the boxes provided.
ii. Ensure the draft assignment complies with the Turnitin requirements.
iii. Locate the draft assignment through the ‘Browse’ option.
ix. Submit the draft assignment by clicking the ‘Upload’ button.
4. Confirm the document you submitted is the correct document and click ‘Submit’.
5. Click ‘go to portfolio’.
6. Click the ‘similarity’ percentage or ‘View’ button to view the originality report.
SUBMISSION INSTRUCTIONS: Submitting assignment (final version)
? Follow the instructions provided above for submitting a draft assignment.
? PLEASE NOTE: Students can only submit a final assignment once. Students must take time and care when submitting their assignment.
Factiva Instructions
Using Factiva
Step 1. Go to the Curtin Library page and select Databases A Z
Curtin Home > Library > Find books and resources > Databases A Z
Step 2. Select Factiva
Step 3. Once you are in the Database – set up your search.
i) Select your keywords in the Free Text Search (we recommend Tax* OR FBT OR GST)
ii) Select the Date (e.g. in the last day, in the last week, in the last 3 months)
iii) Select your sources (e.g. The Australian, the West Australian, The Australian Financial Review)
iv) Select the area where you want to search for text (e.g. Full Article or Headline and Lead paragraph)
v) Click search
Aug 29, 2021 | Uncategorized
BMBA 640
Quiz 5
CT16 2
Chapters 13 – 16
In each of the following situations, determine if the appropriate action was taken. If not, describe the financial statement impact of the error.
A. Recorded the $50,000 purchase of land acquired for investment purposes as a debit to the Land account.
B. A $450 tune up to the delivery truck was capitalized to the Truck account.
C. Land to be used as the site for a new warehouse was purchased for $250,000 plus a broker’s commission of $12,500. The Land account was debited for $250,000, and the $12,500 broker’s commission was recorded as commission expense.
D. The $650 cost to install a new water heater was charged to plumbing repairs expense.
E. A patent was purchased for $475,000 and recorded in the Equipment account.
F. Depletion relating to the extraction of 200,000 barrels of oil was not recorded because the oil is still sitting in inventory and has not been sold.
Aug 29, 2021 | Uncategorized
Question 1
E7 15 E commerce Control Procedures
See Reading 5 in the learning materials
Source: Horngren, C. T., Harrison, W. T. & Oliver M.S., (2012). Internal control and cash. Accounting (9th ed., pp. 386 of Reading 5). Prentice Hall.
Question 2
E7 18 D.J. Harrison
Reading 5 of the learning materials.
Source: Horngren, C. T., & Harrison, W. T. (2012). Internal control and cash. Accounting (9th ed., pp. 387 388 of Reading 5). Prentice Hall.
Answer all parts. Solve using a spreadsheet. Include the normal view and formula view and include an IF function to check balances.
Question 3
1 4 (give examples), 1 17, 1 23 (give examples), 2 5, 2 18
Source: Horngren, et al. (2011). Introduction to management accounting (15th ed., pp. 46 & 83). Pearson.
Question 4
1 47 Ethical Issues
Source: Horngren, et al. (2011). Introduction to management accounting (15th ed., p. 50). Pearson.
Question 5
2 52 CVP
Source: Horngren, et al. (2011). Introduction to management accounting (15th ed., p. 90). Pearson.
Solve using a spreadsheet. Include a spreadsheet graph similar to Exhibit 2 7, p. 67 of the text. See the spreadsheet examples in the Spreadsheet Advice section of Interact and the study modules on this topic.
Aug 29, 2021 | Uncategorized
the Question is :
Convergence of U.S. GAAP & IFRS
Throughout our textbook, the authors continually points out differences between the financial accounting rules in the U.S. (GAAP) and internationally (IFRS). While most everyone agrees that capital markets and investors would be better served by e a single set of high quality worldwide accounting standards, getting there has proved very controversial. At present, the SEC is considering whether U.S. public corporations should be allowed or required to adopt IFRS. This week’s discussion question: Should the SEC eventually approve the conversion to / adoption of IFRS by U.S. domiciled, SEC registrant companies. Why or why not? Support your initial posting with citations from assigned readings.
instruction:
1. In your discussions, when citing outside sources, start the sentence with “According to…”.
2. You may reference other articles in your response if you do, include a hard link to the cited article.
please read the articale in Attached file and make Reflection on it.
I need it in (( 500 Words )) please
thank you
Aug 29, 2021 | Uncategorized
Mel O’Conner owns rental properties in Michigan. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in local newspapers. The property managers transfer cash to O’Conner monthly and prepare their own bank reconciliations. The manager in Lansing has been stealing from the company. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than O’Conner actually has in the bank. In negotiating the sale of the Lansing property, O’Conner is showing the balance sheet to prospective investors.
Identify two parties other than O’Conner who can be harmed by this theft. In what ways can they be harmed? Discuss the role accounting plays in this situation. What internal controls could be put in place to prevent this type of theft?
Please include the name of the person or question to which you are replying in the subject line. For example, “Tom’s response to Susan’s comment.”
Aug 29, 2021 | Uncategorized
the Question is :
Convergence of U.S. GAAP & IFRS
Throughout our textbook, the authors continually points out differences between the financial accounting rules in the U.S. (GAAP) and internationally (IFRS). While most everyone agrees that capital markets and investors would be better served by e a single set of high quality worldwide accounting standards, getting there has proved very controversial. At present, the SEC is considering whether U.S. public corporations should be allowed or required to adopt IFRS. This week’s discussion question: Should the SEC eventually approve the conversion to / adoption of IFRS by U.S. domiciled, SEC registrant companies. Why or why not? Support your initial posting with citations from assigned readings.
instruction:
1. In your discussions, when citing outside sources, start the sentence with “According to…”.
2. You may reference other articles in your response if you do, include a hard link to the cited article.
please read the articale in Attached file and make Reflection on it.
I need it in (( 300 Words )) please
thank you
Aug 29, 2021 | Uncategorized
It is not the matter of having any amount of materials at any time, but the right quality and quantity at right place and time”. However, achieving the above goal is not automatic, because the whole exercise/process must be well managed.
Required:
Provide a detailed account of the challenges or constraints that may inhibit the stock management system to achieve its intended goals.
Give a detailed account ofpractical stepsmanagement needs to take to overcome the constraints observed above.
Aug 29, 2021 | Uncategorized
REQUIRED
1. Prepare in good form a classified comparative balance sheet, and a multi step single year income statement and statement of stockholders’ equity for Oxcom Enterprises for the 2013 year.
In order to achieve this you must perform this exercise in an excel spreadsheet formatted and linked as you wish. The following is a suggestion:
(a)Enter the opening balances for 2013 into a multi column Excel spread sheet (work sheet) using the following column headings:
1. Account
2. Opening Trial Balance)
3. Adjustments (with columns for Dr and Cr)
4. Corrected Trial Balance
(b) Post the necessary entries to the work sheet to record the cash transactions for the year (adjustments column). Keep a separate record of the journal entries posted with a brief explanation in a general journal.
(c) Post the necessary entries to the work sheet to record the adjustments to the accounts needed to prepare the financial statements (adjustments column). Keep a separate record of the journal entries posted with a brief explanation in general journal.
Prepare the financial statements from the worksheet
Aug 29, 2021 | Uncategorized
|
Riley Labs produces various chemicalcompounds for industrial use. One compound, called Lundor, isprepared using an elaborate distilling process. The company hasdeveloped standard costs for one unit of Lundor as follows:
|
|
Standard
Quantity
|
Standard Price or
Rate
|
Standard
Cost
|
|
Direct materials
|
2.0
|
ounces
|
$
|
22.00
|
per ounce
|
$
|
44.00
|
|
Direct labor
|
1.3
|
hours
|
$
|
12.00
|
per hour
|
|
15.60
|
|
Variable manufacturing overhead
|
1.3
|
hours
|
$
|
3.00
|
per hour
|
|
3.90
|
|
|
|
|
|
|
$
|
63.50
|
|
During November,the following activity was recorded by the company relative toproduction of Lundor:
|
| a. |
Materials purchased, 19,000 ouncesat a cost of $358,150. |
| b. |
There was no beginning inventoryof materials; however, at the end of the month, 15,700 ounces ofmaterial remained in ending inventory. |
| c. |
The company employs 11 labtechnicians to work on the production of Lundor. During November,each worked an average of 174 hours at an average rate of $10.30per hour. |
| d. |
Variable manufacturing overhead isassigned to Lundor on the basis of direct labor hours. Variablemanufacturing overhead costs during November totaled $4,976. |
| e. |
During November, 1,520 good unitsof Lundor were produced. |
|
Compute thevariable overhead spending and efficiency variances.
|
|
|
|
|
|
|
Variable overhead spending variance
|
$
|
|
|
|
Variable overhead efficiency variance
|
$
|
|
|
Accounting
Aug 29, 2021 | Uncategorized
Rockford Practice Set: Selected transactions 2012 Due date: October 1, 2013 (Tuesday)
NARRATIVE OF THE DECEMBER TRANSACTIONS
NOTE:Assume the following balances in the accounts at December 1, and adjust accordingly given the transactions below:
Sales Revenue: $5,234,940 Sales returns & allowances: $9,380 Sales discounts: $73,044
Purchases: $3,722,290 Purchase returns, allowances: $25,520 Purchase discounts: $67,496
Freight in: $19,448 Bad debt expense: Advertising expense: $6,578
Supplies expense: $1,540 Freight out: $17,732 Depreciation expense:
Miscellaneous expense: Salaries & wages expense: $933,122 Rent expense:
Payroll tax expense: $82,916 Utilities expense: $16,270 Interest revenue: $3,150
Interest expense: $24,570 Loss on disposal – P. Assets: Gain on disposal – P. Assets:
Income tax expense: $112,000 Insurance expense: $3,220
Note II: Assume that selected Balance Sheet (B/S) account balances are as shown below (prior to adjusting and other entries necessary to complete this exercise):
Cash: $209,930 Inventory (1/1): $531,960 Petty cash: $150
Accounts Receivable: $317,420 Allowance for doubtful accts: $8,280 Notes Receivable: $45,000
Prepaid Insurance: Land: $43,000
Building: $306,000 Accumulated depreciation Bldg.: $73,040 Equipment: $32,800
Accumulated depreciation Equip: $13,200 Truck: $71,100 Accum Dep Trucks: $41,650
Treasury stock (700 shares): $42,610 Retained Earnings: $362,748 Common stock: $$189,000 (6,300 shares with $30 par value) Paid in capital – C/S: $256,400 Notes Payable (L T): $113,000
Bonds Payable: $275,000 Discount on bonds payable: $6,400 Accounts payable: $126,850
Income taxes payable: Dividends paid to date: $32,100 Withholding taxes payable; $13,846
Selected December transactions (the number at the beginning of each line is the date):
22Purchased bathroom and kitchen fixtures from Phoenix Plastics, on account, purchase order No. 319 for $48,330, terms 1/10, n/30.
23Received a bill from DeKalb Transport for $2,300 for transportation (freight) in costs incurred
during the last 30 days, terms n/30.
27The board of directors voted to purchase 1,000 shares of its own stock from stockholder Dionne Schivone at $83 per share and issued check No. 1595 in payment. Stock repurchases are recorded at cost. Rockford is purchasing these shares because Ms. Schivone had been a valuable employee.
27The board of directors declared a $2.70 per share cash dividend payable on January 14 to stockholders of record on December 27 (after purchase of stock; dividends are not paid on treasury (repurchased) stock).
27The president informs you that Beverly’s Building Products agrees to convert the $14,000 overdue accounts receivable (invoice No. 1119) balance to a 12% note due six months from today.
28A half acre parcel of land adjacent to the building is acquired in exchange for 600 shares of unissued common stock. The land has a fair value of $54,000 and will be used immediately as an outside storage lot and parking lot.
28An invoice in the amount of $2,650 is received from Wayne McManus, lawyer, for legal services involved in the acquisition of the adjacent parcel of land; check No. 1596 is issued in payment.
28A court notice indicates that Iwanaga Plumbing and Heating is bankrupt and payment of its account improbable; the president orders the account to be written off as a bad debt (invoice No. 780; face amount $3,700).
28Sold pipe and plumbing materials to Boecker Builders on account, invoice No. 1210 for $42,040.
29Issued check No. 1597 in the amount of $500 to theNorthern Starfor advertisement run in the home building supplement of December 15.
29Issued check No. 1598 in the amount of $925 to Standard Oil Co. in payment of gas, oil, and truck repairs from Standard Oil Co. (use Freight out).
29Purchased copper and cast iron pipe from Oxenford Copperworks on account, purchase order No. 320 for $55,940, terms 1/10, n/30.
29Check No. 1599 for $15,000 is issued to the bond sinking fund trustee, Chicago Trust Co., for deposit in the sinking fund (use Other Assets).
30Received a check for $21,730 from Boecker Builders in payment of invoice No. 1207 (face amount of $21,730).
30Sold plumbing supplies to Swanson Brothers Construction on account, invoice No. 1211for $24,650.
30 Purchased a new Faith computer for $6,100 from Business Basics, Inc., purchase order No. 318, paying $600 down through Check No. 1594 with the balance due in thirty days (n/30). The computer has an estimated life of five years with a salvage value of $1,300. Double declining balance depreciation will be used.
30Issued check No. 1600 for $43,362 to Smith Pipe Company in payment of purchase order No. 317 (face amount $43,800).
31The custodian of the petty cash fund submits the following receipts for reimbursement and reports a cash on hand count of $8.
Postage stamps used ………………………………………. $38
United Parcel (freight out) ……………………………… 23
C.O.D. postage (freight in) ……………………………… 51
Christmas office decorations ……………………………. 30
Check No. 1601 is issued and cashed to reimburse the fund.
31Sold an electric truck lift to Leila Stierman Co. for $2,500 cash. The original cost was $7,900 with salvage value of $900, a life of 10 years, and accumulated depreciation recorded through 12/31/11 of $4,550. The straight line method is used. First, bring the depreciation expense up to date. Then record the entry for the sale.
31Sold bathroom fixtures and plumbing supplies to Trudy’s Plumbing on account, invoice No. 1212 for $55,770.
31The payroll summary for themonthly paid employees is submitted so that December checks can be distributed before the year end; the details are as follows:
Sales salaries …………………………………………………… $16,000
Office and administrative salaries…………………….. 22,900
Federal taxes withheld ………………………… 10,833
Net pay …………………………………………………….. $28,067
Issued check No. 1603 for the amount of the net pay and deposited it in the payroll bank account. Individual payroll checks were prepared for distribution to all monthly employees by the end of the day.
31Cash sales since December 13 total $25,980.
INSTRUCTIONS (Note: you will have to construct an income statement):
1.Construct and record the entries for the transactions on the dates noted for Rockford: 12/23; 12/27;12/28 lawyer bill & A/R write off); 12/30 computer purchase; 12/30 payment with check #1600;12/31petty cash, wages, & the truck lift sale.
2.Construct and record the adjusting entries made for depreciation on the building, interest (separate entries for mortgage and bonds) and taxes.
3. Given the following information, prepare entries for recording bad debt expense and for cost of goods sold (COGS) for the year:
a. The annual provision for doubtful accounts receivable is recorded by providing a charge to Bad Debt Expense in an amount equal to 2% of net sales (after returns and discounts, etc.).
b. An inventory count of the office supplies revealed $830 of supplies on hand at year end.
c. A physical inventory on Friday, January 7, 2013 results in a total dollar value assigned to the ending inventory at lower of cost or market of $539,930.
d. The $3,220 insurance premium outstanding on January 1, 2012, covered the period January 1 through August 31, 2012. The insurance premium of $7,050 recorded in August covers the period from September 1, 2012 through August 31, 2013. Rockford estimates that 75% of the premiums are attributable to general activities and 25% to selling activities (use Miscellaneous Selling Expense).
e. The payroll summary for the employees who are paid biweekly shows the following information at
December 31, 2012:
Delivery and Warehouse Wages ………………………. $5,600
Withholding Taxes ……………………………… 1,629
Net pay…………………………………………………….. $3,971
f. No state or federal unemployment tax is incurred during the fourth quarter because all wages and salaries earned during the last quarter exceed the maximum subject to unemployment tax.
g. Interest has accrued at 8% on the mortgage notes payable since July 1, 2012. The next six month interest payment at 9% on the bonds is due on March 1, 2013. The discount on bonds payable has not been amortized for any part of 2012; the bonds are dated March 1, 2006, and mature March 1, 2016. (Use straight line amortization.)
h. The interest accrued to 12/31/12 on notes receivable is composed of the following:
Platteville Plumbers, 10%, 6 months, due March 31, 2013. $1,125; Bilder Construction, 11%, 6 months, due June 14, 2013, $211; Beverly’s Building, 9%, 6 months, due June 26, 2013, $17.
The interest accrued at 12/31/12 on a 10%, $15,000 note payable is $1,500. Interest is payable on January 2, 2013. (The note is due in 2013.)
i. A warehouse lease payment of $10,890 was made on September 1, 2012, for rental through February 28, 2013. (The Prepaid Rent account is for advance lease payments on the warehouse.)
j. $530 is owed to Northern Electric Co. and $279 is owed to City of Rockford for utility services provided during December 2012.
k. Plant and equipment to be depreciated are composed of the following:
Assets Date Acquired Cost Life Salvage Depreciation Method
Building 7/1/08 $306,000 25 years $20,000 Double declining balance
Truck No. 1 4/1/09 $71,100 85,000 miles $3,100 miles driven
Lift No. 1 6/30/05 $7,900 10 years $900 straight line (Sold 12/31/12)
Lift No. 2 3/31/09 $4,500 10 years $500 straight line
Office Equipment (prior to 1/1/12) $32,800 7 years $2,000 straight line
Computer 12/30/12 $6,100 5 years $1,300 Double declining balance
Truck No. 1 has been driven 45,000 miles prior to 1/1/12. During 2012, truck No. 1 was driven 12,000 miles. Depreciation on the lifts is shown in the accumulated depreciation for trucks.
6.Prepare an income statement (assume the weighted average number of shares outstanding
for the year 2012 is 5,600 shares). Assume that bad debt expense is an administrative expense.
7. Assume federal corporate income tax on income subject to federal tax is as follows:
first $50,000 @15% => next $25,000 @25% => remainder @34%
Hint: Corporations subject to federal income tax must make estimated tax payments throughout the year (see balance in list of accounts). At the time of the payment, the account Income Tax Expense is debited and Cash is credited. To determine the taxable income at year end, use the pretax income amount from the income statement. Note that the estimated income tax expense is listed as a debit and must be subtracted from the total expense computed for the income statement when constructing the entry for income taxes. Note that federal tax is not an expense item on the income statement. Please prepare the journal entry for income taxes.
8. Determine the final year end balances for the following balance sheet accounts (Hint: combine Petty Cash with Cash for balance sheet purposes.): Cash; Accounts receivable; Building; Land.
9. What was the total amount of dividends declared and/or paid for 2012?
10. Determine cash flow amounts for 2012 for the following accounts: Sales revenue; inventory purchases. The beginning balance in Accounts receivables was $172,643. The allowance for doubtful accounts balance at 1/1/2012 was $23,520.
Aug 29, 2021 | Uncategorized
You are a member of a team involved in the audit of accounts payable for ABC Distribution Company. A computer based accounts payable system is used by the company. You are provided with three data files (access using ACL105 Foundations project):
VENDOR Vendor Master File as at 31 December 2000.
AP_TRANS Vendor Transaction File for the year 2000.
You are to produce an audit memorandum to the partner in charge dealing with each of the following issues. You should support your findings with appropriately labelled and totalled reports generated with the ACL package.
You are to submit your audit memorandum in a Word document
You are to submit your findings for each of the objectives in htm files (no other format will be accepted. Do not attempt to embed your htm files in the Word document).
Report headers should identify the client, the year end, your name and the title of the report. Present your reports and extracts from logs in the appendices accompanying your memorandum.
Audit Objectives
- Produce a vendor invoice report showing the vendor number, vendor name, invoice number, invoice date and invoice amount for each accounts payable transaction. Sort this report by invoice number within vendor and subtotal this report by vendor.
- Produce a report showing the details of vendors with no transactions.
- Produce a report showing any duplicate vendor records. Also, search for duplicate transactions, e.g. with the same vendor number, date, amount, product, etc.
- Prepare a vendor purchases summary, showing the percentage for each vendor (in descending order) of total purchases. Which vendors are the top 4?
- Stratify invoice amounts. Identify the larger transactions.
- Discuss the relevance of objectives 1 6 to detecting accounts payable fraud.
Input Files
According to the client’s system documentation, the vendor master file (VENDOR) and accounts payable transaction file (AP_TRANS) have the following fields:
VENDOR
Field No. Field Description Field Name
1 Vendor number VENDOR_NO
2 Vendor name VENDOR_NAME
3 Vendor last active date VENDOR_LAST_ACTIVE
AP_TRANS
Field No. Field Description Field Name
1 Vendor number VENDOR_NO
2 Invoice number INVOICE_NO
3 Invoice date INVOICE_DATE
4 Invoice amount INVOICE_AMOUNT
5 Product number PRODNO
6 Quantity QUANTITY
Points about writing the memorandum:
Note that your memorandum is to the partner in charge. It is therefore an internal memo.
Ideally your memorandum should be no more than 2 pages in length. The purpose of the memo is to detail the findings from your ACL reports and then to discuss relevant issues pertaining to objective 6 above. There is no requirement to discuss the process that was used to generate the reports.
A memorandum does not require references. Use appropriate headings; dot points are acceptable.
Aug 29, 2021 | Uncategorized
A consulting firm produces a service that requires the use of labor and materials. Each unit of service requires a standard labor time of 30 minutes (0.5 hours). The average pay rate for a labor hour is £20. The consulting firm considers all materials that are required for the service as variable overheads (OH), the cost of which is directly associated with the labor hours worked. It has been estimated that variable OH rate is £10 per service hour.
The budgeted and actual costs, revenue and units for the month November are given in the table below:
Original Budget Actual
Units of Service 1,500 1,600
Sales Revenue £120,000 £124,400
Labor hours 750 860
Labor cost £15,000 £20,210
Variable OH costs £7,500 £8,170
Fixed Cost £68,000 £68,000
Total Cost £90,500 £96,380
Operating Profit £29,500 £28,020
1. Calculate the flexed budget and the key variances between budgeted and actual results.
2. Reconcile the original budget and present the relationship between the budgeted and the actual profit for the month November
3. Discuss the calculated variances, and provide suggestions for better cost management (target length 300 words).
Aug 29, 2021 | Uncategorized
Claypool Hardware is the only hardware store in a remote area of northern Minnesota. Some of Claypool’s transactions during the current year are as follows:
| Nov. |
5 |
Sold lumber on account to Bemidji Construction, $13,390. The inventory subsidiary ledger shows the cost of this merchandise was $9,105. |
| Nov. |
9 |
Purchased tools on account from Owatonna Tool Company, $3,800. |
| Dec. |
5 |
Collected in cash the $13,390 account receivable from Bemidji Construction. |
| Dec. |
9 |
Paid the $3,800 owed to Owatonna Tool Company. |
| Dec. |
31 |
Claypool’s personnel counted the inventory on hand and determined its cost to be $182,080. The accounting records, however, indicate inventory of $183,790 and a cost of goods sold of $695,222. The physical count of the inventory was observed by the company’s auditors and is considered correct.
|
| Instructions |
|
|
| a. |
Prepare journal entries to record these transactions and events in the accounting records of Claypool Hardware. (The company uses a perpetual inventory system.)(Omit the “$” sign in your response.)
|
Aug 29, 2021 | Uncategorized
Dividends. Wilder Corporation’s common stock account for 20X3 and 20X2 showed:
Common stock, $10 par value $45,000
The following data are provided relative to 20X3 and 20X2:
| |
20X3
|
20X2
|
|
Dividends
|
$2,250
|
$3,600
|
|
Market price per share
|
$ 20
|
$ 22
|
|
Earnings per share
|
$ 2.13
|
$ 2.67
|
(a) Calculate the dividends per share, dividend yield, and dividend payout, and (b) evaluate the results.
Aug 29, 2021 | Uncategorized
The payroll cheques are manually signed by the chief accountant and given to the foreman.The foreman distributes the cheques to the workers in the factory and arranges for the delivery of the cheques to the workers who are absent . The payroll bank account is reconciled by the chief accountant , who also prepares the various monthly payroll tax reports.
Required: Identify the errors or irregularities that may occur in the Edsell Company’s procedures.
Aug 29, 2021 | Uncategorized
Statement of Accounting Concepts SAC 2 “Objective of General
Purpose Financial Reporting” states that general purpose financial
reports are prepared to provide users with information about the
reporting entity which is useful for making and evaluating decisions
about the allocation of scarce resources (hereinafter “resources”).
When general purpose financial reports meet this objective they
will also be a means by which managements and governing bodies
discharge their accountability to those users. If Statements of
Accounting Concepts and Accounting Standards are to be effective
in ensuring adequate disclosure of information to users of general
purpose financial reports, it is necessary that all those entities which
should report, do report. In addition, if the regulation of general
purpose financial reporting is to be developed on a rational and
efficient basis, it is equally important that those entities for which
there is no justification to report are not required to report.
Aug 29, 2021 | Uncategorized
The following transactions apply to Midsouth Equiptment Sales Corp for 2013.
1. The business started with 60000 from the issue of common stock.
2. purchased 160000 in merchandise on account.
3. Sold merchandise for 220000 cash(not including sales tax). Sales tax of 8% is colected when the merchandise is sold. The merchadise had a cost of 140000.
4. provided a six month warranty on merchandise sold. Based on industry estimates, the warranty claims would amount to 4% of merchandise sales.
5. Paid sales tax to the state agency on 180000 of the sales.
6. On Sept 1 2013, borrowed 40000 from the local bank. The note had 6% interest rate and matures on March 1, 2014.
7. Paid 6600 for warranty repairs during the year.
8. Paid operating expenses of 61,000 for the year.
9 Paid 145000 of accounts payable.
10. Recorded accured interest at the end of the year.
a. Show the effect of these transactions using a horizontal statement. Use a + to indicate increase, a for decrease, and N/A for not affected. In the cash flow column indicate whether the item is an operatingactivity (OA), investing Activity (IA), or Financial Activity (FA).
b. Prepare the journal entries for the above transactions and post them in the appropiate T accounts.
c. Prepare the income statement, balance sheet, and statement of cash flows for 2013.
d. What is the toal amount of current liabilities at DEC 31, 2013?
Aug 29, 2021 | Uncategorized
Santana Rey created Business Solutions on October 1, 2011. The company has been successful and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating these funding sources. a. Santana’s sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Santana currently had about $129,000 invested in the business, Cicely’s investment will mean that Santana will maintain about 60% ownership and Cicely will have 40% ownership of Business Solutions. b. Santana’s Uncle Marcello is willing to invest $86,000 in the business as a preferred stockholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. c. Santana’s banker is willing to lend her $86,000 on a 7%, 10 years not payable. She would make monthly payments of $1,000 per month for 10 years. Questions: 1. Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c). 2. Evaluate the three proposals for expansion, providing the pros and cons of each option. 3. Which option did you recommend Santana adopt? Explain. Problem 2 While reviewing the March 31, 2012, balance sheet of Business Solutions, Santana Rey notes that the business has built a large cash balance of $68,057. Its most recent bank money market statement shows that the funds are earning an annualized return of 0.75%, so Rey decided to make several investments with the desire to earn a higher return on the idle cash balance. Accordingly, in April, 2012, Business Solutions makes the following investments in trading solutions: April 16 Purchase 400 shares of Johnson & Johnson at $50 per share plus $300 commission. April 30 Purchase 200 shares of Starbucks Corporation at $22 per share plus $250 commission. Questions: 1. Prepare journal entries to record the April purchases of trading securities by Business Solutions. 2. On June 30, 2012, the per share market price (fair value) of the Johnson & Johnson shares is $55 and the Starbucks shares is $19. Prepare the adjusting entry to record any necessary fair value adjustment to its portfolio of trading securities. Problem 3 Use the following selected data from Business Solutions’ income statement for the three months ended March 31, 2012, and from its March 31, 2012, balance sheet to complete the requirements before computer services revenue, $25,307; net sales (of goods), $18,693; total sales and revenue, $44,000; cost of goods sold, $14,052; net income, $18,833; quick assets, $90,924; current assets, $95,568; total assets, $120,268; current liabilities, $875; total liabilities, $875, and total equity, $119,393. Questions: 1. Compute the gross margin ratio (both with and without services revenues) and net profit margin ratio. 2. Compare the current ratio and acid test ratio. 3. Compute the debt ratio and equity ratio. 4. What percent of its assets are current? What percent are long term? Problem 4 The computer workstation furniture manufacturing that Santana Rey started January is progressing well. As of the end of June, Business Solutions’ job cost sheets show the following total costs accumulated on three furniture jobs. Job 6.02 Job 6.03 Job 6.04 Direct materials $1500 $3300 $2700 Direct labor 800 1420 2100 Overhead 400 710 1050 Job 6.02 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $180; and overhead, $90. Job 6.03 and 6.04 were started in June. Overhead costs is applied with a predetermined rate based on direct labor costs. Jobs 6.02 and 6.03 are finished in June, and Job 6.04 is expected to be finished in July. No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over three months). Questions: 1. What is the cost of the raw materials used in June for each of the three jobs and in total? 2. How much total direct labor cost is incurred in June? 3. What predetermined overhead rate is used in June? 4. How much cost is transferred to finished goods inventory in June? Problem 5 After reading an article about activity based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Rey found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows: Activity Cost Driver Setting up machines $20,000 25 batches Inspecting components $7,500 5,000 parts Providing utilities $10,000 5,000 machine hours Overhead has been applied to output at a rate of 50% if direct labor costs. The following data pertain to Job 6.15. Direct materials $2500 Number of Parts 400 parts Direct labor $3500 Machine Hours 600 machine hours Batches 2 batches Questions: 1. What is the total cost of Job 6.15 if Business Solutions applies overhead at 50% of direct labor cost? 2. What is the total cost of job 6.15 is Business Solutions uses activity based costing? 3. Which approach to assigning overhead gives a better representation of the costs incurred to produce Job 6.15? Explain. Problem 6 Santana Rey expects second quarter 2012 sales of her new line of computer furniture to be the same as the first quarter sales (reported below) without any changes in strategy. Monthly sales averaged 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500). Business Solutions Segment Income Statement* For Quarter Ended March 31, 2012 Sales † $180,000 Cost of goods sold‡ 115,000 Gross Profit 65,000 Expenses Sales commissions (10%) 18,000 Advertising expenses 9,000 Other fixed expenses 18,000 Total expenses 45,000 Net income $20,000 *Reflect revenue and expense activity only related to the computer furniture segment. †Revenue: (120 desks X $1,250)+ (60 chairs X $500) = $150,000+$30,00 + $180,000 ‡ Cost of goods sold: (120 chairs C $750) + (60 chairs X $250) + $10,000 = $115,000 Santana Rey believes that sales will increase each month for the next three months (April 48 desks, 32 chairs: May 52 desks, 35 chairs: June 56 desks, 38 chairs) if selling prices are reduced to $1,150 for desks and $450 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products’ variable cost will remain at $750 for desks and $250 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,000 and other fixed expenses will remain at $6,000 per month. Questions: 1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes. Use a three column format, with one column for each month. 2. Use the budgeted income statements from part 1 to recommend whether Santana Rey should implement the proposed changes. Explain. Problem 7 Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $300,000 and to have a six year life and no salvage value. It will be depreciated on a straight line basis. Business Solutions expects to sell 100 units of the equipment’s products each year. The expected annual incomes related to this equipment follows. Sales $375,000 Costs Materials, labor, and overhead (except for depreciation) 200,000 Depreciation of new equipment 50,000 Selling and administrative expenses 37,500 Total costs and expenses 287,500 Pretax income 87,500 Income taxes (30%) 26,250 Net income $61,250 Question: 1. Compute the (1) payback period and (2) accounting rate of return for this equipment. (Record answers as percents, rounded to one decimal.) Submit your portfolio project through the assignment link by Sunday midnight of Week 8.
Aug 29, 2021 | Uncategorized
Assignment 1 Note: Prepare the answers to these assignment questions in Word and save them as one Word document on your hard drive. See the TX2 Assignment Submission/FAQ section for the recommended format and filename. When your file is complete and you are ready to submit it for marking, select your “TX2 Assignment Submission” section under the “My CGA” tab. Question 1 (20 marks) Important: Multiple choice questions are to be completed within the Online Learning Environment in your TX2 Assignment Submission section. This portion of the assignment will be automatically graded.
Aug 29, 2021 | Uncategorized
please set up for reporting entities änsell pty ltd following SAC 1 related Reporting entities
Aug 29, 2021 | Uncategorized
Abigail Smith opened Smith Cleaning Company on March I, 2011. During Mob h following transactions were completed.
Mar. 1 Mar. 1 Mar. 3 Mar. 5 Mar, 14 Mar. 1 Mar. 20 Mar. 21 Mar. 28 Mar. 30
Issued 10,000 shares of common stock for $12,000 cash. Purchased used truck for $6,000, paying $3,000 cash anti t he I I s11 ¦ Ot1111 Purchased cleaning supplies (Or $1,500 on account Paid $3,000 cash on 1 year insurance policy el teeti¦ Nflo Billed customers $3,800 for cleaning services performed Paid $1,000 cash on amount owed on truck and $100 on o‘N cleaning supplies. Paid $2,500 cash for employees salaries. Collected $2,600 cash from customers billedl I Billed customers $6,200 for cleaning services pet Collected $3,000 in advance for a cleaning ,t).)
Aug 29, 2021 | Uncategorized
Calculate the per patient day (PPD) rates for all areas highlighted in blue.
2. gather all the summary for the summary: per diem and give a complete review of the entirebudget based on PPD. please give detailed explanations on workings.
Aug 29, 2021 | Uncategorized
Developed current operating budget that displayed appropriate and accurate analysis of relevant factors.
Developed proposed operating budget that displayed appropriate and accurate analysis of relevant factors.
Supported assertions with reasons, examples, and references to reliable sources.
Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources, displayed accurate spelling, grammar, and punctuation.
Aug 29, 2021 | Uncategorized
differences between the financial accounting rules in the U.S. (GAAP) and internationally (IFRS). While most everyone agrees that capital markets and investors would be better served by e a single set of high quality worldwide accounting standards, getting there has proved very controversial. At present, the SEC is considering whether U.S. public corporations should be allowed or required to adopt IFRS. This week’s discussion question: Should the SEC eventually approve the conversion to / adoption of IFRS by U.S. domiciled, SEC registrant companies. Why or why not? Support your initial posting with citations from assigned readings.
for now please do this for me. after that I will give you two more..
Aug 29, 2021 | Uncategorized
Throughout our textbook, the authors continually points out differences between the financial accounting rules in the U.S. (GAAP) and internationally (IFRS). While most everyone agrees that capital markets and investors would be better served by e a single set of high quality worldwide accounting standards, getting there has proved very controversial. At present, the SEC is considering whether U.S. public corporations should be allowed or required to adopt IFRS. This week’s discussion question: Should the SEC eventually approve the conversion to / adoption of IFRS by U.S. domiciled, SEC registrant companies. Why or why not? Support your initial posting with citations from assigned readings.
for now please do this for me. after that I have two more..
please (one page) (300) words
Aug 29, 2021 | Uncategorized
Final Paper Accounting for partnerships – Discuss the advantages and disadvantages of partnerships. Identify and discuss the Financial Accounting Standards (FAS) that govern accounting for partnerships including creation, operation, and liquidation. What are the tax consequences of partnerships? Must be 7 PAGES APA style. Must begin with an introductory paragraph that has a succinct thesis statement. Must address the topic of the paper with critical thought. Must end with a conclusion that reaffirms your thesis. Must use at least three scholarly sources and cited.
Aug 29, 2021 | Uncategorized
Read headline
“Think before you spend” and then, drawing on material covered in this subject, Accounting Theory, identify some ways in which you think corporations would respond to such allegations.
Here are some of the products “The Rough Guide to Ethical Shopping” believes we should think about before buying:
Beverages: Maxwell House. One of the thousands of familiar brands Bird’s, Jacobs, Ritz and Toblerone are others owned by tobacco giant Philip Morris of Marlboro cigarette fame, which recently changed its name to Altria.
It denies to this day that smoking is addictive, was fined for failing to disclose political donations and was one of George Bush’s largest corporate campaign contributors.
Clothing: Nike trainers. Nike is said to have petitioned the Indonesia government for exemption from the minimum wage and has been accused of lying about labour conditions at its contractor factories.
According to Sweatshop Watch, an average Nike worker would need to put in 72,000 years of work to receive what Tiger Woods gets for one five year contract to publicise the brand.
Food: Tiger prawns. Hugely popular nowadays in restaurants and supermarkets, tiger prawns are mostly raised in man made pools in Bangladesh and the Philippines.
It takes 50,000 litres of water to produce a kilogram of prawn meat and the chemical additives to promote rapid growth ends up polluting the surrounding farming land.
People are routinely displaced to make way for these farms. Rape and murder have been reported in some cases.
Sport: Snooker cues. Thousands of snooker cues are made every year using wood from the Indonesian ramin tree. The ramin, which is also used for furniture and window blinds, is a rare and endangered tree listed under the Convention on International Trade in Endangered Species, but continues to be logged illegally at an alarming rate.
(Irish Independent, 1 December 2004, Independent Newspapers Ireland Ltd)
Aug 29, 2021 | Uncategorized
Assume that you are audit senior in an accounting firm. Your firm has recently won an audit for a company that you selected in assignment 1. However, your firm does not have any other clients that operate in this industry. Your audit partner is concerned about his lack of knowledge of the industry the company is operating in. He is aware of the requirements of ASA 315 (par 25 and 26).
Your audit partner asks you to prepare a memo on the ‘state of the company’s industry’ and associated risk factors.
Required:
- Prepare a list of all useful sources that you can use to obtain the required knowledge.
- Prepare a memo to the audit partner on the ‘state of the company’s industry’ and associated risk factors.
- Suggested five most important general balance related or transaction related audit objectives based on your finding of the risk factors.
General requirement:
The length of the writing / essay must not exceed 1000 words. Words in Bibliography or Reference Lists section are not included in the word count.
4 marks will be given for the contents (sources and understanding of industry and able to link audit objectives with findings) and 1 mark will be given for correct referencing (Harvard or APA) and clear paragraph structure (topic sentences in paragraphs and show coherence with careful proofreading)
Please note that this is an individual assignment and there is no tolerance for collaborations between students in completing this assignment. Assignment suspected of committing plagiarism will be penalised in the marks given.
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Company’s name |
Ticker used in ASX |
Student’s name |
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Empire Oil & Gas NL |
EGO |
ALI |
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Aug 29, 2021 | Uncategorized
Important notice:
I attached to you a guideline for the assignment and a sample assignment that I want you to use it and paraphrase it to avoid the plagiarism issues.
Regarding the paraphrasing:
1. I don’t want exact information to be used in data collection to avoid the plagiarism.
2. The trailer dimensions must be (length 2250mm × width 1500mm).
3. Change some references and add some new references and add new data, photos and tables.
4. Improve the assignment quality and presentation
5. No extension is given so if you are not able to do it, Mention that from the beginning.
Aug 29, 2021 | Uncategorized
You have been asked to estimate the market value of an apartment complex that is producing annual net operating income of $44,500. Four highly similar and competitive apartment properties within two blocks of the subject property have sold in the past three months. All four offer essentially the same amenities and services as the subject. All were open market transactions with similar terms of sale. All were financed with 30 year fixed rate mortgages using 70 percent debt and 30 percent equity. The sale prices and estimated first year net operating incomes were as follows:
Comparable 1: Sale price $500,000; NOI $55,000
Comparable 2: Sale price $420,000; NOI $50,400
Comparable 3: Sale price $475,000; NOI $53,400
Comparable 4: Sale price $600,000; NOI $69,000
What is the indicated value of the property using direct capitalization?
Aug 29, 2021 | Uncategorized
You are estimating the value of a small office building. Suppose the estimated NOI for the first year of operations is $100,000.
a. If you expect that NOI will remain constant at $100,000 over the next 50 years and that the office building will have no value at the end of 50 years, what is the present value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate?
b. If you expect that NOI will remain constant at $100,000 forever, what is the value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate?
c. If you expect the initial $100,000 NOI will grow forever at a 3% annual rate, what is the value of the building assuming a 12.2% discount rate? If you pay this amount, what is the indicated initial cap rate?
Aug 29, 2021 | Uncategorized
Assume an elderly couple owns a $140,000 home that is free and clear of mortgage debt. A reverse annuity mortgage (RAM) lender has agreed to a $100,000 RAM. The loan term is 12 years, the contract is 9.25%, and payments will be made at the end of each month.
a. What is the monthly payment on this RAM?
b. Fill in the following partial loan amortization table:
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Month
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Beginning Balance
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Monthly Payment
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Interest
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Ending Balance
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1
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2
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3
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4
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5
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c. What will be the loan balance at the end of the 12 year term?
d. What portion of the loan balance at the end of year 12 represents principal? What portion represents interest?
Aug 29, 2021 | Uncategorized
Five years ago you borrowed $100,000 to finance the purchase of a $120,000 house. The interest rate on the old mortgage is 10%. Payment terms are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 8% with monthly payments for 30 years. The new lender will charge two discount points on the loan. Other refinancing costs will equal $3,000. There are no prepayment penalties associated with either loan. You feel the appropriate opportunity cost to apply to this refinancing decision is 8%.
a. What is the payment on the old loan?
b. What is the current loan balance on the old loan (five years after origination)?
c. What should be the monthly payment on the new loan?
d. Should you refinance today if the new loan is expected to be outstanding for five years?
Aug 29, 2021 | Uncategorized
The cost accountant of ABC Manufacturing attended a workshop on activity based costing and was impressed by the results. After consulting with the production personnel, he prepared the following information on cost drivers and the estimated volume for each driver.
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Activity
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Cost driver
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Cost driver volume
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Total
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Machining
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Ace
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Best
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Champ
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Setup
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Number of setups
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125
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75
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50
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250
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Machining
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Machine hours
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2,500
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1,500
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2,000
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6,000
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Assembly
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Assembly
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Direct labor hours
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25,000
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15,000
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5,000
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45,000
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Inspection
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Number of inspections
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50
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25
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25
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100
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The cost accountant also determined how much overhead costs were incurred in each of the four activities as follows:
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Activity
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Overhead costs
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Machining
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Setup
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$150,000
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Machining
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750,000
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Total Machining department overhead
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$900,000
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Assembly
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Assembly
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$360,000
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Inspection
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90,000
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Total Assembly department overhead
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$450,000
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Total overhead costs
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$1,350,000
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Required:
a. Determine the cost driver rate for each activity cost pool.
b. Use the activity based costing method to determine the unit cost for each product.
c. Summarize and comment the results.
Aug 29, 2021 | Uncategorized
Kirby Industries is considering the possibility of outsourcing the activities of service department S1. In order to evaluate the bids from qualified vendors, Kirby’s accountant provides the following revised data that reflect only the variable costs incurred.
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Variable
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Proportion of services provided to:
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costs
incurred
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Service
department
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S1
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S2
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P1
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P2
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P3
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$300,000
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S1
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20%
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30%
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40%
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10%
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104,000
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S2
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40%
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20%
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15%
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25%
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The avoidable fixed costs of running service department S1 are estimated to be $390,000.
Required:
Determine the possible cost savings from eliminating service department S
1
.
Aug 29, 2021 | Uncategorized
Each electronic bicycle produced at East Mountain Bike requires two major parts (frame and tires) and an electronic subassembly from its suppliers as inputs. The following information is available:
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Frame
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Tires
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Electronic subassembly
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Material per
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1
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2
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1
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Unit cost
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$900
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$30
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$420
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Beginning inventory
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1,100
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2,000
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950
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Ending inventory
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2,500
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3,200
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1,800
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Required:
Prepare the direct material budget for next year.
Aug 29, 2021 | Uncategorized
Emerson Manufacturing Company produces two products: Model S and Model Z. The following income statement shows this year’s operating results.
Emerson Manufacturing Company
Income Statement
For the year ended December 31
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Revenue:
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Model S
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$300,000
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Model Z
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200,000
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$500,000
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Cost of goods sold:
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Model S
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$150,000
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Model Z
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120,000
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(270,000)
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Gross margin
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$230,000
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Operating costs:
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Marketing
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$60,000
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Distribution
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50,000
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Depreciation
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21,000
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Administration
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30,000
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(161,000)
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Operating income
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$69,000
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Emerson’s management is in the process of preparing next year’s budget. The following information is under consideration.
a. Selling price of Model S is expected to remain the same, but the units sold will increase by 6 percent
b. Selling price and units of Model Z will increase by 5 percent and 10 percent, respectively.
c. As indicated by the suppliers of key components, the cost of each unit sold will increase by 3 percent.
d. Marketing costs are expected to increase by $20,000.
e. Distribution costs remain the same fixed percentage of total sales revenue.
f. Depreciation costs remain unchanged.
g. A new administrative aide will be hired part time for $25,000.
h. There is no beginning or ending inventory.
Required:
Prepare a budgeted income statement for next year.
Aug 29, 2021 | Uncategorized
The accountant at EZ Toys, Inc. is analyzing the production and cost data for its Trucks Division.
For October, the actual results and the master budget data are presented below.
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Actual results
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Budget data
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10,000 trucks produced and sold
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12,000 trucks planned
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Unit selling price
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$15
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Unit selling price
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$14
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Variable costs:
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Unit variable cost:
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Direct materials
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$52,800
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Direct materials
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$5
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Direct labor
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51,000
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Direct labor
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4
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Variable overhead
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23,000
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Variable overhead
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2
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Total variable costs
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$126,800
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Total unit variable costs
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$11
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Fixed overhead
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$9,000
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Fixed overhead
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$9,600
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Required:
Prepare a variance analysis to compare actual results and master budget.
Aug 29, 2021 | Uncategorized
Information about the use of direct materials at EZ Toys’ Trucks Division for October follows:
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Standard costs
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2 units per truck @ $2.5 per unit
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= $5 per truck
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Trucks produced in October
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= 10,000
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Actual materials purchased and used
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22,000 units @ $2.4 per unit
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= $52,800
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There was no beginning inventory on October 1.
Required:
Prepare Truck Division’s direct materials variances for October.
Aug 29, 2021 | Uncategorized
Information about the use of direct labor at EZ Toys’ Trucks Division for October follows:
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Standard costs
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0.4 hour per truck @ $10 per hour
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= $4 per truck
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Trucks produced in October
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= 10,000
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Actual direct labor costs
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Actual hours worked
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= 5,000
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Total actual labor cost
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= $51,000
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Average cost per hour
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= $10.2
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Required:
Prepare Truck Division’s direct labor variances for October.
Aug 29, 2021 | Uncategorized
information about the use of fixed overhead at EZ Toys’ Trucks Division follows:
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Annual budget data
Fixed overhead
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= $115,200
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Direct labor hours
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= 57,600
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Standard fixed overhead rate
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= $2 per hour
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Standard costs
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0.4 hour per truck @ $2 per hour
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= $0.8 per truck
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|
Trucks produced in October
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= 10,000
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Actual variable overhead cost
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= $9,000
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Required:
Prepare Truck Division’s fixed overhead variances for October.
Aug 29, 2021 | Uncategorized
Operating and Cash Conversion Cycles. Consider the following selected financial data for the Cloud 9 Retailer:
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Item
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Beginning
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Ending
|
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Inventory
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$5,000
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$7,000
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Accounts receivable
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1,600
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2,400
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Accounts payable
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2,700
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4,800
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Net credit sales
|
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$50,000
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Cost of goods sold
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30,000
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Calculate the operating and cash conversion cycles (CFM adapted).
Aug 29, 2021 | Uncategorized
Factoring Accounts Receivable. Grafton Corporation is considering factoring its accounts receivable. Its sales are $3,600,000, and accounts receivable turnover is two times. The factor requires: (1) an 18 percent reserve on accounts receivable; (2) a commission charge of 2.5 percent on average accounts receivable, payable when receivables are purchased; and (3) an interest charge of 19 percent on receivables after deducting the commission charge and reserve.
The interest charge reduces the advance.
Given the facts, answer the following questions: (a) What is the average accounts receivable? (b) How much will Grafton receive by factoring its accounts receivable? (c) What is the annual cost of the factoring arrangement? (d ) What is the effective annual cost of factoring?
Aug 29, 2021 | Uncategorized
Establishing a Line of Credit. Luther Company produces and sells a complete line of infant and toddler toys. Its sales, characteristic of the entire toy industry, are very seasonal. The company offers favorable credit to those customers who will place their Christmas orders early and who will accept a shipment schedule arranged to fit the production schedules of Luther. The customer must place orders by May 15 and be willing to accept shipments beginning August 15; Luther guarantees shipment no later than October 15. Customers willing to accept these conditions are not required to pay for their Christmas purchases until January 30.
The suppliers of the raw materials used by Luther in the manufacture of toys offer more normal credit terms. The usual terms for the raw materials are 2/10, net/30. Luther Company makes payment within the 10 day discount period during the first 6 months of the year; however, in the summer and fall, it does not even meet the 30 day terms. The company regularly pays invoices for raw materials 80 to 90 days after the invoice date during this latter period. Suppliers have come to accept this pattern because it has existed for many years. In addition, this payment pattern has not affected Luther’s credit rating or ability to acquire the necessary raw materials.
Luther recently hired a new financial vice president. He feels quite uncomfortable with the unusually large accounts receivable and payable balances in the fall and winter and with the poor payment practice of Luther. He would like to consider alternatives to the present method of financing the accounts receivable.
One proposal being considered is to establish a line of credit at a local bank. The company could then draw against this line of credit in order to pay the invoices within the 10 day discount period and pay off the debt in February when the accounts receivable are collected. The effective interest rate for this arrangement would be 12 percent. (a) Would establishing a line of credit reduce Luther’s cost of doing business? Support your answer with appropriate calculations. (b) Would long term financing (debt and common stock) be a sound alternative means of financing Luther’s generous accounts receivable terms?
Aug 29, 2021 | Uncategorized
Financial Ratios. Ratio analysis is employed to gain insight into the financial character of a firm. The calculation of ratios can often lead to a better understanding of a firm’s financial position and performance. A specific ratio or a number of selected ratios can be calculated and used to measure or evaluate a specific financial or operating characteristic of a firm. (a) Identify and explain what financial characteristic of a firm would be measured by an analysis in which the following four ratios were calculated: (1) current ratio; (2) acid test ratio; (3) accounts receivable turnover ratio; and (4) inventory turnover ratio. (b) Do the ratios in part (a) provide adequate information to measure this characteristic or are additional data needed? If so, provide two examples of other data that would be required. (c) Identify and explain what specific characteristic regarding a firm’s operations would be measured by an analysis in which the following three ratios were calculated: (1) gross profit margin; (2) operating income margin; and (3) net income to sales (profit margin). (d ) Do these ratios provide adequate information to measure this characteristic or are additional data needed? If so, provide two examples of other data that would be required.
Aug 29, 2021 | Uncategorized
Repurchase versus Cash Dividend. Ambers Corporation is deciding whether to pay out $500 in excess cash in the form of an extra dividend or a share repurchase. Current earnings are $2.50 per share, and the stock sells for $25. The market value balance sheet before paying out the $500 is as follows:
|
Market Value Balance Sheet
|
|
(before paying excess cash)
|
|
Excess cash
|
$500
|
Debt
|
$500
|
|
Other assets
|
2,500
|
Equity
|
2,500
|
|
Total
|
$3,000
|
Total
|
$3,000
|
Evaluate the two alternatives in terms of the effect on the price per share of the stock, the EPS, and the PE ratio.
Aug 29, 2021 | Uncategorized
Dividend Payout. Most Corporation had a net income of $800,000 in 20X1. Earnings have grown at an 8 percent annual rate. Dividends in 20X1 were $300,000. In 20X2, the net income was $1,100,000. This, of course, was much higher than the typical 8 percent annual growth rate. It is anticipated that earnings will go back to the 8 percent rate in future years. The investment in 20X2 was $700,000.
How much dividend should be paid in 20X2 assuming: (a) a stable dividend payout ratio of 25 percent? (b) a stable dollar dividend policy is maintained? (c) a residual dividend policy is maintained and 40 percent of the 20X2 investment is financed with debt? (d ) the investment for 20X2 is to be financed with 80 percent debt and 20 percent retained earnings? Any net income not invested is paid out in dividends.
Aug 29, 2021 | Uncategorized
Dividend Payout. The Xylon Company has experienced rapid growth in the past 5 years. In order to finance the growth, the board of directors has followed a policy of controlled borrowing, a low dividend payout ratio, and regular stock dividends.
The percent of debt in the capital structure has remained constant since 20X0. The funds generated from operations have been reinvested in productive assets. Each January, for the past 4 years, Xylon’s board of directors has declared and paid a 10 percent dividend. A $0.20 per share cash dividend on the stock outstanding on June 15 has been paid each July for the past 5 years.
Management estimates that the earnings for 20X7 will be $250,000. The closing price of Xylon Company’s stock at November 30, 20X7 was $25.50 per share.
|
Years
|
Earnings ($)
|
Shares
Outstanding as
|
Cash Dividends
|
Market
Price per
Share as of
|
|
Years
|
Earnings ($)
|
of December 31
|
Per Share ($)
|
Total Payout ($)
|
December 31 ($)
|
|
20X2
|
100,000
|
100,000
|
0.20
|
20,000
|
10.00
|
|
20X3
|
120,000
|
110,000
|
0.20
|
22,000
|
12.00
|
|
20X4
|
144,000
|
121,000
|
0.20
|
24,200
|
14.30
|
|
20X5
|
172,800
|
133,100
|
0.20
|
26,620
|
17.00
|
|
20X6
|
207,360
|
146,410
|
0.20
|
29,282
|
22.00
|
Prepare a response from the perspective of Xylon Company’s board of directors which (a) justifies the low cash dividend payout, and (b) rationalizes the use of stock dividends.
Aug 29, 2021 | Uncategorized
Reformulated Capital Structure. Blake Company’s capital structure on December 30, 20X1, was:
|
Common stock ($1 par, 100,000 shares)
|
$100,000
|
|
Paid in capital on common stock
|
20,000
|
|
Retained earnings
|
680,000
|
|
Total stockholders’ equity
|
$800,000
|
The company’s net income for 20X1 was $150,000. It paid out 40 percent of earnings in dividends. The stock was selling at $6 per share on December 30.
Assuming the company declared a 5 percent stock dividend on December 31, what is the reformulated capital structure on December 31?
Aug 29, 2021 | Uncategorized
Reorganization of Liquidation. The balance sheet of Morris Corporation for the year ended December 31, 20X3, follows:
Balance Sheet
|
Current assets
|
$ 500,000
|
Current liabilities
|
$ 550,000
|
|
Fixed assets
|
520,000
|
Long term liabilities
|
300,000
|
| |
|
Common stock
|
250,000
|
| |
|
Retained earnings
|
(80,000)
|
| |
|
Total liabilities and
|
|
|
Total assets
|
$1,020,000
|
stockholders’ equity
|
$1,020,000
|
The firm’s liquidation value is $700,000. Instead of liquidating, there could be a reorganization with an investment of an additional $400,000. The reorganization is anticipated to provide earnings of $150,000 a year. A multiplier of 8 is appropriate. If the $400,000 is obtained, long term debt holders will receive 35 percent of the common stock in the reorganized firm in substitution for their current claims. Is reorganization or liquidation recommended?
Aug 29, 2021 | Uncategorized
Distribution in Bankruptcy. Blake Corporation is bankrupt. The book and liquidation values of its assets follow.
| |
Book
Value
|
Liquidation
Value
|
|
Cash
|
$ 500,000
|
$ 500,000
|
|
Accounts receivable
|
1,700,000
|
1,400,000
|
|
Inventory
|
3,400,000
|
2,200,000
|
|
Land
|
4,700,000
|
3,500,000
|
|
Building
|
8,000,000
|
5,600,000
|
|
Equipment
|
7,000,000
|
3,000,000
|
|
Total assets
|
$25,300,000
|
$16,200,000
|
The liabilities and stockholders’ equity at the liquidation date follow.
|
Current liabilities
|
|
|
|
Accounts payable
|
$2,000,000
|
|
|
Notes payable
|
1,000,000
|
|
|
Accrued taxes
|
700,000
|
|
|
Accrued salaries
|
400,000a
|
|
|
Total current liabilities
|
|
$ 4,100,000
|
|
Long term liabilities
|
|
|
|
Mortgage on land
|
$3,500,000
|
|
|
First mortgage—building
|
4,000,000
|
|
|
Second mortgage—building
|
1,600,000
|
|
|
Subordinated debentures
|
4,500,000
|
|
|
Total long term liabilities
|
|
13,600,000
|
|
Total liabilities
|
|
$17,700,000
|
|
Stockholders’ equity
|
|
|
|
Preferred stock
|
$4,500,000
|
|
|
Common stock
|
6,500,000
|
|
|
Retained earnings
|
(3,400,000)
|
|
|
Total stockholders’ equity
|
|
7,600,000
|
|
Total liabilities and stockholders’ equity
|
|
$25,300,000
|
a The salary owed to each worker is below $2,000 and was incurred within 90 days of the bankruptcy petition.
Expenses associated with the bankruptcy administration were 12 percent of the proceeds. The debentures are subordinated only to the two first mortgage bonds. Determine the distribution of the proceeds.
Aug 29, 2021 | Uncategorized
Distribution in Bankruptcy. The balance sheet of Larkin Corporation is shown below.
|
ASSETS
|
|
|
|
Current assets
|
|
|
|
Cash
|
$7,000
|
|
|
Marketable securities
|
5,000
|
|
|
Receivables
|
1,000,000
|
|
|
Inventory
|
2,800,000
|
|
|
Prepaid expenses
|
3,500
|
|
|
Total current assets
|
|
$3,815,500
|
|
Noncurrent assets
|
|
|
|
Land
|
$1,700,000
|
|
|
Fixed assets
|
2,200,000
|
|
|
Total noncurrent assets
|
|
3,900,000
|
|
Total assets
|
|
$7,715,500
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
Current liabilities
|
|
|
|
Accounts payable
|
$ 200,000
|
|
|
Bank loan payable
|
950,000
|
|
|
Accrued salaries
|
250,000a
|
|
|
Employee benefits payable
|
80,000b
|
|
|
Customer claims—unsecured
|
70,000c
|
|
|
Taxes payable
|
300,000
|
|
|
Total current liabilities
|
|
$1,850,000
|
|
Noncurrent liabilities
|
|
|
|
First mortgage payable
|
$1,700,000
|
|
|
Second mortgage payable
|
1,200,000
|
|
|
Subordinated debentures
|
600,000
|
|
|
Total noncurrent liabilities
|
|
3,500,000
|
|
Total liabilities
|
|
$5,350,000
|
|
Stockholders’ equity
|
|
|
|
Preferred stock
|
$ 400,000
|
|
|
Common stock
|
490,000
|
|
|
Paid in capital
|
1,400,000
|
|
|
Retained earnings
|
75,500
|
|
|
Total stockholders’ equity
|
|
2,365,500
|
|
Total liabilities and stockholders’ equity
|
|
$7,715,500
|
a The salary owed to each worker is below $2,000 and was incurred within 90 days of the bankruptcy petition.
b Employee benefits payable have the same limitations as unsecured wages and satisfy for eligibility in bankruptcy distribution.
c No customer claim is greater than $900.
Additional data are as follows:
1. The mortgages relate to the firm’s total noncurrent assets.
2. The subordinated debentures are subordinated to the bank loan payable.
3. The trustee has sold the current assets for $2 million and the noncurrent assets for $1.8 million.
4. The administration expense related to bankruptcy proceedings was $700,000.
Determine the distribution of the proceeds.
Aug 29, 2021 | Uncategorized
Distribution in Bankruptcy. Hover Company’s balance sheet follows:
|
ASSETS
|
|
|
Current assets
|
$1,200,000
|
|
Land
|
3,000,000
|
|
Plant and equipment
|
2,400,000
|
|
Total assets
|
$6,600,000
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
Current liabilities
|
|
|
|
Accounts payable
|
$ 500,000
|
|
|
Notes payable
|
1,200,000
|
|
|
Accrued taxes
|
300,000
|
|
|
Total current liabilities
|
|
$2,000,000
|
|
Noncurrent liabilities
|
|
|
|
Mortgage bonds
|
$1,800,000a
|
|
|
Debentures
|
1,000,000
|
|
|
Total noncurrent liabilities
|
|
2,800,000
|
|
Total liabilities
|
|
$4,800,000
|
|
Stockholders’ equity
|
|
|
|
Preferred stock
|
$ 500,000
|
|
|
Common stock
|
1,300,000
|
|
|
Total stockholders’ equity
|
|
1,800,000
|
|
Total liabilities and stockholders’
|
|
|
|
equity
|
|
$6,600,000
|
a Mortgage bonds are secured against plant and equipment.
The liquidation value for the total assets is $4 million, $1.2 million of which was received for plant and equipment. Bankruptcy costs were $150,000. Determine the distribution of the proceeds.
Aug 29, 2021 | Uncategorized
For each of the following transactions, indicate which elements of the accounting equation are affected (minimum of 2 per transaction) and whether the element has increased or decreased as a result.
|
a) Paid rent for August
|
$3,000
|
|
b) Received cash from cash customers
|
$7,500
|
|
c) Received cash for capital stock
|
$15,000
|
|
d) Paid creditors on account
|
$800
|
|
e) Received cash from customer’s on account
|
$1,200
|
Aug 29, 2021 | Uncategorized
The following table shows financial data for Cuddly Pets, Inc. as of June 30, 2010. Prepare a balance sheet using this data.
|
Accounts receivable
|
$419,200
|
|
Accounts payable
|
349,200
|
|
Inventory
|
58,400
|
|
Capital stock
|
662,100
|
|
Other assets
|
69,400
|
|
Notes payable
|
268,900
|
|
Cash
|
732,600
|
|
Equipment
|
118,500
|
|
Retained earnings
|
117,900
|
Aug 29, 2021 | Uncategorized
1) Journalize the transactions below using the following account titles:
|
Cash
|
Capital Stock
|
Rent expense
|
|
Accounts Receivable
|
Dividends
|
Automobile expense
|
|
Supplies
|
Sales Commissions
|
Supplies expense
|
|
Accounts Payable
|
Office Salaries Expense
|
Misc. expense
|
2) Prepare T accounts and post the entries to the appropriate accounts. Determine balances after all entries are posted.
a) Issued capital stock for $16,000.
b) Paid rent on office building for the month, $3,000.
c) Purchased supplies on account, $1,200.
d) Paid creditor on account, $800.
e) Earned sales commissions and sent invoices to customers, $22,500.
f) Paid automobile expenses for month, $2,900, and miscellaneous expenses, $1,450.
g) Paid office salaries, $4,200.
h) Determined the cost of supplies used was $960.
i) Paid cash dividends, $1,400.
Aug 29, 2021 | Uncategorized
The debit and credit totals of the following trial balance are unequal as a result of the following errors. Prepare a corrected trial balance as of June 30 of the current year.
|
Cash
|
$26,500
|
|
|
Accounts Receivable
|
37,775
|
|
|
Prepaid Insurance
|
800
|
|
|
Office Supplies
|
960
|
|
|
Accounts Payable
|
|
$11,410
|
|
Notes Payable
|
|
6,000
|
|
Capital Stock
|
|
7,500
|
|
Retained Earnings
|
|
25,340
|
|
Dividends
|
|
2000
|
|
Fees Earned
|
|
126,500
|
|
Wages Expense
|
84,100
|
|
|
Rent Expense
|
5,500
|
|
|
Advertising Expense
|
3,900
|
|
|
Automobile Expense
|
275
|
|
|
Miscellaneous Expense
|
1,550
|
|
|
Totals
|
$161,360
|
$178,750
|
Errors noted:
a) The balance of cash was understated by $750. (Cash +750)
b) A cash receipt of $2,100 was posted as a debit to Cash of $1,200. (Cash +900) c)
c) A debit of $3,000 for a cash dividend was posted as a credit to Retained Earnings. (Dividends +3,000; RE –3,000)
d) The balance of $2,750 in Automobile Expense was entered in the trial balance as $275. (Auto Exp. = 2,750)
e) A debit of $975 to Accounts Receivable was not posted. (A/R +975)
f) A return of $125 of defective supplies was erroneously posted as a $215 credit to Supplies. (Supplies +90)
g) An insurance policy acquired at a cost of $150 was posted as a credit to Prepaid Insurance. (Prepaid Ins. +300)
h) A debit of $900 in Accounts Payable was overlooked when determining the balance of the account. (A/P –900)
i) The balance of Notes Payable was overstated by $5,000. (Notes Payable –5,000)
j) The balance of cash was understated by $750. (Cash +750)
k) A cash receipt of $2,100 was posted as a debit to Cash of $1,200. (Cash +900)
Aug 29, 2021 | Uncategorized
The cash account for Ace Co. on August 31, 2004, indicated a balance of $9,420. The bank statement indicated a balance of $12,785 on August 31, 2004. The following reconciling items were discovered.
a) Checks outstanding totaled $6,240.
b) A deposit of $5,375, representing cash receipts of August 31, had been made too late to appear on the bank statement.
c) A check for $240 had been incorrectly charged by the bank as $420.
d) A check for $658 returned with the statement had been recorded by Ace as $568. The check was for the payment of an obligation to Cahill Co. on account.
e) The bank had collected for Ace $2,800 on a note left for collection.
The face of the note was $2,000.
f) Bank service charges for August amounted to $30. Additional information for the company’s records:
· Checks outstanding totaled $6,240.
· A deposit of $5,375, representing cash receipts of August 31, had been made too late to appear on the bank statement.
· A check for $240 had been incorrectly charged by the bank as $420.
· A check for $658 returned with the statement had been recorded by Ace as $568. The check was for the payment of an obligation to Cahill Co. on account.
· The bank had collected for Ace $2,800 on a note left for collection. The face of the note was $2,000.
· Bank service charges for August amounted to $30.
Required:
Prepare the bank reconciliation and journalize the necessary entries.
Aug 29, 2021 | Uncategorized
Given the following information and using the indirect method prepare the Cash Flows from Operating Activities section of the statement of cash flows.
| |
End of Year
|
Beginning of Year
|
Change
|
|
Cash
|
$ 23,500
|
$ 37,400
|
(13,900)
|
|
Accounts receivable (net)
|
84,500
|
80,350
|
4,150
|
|
Inventories
|
100,200
|
94,300
|
5,900
|
|
Prepaid expenses
|
4,970
|
5,300
|
(330)
|
|
Accounts payable (creditors)
|
71,400
|
68,900
|
2,500
|
|
Salaries Payable
|
5,320
|
6,450
|
(1,130)
|
Net Income reported on the income statement for the current year was $134,800. Depreciation expense recorded on buildings and equipment was $27,400 for the year.
Aug 29, 2021 | Uncategorized
Given the following selected information, determine the net cash flows from investing activities and the net cash flows from financing activities:
a) Net income was $189,500 for the period.
b) Purchased 10,000 shares of common stock at $15 per share for the treasury.
c) Sold equipment with a carrying value of $32,500 at a gain of $6,000.
d) Purchased land and a building worth $450,000 by signing a ten year note payable.
e) Issued $1,000,000 in bonds at par.
f) The beginning and ending retained earnings account balances were $418,000 and $534,000, respectively. There were no prior period adjustments during the period.
g) Wrote a check for $648,000 for the purchase of machinery.
h) Sold long term investments in marketable securities with a $50,000 carrying value, at a loss of $17,500.
i) Cash dividends were declared and paid during the period.
Aug 29, 2021 | Uncategorized
ABC Manufacturing, Inc. produces three gadgets (Ace, Best, and Champ) in two departments, Machining and Assembly. Each product requires one hour of direct labor for completion. The following table provides production and cost data for the year.
| |
Ace
|
Best
|
Champ
|
Total
|
|
Number of units
|
25,000
|
15,000
|
5,000
|
45,000
|
|
Machine hours
|
2,500
|
1,500
|
2,000
|
6,000
|
|
Direct materials
|
$1,000,000
|
$450,000
|
$275,000
|
$1,725,000
|
|
Direct labor
|
375,000
|
225,000
|
75,000
|
675,000
|
|
Overhead
|
|
|
|
|
|
Machining
|
|
|
|
900,000
|
|
Assembly
|
|
|
|
450,000
|
|
Total overhead
|
|
|
|
1,350,000
|
|
Tot costs
|
|
|
|
$3,750,000
|
Required:
Use the plantwide allocation method to determine the unit cost for each product. The allocation bases to choose from are
a. Machine hours.
b. Direct labor costs.
Aug 29, 2021 | Uncategorized
Bachelor of Business (Incorporating Graduate Diploma in Business & Graduate Certificate in Business) Taxation for Accounting Studies 367911 ASSIGNMENT SEMESTER 2 2013 Due date: Tuesday 24th September 2013 at 12 noon To be handed in: Hard copy with cover sheet in WF1 assessment box. It is also a requirement to submit the soft copy into Turnitin on the same day. Course Contribution: 20%. 20 marks Requirements: 1. In answering the questions, marks will be awarded for: a) Clarity of discussion and analysis; b) Correctness of content materials; c) Logical flow of the discussion involved; d) Quality of communication, e.g. correct spelling, grammar, structure, proper page numbers and referencing used. e) Adhering to the word limit. Work that has exceeded the word limit will not be marked. You are required to record the number of words at the end of each question. 2. Students are required to work in groups of four. The groups are chosen by the students themselves. 3. Any query relating to the assignment can to be directed to the discussion forum on AUT Online. 4. This assignment must be fully typed, one sided with double line spacing using 12 font Arial. 5. References and quotations taken from other authors must be properly acknowledged at all times using the NZ Law style guide referencing (not APA style) 6. Students are to familiarise themselves with the AUT’s Rules and Regulation regarding assignment as spelt out in the study guide. Instructions: You are to work in a group of four for this assessment. You are to nominate your own group members and manage the group. Group members can be selected from any stream(s) of your choice. The cover sheet of the hard copy assignment must include each member’s name, SID, stream and their workshop lecturer’s name. Please note that since the group members have been chosen by you, it is your responsibility to manage it and to ensure that each member contributes to the assignment fairly and equitably. Any problems pertaining to the group is solely and entirely the responsibility of the group and not the teaching team. The discussion forum for the assignment will be open from week 1 for those who would like to form a group for the assignment. No individual assignment will be accepted. The mark awarded by the teaching team for the assignment will be the mark given for each group member with no variations between members. It is to your best interest to find your group members appropriately who would work to maximise the assignment mark for you. Please bear in mind that this mode of assessment is similar to those in the commercial world where team work is required to achieve a group outcome. Question 1: Fringe Benefit Tax 1. “The Fringe Benefit Tax in New Zealand was introduced in the mid 1980’s as an antiavoidance measure for employment income”. Do you agree with the statement? Discuss your answer from the perspectives of the canons of taxation and the good tax system. 10 marks Word limit: 1500 (not including references and footnotes) Question 2: Capital – Revenue Distinction 2. Income tax law by its very nature is a complex subject. The capital revenue distinction is one area that causes this complexity. In New Zealand the capitalrevenue distinction is even more important because of the lack of a comprehensive capital gains regime. Furthermore, the term “capital” is not defined in the Income Tax Act 2007. However, there is a considerable body of case law that provides useful guidance. By examining the following two New Zealand tax cases discuss what guidance they provide to this complex area of tax law. a. Fullers Bay of Island v CIR (2006) 22 NZTC 19,716 (CA) b. Case W26 (2006) 22 NZTC 12,303 10 marks Word limit: 1500 (not including references and footnotes)
Aug 29, 2021 | Uncategorized
Assume that you are the president of Nuclear Company. At December 31, 2011, the end of the first year of operations, the following financial data for the company are available:
|
| Cash |
$ |
25,000 |
| Receivables from customers (all considered collectable) |
|
12,000 |
| Inventory of merchandise (based on physical count and priced at cost) |
|
90,000 |
| Equipment owned, at cost less used portion |
|
45,000 |
| Payables to suppliers of merchandise |
|
47,370 |
Salary payable for 2011 (on December 31, 2011, this was
owed to an employee who wasaway because of an emergency and
returned to work on January 10, 2012, at which time the payment was made) |
|
2,000 |
| Total sales revenue |
|
140,000 |
| Expenses, including the cost of the merchandise sold (excluding income taxes) |
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89,100 |
| Income taxes expense (at 30% of pretax profit); all paid during 2011 |
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| Share capital, 7,000 shares outstanding |
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87,000 |
| No dividends were declared or paid during 2011. |
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| Required: |
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1.
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Prepare a summarized income statement for the year ended December 31, 2011. (Input all amounts as positive values. Omit the “$” sign in your response.)
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| NUCLEAR COMPANY |
| Summary Income Statement |
| For the Year Ended December 31, 2011 |
| Total sales revenue |
$ |
| Total expenses, excluding income taxes |
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$ |
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2.
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Prepare a statement of financial position at December 31, 2011.(Be sure to list the accounts in order of their liquidity. Omit the “$” sign in your response.)
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| NUCLEAR COMPANY |
| Statement of Financial Position |
| As at December 31, 2011 |
| Assets |
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$ |
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| Total Assets |
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$ |
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| Liabilities and Shareholders’ Equity |
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| Liabilities: |
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$ |
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| Total Liabilities |
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$ |
| Shareholders’ Equity: |
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$ |
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| Total Shareholders’ Equity |
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| Total Liabilities and Shareholders’ Equity |
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Aug 29, 2021 | Uncategorized
Your boss recently attended an accounting seminar at which the balanced scorecard was discussed. He has asked you to prepare a presentation for the next manager’s meeting about the balanced scorecard and how EEC might adopt it. In your presentation, complete the following:
- Define the elements that might be presented in a balanced scorecard
- Explain how it is used
- Make a recommendation of whether or not EEC should adopt the balanced scorecard
- If adopted, how might itimprove the company?
Please use U. S. references only
Aug 29, 2021 | Uncategorized
UNIVERSITY OF WESTERN SYDNEY
200109 Corporate Accounting Systems
Consolidated Financial Statements with Non Controlling Interests
Assignment – spring 2013
INSTRUCTIONS
1. The assignment is to be submitted as an individual attempt. It must be prepared using Excel spreadsheet and be entirely your own work from this semester – i.e. do not use or copy any file, in whole or in part, from any previous semester or from any other student. Create a NEW EXCEL FILE for this assignment and use your student number as the file name.
2. Marking guide can be found as the last page of this assignment question file. Print this page and complete. Use the marking guide sheet to see what is expected and how your work will be marked. Significant emphasis is placed on the correctness of the journal entries so ensure you spend adequate time on these. Review your work before submission and consider how well have met the expected standards (performance levels) for the criteria identified.
3. After handing in the printed copy, the excel file must be uploaded to vUWS using TURNITIN. Further instructions on this process will be provided on vUWS closer to the due date. The excel file MUST EXACTLY MATCH the printed version and not be modified after the submitted version was printed. Uploading a file that doesn’t match exactly, or failing to upload the excel file on time, will result in a significant penalty! The file will be checked against other students’ submissions for potential plagiarism.
4. Marks will be deducted for poor quality presentation, for incorrect work, and for missing work. The presentation of the financial statements must the format of the examples and end of chapter exercise in chapter 29 of the textbook.
QUESTION
Using the information below and the financial statements on the following page, prepare the following at 30 June 2013:
A. adjustment/elimination journal entries for consolidation (10 marks); and
B. consolidation worksheet and detailed calculation of non controlling interest balance (5 marks); and
C. consolidated financial statements and statements of changes in equity of Platypus Limited and its controlled entities (5 marks).
INFORMATION
1. On 1 January 2007 Platypus Ltd purchased 100% of the issued capital of Emu Ltd for $650,000 cash. On acquisition Emu Ltd accounts showed: Share capital $700,000 and Retained earnings $159,000. All assets and liabilities were recorded at fair value except for land that was undervalued by $80,000.
2. On 1 July 2008 Platypus Ltd and Emu Ltd each acquired 35% of the issued capital of Koala Ltd for a combined total of $400,000 cash. The balance sheet of Koala Ltd at the acquisition date showed: Share capital $250,000 and Retained earnings $56,000. All assets and liabilities were recorded at fair value except for an item of plant that was undervalued by $30,000. At that time the plant had a remaining life of 6 years and accumulated depreciation of $24,000. The plant was still on hand at 30 June 2013.
For the year ended 30 June 2013:
3. On 1 July 2012 Koala Ltd sold an item of plant to Emu Ltd for $72,750 when its carrying value in Koala’s books was $69,000 (original cost $110,400 and original estimated life of 12 years).
4. The opening inventory on 1 July 2012 in Platypus Ltd included stock of $29,000 acquired from Emu Ltd.
5. During the year Emu Ltd made sales of inventory to Koala Ltd of $116,000, while Koala Ltd sold $184,000 of inventory to Platypus Ltd.
6. Closing inventories on 30 June 2013 included the following: Platypus Ltd $55,000 (bought from Koala Ltd) and Koala Ltd $28,000 (bought from Emu Ltd).
7. Platypus Ltd charged management fees to both Emu Ltd and Koala Ltd. Emu Ltd also charged management fees to Koala Ltd.
8. Dividends were declared/paid by the three companies.
AT 30 JUNE 2013 PLATYPUS LTD EMU LTD KOALA LTD
$ $ $
INCOME STATEMENTS
Sales revenue 1,413,500 978,300 777,100
Cost of goods sold 798,000 538,060 427,400
Gross profit 615,500 440,240 349,700
Other income
Management fee revenue 22,600 21,000
Dividend revenue 222,750 36,750
Gain on sale of plant 3,750
Expenses
Depreciation expense (126,200) (49,000) (93,700)
Management fee expense (12,600) (31,000)
Other expenses (326,100) (263,800) (221,400)
Profit before tax 408,550 172,590 7,350
Income tax expense (127,200) (50,050) (2,400)
Profit for the year after tax 281,350 122,540 4,950
Retained earnings at start of year 659,100 434,000 243,900
Dividend paid/declared (250,000) (186,000) (105,000)
Retained earnings at year end 690,450 370,540 143,850
BALANCE SHEETS
Equity
Share capital 850,000 700,000 250,000
Retained earnings 690,450 370,540 143,850
Current Liabilities
Accounts payable 184,000 71,010 114,750
Income tax payable 125,900 66,700 2,600
Dividends payable 125,000 50,000 55,000
Provision for employee benefits 19,200 15,700 12,900
Non Current Liabilities
Loans 675,100 175,100 645,000
Provision for employee benefits 21,900 19,400 14,100
Deferred tax liability 6,900 9,700
2,698,450 1,478,150 1,238,200
Current Assets
Accounts receivable 276,300 104,100 110,800
Allowance for doubtful debts (15,500) (7,000) (4,200)
Dividends receivable 69,250 19,250
Inventory 112,100 144,200 75,900
Non Current Assets
Land and buildings 800,000 610,800 652,000
Plant – at cost 901,200 601,200 699,600
Accumulated depreciation – plant (294,900) (194,400) (297,600)
Deferred tax asset 1,700
Investment in Emu Ltd 650,000
Investment in Koala Ltd 200,000 200,000
2,698,450 1,478,150 1,238,200
9. Non controlling interests to be recognised.
10. Platypus Ltd has the following accounting policies which have been in place for the group for many years: (i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of the subsidiary; (ii) Non controlling interest is measured at fair value; (iii) Intragroup sales of inventory to be at a markup of 25% on cost; (iv) Plant is depreciated straight line over its estimated life, with no residual value; and (v) all amounts to be recorded to the nearest whole dollar.
11. The company tax rate is currently 30% and it has been this rate for many years.
NOTE:
• You MUST number journal entries as they relate to the point numbers given in the information below. Where more than one journal is needed, add the letters a,b,c,…etc to them. That is, if two journals are required to record the acquisition detailed in information point 1, then the first journal will be 1a and the second is 1b. Short narrations are expected for each journal entry.
• The consolidated statements required for both the group and the parent company are: the statement of comprehensive income, statement of financial position, and statement of changes in equity. Notes to the statements are not required.
• You may “cut and paste” the financial information on the next page into your excel file, but no other information is to be copied into your file.
Plagiarism, Cheating & Collusion
Plagiarism, cheating or collusion is regarded as a serious breach of the University’s academic standards. Students must carefully read the Academic Rules on Plagiarism, Cheating & Collusion. Refer to the School of Accounting Handbook for further details
RULES WILL BE STRICTLY ENFORCED
200109 CORPORATE ACCOUNTING SYSTEMS ASSIGNMENT MARKING CRITERIA & STANDARDS – SPRING 2013
CRITERIA UNSATISFACTORY BELOW EXPECTATIONS MEETS MINIMUM EXPECTATIONS FOR A PASS EXCEEDS MINIMUM EXPECTATIONS SIGNIFICANTLY EXCEEDS EXPECTATIONS
A. Journal entries:
Correctness/completeness
of journals Four or more events not correctly recorded and/or missing and/or included incorrectly
? 0 marks Three events not correctly recorded and/or missing and/or included incorrectly
? 3 marks Two events not correctly recorded and/or missing and/or included incorrectly
? 5 marks One event not correctly recorded and/or missing and/or included incorrectly
? 7 marks Every required journal is correct, with none missing or included incorrectly
? 9 marks
Presentation, numbering and
narrations Three or more journals are not presented clearly and/or not complete and/or not numbered correctly
? 0 marks One or two journals not presented clearly and/or not complete and/or not numbered correctly
? ½ mark All journals are presented clearly and numbered correctly. All narrations are complete and informative
? 1 mark
B. Consolidation Worksheet and Non Controlling Interest Calculation:
Consolidation Worksheet Poor presentation and/or not balanced due to errors and/or missing entries
? 0 marks Not clearly presented but does balance.
? 1 mark Clearly presented. No errors and/or missing entries
? 2 marks
Non Controlling Interest Summary Calculation Three or more errors and/or not reconciled to the Balance Sheet
? 0 marks Two errors but is reconciled to the Balance Sheet
? 1 mark One error but is reconciled to the Balance Sheet
? 2 marks Information is presented well, no errors and reconciled to the Balance Sheet
? 3 marks
C. Consolidated Financial Statements
Presentation of Comprehensive Income Statements & Balance Sheets
(for both Group and Parent) Poor presentation and/or more than three errors and/or missing headings or amounts
? 0 marks Not acceptably presented and/or three errors and/or missing headings or amounts
? ½ mark Acceptably presented, but with two errors and/or missing headings or amounts
? 1½ marks Acceptably presented, but with one error and/or missing heading or amount
? 2 marks Correctly presented. No errors and/or missing headings or amounts
? 3 marks
Statements of Changes in Equity (for both Group and Parent) One or more errors and/or not reconciled to the Balance Sheet
? 0 marks Information could be presented more clearly but is reconciled to the Balance Sheet
? 1 mark Information is clearly presented and reconciled to the Balance Sheet
? 2 marks
STUDENT ID: STUDENT NAME: TOTAL MARK: / 20
[NOTE: Errors flowing from earlier incorrect journals, etc will not be treated as further errors]
Aug 29, 2021 | Uncategorized
ACC310 Management Accounting 2 Assessment Item Rationale: You have finally completed your accounting degree and secured a job with a catering business called Boutique Catering and have been asked to report to management on the issues identified in the questions below. This business has experienced significant growth over a short period of time and desperately requires someone to help manage the rapid growth of the business. Boutique Catering’s core business is providing meals for 3 conference rooms which are owned by the company. The business operates from Tuesday to Friday. The general manager who is also the owner wants you to review the business with ‘fresh eyes’ to see where it can improve and also seek some guidance about business opportunities that might be available As such you are required to complete all parts of the questions showing all workings and providing a clear explanation of the process and output. Where appropriate use a well constructed spreadsheet, compatible with Excel, to answer the questions. The spreadsheet must be submitted with your written report. Your spreadsheet will have a separate worksheet for each question. For each question there will be a data entry section followed by a model or results section. Where appropriate, formula should be utilized. Your response is to be in a report format and it is compulsory for you to lodge both the report (word file) and your calculations (spreadsheet excel compatible). Question 1 (15 marks) In order to assist the manager you are compiling a resource which will define the various management accounting terms used in the process of strategic analysis. Provide an explanation of the following terms, with examples specifically relating to Boutique Catering, to include in a resource file which incorporates a reason why each concept is relevant or not relevant to decision making: Satisficing model Simulation Opportunity Cost Sunk cost Break even point Question 2 (20 marks) It’s your second day with Boutique Catering and the general manager has received a report summarising client complaints which she would like you to investigate. There is a consistent theme of clients being unhappy with the service time when receiving their meals. The general manager would like you to establish if additional staff should be employed to improve the service time. Meals are served in a general area and often the clients will stand around talking before placing an order. The following pattern records customer arrivals and the time it takes for the clients to receive their meals. Time between arrivals (minutes) Frequency 1 0.08 2 0.25 3 0.20 4 0.12 5 0.35 Service time (minutes) Relative Frequency 1 0.10 2 0.25 3 0.25 4 0.40 a) Using the random number function in excel simulate the arrival of 25 customers (10 marks) b) Calculate the total simulated hours, total waiting time for the customer service team member, and the total wait time for the customer? (6 marks) c) Do you think that enough simulations have been completed to report an outcome to the general manager, explain your answer? (4 marks) Question 3 (30 marks) On the third day in your role as accountant the general manager has asked you to review the results of 2012 and 2013 to try and determine if there is a relationship between the number of meals prepared per month and the administration costs which she believes to be too high. Data regarding the number of conferences per month, number of meals prepared for that month and the administration costs for the months of 2012 and 2013 are as follows: Year Month Number of conferences Total number of meals prepared Administrative cost 2012 Jan 20 700 27800 2012 Feb 22 250 14000 2012 Mar 10 200 12000 2012 Apr 20 500 20000 2012 May 24 650 23800 2012 Jun 28 450 18400 2012 Jul 16 650 20400 2012 Aug 14 150 8200 2012 Sep 24 350 18800 2012 Oct 24 600 22200 2012 Nov 16 300 16600 2012 Dec 32 750 32200 2013 Jan 18 850 41500 2013 Feb 19 175 19000 2013 Mar 12 100 17800 2013 Apr 18 775 35500 2013 Jun 24 475 27400 2013 Jul 16 775 30400 2013 Aug 14 25 12100 2013 Sep 23 325 28000 2013 Oct 21 700 33100 2013 Nov 16 250 24700 2013 Dec 26 925 48100 Required: a) Draw a scatter diagram of Boutique Catering’s Number of meals prepared and administrative costs for the year. (5 marks) b) The relevant range has been identified as between 200 and 800 meals prepared. Mark the range on the scatter graph. Do you think this is an appropriate range? Why? (5 marks) c) The high low method in another way of estimating the cost behavior of Boutique Catering. Using administration costs and number of meals prepared within the relevant range create an equation to express the results. (6 marks) d) A third method that can help understand the cost behavior relationship is by using regression analysis. Construct an excel spreadsheet and use regression analysis to estimate the; a. Number of meals and administration cost. What is the administration costs’ equation when 600 meals are prepared? b. Number of meals, administration costs and number of conferences. What is the administration cost when 600 meals are prepared? (8 marks) e) From the methods used which method would you feel most confident to report the findings to the General Manager? In your answer make particular reference to the advantages and disadvantages of each method and in addition discuss the cost benefit of each method. (6 marks) Question 4 (10 marks) The forecast for the financial year 2013/2014 shows there will be a significant increase in the number of conferences that Boutique Catering will need to prepare meals for. The general manager is concerned that she will need to double the staff numbers to allow for such an increase. She has mentioned that because of the learning curve phenomenon it will be too difficult to accurately budget for the expected increase. Required: a) Explain to the General Manager what the learning curve is? In your explanation make reference to the two variant methods. Include in your response the conditions under which a learning curve could be used to assist in forecasting for future operations. (10 marks) NB: To respond to this question you will be required to research beyond the prescribed textbook Question 5 (15 marks) Boutique Catering is considering expanding the business structure by preparing frozen meals that will be home delivered. The meals will then only require to be heated up by the customer. As a point of difference the meals will be cooked according to the CSIRO total wellbeing recipe book. The meals Boutique Catering will offer are ‘everyday’, ‘vegetarian’ and ‘speciality’ meals (for people who have allergies). To prepare and cook the meals Boutique Catering is looking at purchasing Frozen Delights which already has the capital equipment to prepare the three types of meals. Frozen Delights provides supermarkets with frozen meals and has spare capacity to supply Boutique Catering with the frozen meals as well as maintain its current customer base. In the table below is an estimation of the cost and hours required to prepare, cook and freeze the meals and hours available to supply Boutique Catering with the meals. Cost per meal Preparation (hours) Cooking (hours) Freezing (hours) HOURS REQUIRED Everyday meals $8.00 4 8 3 Vegetarian meals $9.00 10 3 2 Speciality meals $12.00 8 8 2 HOURS AVALIABLE 800 1200 1000 Required a) Using solver derive the optimal solutions for how many meals should be prepared to maximize profit. (6 marks) b) State the optimum meal mix and the resulting profit (4 marks) c) Explain to the General Manager what transfer pricing is and what are two methods that can be used to set the price between divisions? (5 marks) Question 6 (10 marks) The decision making process is a series of steps or stages that we work through to make a choice from an array of alternatives. Making decisions is an important role that management accountants need to undertake in their position. Explain the utility curve with reference to the three perceptions of risk. Which of these best describes your attitude toward risk? In your role as a management accountant explain how your choice may affect your decision making process and behavior.
Aug 29, 2021 | Uncategorized
C7.43 [L03] [L04) [L06] [L010]
Support department cost allocation; plantwide versus departmental overhead rates; product costing; cost drivers: manufacturer Rising Fast Pty Ltd manufactures a complete line of fibreglass attaché cases and suitcases. The firm has three manufacturing departments: Moulding, Component and Assembly. There are also two support departments: Power and Maintenance. The sides of the cases are manufactured in the Moulding Department. The frames, hinges and locks are manufactured in the Component Department. The cases are completed in the Assembly Department. Varying amounts of materials and time are required to manufacture each type of case. JJJ
Rising Fast has always used a plantwide overhead rate. Direct labour hours are used to assign overhead to products. The predetermined overhead rate is calculated by dividing the company’s total estimated overhead by the total estimated direct labour hours to be worked in the three manufacturing departments. Liam Bolt, manager of cost accounting, has recommended that Rising Fast use departmental overhead rates. The planned operating costs and expected levels of activity for the coming year have been developed by Bolt and are presented by department in the following schedules. (All numbers are in thousands.)
Departmental activity measures: Manufacturing departments Moulding Component Assembly Direct labour hours 500 2 000 1 500 Machine hours 875 125 0 Departmental costs: Direct material SI2 400 530000 S 1 250 Direct labour 3 500 20000 12000 Manufactunng overhead 21 000 16200 22 600 Total departmental costs $36900 $66200 $35850 Use of support departments Moulding Component Assembly Maintenance:
Estimated usage in labour hours for the coming year ‘0 Power (in kilowatt hours): Estimated usage for the corning year 360 3:>3
Support departments Power Maintenance
Departmental activity measures: Estimated usage for the corning year 800 kWh 125 labour hours Departmental costs: Materials and supplies (variable) 55 000 $1 500 Variable labour 1 400 2 250 Fixed overhead 12 000 250 Total support department costs $18400 54 000
Required: I (a) Calculate the plantwide overhead rate for Rising Fast for the coming year using the same method as used in the past. (b) Estimate the overhead cost of an Elite attache case that requires 4 direct labour hours and 5 machine hours in the Moulding Department. 3 direct labour hours in the Component Department and 2 direct labour hours in the Assembly Department. 2 Liam Bolt has been asked to develop departmental overhead rates for comparison with the plantwide rate. The following steps are to be followed in developing the departmental rates: (a) Allocate the total Maintenance Department costs to the three manufacturing departments. using the direct method. (b) Allocate the Power Department costs to the three manufacturing departments. using the direct method.
(c) Calculate departmental overhead rates for the three manufacturing departments, using a machine hour cost driver for the Moulding Department and a direct labour hour cost driver for the Component and Assembly departments. 3 Estimate the overhead cost of the Elite attaché case using the departmental overhead rates. 4 Should Rising Fast use a plantwide rate or departmental rates to assign overhead to products? Explain your answer.
Aug 29, 2021 | Uncategorized
Assignment overview
This assignment has a management accounting orientation. It draws on management accounting topics that include budgeting, sensitivity analysis, cost volume profit analysis and decision making. The assignment is designed to develop the student’s ability to develop a well reasoned financial plan. The plan is to be written from the perspective of a small start up business that is seeking to document its worthiness to a bank in order to secure a loan. Students have the choice of working on their own, or in teams of up to four people.
Assignment details
You have approached a bank and asked for a loan in connection with a small business you are planning to start. The bank has requested that you prepare a detailed financial plan in support of your loan application
Assumptions/Criteria
· To simplify the analysis, this is a one product merchandising or retail business.
· Assume the following cash receipts pattern: 40% collected in month of sale; 55% in month after sale; 5% bad debts.
· Assume the following cash payments pattern for inventory purchases: 30% paid in month following the purchase, 70% paid two months after the purchase.
· Ignore GST and any other taxes.
· The loan you seek will result in a debt / equity ratio of 1.5.
Guidelines for submitting your work.
SECTION A: WORD DOCUMENT
Your work is to be submitted online and presented using 10 font Microsoft Word, single space formatting with standard margins. Your submitted assignment is to be a maximum of fifteen pages (including coversheet) and presented as follows:
Part 1) Written Report to bank:
The first part of the assignment is to be a one page written report to the bank. This page should include a description of the nature of the planned business activity, as well as a visionary statement that indicates the business owner’s longer term aspirations for the firm and implications for capital expenditure. Include any additional assumptions made (beyond those specified in the assignment) and give an indication of the debt exposure.
Maximum length of part 1: one page
Part 2) A one year plan (individual budgets can be broken up by month or quarter) which includes:
One page dedicated to each of the following:
Data Input sheet
Sales budget
Inventory purchases budget
Other operational budgets
Budgeted Income statement in contribution format
Cash flow budget
Budgeted Balance Sheet
Capital expenditure budget
Sensitivity analysis of profit and cash flows:
a. If sales volume increases / decreases 10% from that expected
b. If variable costs increase by 20%
Total length of part 2: nine pages
Part 3) A long term plan (5 years) which includes:
One page dedicated to each of the following:
Sensitivity analysis of income statement (in contribution format)
Sensitivity analysis of cash flow budget
Capital expenditure plan.
Sensitivity analysis is to document profitability and cash flow under three sales volume scenarios: best case, most likely, and worst case scenarios.
Total length of part 3: three pages
Part 4) Cost volume profit assessment
One page dedicated to:
Breakeven analysis and margin of safety analysis (in units and sales dollars). The margin of safety analysis should assess three sales volume scenarios: best case, most likely, and worst case scenarios.
Total length of part 4: one page
SECTION B: EXCEL REPORTS
Submit an Excel spreadsheet of the business’s financial plan (to enable verification of figures and formulae appearing in the Microsoft Word document)
SECTION C: GROUP REPORT
For students working in groups, each individual must complete a small summary outlining their contribution to the completed assignment. This summary is to be typewritten and is to be a maximum of 200 words per student. This summary is to be signed by each member of the group. This is to ensure that the information represents an accurate reflection of each individual’s input to the project.
Aug 29, 2021 | Uncategorized
You have been approached by a large accounting firm to provide advice in relation to Virtual assets. In particular, the managers of the firm have requested that you provide a report outlining the following: • what are Virtual assets?How are they different to the commonly understood notion of intangible assets? • Do these items meet the definition criteria for assets contained in the Framework? • Do these items meet the recognition criteria for assets contained in the Framework? • Should these items be recognised on the financial statements or would disclosure in the notes be sufficient? • Is income earned in a virtual world “real”? If so, should such profits be reported? • If we are required to recognise these items on the financial statements then we need to be able to measure them. What measurement model would you recommend? In completing this report, students can certainly include information relating to online gaming but remember that this report is being prepared for an accounting firm whose greater concern would be other types of Virtual assets. You must therefore not confine your discussion to online gaming, but it does provide a useful and fairly clear starting point
Aug 29, 2021 | Uncategorized
ASSIGNMENT TRIMESTER 2, 2013 AUDITING AND ASSURANCE – ACC300 BACKGROUND
You are an Audit Senior of Kamal Chartered Accountants (KCA) a boutique 3 partner firm with 20 staff. It is 16 July 2013 and your firm has engaged in the tender to become the external auditor of 4X Heavy Ltd for the 30 June 2013 audit. 4X Heavy Ltd is a company that runs multiple Fitness Centres throughout NSW, Australia and has been in operation since 1991.
Pammy Ngo, one of KCA’s Audit Managers was formerly a Fitness Instructor at 4X Heavy Ltd and coincidently joined KCA on 16 February 2013 prior to tender.
4X Heavy Ltd are initiating an aggressive expansion in 2013, with management having plans to list the company on the ASX within the next 5 years.
The 2013 financial year saw 4X Heavy Ltd encounter strong competition from new fitness gyms entering the market as with facing the new popular fitness regime “Ya Ya Yoga”, which is a regime exclusive to Ya Ya Fitness Gyms. Other Notable operational challenges for 4X Heavy Ltd faced in 2012/2013 were but not limited to:
4X Heavy Ltd borrowed substantially from KNVB Bank in order to purchase the equipment required for its gyms. The finance involved a mixture of both leases over the equipment where KNVB continued to hold legal title as well as some equipment on chattel mortgages where 4X Heavy holds legal title. Overriding these finance arrangements is a covenant from KNVB requiring 4X Heavy Ltd to maintain a debt to equity ratio of no more than 2.5:1 at each reporting date.
In order to rapidly grow its membership base and revenue stream, 4X Heavy has built a substantial network of fitness instructors to recruit new members to the gym. These fitness instructors are remunerated on a commission basis at 15% of the value of the membership subscription signed up from each new customer. Each month the fitness instructors are required to provide the finance department of 4X Heavy with a claim sheet showing details of each new member to support the commission claimed. The finance department checks this against membership contracts previously provided by the fitness instructor when the new customer signed up prior to payment.
Aug 29, 2021 | Uncategorized
Bella Beauty Salon’s unadjusted trial balance for the current year follows:
Additional information:
a. An insurance policy examination showed $1,400 of expired insurance.
b. An inventory count showed $280 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments, and this $200 of accrued revenue was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year end.
g. The one employee, a receptionist, works a five day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months’ property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month’s interest on the note payable, $600, has accrued but is unrecorded.
|
Based on the above information, prepare the adjusting journal entries for Bella’s Beauty Salon.
Use the above information to prepare the adjusted trial balance for Bella’s Beauty Salon. |
Bella Beauty Salon Adjusting entries: Account titles Debits Credits a) Insurance expense $1,400 Prepaid insurance $1,400 b) Shop Supplies expense $710 Shop Supplies $710 c) Depreciation expense $350 Accumulated depreciation Shop eq. $350 d) Depreciation expense $2,220 Accumulated depreciation Building $2,220 e) Rent receivable $200 Rent revenue $200 f) Unearned rent $800 Rent revenue $800 g) Wages expense $200 Wages payable $200 h) Property taxes expense $450 Property taxes payable $450 i) Interest expense $600 Interest payable $600 Adjusted Trial Balance as on Dec 31 Account titles Debits Credits Cash $4,200 Rent receivable $200 Prepaid insurance $80 Shop supplies $280 Shop equipment $3,860 Accumulated depreciation Shop equipment $1,120 Building $57,500 Accumulated depreciation Building $6,060 Land $55,000 Wages payable $200 Property taxes payable $450 Interest payable $600 Unearned rent $800 Long term notes payable $50,000 Common stock $10,000 Retained earnings $39,860 Rent earned $3,400 Fees earned $23,400 Wages expense $3,400 Utilities expense $690 Property taxes expense $1,050 Insurance expense $1,400 Shop supplies expense $710 Depreciation expense Shop equipment $350 Depreciation expense Building $2,220 Interest expense $4,950 Totals $135,890 $135,890
Aug 29, 2021 | Uncategorized
During the fiscal year ended November 30, 20Y4, Depp Construction Division had one construction project in process. A $30,000,000 contract for construction of a civic center was granted on June 19, 20Y4, and construction began on August 1, 20Y4. Estimated costs of completion at the contract date were $25,000,000 over a 2 year time period from the date of the contract. On November 30, 20Y4, construction costs of $7,200,000 had been incurred and progress billings of $9,500,000 had been made. The construction costs to complete the remainder of the project were reviewed on November 30, 20Y4, and were estimated to amount to only $16,800,000 because of an expected decline in raw materials costs. Revenue recognition is based upon a percentage of completion method. what is the revenue to be recognized in 20Y4?
Aug 29, 2021 | Uncategorized
Explain why the payment to the taxpayer in
FCT v Dixon (1952) 86 CLR 540 was assessable income but the payment in
Scott v FCT (1966) 117 CLR 514 was not.
In your answer you should include (but not necessarily be limited to) the following:
- A brief statement in your own words of the facts of the cases.
- Identify the issues raised and the relevant legislation in the context of ITAA97.
- Identify any cases and other sources of information relevant to the issues and legislation.
- Apply the law to the facts stating clearly why one taxpayer was assessable and the other was not.
Part B [Approx 50%]
Nigel is a professional percussionist and performs with a number of bands and orchestras. In order to practice, he set aside a special room in his house that is soundproof and contains a variety of electronic sound equipment. The room is used only for practice or performance related purposes. He pays council rates, interest on the house mortgage, repairs and maintenance, electricity and telephone expenses in connection with the house. He believes he should be able to claim tax deductions for all these costs together with depreciation on the room and equipment.
Explain the tax position to Nigel. In you answer you should:
- Identify the tax issues that are raised and the relevant sections of the legislation.
- Identify any cases and other sources of law or information that apply.
- Apply the law to the facts.
Express a conclusion in regard to the issues identified and indicate any other information required
Aug 29, 2021 | Uncategorized
ACC 618 1.Gift Tax Form 709 John D. and Rose W. Smith (SSN’s 555 12 8899 and 555 21 7788) live at 18 Torchwood Drive, Area 51, AZ 88951. John and Rose have been married for many years and own and operate a profitable real estate business. They have two children, Donna (age 20) and Mickey (age 22), both of whom attend college. During 2010, the Smith’s made the following transfers: John paid college expenses of $50,000 in tuition and $12,000 in room and board. To establish financial responsibility with their kids, they gave the money directly to Donna and Mickey.
Aug 29, 2021 | Uncategorized
Details regarding the inventory of appliances at January 1, 2010, purchases invoices during the year, and the inventory count at December 31, 2010, of Arctic
Appliances are summarized as follows:
?
Instructions
1. Determine the cost of the inventory on December 31, 2010, by the first in, first out method. Present data in columnar form, using the following headings:
Model…………. Quantity………….. Unit Cost…………. Total Cost
If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each purchase.
2. Determine the cost of the inventory on December 31, 2010, by the last in, first out method, following the procedures indicated in (1).
3. Determine the cost of the inventory on December 31, 2010, by the average cost method, using the columnar headings indicated in (1).
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) decliningprices.
Aug 29, 2021 | Uncategorized
After the accounts are closed on September 10, 2010, prior to liquidating the partnership, the capital accounts of Kris Harken, Brett Sedlacek, and Amy Eldridge are $31,500, $5,700, and $23,700, respectively. Cash and noncash assets total $7,200 and $61,300, respectively. Amounts owed to creditors total $8,000. The partners share income and losses in the ratio of 1:1:2. Between September 10 and September 30, the noncash assets are sold for $32,500, the partner with the capital deficiency pays his or her deficiency to the partnership, and the liabilities are paid.
Instructions
1. Prepare a statement of partnership liquidation, indicating
(a) The sale of assets and division of loss,
(b) The payment of liabilities,
(c) The receipt of the deficiency (from the appropriate partner), and
(d) The distribution of cash.
2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries to
(a) Allocate the partner’s deficiency and
(b) Distribute the remaining cash.
Aug 29, 2021 | Uncategorized
DESCRIPTION OF EVENTS OCCURRING January 1 –15, 2007
|
Date |
Description of Event |
|
January 2, 2007 |
Employees are paid bi monthly on the first day of the month for work performed during the last half of the previous month (because of the New Year’s holiday, this month they are paid on the 2nd), and on the 16th for work done during the first half of the current month. Total wages paid on this date were $20,400. (Ignore payroll taxes for this assignment.) |
|
|
Cottonwood signed and paid for an annual advertising agreement with the PRCA for banner ads on the PRCA website. Cottonwood’s advertisements will be posted to the website starting in March 2007 and run until February 28, 2008. The contract cost is $7,200 plus any art and setup charges, which will be billed as they occur. |
|
January 3, 2007 |
Cottonwood’s office manager picked up office supplies from Office Max on her way into work. She checked the orders against Cottonwood’s purchase order and stocked the supplies in the supply cabinet. The Office Max invoice totaled $362 and payment terms are net the 15th of the month. |
|
|
Cottonwood received a check for $12,620 from one of their customers as payment for a previous order. |
|
|
Cottonwood received a shipment of event merchandise from the Rodeo Outfitters Company. This merchandise was ordered on December 20th and was delivered by Viking Freight. Rodeo Outfitters paid Viking for the shipping charge of $882. Cottonwood is to pay Rodeo Outfitters $92,000 based on terms of 2/10 net 30. |
|
|
Cottonwood received their new product catalogs ordered from a local print shop. The print shop billed Cottonwood $6,000 for 5,000 catalogs with payment terms of net 10. Cottonwood considers catalogs as advertising and expenses the catalogs at the end of the month based on how many catalogs are sent out during the month. |
|
January 4, 2007 |
Cottonwood received an order from the FFA rodeo in LaJunta Colorado, (LJ FFA), for $19,820 in event merchandise. The Cottonwood customer service representative confirmed that the LJ FFA Rodeo’s account was paid current and they had sufficient credit available to cover the new sale. The order was then sent to
the warehouse where it was picked and prepared for shipping. The merchandise was shipped via UPS at a cost of $170, which was paid by Cottonwood. Cost of the merchandise shipped was $12,584. Terms of the sale are net 30. |
|
January 5, 2007 |
Cottonwood placed a purchase order with the Lazy J Ranchers Emporium for $76,000 in resale merchandise. Payment terms to Lazy J Ranchers are net 30 upon receipt of goods. |
|
|
Cottonwood paid an outstanding vendor invoice of $16,050. |
|
|
Cottonwood paid the December telephone bill to AT&T in the amount of $428. Expenses are usually accrued at the end of the month as “other accrued expenses payable”. |
|
January 8, 2007 |
Cottonwood hired an additional employee for the warehouse. She starts work today. As with all of the other employees, this employee will be paid bi monthly at a rate of $2,400 per month. |
|
|
Cottonwood received an order from the Del Norte County Rodeo in Trinity, CA for $18,000 of resale merchandise. This is a new rodeo with no credit history. Cottonwood has requested payment in full prior to the delivery of goods. The cost of the goods ordered is $10,440. |
|
|
One of Cottonwood’s sales reps sold event merchandise to the Dust Bowl Rodeo in Kansas for a total sales amount of $126,000. Terms of the sale are net 15 and will be paid by electronic funds transfer (EFT). The order information was sent to the warehouse where the merchandise was picked and packaged for shipment. The order was picked up by CWX Freightlines and shipping costs of $685 were paid by Cottonwood at the time of shipment. Cost of the merchandise shipped was $80,600. |
|
|
Cottonwood received customer checks totaling $28,400 for payment on outstanding accounts. |
|
January 9, 2007 |
Cottonwood paid the December’s Pacific Gas & Electric (PG&E) bill in the amount of $2,110 using their bank’s automated bill payment system. |
|
|
A wire transfer in the amount of $18,000 is received from the Del Norte County Rodeo for payment of the order placed on January 8th. The goods are picked, packaged and shipped via UPS. Cottonwood has an account with UPS and will pay the shipping costs of $112 for this order. UPS’ payment terms are net 7 days. |
|
|
Alamo Conference Center in Texas placed an order via email. Cottonwood’s sales rep wrote up the order, checked their credit and sent the order information to the warehouse for shipping. The sale amount was $102,240, which included $80,100 in resale merchandise and $22,140 in event merchandise. The cost of the resale merchandise was $51,264 and the cost of the event merchandise was $11,513. The goods were shipped that day. Cottonwood paid the shipping expense of $1,502. Payment terms for the order are net 15. |
|
January 10, 2007 |
Cottonwood’s warehouse received the January 5th order from Lazy J Ranchers Emporium. The inventory was counted and placed on the shelves. Proof of receipt and the vendor’s invoice was sent to accounting. Lazy J paid the shipping of $1,190. |
|
January 11, 2007 |
Cottonwood placed a purchase order with a local vendor for the new industrial shelving for the warehouse that was approved in Cottonwood’s budget. The total price for the shelving is $24,000 plus 7.25% sales tax. Installation costs are quoted at $1,200. Vendor payment terms are net 10. |
|
|
The Bozeman Convention Center, (BCC), in Montana contacted Cottonwood with an order for $21,000 in resale merchandise. Cost of the merchandise was $13,440. BCC has never purchased from Cottonwood before, but has already submitted the appropriate paperwork to Cottonwood’s credit department. |
|
January 12, 2007 |
Cottonwood’s credit department approved BCC for up to $15,000 credit at terms of net 15. BCC has been asked to send payment of $6,000 so that their order can be shipped. |
|
|
Cottonwood paid Office Max for the supplies picked up on January 3rd. |
|
|
Cottonwood paid for their printed catalogs received January 3rd |
|
|
Cottonwood paid the invoice for the shipment from Rodeo Outfitters received on January 3rd and took the 2% discount because of early payment. |
|
January 15, 2007 |
After extensive collection effort including having a collection agency contact the party, Cottonwood was notified today that the Fly by Knight Rodeo has gone out of business. They owed Cottonwood $3,500 on account. Cottonwood now deems that debt as being uncollectible and removes it from their books. |
|
|
Employees submitted their time statements for hours worked from January 1 – 15th |
Aug 29, 2021 | Uncategorized
Effectiveness of communication – i.e. readability, legibility, grammar, spelling, neatness, completeness and presentation will be a minimum threshold requirement for all written work submitted for assessment. Work that is illegible or incomprehensible and does not meet the minimum requirement will be awarded a fail grade. 2. Demonstrated understanding This will be evidenced by the student’s ability to be dialectical in the discussion of contentious issues. 3. Evidence of research This will be evidenced by the references made to the statutes, auditing standards, books, journal articles and inclusion of a bibliography.What is there to suggest that this is true? 2. What would lend support to this proposition?
“Doctor, Doctor. Every time I go on an audit I get covered in rashes. What could it be?””Mmmm. Let me take a look. Aaah. As I suspected. Ticks.”
Aug 29, 2021 | Uncategorized
Identify an organisation with which you are familiar with or wish to study. The
banking, insurance or other service based industry is a good start in terms of
industry, though you may choose your own. You should seek guidance and
approval from your lecturer.
Identify and evaluate the entrepreneurial process (including intrapreneurship) and
how ideas are encouraged and fostered to create competitive advantage.
You should look broadly at the industry sector and discuss the relative strengths and
weaknesses of your chosen organisation against that sector. You may find the
insights from your first assignment helpful.
In your report should include discussion on (but are not limited to) the following
concepts.
? The emerging entrepreneurial revolution
? Creativity and systemic innovation
? Theoretical and practical perspectives of creative thinking and behaviour
? Turning Creative Ideas into Innovative Outcome
? Value Adding Services And Products
? Intrapreneurship
? Techniques and processes to develop opportunities
? Managing Innovation And Change
? Developing And Promoting Imaginative, Flexible And Practical Thought And
Action.
Aug 29, 2021 | Uncategorized
Rationale The requirements of this assignment cover up to and including Topic 7 of the Subject Outline. The assignment is designed to develop your problem solving, spreadsheet (Excel) design, and written communication skills. The questions require you to apply the knowledge and tools covered in the subject topics in order to demonstrate your understanding of the subject content and also to illustrate your capacity for strategic thinking. The assignment will also test your ability to communicate and explain the impacts of your findings whether through quantitative or written reports. The ability to communicate effectively has been identified by the accounting professional bodies as being critical to your future role as an accountant.
Assessment Criteria You will be assessed on the following criteria: 1. The ability to obtain correct answers for each of the practical questions and sub questions. 2. Submitted workings showing how you have obtained your answers, including whether you have applied appropriate techniques to analyse and solve problems. 3. The ability to use Excel to solve management accounting problems. This includes the ability to use appropriate Excel (or similar) analysis tools and functions, construct appropriate spreadsheet formulae and to effectively and appropriately print and present your material and results. 4. The ability to correctly interpret the results of your analyses and to clearly convey your understanding of the results to the reader. 5. The demonstrated, and appropriately communicated, level of understanding of the theoretical issues associated with the topics covered and your capacity to apply your understanding strategically to business situations. 6. The ability to present your answers, effectively, appropriately, and neatly, using computers.
Aug 29, 2021 | Uncategorized
Sydney on 27 e Company. In
NS:
D she sold her ercedes on 19
1987 for 55,000. ract signed on 17 rred in selling the he property was
mirer, Paul, on 15 )ught the ring on 7 ne same on 7th and
family for $275,000 $65,000. The costs
,e, 2013 for $19,000. /ember, 1989.
2013. She bought the
five transactions for the jenny’s net capital gain aationsi in addition to
Aug 29, 2021 | Uncategorized
| The following data come from the financial records of Bynum Corporation for 2011. |
| |
|
|
| Sales |
$ |
840,000 |
| Interest expense |
|
5,000 |
| Income tax expense |
|
27,000 |
| Net income |
|
28,000 |
|
| How many times was interest earned in 2011? |
Aug 29, 2021 | Uncategorized
Australian Government medicare Medicare Australia Application for Medicare levy exemption certification The Income Tax Assessment Act 1936 makes the Medicare levy payable by individuals residing in Australia who are eligible for Medicare. Persons who are not entitled to Medicare can seek an exemption from the Medicare levy in their income tax return. To obtain an exemption, you (and your dependants) must be ineligible for Medicare and must apply for Medicare levy exemption certification. Eligibility • To check your eligibility for Medicare benefits, call the Medicare Levy Exemption Certification Unit on 1300 300 271″. • You may not be eligible for an exemption certificate if you: hold an Australian permanent resident visa or have applied for a permanent resident visa were a resident of the United Kingdom, Northern Ireland, Italy, Malta, Sweden, the Netherlands, Finland or Norway prior to entering Australia maintain a dependant or other person(s) who was eligible for Medicare (an applicant maintains a dependant if any of the following applies—the applicant and their dependant live in the same house; the applicant provides the dependant with food, clothing and lodging; the applicant helps the dependant pay for their living, medical and educational costs.) are an Australian citizen, residing overseas for less than five years. (Note: this includes Australian government officers.) • You should not apply for certification for the current financial year unless you are leaving the country and will be submitting a final income tax return before the end of the financial year. To claim an exemption • To claim an exemption from the Medicare levy in your income tax return, you need to supply a copy of your Medicare levy exemption certification. To obtain this certification, you must complete this application form and submit it to Medicare Australia. • When we have assessed and processed your application, we will send you the certificate, or a response which details the reason your certification was refused. • We require certified copies of all used pages of your passport. This includes all Australian visas, all arrival and departure stamps and the photo page. • We require a separate application form for each financial year. (A financial year runs from 1 July to 30 June). • We require an original dated signature on each application form. • If a tax agent prepares the application, the tax agent must complete the Tax Agent details under question 12 of the application form. • For more copies of this form visit www.medicareaustralia.gov.au then go to Medicare forms individuals then go to Medicare claiming forms or call 1300 300 271*. Lodgement details Post your completed application form to: Levy Exemption Certification Unit Medicare Australia GPO Box 9822 Hobart TAS 7001 * Call charges apply Enquiries If you need help completing this form call the Medicare Levy Exemption Certification Unit on 1300 300 271* or email your enquiry to levyenquiry@medicareaustralia.gov.au Queries about deductions of the Medicare levy from salary or wages should be directed to the Australian Tax Office. Application for Medicare levy exemption certification You must answer all questions. Print neatly in BLOCK LETTERS. Tick where applicable !NI 1 Which financial year are you applying for? 1 July 20 to 30 June 20 Note: you must make a separate application for each financial year you are applying for. Your details Show exactly as it will appear on your income tax return. Dr Mr Mrs Other (please specify) 2 Family name Miss Ms First given name Second given name 3 Date of birth / / 4 Your sex Male Female 5 Phone number ( ) 6 Your permanent address This cannot be a PO Box address. A business address is not acceptable unless you are living at the business address. Postcode Country (if not Australia) Page 1 of 2 3169.21.12.07
Aug 29, 2021 | Uncategorized
Prepare a budget report outlining the costs of attending college (full time) for the next two semesters (30 hours). This budget’s focus is solely on attending college; do not include personal items in the budget. Your budget must include tuition, books, supplies, fees, food, housing, and all costs associated with travel to and from college. This budgeting exercise is similar to the initial phase in activity based budgeting. Include a list of any assumptions you use in completing the budget. Present your budget in an Excel spreadsheet and attach. Your file must end in .
Aug 29, 2021 | Uncategorized
Exercise 1 10
Net Income (or Loss) and Retained Earnings
The following information is available from the records of Prestige Landscape Design Inc. at the end of the year:
Required:
Use the above information to answer the following questions.
1.What is Prestige’s net income for the year?
$
2.What is Prestige’s Retained Earnings balance at the end of the year?
$
3.What is the total amount of Prestige’s assets at the end of the year?
$
4.What is the total amount of Prestige’s liabilities at the end of the year?
$
5.How much owners’ equity does Prestige have at the end of the year?
$
6.What is Prestige’s accounting equation at the end of the year?
Aug 29, 2021 | Uncategorized
SEC MODERNIZES OIL AND GAS REPORTING Anonymous Petroleum Accounting and Financial Management Journal; Spring 2009; 28, 1; Accounting & Tax pg. 18
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Aug 29, 2021 | Uncategorized
$ $ $ $ E7 9 Transfer of Depreciable Asset at Beginning of Year a. Eliminate the gain on Truck & correct asset’s basis: Gain on sale Truck Accumulated Depreciation Accumulated Depreciation Depreciation Expense b. Eliminate the gain on Truck & correct asset’s basis: Investment in Minnow Corp. $ Truck $ Accumulated Depreciation $ Accumulated Depreciation Depreciation Expense $ E7 8 Transfer of Depreciable Asset at Year End a. Eliminate the gain on Truck & correct asset’s basis: Gain on sale Truck Accumulated Depreciation $ $ b.
Aug 29, 2021 | Uncategorized
HA2042 – Accounting Information Systems Assignment 2 Due: 5pm Friday, Week 11 You are to prepare a submission to satisfy your client’s requirements as outlined below. You are required to investigate the issues at Pressure Hydraulics and provide a feasibility study into the improvement to their current business processes. You will need to conduct an investigation into the client’s problems and evaluate a solution to meet their business needs. Overview – Pressure Hydraulics Pressure Hydraulics is a locally owned business that currently has three service centres; Newcastle, Toronto and Maitland. Each service centre provides maintenance and specialised servicing of hydraulic systems as used in cars, trucks and earth moving equipment. The Maitland service centre also provides a specialty service to the mining industry where two purpose built trucks go onsite to service a range of mining equipment. The business has become quite profitable in the past years and its owner, Allan Taylor, has devised plans to expand by opening service centres at Coffs Harbour and Gosford. Allan has future plans for other service centres along the east coast of NSW. He also feels that the time is right to look at how IT can support the existing business and enable his future business plans. Currently, Allan spends a portion of each day at each service centre to monitor its operations. This is leaving little time to continue developing his business and he realises he will not be able to spend the same sort of time in the Coffs Harbour and Gosford service centres. Existing System Each service centre operates as an independent business, with eight technicians in the workshop (one of whom is a workshop foreman) and one office assistant. The office assistant takes phone calls from people requesting quotes for work or to have work done. For requests on quotes, the office assistant looks up a hard copy of a price book (known as The Price Book) and gives a verbal quote. Allan is unhappy with the time being taken to update the Price Book as the office assistant is often too busy to update the prices from the supplier invoices. Sometimes, this time delay results in either lost sales if the price has gone down or lost income if the price has gone up. If a customer phones to make a booking for work to be done, the office staff assistant writes down thedetails in a journal (Works Book). Any variations to the Works Book by a customer requesting to change a date/time results in crossed out entries. There have been times when this has been the cause of misinterpretation as to when a job is booked in. Other problems with the system include occasional overbooking or slack periods for the workshop staff. When a customer arrives at a service centre for work to be done, the office staff member writes out a Job Card with the customer details along with the price from The Price Book for the job. There is sometimes a discrepancy between what the Price Book shows and what the customer says they were quoted for that particular work. When completed, the Job Card is passed to the workshop foreman who assigns the job to a technician. When the job is completed, the technician initials the Job Card and gives it back to the workshop foreman, who returns it to the office. The office assistant writes out an invoice and collects payment from the customer; cash, EFTPOS and credit card are acceptable forms of payment. Once per week, the office assistant uses the Job Cards to prepare an order for stockreplacement. Allan has developed a business relationship with several transport companies where two technicians will go to the transport companies’ central site and service the hydraulics on a truck. As the parts required to perform the service can be varied, a special van equipped with basic workshop equipment and a full range of component parts is used. The time taken for these jobs can be varied and
unpredictable. Upon returning from such a job, the technicians will alert the workshop foreman that the job has been completed. The office assistant is then informed and an invoice written out and mailed to the transport company. Carbon copies are used to track such invoices. The Maitland service centre provides a service to the mining industry and there have been a few repeated issues with the incorrect component parts being taken onsite for servicing the machinery. Such mistakes not only costs a loss in terms of travel time back to the service centre to collect the correct part, but the mining companies have very tight maintenance schedules. Machinery has to be available and delays are not tolerated. Each fortnight, Allan contacts the workshop foremen and checks the hours worked by staff at the service centre. He then prepares the payroll and writes cheques for each employee. Each day, the office assistant banks the day’s takings and gives the bank receipt to Allan when he makes his daily call. Usually this will be the following day from the bank deposit. Allan then does a reconciliation of money banked with the previous day’s takings. Apart from the issues identified above, Allan wants to achieve the following: Ensuring repeat business from mining companies. Improve control over stock ordering. A new system is required to manage this aspect of the business. The ability to order stock for the three businesses instead of individual ordering would ensure economies not being realised at the moment. Ability to quickly determine if a required component part is in stock. Ability to generate an invoice off data held within the system. Improved payroll process to reduce the need to contact staff for details. Allan would prefer a system that recorded the working hours daily and also supported staff being paid directly through his bank system. Tracking customers for repeat business. Allan wants a system that will track customers and contact them at specified times with special offers. Price Book issues. A system to have timely production of price variations to arrive at all service centres on the same day. Technology to support these changes. After an initial investigation, Allan has asked your group to develop a feasibility report on providing a suitable solution for the accounting and payroll problems. At a minimum level, your feasibility report should contain the following generic sections: Your Task: You are required to submit a feasibility report. At a minimum level, your feasibility report should contain the following generic sections: ? Executive Summary ? Description of the problem ? Solution objectives ? Constraints ? Development plans ? Potential solutions ? Recommendations Your appendix should also contain ? Any brochures (scans), websites, photographs and prices you have researched to complete your assignment. A group evaluation sheet is also to be submitted by each member of the group on Blackboard by the end of week 12. Any student not submitting this form will not receive a mark.
Aug 29, 2021 | Uncategorized
Plath Ltd commenced operations on 1 July 2011 with 24 employees. On 30 June 2014 all these employees remained with the company. On 1 July 2013 Plath Ltd engaged another 30 employees but by 30 June 2014 only 20 of those new employees were still in employment with Plath Ltd.
The workplace Enterprise Bargain Agreement entitles employees to 13 weeks long service leave (LSL) after serving for 10 years with Plath Ltd. At 30 June 2014 Plath Ltd estimates the following:
- the combined annual salaries of all employees hired on 1 July 2011 is $2,400,000;
- the combined annual salaries of all current employees hired on 1 July 2013 is $1,600,000;
- the probability that employees hired on 1 July 2011 will continue to be employed until entitled to LSL is 30% per cent; and
- the probability that employees hired on 1 July 2013 will continue to be employed until entitled to LSL is 20% per cent.
- Salaries are expected to increase by 5% per cent per annum.
- At 30 June 2013 the provision for long service leave was $18,000.
The interest rates on high quality corporate bonds are as follows:
Aug 29, 2021 | Uncategorized
Pringly Division
A meeting of senior managers at the Pringly Division has been called to discuss the pricing strategy for a new product. Part of the discussion will focus on estimating sales for the new product. Over the past years, a number of new products have failed to meet their sales targets. It appears that the company’s profit for the year will be lower than budget and the main reason for this is the disappointing sale of new products.
This time a range of possible sales targets rather than only one goal will be established and evaluated.
The first strategy is to set a selling price of $170 with annual fixed costs at $20,000,000. A number of managers are in favor of this strategy, as they believe it is important to reduce costs.
The second strategy is to increase spending on advertising and promotions and set a selling price of $200. With the higher selling price the annual fixed costs would increase to $25,000,000. The marketing department is adamant that increased emphasis on advertising and promotions is essential.
The table below shows three probable levels of customer demands. The likelihood of reaching a certain level is indicated by the estimated probability. Note that it is not necessary to create a complex model based on probabilities. However, the probability distribution provides some guidance for the managers. Don’t forget that the company has certain minimum expectations of a new product.
| Estimated demand (units) |
Estimated probability (units) * |
| 150,000 |
0.25 |
| 180,000 |
0.5 |
| 200,000 |
0.25 |
* Estimated probabilities are given to assist in making a final recommendation. These probabilities don’t have to be incorporated into a model, just considered in the final recommendation.
Additional information:
- The estimate of variable cost per unit is $30.
- The probability of the new product achieving break even is very important. A profit greater than $4,000,000 is expected.
Required:
- Compute break even at each level.
- Is the company likely to achieve its desired target profit of $4,000,000 or more? Support your discussion with financial analysis.
- Compute the margin of safety and explain the meaning of the number derived.
- Should the company go ahead with the new product?
- Would this type of analysis be useful to a large company with a wide range of products?
- ROI (return on investment) and residual income are two other methods that can be helpful for this type of decisions. Could they be applied in this situation? Support your answer with financial analysis.
HINT: Don’t forget to use the variable costing approach for your analysis.
Modular Case Assignment Expectations
It is important to answer the questions as posed.The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.
Aug 29, 2021 | Uncategorized
Grimm LTD sold an item of depreciable equipment to its subsidiary ,Bronte LTD ,for $100000 on 1/7/20×4.The equipment had originally been acquired by Grimm on 1/7/20×2 at a cost of $150000.
Assuming a five year economic life for the equipment ,Grimm had been charging deprecation on this equipment at 20% straight line .On acquiring the asset ,Bronte LTD assessed that the equipment had a remaining useful life of three years and therefore commenced depreciating the equipment over that period on a straight line basis .Assume a tax rate of 30%
Required
1 prepare the consolidation journal entries required as at 30/6/20×4
2 Prepare the consolidation journal entries required as at 30/6/20×5
Aug 29, 2021 | Uncategorized
Word limit: Whilst there is not a maximum limit, the minimum is 2,000 words (1,000 words per person). You should identify the contribution of each member.
Assignment requirements.
You are to read the report “
The case for global accounting standards” by Professor Ann Tarca (UWA) and analyse what the key points are of the report. Then prepare a report either supporting or challenging the position of the author.
The report must include clear evidence that you have conducted research to support your position and it must be analytically sound and detailed.
There is not a limit on referenced material BUT all sourced references must be clearly identified (within the body of your report and a list of references at the rear of your paper) and must be accompanied with your own comments and views. The references should be considered in the context of supporting your views.
Aug 29, 2021 | Uncategorized
1. In answering the questions, marks will be awarded for:
a) Clarity of discussion and analysis;
b) Correctness of content materials;
c) Logical flow of the discussion involved;
d) Quality of communication, e.g. correct spelling, grammar, structure, proper
page numbers and referencing used.
e) Adhering to the word limit.
Work that has exceeded the word limit will not
be marked
. You are required to record the number of words at the end of
each question.
2. Students are required to work in groups of four. The groups are chosen by the
students themselves.
3. Any query relating to the assignment can to be directed to the discussion forum on
AUT Online.
4. This assignment must be fully typed, one sided with double line spacing using 12
font Arial.
5. References and quotations taken from other authors must be properly
acknowledged at all times using the
NZ Law style guide referencing (not APA style)
6. Students are to familiarise themselves with the AUT’s Rules and Regulation
regarding assignment as spelt out in the study guide.
Aug 29, 2021 | Uncategorized
ED There was no work in process on 1 November. During November, jobs AB and CD were completed. All material was issued for job MN, which was 80 per cent complete as to direct labour. The standard costs for a box of 3 jackets are as follows:
Direct material Direct labour Manufacturing overhead Standard cost per box
24 metres @ $3.30 3 hours @ $14.70 3 hours @ $12.00
$ 79.20 44.10 36.00 $159.30
Required: 1 Construct an Excel° spreadsheet which includes: (a) A schedule calculating the standard cost of jobs AB, CD and MN for November. (b) The following variances for November and indicate whether each variance is favourable or unfavourable: (i) Direct material price variance. (ii) Direct material quantity variance for each job and in total. (iii) Direct labour efficiency variance for each job and in total. (iv) Direct labour rate variance for each job and in total. 2 Prepare journal entries to record each of the following events: (a) Purchase of material. (b) Incurrence of direct labour cost and direct labour variances for November. (c) Addition of direct material to work in process inventory, and direct material variances for November. 3 Use the spreadsheet from requirement 1 to demonstrate the effects of the standard quantity of material decreasing to 20 metres per 3 jackets and the standard direct labour rate increasing to $19.80 per hour. 4 Discuss possible causes for each of the variances that you calculated under requirement 1(b). Consider each variance separately. Also, consider possible interactions between variances.
(CPA, adapted) _add
Aug 29, 2021 | Uncategorized
Beacon Corporation had operated a chain of restaurants for 15 years and owned a small trucking company for 10 years. It decided to sell all the assets of the trucking company (Section 1231 assets) for $1,500,000. The assets had a basis of $900,000 and the corporation is in the 34 percent marginal tax bracket. The company invested half of the after tax sale proceeds to update some of its restaurants, and distributed the remaining half to its shareholders in exchange for 10,000 shares of their stock in Beacon.
a. If the shareholders’ average bases in their shares are $45 per share, what are the tax consequences to the shareholder and the corporation from this distribution?
b. How would your answers change if Beacon received only $600,000 for the assets of the trucking business?
Aug 29, 2021 | Uncategorized
Identify the brother sister corporations given the following ownership percentages by four individuals:
|
Individual/Corporation
|
A
|
B
|
C
|
D
|
|
James
|
20%
|
40%
|
15%
|
15%
|
|
Carol
|
25%
|
10%
|
20%
|
20%
|
|
Joan
|
20%
|
40%
|
40%
|
20%
|
|
Wallace
|
10%
|
10%
|
20%
|
25%
|
Aug 29, 2021 | Uncategorized
Sweeney was the chairman of Sweeney, Inc., a large hardware and lumber store. When Sweeney became ill, his son took over the business but sold the property and all of the inventory valued at $2,000,000 within a year. Shortly thereafter, Sweeney recovered and took control of the corporation. The corporation purchased a new building and started a new hardware store. This store, although slightly larger than the original store, did not carry any lumber. Its inventory was valued at $1,900,000. Sweeney changed the name of the corporation, and the board authorized a plan of partial liquidation. Pursuant to that plan, the original shares of the corporation were replaced, and Sweeney distributed almost $2,000,000 to the shareholders as part of the partial liquidation. Each shareholder received $5,000 and one share of stock for every two of the old corporation that were owned.
Aug 29, 2021 | Uncategorized
Using the following information, determine Chelsea Corporation’s tax owed or refund due using this form if it made estimated tax payments of $15,000. Chelsea Corporation (34 Chelsea Drive, Sarasota, Florida 33456) is a calendar year corporation; its EIN is 78 9999999 and it was incorporated on June 15, 2002. It reported the following for the current year:
|
Sales = $1,450,000
|
Pension Contributions = $28,000
|
|
Cost of Sales = $625,000
|
Meals and Entertainment = $12,000
|
|
Officers Compensation = $187,000
|
Utilities = $21,000
|
|
Salary and Wages = $266,000
|
Repairs/Maintenance = $14,000
|
|
Rent = $48,000
|
Vehicle Expenses = $34,000
|
|
Taxes = $87,000
|
Insurance = $30,000
|
|
Depreciation = $34,000
|
Employee Benefit Plans = $17,000
|
Aug 29, 2021 | Uncategorized
The Barnard Corporation needs additional cash to improve its facilities. It can borrow $2,000,000 from a bank at 9 percent interest for 10 years, with a balloon payment of the entire principal at the end of the 10 year period. It can issue $2,000,000 in 10 year corporate bonds paying 7.5 percent interest, but it will incur underwriting costs related to issuing the bonds of $200,000. Its third alternative is to issue $2,000,000 in preferred stock that will require annual dividend payments of 5 percent. The stock will be callable at the end of 10 years at 102. The costs of issuing the preferred stock will only be $50,000. Which alternative should the corporation choose? The corporation’s effective tax rate is expected to be 30 percent for all relevant years, and the corporation uses a 6 percent discount rate for all of its financial analyses.
Aug 29, 2021 | Uncategorized
John Mason operates a consulting business, Mason Enterprises, as a sole proprietorship. He had to transfer $100,000 of stocks and securities into Mason Enterprise’s name to show financial viability for the business. During the current year, the business had the following income and expenses from operations:
|
Consulting revenue
|
$125,000
|
|
Travel expenses
|
40,000
|
|
Transportation
|
3,000
|
|
Advertising
|
7,000
|
|
Office expense
|
3,000
|
|
Telephone
|
1,000
|
|
Dividends
|
5,000
|
|
Interest
|
2,000
|
|
Charitable contribution
|
1,000
|
|
Political contribution
|
6,000
|
Determine the Schedule C net income. How are items not included in the Schedule C net income reported?
Aug 29, 2021 | Uncategorized
George and Georgenne formed the GG Partnership as equal partners. Each partner contributed cash and property with a value of $100,000 for partnership operations. As a result of these contributions, George had a basis of $80,000 and Georgenne a basis of $60,000 in their partnership interests. At the end of their first year of operations, they had the following results:
|
Gross sales
|
$150,000
|
|
Cost of goods sold
|
95,000
|
|
Rent
|
15,000
|
|
Salaries to employees
|
15,000
|
|
Utilities
|
4,000
|
|
Charitable contribution
|
1,000
|
|
Section 1231 gain
|
2,000
|
a. What is the net income, excluding separately stated items, that each partner is required to report at the end of the year?
b. How is each of the separately stated items treated on the partners’ tax returns?
c. What is each partner’s basis at year end?
Aug 29, 2021 | Uncategorized
CCC Partnership borrowed $100,000 on a five year recourse note from a local bank. It also purchased land for $60,000, putting $10,000 down and signing a qualified nonrecourse loan secured by the land for the balance. The partners’ interests in partnership profits and losses are as follows:
|
Partner
|
Loss
|
Profit
|
|
Carol (general partner)
|
25%
|
50%
|
|
Charles (limited partner)
|
40%
|
25%
|
|
Charlotte (limited partner)
|
35%
|
25%
|
a. How is the $100,000 recourse note allocated to the partners’ bases?
b. How is the $50,000 nonrecourse note allocated to the partners’ bases?
c. How would your answers change if Carol, Charles, and Charlotte were all general partners?
Aug 29, 2021 | Uncategorized
In year 1, Sally invested $45,000 for a 10 percent interest in a limited partnership. This is Sally’s only passive investment. The limited partnership has $100,000 of nonrecourse debt (The debt is not secured by real property.) At the end of years 1 through 5, the partnership passed income and losses through to Sally as follows:
|
Year
|
Income (Loss)
|
|
1
|
($31,000)
|
|
2
|
($21,000)
|
|
3
|
$4,000
|
|
4
|
$8,000
|
|
5
|
($22,000)
|
At the beginning of year 6, Sally sells her interest in the partnership for $40,000. For each of the years, determine Sally’s deductible and nondeductible (suspended) losses. Explain the reason for the nondeductibility of any losses. What are the results of the sale of her interest?
Aug 29, 2021 | Uncategorized
The Jane Corporation, an S corporation, makes several property distributions to its two equal shareholders, A and B, during the year. The distributions are as follows:
| |
A
|
B
|
|
Cash
|
$5,000
|
$5,000
|
|
Land (Basis = $5,000)
|
$10,000 (FMV)
|
|
|
Equipment (Basis = $15,000)
|
|
$10,000 (FMV)
|
At the beginning of the year, the corporation’s accumulated adjustments account is $35,000; A’s basis in his shares is $24,000; and B’s basis is $32,000. The corporation reports net income of $6,000 for the year, excluding any effect of the distributions. Determine the basis in A and B’s shares and the balance in the corporation’s AAA at the end of the year.
Aug 29, 2021 | Uncategorized
The operating results for Peep Corporation, an S corporation, for last year were as follows:
Revenues
|
Revenues
|
|
|
Gross sales
|
$2,000,000
|
|
Tax exempt bond interest
|
2,000
|
|
Dividend income
|
8,000
|
|
Section 1231 gain (land)
|
10,000
|
|
Expenses
|
|
|
Cost of goods sold
|
$900,000
|
|
Salaries
|
600,000
|
|
Rent
|
200,000
|
|
Utilities
|
60,000
|
|
Depreciation
|
40,000
|
|
Charitable contribution
|
12,000
|
|
Section 179 expense
|
20,000
|
a. Determine the corporation’s net income and its separately stated items.
b. Determine the corporation’s financial accounting income if the gain on the sale of the land is only $6,000 and depreciation is $32,000 under financial accounting rules.
c. Sample filled in forms are also in Appendix C of this text.
Aug 29, 2021 | Uncategorized
On March 15, year 1, James Smith formed a business to rent and service vending machines providing healthy snack alternatives and juices to the local middle and high schools. He operates the business as a sole proprietorship from his home, turning the den into an office from which he manages the business. The den contains 400 of the home’s total 1,800 square feet. In addition, he rents additional space in a warehouse complex where he stores his inventory.
When he formed the business, he converted his Ford pick up truck solely to business use to deliver machines and products to the schools. When converted, the truck had a basis of $18,250 and a fair market value of $12,500. He purchased a small car for his personal use. During the current year, year 3, the business reported the following:
|
Rental income
|
$ 20,000
|
|
Sales of products
|
288,000
|
|
Cost of sales
|
121,000
|
|
Truck expense (excl. depreciation)
|
14,000
|
|
Telephone
|
600
|
|
Rent expense
|
2,400
|
|
Part time delivery person
|
25,000
|
|
Machine repairs
|
5,500
|
|
Meals and entertainment
|
4,000
|
|
Charitable contributions
|
10,000
|
|
Liability insurance
|
12,000
|
In April of year 1, James bought 20 vending machines for $60,000; in April of year 2, he bought 20 more machines for $65,000; in June of the current year, he purchased 10 more vending machines for $35,000. All vending machines have a seven year life and are depreciated under MACRS. James did not elect Section 179 expensing or bonus depreciation in any year. James’s expenses related to his home are:
In December, James sold the original truck for $5,000 and purchased a new truck for $24,000.
Determine James’s income or loss from the business. Do not include in this figure items that would not be included on his Schedule C but detail those items separately. Calculate James’s self employment taxes assuming he has no other income subject to FICA taxes.
Aug 29, 2021 | Uncategorized
Cynthia needs your advice regarding which form of business entity to choose for her new business. She expects the new business will have losses of approximately $80,000 in each of the first two years but anticipates profits that will grow steadily thereafter. Cynthia has no cash to contribute to the business but plans to work 50 or more hours per week managing the day to day operations of the new business. Four individuals will contribute $50,000 each to start the business. To fund growth, Cynthia anticipates that additional funding will be needed in three years. Cynthia wants to meet with you next week to discuss your analysis and preliminary recommendations.
a. Based on this information only, what would you recommend?
b. Before meeting with Cynthia, prepare a list of questions you would like to ask to obtain the additional information you would need to make a more thorough analysis.
Aug 29, 2021 | Uncategorized
Clare and Cora have been making wedding cakes in their homes for several years. The Health Department just learned about this and now requires them to shut down or find a commercial kitchen that can be subject to the proper inspections. Clare and Cora located a suitable small restaurant they can rent for $1,000 per month or purchase for $100,000. Their monthly payments would be $1,000 per month for interest and taxes and $100 per month for the principal on a commercial mortgage if they put $10,000 down. Clara and Cora each have $10,000 in savings they can put into the business. Their husbands are also employed and would be able to provide some support during the start up period. Both families are in the 28 percent marginal tax bracket. The women know that the first several years will be difficult, as they will need to build the business by more than word of mouth. As a result, their business plan shows losses of $5,000 in the first year, $4,000 in the second year, and $2,000 in the third year, but the fourth year and beyond show profits. These losses do not include either the rent or the mortgage payment. How do you suggest they set up their business? Should they buy or rent the building?
Aug 29, 2021 | Uncategorized
Accounting for Business BAP 12 Assignment 1, 2013
Class Day/Time:
10 Due Date: Week,5 Friday Week ending the
Time: 5.00prn Friday 27th September Weight: 15% All Questions to be completed_ GROUP ASSIGNMENT QUESTIONS
Q 1 P4 4 Q 2 Part (a) E6 I0 Part (h) E6 1 1 Part (c) P11 5 Q 3 Part (a) P9 4 Part (b) P9 9 Q 4 Part (a) 10 I Part (b) 10 2
uestions attached to this document)
Team Members Maximum 4 persons in a team
All team members are required to upload assignmem on Ifoodle.
Croup No:
Name
Student Number
…. , ,••• e d • • • . ••• GROUP ASSIGNMENT QUESTIONS — 2013 — SEMESTER 2
Aug 29, 2021 | Uncategorized
youve just taken a job at a investment banking firm and been giving the job of calculating appropriate nominal interest interest rate for a number of different Treasury bonds with different maturity dates. The real risk free interest rate that you have been told to use is 2.5% and this rate is expected to continue on into the future without any change. Inflation is expected to be constant over the future at a rate of 2.0%. Since these are bonds that are issued by the U.S. Treasury, they do not have any default risk or any liquidity risk. The maturity risk premium is dependent upon how many years the bond has to maturity the maturity risk premiums are as follows: Bond Matures in Maturity Risk Premium 0 1 year 0.05% 1 2 years 0.30% 2 3 years 0.60% 3 4 years 0.90%Given this information, what should the nominal rate of interest on Treasury bonds maturing in the above years be?
Aug 29, 2021 | Uncategorized
Your argument, must be supported by appropriate references. References must be cited in Harvard referencing style (eg Smith 1992) .The assignment must include a bibliography (list of references used in the assignment). The Internet may be used for authoritative reference material provided the source, author, date of access, and site address is clearly shown in footnote format.
In addition to sources from the Internet, at least two or three hard copy sources must also be used. These can be either books or articles or both. Materials from any common law jurisdiction may be used.
Assignment
You work for an advertising company and are asked to review a holiday package from a brochure before it goes to print. You are asked to provide advice to the advertising company on the legal effect of the representations in the brochure. You are asked to produce a report for management outlining the issues relating to the brochure.
Select a package holiday brochure. Read it and analyse it, looking to answer the following questions in your report;
- Identify the key information about the holiday as set out in brochure.
- Critically analyse the package using the principles of contract law found in case law and categorise the statements into representations, terms, conditions and warranties.
- Critically analyse and identify any material in the brochure which is potentially;
- unconscionable
- misleading or deceptive
- false representation
- bait advertising
- offers gifts or prizes
In your report explain the effect of these representations having regard to the consumer and consumer protection laws. You should outline the law relating to advertising including improper business practices, any legislation regulating advertising, unlawful sales techniques and the powers of enforcement.
- Critically examine the brochure and identify any exclusion or limitation clauses and explain using the principles of contract law whether the clauses would be valid.
When submitting your report please include the brochure.
Some references:
Below are some references which may assist students in their assignment. Students are welcome to use other references. A wide range of hard copy texts are available from university libraries, and of course there is a huge range of materials on the subject available on the ‘Net. Always look for sources written by authors of stature – prominent academics and/or legal practitioners.
Do not use anonymous (materials whose author is not identified) under any circumstances.
- Khoury & Yamouni, ‘Understanding Contract Law,’ 7th ed., Butterworths Lexis Nexis, 2006
- Carter and Harland, ‘Contract Law in Australia,’ 4th ed., Butterworths Lexis Nexis,
Aug 29, 2021 | Uncategorized
1Semester 2, 2013 BUACC5901 Accounting and Finance Assignment 1. General information and due dateThis assignment constitutes 35 per cent of the assessment in this unit. The due date for lodgement will be 5pm on Friday 27 September 2013. The assignment is to be submitted via Moodle. 2. PurposeBUACC5901 is concerned primarily with the use of accounting information. The purpose of the assignment is to provide students with the opportunity to apply the knowledge and skills acquired in Accounting and Finance to a practical task involving the use of ‘real world’ accounting information. This is intended to consolidate students’ accounting knowledge and skills. Students are required to complete the assignment in groups of two or three. The objective of such group work is to foster the development of co operative work skills. 3. RequirementsStudents are to organise themselves into groups of two to complete the assignment. The basic requirement is to undertake a general financial analysis comparing Myer Holdings Ltd (Myer) (ASX Code MYR) latest financial position and performance for 2 Financial Years compared to that of David Jones (ASX Code DJS) over the same period. If the 2013 financial statements are released by Myer and David Jones by 10 September then you should prepare ratios comparing 2013 with 2012 performance for both entities. If the 2013 financial statements are released after 10 September then you should compare 2012 with 2011 performance for both entities. (Note: students are to use the ‘Consolidated’ data in conducting their analysis.) The analysis should consider each of: profitability, asset efficiency, liquidity, capital structure, and market performance. Note that for those ratios which involve Balance Sheet figures students will require the previous year’s financial statements (in addition to the latest report) to provide the beginning of year balance sheet figures. 2The assignment will contain two main elements: Schedule(s) of relevant ratios and other useful calculations The detailed calculation of relevant ratios and other useful calculations should be included as one or more appendices prepared using Excel or a similar spreadsheet. Students are advised to show the formulae used in determining particular ratios and other figures. Data items (for example ‘Sales Revenue’ or ‘Total Assets’) should be entered in a single cell in a specially designated ‘data area’ in the spreadsheet, with any calculation referencing the relevant data cell. A written report The written report should: •Explain briefly what is revealed by the ratios and other calculations in the context of the companies profitability, asset efficiency, liquidity, capital structure, and market performance. In particular, any important changes over the period 2012 to 2013 should be identified, discussed and, where possible, explained. •Provide an overall assessment of whether the companies performance over the 2013 financial year have been better than 2012, and which company has improved its performance to a greater extent over this period. The judgement should be made from the perspective of existing equity investors (shareholders). 4. Other guidelines•The assignment is to comply with the University’s General Guide for the Presentation of Academic Work (revised edition 2011) and the written report is not to exceed 3,000 words and a word count must be shown on the cover page of the assignment. •Students are encouraged to seek and use additional public information about the company from sources other than the annual report (for example, from the internet, newspapers, and business magazines). However, it is not envisaged that students will be engaged in extensive research of this nature and it is expected that the annual report will be the primary resource relied upon in completing the assignment. Students are requested not to try and make direct personal contact with either company (for example by telephone, fax, letter or email) in an attempt to gather further information. •Do not reproduce company promotional material from the annual report or company website and represent it as critical analysis. It is not! •Students are expected to obtain relevant share price data for the company so that investment ratios (such as a price earnings ratio) can be calculated. (It is recommended that students obtain the companys’ share price as at the 2013 and 2012 balance dates for the purpose of calculating relevant ratios on these dates. Share price data is available from a variety of sources including the internet.
Aug 29, 2021 | Uncategorized
BULAW 2611 Organisation Law
Assignment
Semester 2, 2013
Purpose
To enable you to apply problem solving skills; to research and compare
characteristics of specific forms of business organisation, and to evaluate the
most appropriate form of business organisation in a specific situation.
The Assignment will be marked out of 100 and is worth 30% of your total mark
for the BULAW2611 course.
It is important for you to have time to think through how to structure and
present arguments, and to review and discuss what the law is in a particular
area. Whilst discussion with others is encouraged, the final piece of
work must be your own.
Word Limit
2,300 2,500 in total (assignments exceeding the word limit may not be
marked and may be returned to the student for re writing; assignments less
than the required length will risk not covering the topic adequately and may
result in a fail). Do not include synopsis, references or bibliography in the
word count.
Note: All University of Ballarat rules relating to referencing, citation and
acknowledgement must be complied with.
Due Date
Please see your lecturer for submission arrangements.
Required
Read the fact situation below and complete the tasks in Part A and Part
B.
Liam, Nisha, Saul and Jing are first year university students who have
recently opened a bakery (Bio Breads) at their university. Liam, Nisha, Saul
and Jing have entered a written agreement with the university that enables
them to use the university cafeteria ovens overnight to bake bread which is
then sold from a stall located within the university’s food court.
Only certified biodynamic or organic grains and ingredients are used in the
many different Bio Bread loaves, and on the rare occasion ingredients are
sourced from overseas, the Bio Bread operators, Liam, Nisha Saul and Jing,
ensure only fair trade certified products are purchased. The operators all
strongly believe that only sustainable agricultural practices should be
encouraged and that grain growers and other suppliers should be paid a fair
price for their labour. In addition to these shared beliefs, Liam, Nisha, Saul
and Jing do not approve of large multinational corporations – preferring
smaller business structures and the concept of buying from local suppliers
wherever possible.
In keeping with their beliefs that a fair price should be paid for labour Liam,
Nisha, Saul and Jing believe they also should receive a reasonable financial
return for their labour as bakers and operators of the Bio Breads business.
While prices are kept as low as possible at the bakery, the large volume of
sales means that Bio Breads is a profitable operation. The operators choose
to share the profits equally between themselves.
Liam, Nisha, Saul and Jing are, however, finding it difficult to keep up with
demand and often have to turn customers away. This is very much against
their beliefs that Bio Breads should be a place where all who wish to purchase
reasonably priced biodynamic, organic or fair trade food are welcomed. Liam,
Nisha, Saul and Jing are also struggling to keep up with their studies because
they are spending so much time running the bakery.
Liam, Nisha, Saul and Jing approach you for some advice. In particular, they
are seeking your opinion about which of the following ways of organising the
business is most appropriate given the specific circumstances described
above.
? Partnership
? Co operative
? Company
While you are familiar with some of the characteristics of partnerships and
companies you have less knowledge about co operatives, so you inform
Liam, Nisha, Saul and Jing that you need to do some research before you can
give them your opinion.
Required: Complete the tasks in Part A and Part B.
Part A (60 marks)
Compare the essential characteristics of partnerships (20 marks), co operatives
(20 marks) and companies (20 marks) ‘the business structures’.
In your answer you must discuss:
? the respective advantages and disadvantages of each of these
business structures
? the steps required in forming a partnership, a co operative and a
company – and how each business structure can be ended
? further structural options within each of the business structures (eg
provided certain requirements are met a partnership may be a general
partnership or a limited partnership)
? how capital may be raised, and any restrictions on capital raising for
each business structure
? the regulatory environment for each business structure (is there a
specific regulator? Does specific legislation apply to that structure? If
so, is it state, commonwealth or a combination of both?)
? internal management and governance requirements for each business
structure.
Note: limit your comparison to partnerships, co operatives and companies –
and structures within these. DO NOT discuss sole traders, joint ventures,
franchises, associations. And make sure you use the correct state based
legislation for your location …
Part B (40 marks)
Based on your comparison in Part A, advise Liam, Nisha, Saul and Jing which
business structure is most appropriate given the specific circumstances of the
Bio Breads operations as set out above. In your answer you must give
reasons for your advice. (20 marks)
You must also explain why neither of the other two business structures are, in
your opinion, the most appropriate. (10+10 marks)
Aug 29, 2021 | Uncategorized
| Golden Company’s total overhead cost at various levels of activity are presented below: |
| Month |
Machine Hours |
Total Overhead Cost |
| March |
53,000 |
$206,910 |
| April |
43,000 |
$179,210 |
| May |
63,000 |
$234,610 |
| June |
73,000 |
$262,310 |
|
|
Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 43,000 machine hour level of activity is as follows:
|
|
|
|
| Utilities (variable) |
$ |
68,800 |
| Supervisory salaries (fixed) |
|
46,000 |
| Maintenance (mixed) |
|
64,410 |
|
|
|
| Total overhead cost |
$ |
179,210 |
|
|
|
|
| The company wants to break down the maintenance cost into its variable and fixed cost elements. |
| 1. |
Estimate how much of the $262,310 of overhead cost in June was maintenance cost. (Hint: To do this, it may be helpful to first determine how much of the $262,310 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs within the relevant range.)
|
Aug 29, 2021 | Uncategorized
I have attached the specific questions for this assignment
Aug 29, 2021 | Uncategorized
Accounting for Business Decisions –HI5001
SECTION A: (15 MARKS) SECTION B: (15 MARKS) TOTAL: (30% MARKS)
Note: This assignment carries 30% weightage. Students not to worry about the marks shown in each section as the marks shown in each section are to help the lecturers mark.
This assignment is in two parts, the first one that will require you to undertake some research, the second part will involve a preparation of worksheet.
The assignment aims to develop understanding of financial statements and their use in decision making. The task is to study and compare 2 publicly held company specifically in the same industry,(use ASX’s website to select a company) and be able to understand the structure of financial statements. This project itself includes several assignments, each of which comprises a part of the students’ task. However it is well encouraged to include any additional information that students may think will be useful in conducting financial statements analysis of the company.
General Rules and Requirements:
The report should be prepared by a small group (with a maximum of three to four members) with the contribution of each member specified on the report’s title page. Reports must be confined to 4,000 words (+/ 5%). A title page, table of contents page (based on your report headings), introduction, conclusion and list of the references actually cited should accompany your report. Font type should be Arial (size 11), paragraph spacing should be equal to 1.5.
Note: any additional material from external sources that you “paste” into your report is NOT included in the word limit. Also, ensure it is appropriately referenced.
PART A: (50 MARKS)
Section A (total marks are 50. Whatever student scores 15% will be the weightage of this section)
Part A1 (10 points)
Before the actual financial statements are evaluated, your group must inform interested parties about the company’s business structure, operations, services and all other business activities that are conducted, etc.
Part A2 (10 points)
Locate the most recent annual report of your public listed chosen companies of the same year.Your group will need to review the major sections of this report in order to familiarize yourselves with the content of each of the financial statements and appropriate footnotes.
•Review the most recent year end balance sheetsof the companies and indicate the following:
?? ?? ??
The amount of total current assets The amount of total non current assets The amount of total current liabilities
1?? The amount of total non current liabilities ?? The amount of total stockholder’s equity
Compare the above figures with the figure of second company. Compare percentage increase or decrease. (Use Excel Sheet)
Part A3 (10 points)
•
Review the most recent year’s income statementand indicate the following:
• total (operating) revenues; • cost of goods sold (if listed); • total expenses (before income taxes) • any non operating (or extraordinary) gains and losses; and • Earnings per common share.
Compare the above figures with the figure of second company. Compare percentage increase or decrease.
Part A4 (10 points)
Review the statement of cash flowsfor the most recent year and indicate the following:
• • • •
net cash inflow (outflow) from operating activities; net cash inflow (outflow) from financing activities; net cash inflow (outflow) from investing activities; and net increase (decrease) in cash during the year.
Compare the above figures with the figure of second company. Compare percentage increase or decrease.
Part A5 (10 points)
Review the stockholders’ equity sectionin your chosen company’s most recent year end balance sheet and compare that with the figure of second company. Compare percentage increase or decrease. Compare percentage increase or decrease.
• List the stockholders’ equity account balances and number of outstanding shares from these two balance sheets and compute the increase or decrease for each during this past year.
Aug 29, 2021 | Uncategorized
Management Accounting 2
Semester 2, 2013
According to Martin and Steele (2010, p.13), “The two principal professional associations in Australia – CPA Australia (the CPA) and the Institute of Chartered Accountants in Australia (the Institute) have indicated their awareness of the significance of issues of sustainability reporting and development of appropriate skill sets in word and in deed. The commitment of both organisations to sustainability principles has been shown by their adoption of, and support for, sustainability focused reporting approaches and by their opting to take up membership of the Accounting for Sustainability Forum”.
Martin A and Steele F (2010)
Sustainability in Key Professions: Accounting. A report prepared by the Australian Research Institute in Education for Sustainability for the Australian Government Department of the Environment, Water, Heritage and the Arts.
In a two part essay:
- Consider the above. Discuss the stance and initiatives of the Australian accounting profession on corporate social responsibility (CSR) and sustainability.
- Include your views on the role of accounting and the accountant on CSR and sustainability.
Go to:
http://agl.com.au/about/Sustainability/Pages/SustainabilityReport.aspx
http://www.abc.net.au/4corners/stories/2013/04/01/3725150#transcript
http://www.abc.net.au/iview/?series=2303988#/series/2303988
- Discuss the way in which AGL has demonstrated its social and environmental accountability in the last two years.
NOTE: AGL has published an annual sustainability report since 2004 to communicate sustainability performance in the areas of customers, community, people, economic, climate change and environment.
Please note: good starting is given in the IFAC’s International Guidance Document on Environmental Management Accounting and the websites of the CPA and ICAA. For example, go to: http://www.cpaaustralia.com.au/cps/rde/xchg/cpa site/hs.xsl/knowledge practice toolkit green accountingl
Please note the following:
- Format: research and essay
- Students should do reasonable research to support their answers
- Contribution to overall assessment: 35%
- Length: 2000 – 2500 words
Aug 29, 2021 | Uncategorized
The net profit according to the Profit and loss account amounted to R680 000 on 28 February 2013.
(b) The partnership agreement makes provision for the following:
Interest on capital must be provided at 15% per annum on the balances In the capital accounts. Note: Pac increased his capital by R120 000 on 01 September 2012. On the same date, Mann decreased his capital by R60 000. The capital changes have been recorded.
The partners are entitled to the following monthly salaries:
Pac R7 000
Mann R6 000
Note: The partners’ salaries were increased by 10% with effect from 01 December 2012. Pac is entitled to a bonus of 10% of the net profit before any appropriations are made.
Pac and Mann share the remaining profits or losses equally.
Aug 29, 2021 | Uncategorized
Obtain and review the balance sheets for three rail companies in Europe whose financial statements are prepared using IFRS. Obtain and review the balance sheets for three rail companies in the US whose financial statements are prepared using US GAAP. Compare the following:
– The IFRS balance sheets to the US GAAP balance sheets.
– The IFRS balance sheets to each other.
?Answer the following questions:
– Are the IFRS balance sheet classifications presented the same as the US GAAP balance sheet classifications?
?If different, which presentation do you believe is better? Explain why.
– Are the IFRS balance sheet classifications the same between each of the companies?
– What does IAS 1 require for a particular presentation format or order of items on the balance sheet?
?Does this agree with your observations? Discuss any differences.
Do you believe that one presentation format for balance sheets should be required of all companies throughout the world? Explain why or why not
Aug 29, 2021 | Uncategorized
Fall 2013: Due September 15, 2013
Chapter 1 Management Decision Problems
For each management decision problem question, type a brief answer as informal notes – that is, brief phrases that represent the key ideas. Identify answers with numbers and letters. Restrict your answers to no more than a total of
one typewritten sheet, double spaced, Times New Roman 12 point font, with 1 inch margins. Expect lost credit for failure to write informal notes or otherwise follow this format.
Bring the typed answers to class on the due date and be prepared to discuss them. If you anticipate you may miss class, also email them in an attached Word document to lederer@uky.edu to arrive before class, and keep a copy of the outgoing message with the attachment in your outgoing mail folder.
The management decision problems are on page 34.
Problem 1 – Snyders of Hanover
Note the word “manual” in the first sentence. It means that one or more of the activities in the process are done without the use of computers such as collecting, consolidating, re entering.
Replace the last sentence, “Assess the impact of this situation on business performance and management decision making,” with these:
1a What is the impact of this method of creating the profit and loss statement on management decision making?
1b What is the impact of this method of creating the profit and loss statement on business performance?
Problem 2 – Dollar General Corporation
Replace the last sentence, “What decisions have to be made before investing in an information system solution?” with this:
2 List a few things that must be done before investing in a new information system?
Aug 29, 2021 | Uncategorized
| A business had the following amounts of assets and liabilities at the beginning and end of a recent year: |
|
Assets |
Liabilities |
| Beginning of the year |
$ |
81,000 |
$ |
34,000 |
| End of the year |
|
124,000 |
|
52,000 |
|
| Determine the net income earned or net loss incurred by the business during the year under each of the following unrelated assumptions: |
| a. |
The owner made no additional investments in the business and withdrew no assets during the year. |
|
b.
|
The owner made no additional investments in the business during the year but withdrew $4,950per monthto pay personal living expenses.
|
|
c.
|
The owner withdrew no assets during the year but invested an additional $84,000 cash.
|
|
d.
|
The owner withdrew $3,900per monthto pay personal living expenses and invested an additional $79,000 cash in the business.
|
Aug 29, 2021 | Uncategorized
Its a case studys.
Thank you.
Aug 29, 2021 | Uncategorized
1. The Financial Controller (FC) of Management Consolidated Systems Ltd (MCS), a public company, has approached your audit firm to provide audit services. The FC has given permission to you and the previous audit firm, Anderson & Price, to communicate. In your discussion with Randel Mudge, the partner of Anderson & Price who supervised the MCS audit, you learnt the following: a) Mudge has no reason to question the integrity of MCS management. b) Mudge understands that the reason for the change in auditors was to obtain a lower audit fee. Anderson & Price charged $80,000 for the prior year audit, of which $50,000 has not yet been paid by MCS. c) Mudge indicated that he had no disagreement with MCS management concerning accounting principles or auditing procedures. He did note that management had not informed the audit team of several cancelled customer sales contracts for which revenue has been recorded. The auditors learnt of the cancellations from their audit procedures, and management agreed to reduce revenue only when questioned about the matter. d) Mudge stated that MCS management was very conscious of a perceived need to increase earnings per share each year. To do this, they would provide a minimum amount for doubtful debts and warranty expenses. Where alternative accounting principles existed, MCS management always selected the principle that resulted in the highest current net income. e) Mudge said that, because of significant losses in the last two years, he had seriously considered modifying the audit report last year to indicate substantial doubt about MCS’s ability to continue as a going concern. He discussed this matter with management, who was adamant that the company would continue as a going concern. Mudge agreed not to modify the report for last year, but he told management that a modified audit report might be necessary in the future.
Aug 29, 2021 | Uncategorized
| Southworth Company uses a job order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $217,000 of manufacturing overhead for an estimated allocation base of $155,000 direct material dollars. |
| The following transactions took place during the year (all purchases and services were acquired on account): |
| a. |
Raw materials purchased, $149,000. |
| b. |
Raw materials requisitioned for use in production (all direct materials), $148,000. |
| c. |
Utility bills incurred in the factory, $22,000. |
| d. |
Costs for salaries and wages were incurred as follows: |
|
|
|
| Direct labor |
$ |
220,000 |
| Indirect labor |
$ |
67,400 |
| Selling and administrative salaries |
$ |
142,000 |
|
| e. |
Maintenance costs incurred in the factory, $19,000. |
| f. |
Advertising costs incurred, $124,000. |
| g. |
Depreciation recorded for the year, $40,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets). |
| h. |
Rental cost incurred on buildings, $83,000 (90% of the space is occupied by the factory, and 10% is occupied by sales and administration). |
| i. |
Miscellaneous selling and administrative costs incurred, $12,000. |
| j. |
Manufacturing overhead cost was applied to jobs, $ ? |
| k. |
Cost of goods manufactured for the year, $553,000. |
| l. |
Sales for the year (all on account) totaled $1,400,000. These goods cost $510,000 according to their job cost sheets. |
| The balances in the inventory accounts at the beginning of the year were as follows: |
|
|
|
| Raw Materials |
$ |
17,000 |
| Work in Process |
$ |
22,000 |
| Finished Goods |
$ |
32,000 |
|
| 1. |
Prepare journal entries to record the above data. |
|
General Journal |
Debit |
Credit |
| a. |
(Click to select)Advertising expenseRaw materialsWork in processManufacturing overheadSalaries and wages payableAccounts payableSelling and administrative salariesMiscellaneous expense |
|
|
|
(Click to select)Miscellaneous expenseRaw materialsWork in processSalaries and wages payableManufacturing overheadAdvertising expenseAccounts payableSelling and administrative salaries |
|
|
|
|
|
|
| b. |
(Click to select)Accounts payableWork in processMiscellaneous expenseManufacturing overheadAdvertising expenseSalaries and wages payableSelling and administrative salariesRaw materials |
|
|
|
(Click to select)Raw materialsWork in processManufacturing overheadMiscellaneous expenseSalaries and wages payableSelling and administrative salariesAdvertising expenseAccounts payable |
|
|
|
|
|
|
| c. |
(Click to select)Accounts payableManufacturing overheadSelling and administrative salariesSalaries and wages payableMiscellaneous expenseWork in processRaw materialsAdvertising expense |
|
|
|
(Click to select)Service expensesManufacturing overheadSalaries and wages payableAdvertising expenseRaw materialsWork in processAccounts payableMiscellaneous expense |
|
|
|
|
|
|
| d. |
(Click to select)Manufacturing overheadAdvertising expenseWork in processMiscellaneous expenseAccounts payableRent expenseSalaries and wages payableSelling and administrative salaries |
|
|
|
(Click to select)Advertising expenseMiscellaneous expenseRent expenseSelling and administrative salariesManufacturing overheadWork in processSalaries and wages payableAccounts payable |
|
|
|
(Click to select)Work in processMiscellaneous expenseManufacturing overheadSalaries and wages payableAdvertising expenseSelling and administrative salariesRent expenseAccounts payable |
|
|
|
(Click to select)Miscellaneous expenseSalaries and wages payableAdvertising expenseWork in processSelling and administrative salariesRent expenseManufacturing overheadAccounts payable |
|
|
|
|
|
|
| e. |
(Click to select)Selling and administrative salariesAccounts payableDepreciation expenseSalaries and wages payableAccumulated depreciationMiscellaneous expenseManufacturing overheadAdvertising expense |
|
|
|
(Click to select)Selling and administrative salariesMiscellaneous expenseSalaries and wages payableDepreciation expenseAccounts payableManufacturing overheadAccumulated depreciationAdvertising expense |
|
|
|
|
|
|
| f. |
(Click to select)Accounts payableDepreciation expenseAccumulated depreciationMiscellaneous expenseAdvertising expenseSelling and administrative salariesSalaries and wages payableManufacturing overhead |
|
|
|
(Click to select)Accounts payableSelling and administrative salariesDepreciation expenseAdvertising expenseMiscellaneous expenseAccumulated depreciationSalaries and wages payableManufacturing overhead |
|
|
|
|
|
|
| g. |
(Click to select)Accumulated depreciationRent expenseDepreciation expenseMiscellaneous expenseSelling and administrative salariesManufacturing overheadAccounts payableAdvertising expense |
|
|
|
(Click to select)Manufacturing overheadDepreciation expenseAccounts payableAdvertising expenseSelling and administrative salariesMiscellaneous expenseAccumulated depreciationRent expense |
|
|
|
(Click to select)Depreciation expenseMiscellaneous expenseSelling and administrative salariesAdvertising expenseManufacturing overheadRent expenseAccounts payableAccumulated depreciation |
|
|
|
|
|
|
| h. |
(Click to select)Miscellaneous expenseDepreciation expenseAccounts payableSelling and administrative salariesManufacturing overheadRent expenseAccumulated depreciationAdvertising expense |
|
|
|
(Click to select)Depreciation expenseAccumulated depreciationAccounts payableManufacturing overheadRent expenseAdvertising expenseMiscellaneous expenseSelling and administrative salaries |
|
|
|
(Click to select)Rent expenseAdvertising expenseSelling and administrative salariesMiscellaneous expenseManufacturing overheadAccumulated depreciationDepreciation expenseAccounts payable |
|
|
|
|
|
|
| i. |
(Click to select)Selling and administrative salariesAdvertising expenseRent expenseWork in processManufacturing overheadSalaries and wages payableMiscellaneous expenseAccounts payable |
|
|
|
(Click to select)Selling and administrative salariesAdvertising expenseManufacturing overheadRent expenseAccounts payableWork in processMiscellaneous expenseSalaries and wages payable |
|
|
|
|
|
|
| j. |
(Click to select)Work in processSalaries and wages payableManufacturing overheadMiscellaneous expenseFinished goodsRent expenseAdvertising expenseSelling and administrative salaries |
|
|
|
(Click to select)Salaries and wages payableAccounts payableAdvertising expenseSelling and administrative salariesRent expenseWork in processManufacturing overheadMiscellaneous expense |
|
|
|
|
|
|
| k. |
(Click to select)Selling and administrative salariesRaw materialsCost of goods soldAccounts payableSalesAccounts receivableWork in processFinished goods |
|
|
|
(Click to select)Accounts receivableSalesSelling and administrative salariesCost of goods soldAccounts payableRaw materialsWork in processFinished goods |
|
|
|
|
|
|
| l |
(Click to select)Accounts receivableRaw materialsFinished goodsSelling and administrative salariesAccounts payableWork in processSalaries and wages payableSales |
|
|
|
(Click to select)Cost of goods soldAccounts receivableSalesAccounts payableSelling and administrative salariesRaw materialsSalaries and wages payableWork in process |
|
|
|
|
|
|
|
(Click to select)SalesSalaries and wages payableCost of goods soldSelling and administrative salariesMiscellaneous expenseFinished goodsRaw materialsAccounts payable |
|
|
|
(Click to select)Cost of goods soldAccounts payableSalaries and wages payableFinished goodsRaw materialsMiscellaneous expenseSelling and administrative salariesAccounts receivable |
|
|
|
| 2. |
Post your entries to T accounts. (Don’t forget to enter the opening inventory balances above.) Determine the ending balances in the inventory accounts and in the Manufacturing Overhead account. (Record the transactions in the given order.) |
|
|
|
| (Click to select)(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l) |
|
|
|
|
|
|
|
|
|
|
|
| Bal. |
|
(Click to select)(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l) |
|
| (Click to select)(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l) |
|
|
|
|
|
| Bal. |
|
|
|
|
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|
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|
Aug 29, 2021 | Uncategorized
Topic 1:
MoviesPlus, Inc. is in its third year of business. The company offers DVD rental to online customers for a fixed monthly fee. For $20 per month, a customer receives three DVDs each month, one at a time as the previous one is returned. No matter how many DVDs a customer uses (up to three), the fee is fixed at $20 per month. Customers sign a contract for a year, so MoviesPlus recognizes sales revenue of $240 each time a customer signs up for the service. The owner of MoviesPlus, Bob Colbert, has heard about GAAP, but he does not see any reason to follow these accounting principles. Although MoviesPlus is not publicly traded, Bob does put the company’s financial statements on the company’s Web page for customers to see. Explain how MoviesPlus would account for its revenue if it did follow GAAP. Explain to Bob Colbert why he should use GAAP, and describe why his financial statements may now be misleading. Do you see this as an ethical issue? Explain.
Topic 2:
You are a business consultant providing information and advice to future small business owners. One difficult concept for your clients to understand is the concept of economic substance. Accountants do not base the recognition of revenues and expenses on the income statement on the collection of cash or on the disbursement of cash. Revenues and expenses are recognized when the economic substance of the transaction has taken place. Create a PowerPoint presentation for a seminar aimed at future business owners. Explain the meaning and importance of economic substance and how it relates to the financial statements.
Topic 3:
You own an automobile parts company and have been approached by a leading car manufacturer to supply parts to the company. How would you determine that the car manufacturer has a good record of servicing sales and paying its suppliers? What are the signs you would look out for in the financial statements for the possibility of bad debts? What are the advantages and disadvantages of allowing customers to make purchases on credit? Give reasons for your answers
Topic 4:
You are a business consultant providing information and advice to future small business owners. Controls are especially important with respect to cash. Three of them are clear assignment of responsibility, specific procedures for documentation, and independent internal verification of the data. Create a PowerPoint presentation for a seminar aimed at future business owners who will be dealing with large amounts of cash. Explain the importance of the three areas of cash control and make recommendations for procedures that could be implemented.
Topic 5:
Retail firms are at risk that their inventory will become obsolete. What can a firm do to minimize this risk? What types of firms are most at risk? Least at risk? Select a retail firm that you think might be concerned about obsolete inventory and another that you believe would not be very concerned. Then, find their financial statements and calculate the inventory turnover ratio of these two firms for the past two fiscal years. Are your results what you expected? Explain what you expected to find and your results.
Topic 6:
In Week 1 you examined the four basic financial statements for a publicly traded corporation. You used the search tool here: http://sec.gov/edgar/searchedgar/companysearchl. Answer the ten questions you asked about the financial statements. For the questions you are unsure about, provide a possible method for determining the answer (additional research, etc.). Help other students with questions they are unable to answer.
Aug 29, 2021 | Uncategorized
Sue Electronics makes CD players in three processes: programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no work in process on March 31. In mid April, Sue Electronics started production on 100,000 CD players. Of this number, 76100 CD players were assembled during April and transferred out to the Programming Department. The April 30 work in process in the Assembly Department was 40% of the way through the assembly process. Direct materials costing $375,720 were positioned in production in Assembly during April, and direct labor of $157,700 and manufacturing overhead of $98,595 were assigned to that department.
Requirements
1. Draw a time line for the Assembly Department.
2. Use the time line to assist you computes the number of equivalent units and the cost per equivalent unit in the Assembly Department for April.
3. Assign total costs in the Assembly Department to (a) units completed and transferred to Programming during April and (b) units still in process at April 30.
4. Prepare a T account for Work in Process Inventory Assembly to show its activity during April, including the April 30 balance.
Aug 29, 2021 | Uncategorized
Read headline “Health rates as top social issue”. Would you expect management to worry about attitudinal surveys, such as the one described in Headline below. Explain you answer, as well explaining how such surveys might impact on the disclosure policies of an organisation.
CANBERRA: Health has taken over from crime as the most important social issue seen to be facing Australia, figures showed yesterday.
The survey of people’s views of environmental issues found the environment rated fifth in importance even though three in four Australians had at least one environment concern.
The Australian Bureau of Statistics (ABS) figures showed 29% of respondents believed health was the most important social issue.
This was followed by crime (24%) education and unemployment (both 16%) and environmental problems (16 %).
In 1996, crime was seen as the most important social issue, followed by health, education, unemployment, the environment.
In the latest survey, dated March 1998, health was the most important issue to older people and least important to people aged 35 44.
In general, younger people were more concerned about long term environmental problems although 19 24 year olds, as well as 45 54 year olds were most concerned about unemployment.
But the survey said 71% of Australians were concerned with at least one specific environmental problem.
The figure was up from 68% in 1996 but down from 75% in 1992.
People living in ACT were most concerned while Tasmanians were the least concerned about environmental problems.
Air pollution continued to be the problem of greatest worry for Australians, with 32% reporting it as their major concern.
The Chronicle,
Aug 29, 2021 | Uncategorized
BAP42A Financial Statements and Investments Analysis Group C Assignment Semester 2 2013 1. Assignment Due Date and Submission As per the subject description, this assignment constitutes 20 per cent of the total assessment in this subject. Due date is 17th September 2013 at 8pm). Assignment should be submitted by using moodle. Students are required to complete the assignment in groups of three and do not have an automatic entitlement to adopt some other arrangements without prior permission from the lecturer. Each member of the group needs to submit the assignment by using moodle. No hard copy of the assignment would be accepted. Member one of the group should submit whole assignment including cover page and references. Member two of the group should submit cover page. Member three of the group should submit reference. 2. Objective BAP42A covers a range of important theory and practice of Financial Statements and Investment Analysis. The main purpose of this assignment is to provide students with the opportunity to consolidate and extend their understanding in connection with the financial statements analysis of Australian stock listed companies. 3. Presentation Assignment needs to submit by using the following guideline: ? Cover page: showing your name, student number, the subject name, the subject code, the case topic, and the date of submission. UBSS assignment cover page is also need to be attached with the assignment. ? Contents ? Executive Summary ? Introduction ? Findings (explain the answers of the questions) ? Conclusion ? List of references: Please read reference notes from Moodle. 4. Assessment criteria In assessing submitted assignments consideration will be given to overall neatness, completeness and quality of presentation, timeliness of submission and demonstrated application of appropriate analysis of financial statements. 5. Assignment Topic Analysis of Financial Statements of a limited Company from ASX. Select a company from ASX web site and Draft a Report incorporating the following points in relation to your selected company. 1. Describe the Core Business activity of the company. Provide full details of its different activities and/or operating segments. 2. Discuss any major changes in financial performance from the chairman’s message or managing director’s review. 3. Calculate the key financial ratios for the selected company based on the consolidated financial statements, for 2011 and 2012. 4. Provide an overall assessment of the company and its future prospects. Note: 1 A supporting document for Financial Statement Analysis (ratios) is uploaded in the moodle. Note: 2 Each group has to select a limited company from ASX web. A company cannot be selected by two groups. Company selection must be provided to lecturer by week 6 in the class. 6. Plagiarism Taking another person’s ideas, words or inventions and presenting them as your own without acknowledging your sources (citing or referencing), is plagiarism. Paraphrasing or rewording another person’s work, without acknowledging its source, is also plagiarism. If you are identified with plagiarism assessment mark will be zero. 7. Referencing Correct referencing is important for two main reasons. The first is to enable the reader to access source material you have relied upon, should they care to. The other is to ensure that you have properly recognized the contribution of the work of others to your assignment. If you do not do this properly, you are engaging in plagiarism—the theft, intentional or otherwise, of the intellectual or creative work of others. UBSS will not tolerate plagiarism. It is therefore important that you understand how to avoid it. It is important that you adopt a consistent, and adequate, referencing system. Please read the referencing notes from Moodle. 9. Marking Criteria Format Marking Criteria Very Poor Poor Satisfactory Good Very good MARK Evidence of research (5 marks) • interpreted the questions answers appropriately. • demonstrated an understanding of the necessary concepts/perspective/theories. • used sufficient and appropriate material from relevant and credible sources to effectively support the key points. • followed any instructions on the number and type of references to be used. Understanding of the issues (10 Marks) • the introduction is appropriate to the type and format of response and clearly outlines the focus. • the body of the response is well structured, with coherent and logical development of key ideas in appropriate sections/paragraphs. • clearly addressed the topic with appropriate elaboration of relevant sub topics, appropriately weighted and within the prescribed word count • demonstrated the ability to critically reflect upon key ideas/issues/findings. • each section/paragraph has a clear focus and line of thought. • the conclusion is appropriate to type and format of the response, successfully summarising the key ideas/issues/findings. PRESENTATION (3 Marks) • the response conforms to the appropriate style guide advice and the requirements of the specified format (font, margins etc) REFERENCING (2 Marks) • in text citations and direct quotes follow referencing guide rules. • reference list and/or bibliography appropriately compiled in accordance with Harvard style. Total available marks 20 Total mark obtained
Aug 29, 2021 | Uncategorized
Complete the following 1040 with a Schedule D attached. Nathan and Phoebe Wheeler Nathan and Phoebe Wheeler are married and live together. Nathan is employed in the health care industry. During the year, the Wheelers sold some stock that they owned. They brought in these forms and said they had no record of what they paid for the stock they purchased on May 24, 2011.
Aug 29, 2021 | Uncategorized
Tax Return Final Project Sun & Fun Summary
Can be done in small groups (2 3)
Due on the last day of class
On June 6, 2001, Joe Mooney and Guy Flick formed Sun and Fun Beach Products to manufacture and sell beach gear, toys, and accessories. For several years prior, Joe had run a smaller shop “Cheap Beach Stuff” which operated as a cash basis sole proprietorship. Cheap Beach Stuff reported the following balance sheet:
|
June 6, 2001 |
|
|
Tax Basis |
Fair Value |
|
| Cash |
6,137 |
6,137 |
|
| Accounts Receivable |
0 |
24,558 |
|
| Inventory |
60,647 |
129,305 |
|
| Building |
55,250 |
110,000 |
|
| Land |
29,750 |
55,000 |
|
|
151,784 |
325,000 |
|
|
|
|
|
| Accounts Payable |
0 |
13,189 |
| Notes Payable |
24,000 |
24,000 |
| Mortgage on Land/Building |
40,000 |
40,000 |
| Equity |
87,784 |
247,811 |
|
151,784 |
325,000 |
|
|
|
|
|
Joe transfers all of the assets and liabilities of Cheap Beach Stuff for 70% of the common stock in Sun & Fun.
Guy contributes cash of $40,000, inventory worth $56,205 (basis of $38,013) and provides services to help organize the corporation worth $10,000 for the remaining 30% of the common stock in Sun & Fun.
General Information regarding the corporation is summarized as follows:
- The business address is 350 Main Street, White Sands, Florida
- The employer identification number is 75 3392543; the principal business activity code is 339900.
- Joe is president of the company and Guy is the secretary treasurer. Both are full time employess of the corporation. Joe’s compensation is $150,000 (SSN 123 45 6789). Guy’s compensation is $90,000 (SSN 333 22 4444).
- The corporation uses the accrual method of accounting and reports on a calendar year basis. Inventory has been consistently valued at lower of cost or market under the FIFO method. Inventory capitalization rules of IRC section 263A do not apply due to the “small business exception” (average annual gross receipts for the three preceding taxable years do not exceed $10 million).
- The corporation was not a grantor to a foreign trust, nor does the corporation maintain a foreign bank account or foreign security account.
- No net operating loss, capital loss, general business credit, prior year minimum tax credit, or other carryovers to 2012 exist.
Detailed information regarding some of Sun & Fun’s activities and transactions during the year:
- Sun & Fun purchased some new manufacturing equipment (7 year property) that cost $13,580. MACRS on all other existing depreciable assets totaled $69,163 for 2012.
- Sun & Fun purchased at par $50,000 of Seabrook Station Utility bonds. Interest of $1,500 was received on the bonds during the year.
- Sun & Fun sold a warehouse for $30,000. The consolidated their warehouse activities and chose not to replace the warehouse. The warehouse cost $40,000. Accumulated depreciation for book purposes was $14,000. Cost recovery for tax purposes totaled $7,179.
- Sun & Fun sold machinery for $6,900. The machine cost $15,350. Accumulated depreciation for book purposes was $7,246. Cost recovery for tax purposes totaled $9,596.
- Sun & Fun has a qualified retirement plan which covers all of their employees. During 2012 they made total contributions of $23,900 to this plan, of which $10,000 was for Joe and Guy ($5,000 each).
- Included in employee benefits expense are $532 and $420 premiums for $50,000 (face value) group term life insurance for Joe and Guy, respectively. Family members are named as beneficiaries in the policies.
- The key man life insurance provided $500,000 coverage on Joe and Guy. The company is the owner and the beneficiary of the policies.
- Contributions for the year included:
- World Wildlife Fund, Inc. ……………………………..29,963
- American National Red Cross………………………….3,000
- Woodbury Church Food Pantry……………………….1,969
- An analysis of the Allowance for Doubtful Accounts reveals:
Balance – December 31, 2011………………………………$15,782
2012 Transactions
Bad Debt Expense ……………………………………….3,105
Recovery of account previously written off……1,200
Accounts written off as uncollectible……………(4,756)
Balance – December 31, 2012………………………………..$15,331
- Taxes included:
Property Taxes…………………….21,244
Payroll Taxes……………………….51,883
Other Misc. Taxes ……………….…2,168
- Interest expense was on loans for the following purposes:
Purchase of buildings, machinery and equipment………………….77,779
Purchase of Seabrook Station Utility Bonds…………………………….1,300
Cover shortfall in working capital…………………………………………..3,798
- Information regarding the sale of investments in common stock during the year:
| Asset |
Acquired |
Sold |
Basis |
Proceeds |
| “A” Stock (100 Shares) |
2 15 06 |
8 13 12 |
5,000 |
7,085 |
| “B” Stock (200 Shares) |
3 2 12 |
7 7 12 |
12,295 |
8,300 |
| “C” Stock (50 Shares) |
1 3 07 |
12 7 12 |
10,000 |
8,320 |
**Note: The “C” stock was sold to Joe Mooney**
- Dividend income from less than 20% investments is from the following sources:
Plastics Corporation Common Stock…………………………………………………..4,244
International Manufacturing Corporation Common Stock……………………2,731
Stow n Go Corporation preferred stock………………………………………………3,798
- Sun & Fun owns 30% of the outstanding common stock of Hobby Corporation. During 2012 Hobby reported $1,000,000 of income. For book purposes Sun & Fun accounted for its investment in Hobby under the equity method. Hobby Corporation also distributed a $100,000 dividend to Sun & Fun.
- Sun & Fun distributed cash dividends totaling $160,000.
- Sun & Fun Corporation made timely estimated federal income tax payments of $130,000 to the U.S. Treasury. (Ignore deferred income taxes for book purposes.)
- Sun & Fun’s qualified production activities income (QPAI) is $200,000.
- After taking a physical count of inventory at December 31, 2012, ending inventory was computed as $641,774
- The accumulated E & P balance at December 31, 2011 was $520,960. Depreciation expense computed under ADS for E&P purposes was $40,000. The increase in the cash surrender value of the life insurance was $374. (Note: Ignore the +/ E&P adjustment for differences in the gain (loss) from the sale of business properties.)
Requirements:
- Mr. Mooney, Sun & Fun’s President, has asked you to prepare Sun & Fun’s 2012 corporate tax return. Mr. Mooney has asked you to minimize Sun & Fun’s taxable Income (ignore any AMT). Round your computations to the nearest dollar. Clearly state any assumptions made in completing the return. Include any supporting schedules you feel are necessary. When submitting the forms, please place in sequence according to the appropriate order (i.e. ascending sequence number). Place all supporting schedules after the forms to which they directly relate, making sure they are properly referenced.
The following forms (and instructions) are available via the link in Class Content>Final Project. DO NOT prepare the return with commercial tax prep software.
- Form 1120: US Corporate Income Tax Return (and accompanying schedules C, K, L, M 1, and M 2)
- Schedule D (Form 1120): Capital Gains and Losses (ignore Form 8949 – Assume Box “A” is checked for the sale of all investments in common stock)
- Form 4562: Depreciation and Amortization
- Form 4797: Sales of Business Property
Note: For Schedule L – complete the ending balance sheet ONLY
- Include a memo to the client informing them of the following:
- How much tax they owe or how much is to be refunded to them.
- Instructions for paying estimated taxes for the 2013 tax year.
- Any carryforwards they may have.
- What amounts will Joe and Guy report on their individual Form 1040’s related to Sun & Fun’s 2012 activities?
GOOD LUCK!!!!!!!!!!
Aug 29, 2021 | Uncategorized
Business Process Integration Exercise 2 Use the uploaded Chapter 1 as a guide to completing this assignment. Provide online references if used.
Complete ASSIGNMENT 2 in Chapter 1 of Essentials of Business Processes and Information Systems by Magal and Word. Be specific and cite real life examples from a company you have researched (US based Company). Treat each sub question as a section in your document (e.g. “A brief description of the process” may be titled ‘Process Description’ in a section in a larger ‘mock specification’ document.) Save you final document to MS Word and post to the drop box by the specified due date.
- A brief description of the process.
- The purpose or desired outcome.
- Steps in the process and the person and functional area responsible for completing the step.
- Data, document and information flows associated with the process.
- The types of inefficiencies (delays, etc.) associated with the manual execution of this process.
- The role of enterprise systems in supporting this process.
Aug 29, 2021 | Uncategorized
1 page writing assignment Read the attached Sun City Savings and Loan Company case. Answer the following: In the last sentence of the case, Johnson states, “there could be serious consequences to several different parties whatever decision he (Johnson) makes.” Besides damage to Johnson’s “own career goals” and the potential “to lay off professional and staff employees” at Pina, Johnson & Associates, who are the “several different parties” to which Johnson refers and how might they be affected? Include employees of Sun City as another group of people affected.
Aug 29, 2021 | Uncategorized
Hi i have attached thequestions here.
CHARLES STURT UNIVERSITY School of Accounting and Finance ACC310 Management Accounting 2 201360 Assessment Item 2 Rationale: You have finally completed your accounting degree and secured a job with a catering business called Boutique Catering and have been asked to report to management on the issues identified in the questions below. This business has experienced significant growth over a short period of time and desperately requires someone to help manage the rapid growth of the business. Boutique Catering’s core business is providing meals for 3 conference rooms which are owned by the company. The business operates from Tuesday to Friday. The general manager who is also the owner wants you to review the business with ‘fresh eyes’ to see where it can improve and also seek some guidance about business opportunities that might be available As such you are required to complete all parts of the questions showing all workings and providing a clear explanation of the process and output. Where appropriate use a well constructed spreadsheet, compatible with Excel, to answer the questions. The spreadsheet must be submitted with your written report. Your spreadsheet will have a separate worksheet for each question. For each question there will be a data entry section followed by a model or results section. Where appropriate, formula should be utilised. Your response is to be in a report format and it is compulsory for you to lodge both the report (word file) and your calculations (spreadsheet excel compatible). Question 1 (15 marks) In order to assist the manager you are compiling a resource which will define the various management accounting terms used in the process of strategic analysis. Provide an explanation of the following terms, with examples specifically relating to Boutique Catering, to include in a resource file which incorporates a reason why each concept is relevant or not relevant to decision making: Satisficing model Simulation Opportunity Cost Sunk cost Break even point Question 2 (20 marks) It’s your second day with Boutique Catering and the general manager has received a report summarising client complaints which she would like you to investigate. There is a consistent theme of clients being unhappy with the service time when receiving their meals. The general manager would like you to establish if additional staff should be employed to improve the service time. Meals are served in a general area and often the clients will stand around talking before placing an order. The following pattern records customer arrivals and the time it takes for the clients to receive their meals. a) Using the random number function in excel simulate the arrival of 25 customers (10 marks) b) Calculate the total simulated hours, total waiting time for the customer service team member, and the total wait time for the customer? (6 marks) c) Do you think that enough simulations have been completed to report an outcome to the general manager, explain your answer? (4 marks) Time between arrivals (minutes) Frequency 1 0.08 2 0.25 3 0.20 4 0.12 5 0.35 Service time (minutes) Relative Frequency 1 0.10 2 0.25 3 0.25 4 0.40 Question 3 (30 marks) On the third day in your role as accountant the general manager has asked you to review the results of 2012 and 2013 to try and determine if there is a relationship between the number of meals prepared per month and the administration costs which she believes to be too high. Data regarding the number of conferences per month, number of meals prepared for that month and the administration costs for the months of 2012 and 2013 are as follows: Year Month Number of conferences Total number of meals prepared Administrative cost 2012 Jan 20 700 27800 2012 Feb 22 250 1400 2012 Mar 10 200 12000 2012 Apr 20 500 20000 2012 May 24 650 23800 2012 Jun 28 450 18400 2012 Jul 16 650 20400 2012 Aug 14 150 8200 2012 Sep 24 350 18800 2012 Oct 24 600 22200 2012 Nov 16 300 16600 2012 Dec 32 750 32200 2013 Jan 18 850 41500 2013 Feb 19 175 1900 2013 Mar 12 100 17800 2013 Apr 18 550 29800 2013 May 21 775 35500 2013 Jun 24 475 27400 2013 Jul 16 775 30400 2013 Aug 14 25 12100 2013 Sep 23 325 28000 2013 Oct 21 700 33100 2013 Nov 16 250 24700 2013 Dec 26 925 48100 Required: a) Draw a scatter diagram of Boutique Catering’s Number of meals prepared and administrative costs for the year. (5 marks) b) The relevant range has been identified as between 200 and 800 meals prepared. Mark the range on the scatter graph. Do you think this is an appropriate range? Why? (5 marks) c) The high low method in another way of estimating the cost behaviour of Boutique Catering. Using administration costs and number of meals prepared within the relevant range create an equation to express the results. (6 marks) d) A third method that can help understand the cost behaviour relationship is by using regression analysis. Construct an excel spreadsheet and use regression analysis to estimate the; a. Number of meals and administration cost. What is the administration costs’ equation when 600 meals are prepared? b. Number of meals, administration costs and number of conferences. What is the administration cost when 600 meals are prepared? (8 marks) e) From the methods used which method would you feel most confident to report the findings to the General Manager? In your answer make particular reference to the advantages and disadvantages of each method and in addition discuss the cost benefit of each method. (6 marks) Question 4 (10 marks) The forecast for the financial year 2013/2014 shows there will be a significant increase in the number of conferences that Boutique Catering will need to prepare meals for. The general manager is concerned that she will need to double the staff numbers to allow for such an increase. She has mentioned that because of the learning curve phenomenon it will be too difficult to accurately budget for the expected increase. Required: a) Explain to the General Manager what the learning curve is? In your explanation make reference to the two variant methods. Include in your response the conditions under which a learning curve could be used to assist in forecasting for future operations. (10 marks) NB: To respond to this question you will be required to research beyond the prescribed textbook Question 5 (15 marks) Boutique Catering is considering expanding the business structure by preparing frozen meals that will be home delivered. The meals will then only require to be heated up by the customer. As a point of difference the meals will be cooked according to the CSIRO total wellbeing recipe book. The meals Boutique Catering will offer are ‘everyday’, ‘vegetarian’ and ‘speciality’ meals (for people who have allergies). To prepare and cook the meals Boutique Catering is looking at purchasing Frozen Delights which already has the capital equipment to prepare the three types of meals. Frozen Delights provides supermarkets with frozen meals and has spare capacity to supply Boutique Catering with the frozen meals as well as maintain its current customer base. In the table below is an estimation of the cost and hours required to prepare, cook and freeze the meals and hours available to supply Boutique Catering with the meals. Cost per meal Preparation (hours) Cooking (hours) Freezing (hours) HOURS REQUIRED Everyday meals $8.00 4 8 3 Vegetarian meals $9.00 10 3 2 Speciality meals $12.00 8 8 2 HOURS AVALIABLE 800 1200 1000 Required a) Using solver derive the optimal solutions for how many meals should be prepared to maximise profit. (6 marks) b) State the optimum meal mix and the resulting profit (4 marks) c) Explain to the General Manager what transfer pricing is and what are two methods that can be used to set the price between divisions? (5 marks) Question 6 (10 marks) The decision making process is a series of steps or stages that we work through to make a choice from an array of alternatives. Making decisions is an important role that management accountants need to undertake in their position. Explain the utility curve with reference to the three perceptions of risk. Which of these best describes your attitude toward risk? In your role as a management accountant explain how your choice may affect your decision making process and behaviour.
Aug 29, 2021 | Uncategorized
Mucho Macho is the leading beer in Patagonia, with a 65 percent share of the market. Because of trade barriers, it faces essentially no import competition. Exports account for less than 2 percent of sales. Although some of its raw material is bought overseas, the large majority of the value added is provided by locally supplied goods and services. Over the past five years, Patagonian prices have risen by 300 percent, and U.S. prices have risen by about 10 percent. During this time period, the value of the Patagonian peso has dropped from P 1 = $1.00 to P 1 = $0.50.
a. What has happened to the real value of the peso over the past five years? Has it gone up or down? A little or a lot?
b. What has the high inflation over the past five years likely done to Mucho Macho’s peso profits? Has it moved profits up or down? A lot or a little? Explain.
c. Based on your answer to part a, what has been the likely effect of the change in the peso’s real value on Mucho Macho’s peso profits converted into dollars? Have dollar equivalent profits gone up or down? A lot or a little? Explain.
d. Mucho Macho has applied for a dollar loan to finance its expansion. Were you to look solely at its past financial statements in judging its creditworthiness, what would be your likely response to Mucho Macho’s dollar loan request?
e. What foreign exchange risk would such a dollar loan face? Explain.
Aug 29, 2021 | Uncategorized
Nissan produces a car that sells in Japan for ¥1.8 million. On September 1, the beginning of the model year, the exchange rate is ¥150:$1. Consequently, Nissan sets the U.S. sticker price at $12,000. By October 1, the exchange rate has dropped to ¥125:$1. Nissan is upset because it now receives only $12,000 x 125 = ¥1.5 million per sale.
a. What scenarios are consistent with the U.S. dollar’s depreciation?
b. What alternatives are open to Nissan to improve its situation?
c. How should Nissan respond in this situation?
d. Suppose that on November 1, the U.S. Federal Reserve intervenes to rescue the dollar, and the exchange rate adjusts to ¥220:$1 by the following July. What problems and/or opportunities does this situation present for Nissan and for General Motors?
Aug 29, 2021 | Uncategorized
Chemex, a U.S. maker of specialty chemicals, exports 40 percent of its $600 million in annual sales: 5 percent goes to Canada and 7 percent each to Japan, Britain, Germany, France, and Italy. It incurs all its costs in U.S. dollars, while most of its export sales are priced in the local currency.
a. How is Chemex affected by exchange rate changes?
b. Distinguish between Chemex’s transaction exposure and its operating exposure.
c. How can Chemex protect itself against transaction exposure?
d. What financial, marketing, and production techniques can Chemex use to protect itself against operating exposure?
e. Can Chemex eliminate its operating exposure by hedging its position every time it makes a foreign sale or by pricing all foreign sales in dollars? Why or why not?
Aug 29, 2021 | Uncategorized
During 1993, the Japanese yen appreciated by 11 percent against the dollar. In response to the lower cost of the main imported ingredients–beef, cheese, potatoes, and wheat for burger buns–McDonald’s Japanese affiliate reduced the price on certain set menus. For example, a cheeseburger, soda, and small order of french fries were marked down to ¥410 from ¥530. Suppose the higher yen lowered the cost of ingredients for this meal by ¥30.
a. How much of a volume increase is necessary to justify the price cut from 530 to 410 yen? Assume the previous profit margin (contribution to overhead) for this meal was ¥220. What is the implied price elasticity of demand associated with this necessary rise in demand?
b. Suppose sales volume of this meal rises by 60 percent. What will be the percentage change in McDonald’s dollar profit from this meal?
c. What other reasons might McDonald’s have had for cutting price besides raising its profits?
Aug 29, 2021 | Uncategorized
In 1990, a Japanese investor paid $100 million for an office building in downtown Los Angeles. At the time, the exchange rate was ¥145/$1. When the investor went to sell the building five years later, in early 1995, the exchange rate was ¥85/$1 and the building’s value had collapsed to $50 million.
a. What exchange risk did the Japanese investor face at the time of his purchase?
b. How could the investor have hedged his risk?
c. Suppose the investor financed the building with a 10 percent down payment in yen and a 90 percent dollar loan accumulating interest at the rate of 8 percent per annum. Since this is a zero coupon loan, the interest on it (along with the principal) is not due and payable until the building is sold. How much has the investor lost in yen terms? In dollar terms?
d. Suppose the investor financed the building with a 10 percent down payment in yen and a 90 percent yen loan accumulating interest at the rate of 3 percent per annum. Since this is a zero coupon loan, the interest on it (along with the principal) is not due and payable until the building is sold. How much has the investor lost in yen terms? In dollar terms?
Aug 29, 2021 | Uncategorized
ABC limited account of motor vehicles as at 1/1/03 was Ksh. 5,000,000 while the accumulated depreciation as at that date was Ksh. 2,000,000. During the year the following transaction took place.
i. A motor vehicle bought on 1/1/01 at sh. 1,000,000 was exchanged with a new one cost sh. 1,500,000. The company paid sh. 800,000 in the exchange. The exchange took place on 30/6/03
ii. On 1/4/03 a new motor vehicle was bought at sh. 1,000,000
iii. On 31/7/03 a motor vehicle bought on 1/8/00 at cost sh. 800,000 was sold at 300,000.
iv. On 31/8/03 a 2nd hand motor vehicle was bought from XYZ limited at sh.
700,000. XYZ limited had bought the motor vehicle on 31/6/01 at 1,000,000.
It is the company’s policy to charge depreciation on motor vehicle at 20% on cost with a full year charge in the year of acquisition and no charge in the year of disposal.
Required:
1. Motor vehicle a/c 2) Depreciation a/c 3) Accumulated depreciation a/c 4) Disposal a/c
Aug 29, 2021 | Uncategorized
XYZ limited account of plant and machinery as at 1/1/03 stood at Ksh. 11,000,000 while the accumulated depreciation stood at Ksh. 4,000,000. It is the company’s policy to charge depreciation at 10% on cost pro rata to time on all assets and no charge in the year of disposal. The following transactions took place:
|
Purchases:
|
|
|
|
Date
|
Item
|
Amount
|
|
1/3/03
|
Machinery X
|
3,000,000
|
|
30/6/03
|
Machinery
|
4,000,000
|
|
Disposals:
|
|
|
|
|
|
Date
|
Item
|
Orig.cost
|
Sale proceeds
|
Date of Purchase
|
|
1/4/03
|
Machinery A
|
2,000,000
|
900,000
|
30/6/99
|
|
30/6/99
|
Machinery B
|
1,500,000
|
1,200,000
|
1/9/01
|
Other transactions:
1. A machinery bought on 30/6/00 at 1,000,000 was completely damaged on 1/4/03.
The insurance company paid sh. 700,000
2. A machinery bought on 30/6/99 at 1,000,000 was exchanged for a new one costing 1200,000 on 31/7/03. The company paid sh. 400,000 in the exchange.
Required:
1. Machinery a/c 2) Depreciation a/c 3) Accumulated depreciation a/c 4) Disposal a/c
Aug 29, 2021 | Uncategorized
Your essay needs to address the following questions: A. Critically review literature on arguments for and against global convergence of international financial reporting standards (IFRS) B. Identify two listed companies: one from Australian Securities Exchange (ASX) and the other from New York Stock Exchange (NYSE); and analyse the accounting policy statement in their annual reports for the reporting year 2012 C. Discuss if your findings of Question 2 support (or reject) the convergence of IFRS.
Aug 29, 2021 | Uncategorized
FINANCIAL AND MANAGERIAL ACCOUNTING
QUESTION 1 [20]
The directors of Gordon Limited (Ltd) are currently considering two mutually exclusive investment projects. Both projects are concerned with the purchase of a new plant. The following data are available for each project:
Project
1 2
R R
Cost (immediate outlay) 300 000 180 000
Expected annual net profit (loss)
Year 1 87 000 54 000
2 (3 000) (6 000)
3 6 000 12 000
Estimated residual value of the plant 21 000 18 000
The business has an estimated cost of capital of 10%, and uses the straight line method of depreciation for all non current assets when calculating net profit. Neither project would increase the working capital of the business. The business has sufficient funds to meet all capital expenditure requirements.
Required:
1.1 Calculate for each project:
1.1.1 The net present value. (10)
1.1.2 The payback period. (4)
1.2 Determine with reasons which of the two investment projects the directors of Gordon Ltd should accept. (3)
1.3 Briefly discuss which method of investment appraisal you consider to be most appropriate for evaluating investment projects. (3)
QUESTION 2 [30]
You are the financial director of Cato Rest Enterprises. The business operates in the hardware and building industry and it is located in an area where many low cost homes have recently been built. Given the economic and political climate in the country (South Africa) the company has experienced a tough financial year. The following information is prepared by your head accountant and presented to you for the current year (2012) and the comparative year (2011):
|
Return on Shareholder’s Equity (ROE)
|
16%
|
25%
|
|
Net Profit before tax (Rm)
|
R4.5
|
R6.0
|
|
Current ratio
|
2.2:1
|
2.6:1
|
|
Acid test ratio
|
0.8:1
|
1.4:1
|
|
Debtors collection period (30 days)
|
62 days
|
30 days
|
|
Creditors payment period (30 days)
|
40 days
|
30 days
|
|
Inventory turnover rate
|
6 times
|
8 times
|
Required:
2.1 After an analysis and interpretation of the above information prepare adetailed reportthat you would present to your Board of Directors.
Include in your report recommendations/suggestions to improve the financial performance
of the business.(20)
2.2 Discuss in general the inherent weaknesses of financial statements. (10)
QUESTION 3 [30]
The following information pertains to Chennai Coolers, a supplier of bottled water for three months ended 31 December 2012.
Actual Budgeted
October November December
R R R
Sales (20% for cash and 80% on credit) 360 000 380 000 400 000
Purchases (10% for cash 90% on credit) 240 000 280 000 320 000
Salaries and wages paid 40 000 60 000 60 000
Cash expenses 24 000 28 000 32 000
Depreciation 2 000 2 000 2 000
Additional information:
1. It is expected that debtors will settle their accounts as follows:
20% in the month of sale
70% in the month after the month of sale, and
5% in the second month after the month of sale.
2. The remaining 5% is usually written off as bad debts.
3. Trade creditors are paid in the month after the purchases at a discount of 5%.
4. 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred.
5. Expenses are paid as they arise.
6. The favourable bank balance on 1 November 2012 was R 16 000.
Required:
3.1 Prepare thecash budgetfor November and December 2012. (20)
3.2 Discuss how the budgeting process in an organisation benefits a functioning standard costing system. (10)
QUESTION 4 [20]4.1 Discuss in detail the refinement of Activity based Costing (ABC) in management accounting.
In your discussion include the benefits and problems of operating an Activity Based Management (ABM) system. (10)
Marks will be awarded for overall presentation, introduction, insight on the subject matter, conclusion and referencing. Your response shouldnotexceed3typed pages.
4.2 Cell U Ltd produces a universal cell phone charger that sells for R20 per unit. Variable costs to manufacture and sell are R14 per unit. Fixed costs and expenses are budgeted at a total of R35 000 per year.
Required:
4.2.1 Calculate the break even value in Rands. (4)
4.2.2 Calculate the income to be expected on sales of R180 000. (4)
4.2.3 Calculate the sales revenue required to produce net income of R5 000. (2)
Marks will be awarded for overall presentation, introduction, insight on the subject matter, conclusion and referencing.
END OF FINANCIAL AND MANAGERIAL A
Aug 29, 2021 | Uncategorized
Requirement:
Internal financial information is not available to the public, so we have to rely on external information for our analysis. Review financial statements for two years. Use the same companies you selected in Module 2 for the SLP assignments in this course. Make a comparison of the following items and note trends.
- Revenues;
- Cost of good sold
- Accounts receivable
- Accounts payable
- Inventory
Keeping the case analysis in mind, discuss and interpret the changes over the two year period. Which company is the best performer and why? How is this information useful to you from a managerial perspective? Explain your reasoning and support your conclusions with the numbers you have pulled out for the comparison above. Don’t forget to comment on the interaction of the balance sheet and income statement.
Modular SLP Assignment Expectations
Always include the name of the organization(s), time period covered and source of information. It is important to answer the questions as posed.The document should be from 2 to 4 pages and written in a clear and concise manner. Don’t forget to include tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatiblespreadsheet when computations are involved. You can turn in the spreadsheet instead of the Word document. The content should be equivalent to the page length suggested for a word processing document.
Aug 29, 2021 | Uncategorized
The Business School
BUACC2606 – Corporate Accounting
Semester 2, 2013
RESEARCH ASSIGNMENT
Assessment weight: 25%
Due Date: Week 10
Length: 2000 words
Group Assignment: 2 people
Stigler’s ‘private interest theory’ proposes that regulatory bodies (including accounting
standard setters) are made up of individuals who are self interested, and these individuals
will introduce regulation that best serves their own self interest. If regulators acted in
accordance with the predictions provided by private interest theory of regulation, what is the
likely of the introduction of regulation aimed at reducing the problems associated with
climate change, particularly if business corporations opposed such regulations?
Stigler, G. J. 1971, The politicisation of accounting, Journal of Accountancy, 146(5), pp. 65
72
Required
a. Compare the view espoused by the economist Milton Friedman about the social
responsibilities of business with the views express by Stigler above.
b. Discuss the standards that are inherent in Global Reporting Initiative (GRI).
c. Choose a company listed on the ASX and discuss how the company has disclosed
Corporate Social Responsible (CSR) issues. Refer to instruction 2 below.
d. Evaluate your company performance in relation to GRI standards and comment on
Stigler’s theory
Instructions
1. The research essay is to be conducted in groups of two. Students do not have the
option to extend or reduce the size of the group.
2. Each group must choose a different company listed on the ASX. Discuss you chosen
company with your lecturer/tutor to ensure there is no duplication.
3. Assignments must not exceed the word counts indicated.
4. Your assignment must include an abstract/synopsis, introduction, essay body that
clearly addresses the problem areas, a conclusion and a properly referenced (refer to
the research essay marking guide for further guidance)
5. Evidence of extensive research beyond the prescribed text is required. Ensure these
are referenced. Refer to the University of Ballarat’s policy on plagiarism.
6. NO extensions will be granted unless supported by appropriate documentation prior
to the due date.
7. The group assignment will be due in week 10 of the semester; your lecturer will
advise you of the time and date. Assignments that are submitted late will be
penalised at the rate of 10% per day. The lecturer, in the evaluation of the group
submission and each individual’s contribution, may require any or all of the members
of the group to discuss various aspects of the assignment
Assessment criteria
2000 words max. Excellent
(HD)
80 100
Very
Good
(D)
70 79
Good
(C)
60 69
Pass
(P)
50 59
Marginal
Fail
(MF)
40 49
Fail
(F)
0 39
1. Introduction (10)
2. Body/Discussion (40)
a – 10 marks
b – 10 marks
c – 10 marks
d – 10 marks
Critical evaluation of topic
3. Recommendation/s (10)
Conclusion (5)
4. Examples (10)
6. Referencing, citations (5)
7. Evidence of reading,
quality and quantity (10)
8. English expression,
coherence, grammar and
spelling. Logical flow of
ideas (10)
100/4 = 25%
Aug 29, 2021 | Uncategorized
BUACC5932 CORPORATE ACCOUNTING
Major Assignment
Semester 2 2013
PART A
The trial balance for Commotion Ltd as at 30 June 2012 (before calculation of income tax) is as follows:
Note: this is the first year of operation of Commotion Ltd.
DR CR
$000 $000
Sales Revenue 1235
Cost of Sales 540
Interest revenue 19
Gain on Sale of Equipment 10
Admin and Selling Expenses 153
Auditor Fees 18
Bad Debts Expense 8
Depreciation Plant and Equipment 96
Doubtful Debts Expense 6
Interest Expense 21
Miscellaneous Expense 28
Rent Expense 17
Salaries 187
Proceeds from Insurance Claim 25
Accounts Receivable 118
Allowance for Doubtful Debts 6
Cash on Hand 5
Inventories 145
Deposits 130
Debentures in Ryco Ltd 220
Plant and Equipment 472
Accumulated Depreciation Plant and Equip. 96
Land 50
Accounts Payable 235
Bank Overdraft 13
Bank Loan 175
Share Capital 400
2214 2214
Additional information:
a) Included in auditor remuneration is $6,000 in fees for various management consulting services.
b) The gain on sale of plant and equipment amounted to $10,000. The carrying amount of the item sold was $77,000
c) Directors have declared a final dividend of 5 cents per share) at 30 June 2012
d) On 30 June 2012 the company revised the useful life of one of its plant and equipment assets from 5 years to 3 years. The asset had been purchased on 1 July 2011 at a cost of $75,000
e) All assets other than accounts receivable, cash on hand and inventories are non current. All liabilities other than accounts payable, bank overdraft, current tax liability and provision for dividend are non current.
f) Share capital comprises 400,000 fully paid ordinary shares issued on 1 July 2011.
g) Income tax rate is 30% The only temporary differences relate to doubtful debts expense and depreciation of Plant and Equipment (the depreciation allowable for tax purposes for the year ended 30 June 2012 was $80,000
h) Land was purchased on 1 July 2011 for $50,000. At 30 June 2012 the directors wish to revalue the land to $100,000.
i) On 1 August 2012 the company discovers that inventory valued at $30,000 at 30 June 2012 has no value due to flood damage.
j) At 30 June 2012 the company has signed a contract for the construction of a warehouse to the value of $250,000. All amounts under the contract are due before 30 June 2013.
k) At 30 June 2012 Commotion Ltd purchased all the assets and liabilities of a competitor Exco Ltd. The details of the acquisition are as follows:
Assets acquired:
Inventories $44,000 (fair value $38,000)
Building 200,000 (fair value $170,000)
Liability Assumed:
Bank Loan $10,000 (fair value $10,000)
Cost of acquisition:
Cash $250,000 (to be paid 30/9/2012 – funded by increasing Commotion Ltd’s Bank Loan)
Legal fees $7,000 (to be paid 31/7/2012.
The directors of Commotion Ltd require this acquisition to be included in the financial statements at 30 June 2012
l) At 30 June 2012 directors confirm that the asset Debentures in Ryco Ltd is impaired and will realise only $120,000 due to the liquidation of Ryco Ltd. An adjustment is required for the 2012 financial statements.
Required
i) Prepare the required adjustments to the trial balance data at 30 June 2012 (in journal entry form)
ii) Prepare a statement of comprehensive income ( using classification of expenses by function method), a statement of financial position and a statement of changes in equity, including any required notes for the year ended 30 June 2012. These statements are to comply with Australian accounting standards AASB3, AASB101, AASB108,AASB110 and AASB116
Note: round all calculations to the nearest thousand dollars
17 marks
PART B
With reference to Accounting Standard AASB110 ‘Events After the Reporting Period’:
a) Explain the distinction between adjusting and non adjusting events
b) Discuss the requirements under the standard for the disclosure of events after the reporting period
Maximum 250 words
3 marks
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by Text Enhance”>tax
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Henry Wong is the audit partner of Wong, Judd & Co. James Swann, the MD of Evatt Ltd, a large public listed publishing company and Henry Wong are long time friends. Currently they are involved in a substantial joint business venture. James disclosed to Henry that Evatt Ltd is preparing tender documents for next year’s audit. He further indicated that the lowest tender bid received will secure the audit engagement. In addition to the usual audit services, Evatt Ltd is also requiring consulting services for designing and implementing a new financial information technology system that will generate information for the company’s financial statements.
Henry wants to tender for the audit of Evatt Ltd., so he met with his staff to discuss the potential threats to independence in relation to Evatt & Co as audit client. During the meeting, Alvin Turei, the audit senior commented that his aunty is the financial controller of the company.
Required:
Referring to PES1 (Revised) andPES3 (Revised), and citing the standards where appropriate:
- Explain the ethical audit issues identified in the case facts above
- Explain the specific threats to independence that Henry and his firm are exposed to in relation to Evatt & Co, and
- Suggest safeguards that may reduce the audit team’s exposure to independence identified in (a) and (b)
Ensure that your answers are clear and specific.
Present your answer as follows:
- Ethical audit issue
|
- Specific threats
|
- Safeguards
|
|
|
|
(4 points = 2 marks) (any 4 points = 2 marks) (any 12 points = 6 marks)
- Ethical audit issue must contain integrity, auditing duties and responsibility
- Ethical issue must contain objectivity, confidentiality, competence
- Ethical issue must contain pes1 100.5 (a), (b), (c), (d)
- Safeguard must contain pes2 100.13, 14,16
Word 600
- Pes1 and 2 is in http://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Professional_Ethical_Standards.aspx
Must relate to New Zealand auditing standard not the USA
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I have difficulties to choose the topic for my essay. I need to write an essay to argue that selected standard. I need to choose 1 of the topic but I don’t which one.
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Accounting for Fiduciary Activities – Agency and Trust Funds
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1) c. Prepare a three part consolidation worksheet s of December 31, 20×7:
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• The company purchased machinery and equipment in exchange for 10,000 shares of common stock. The stock was selling for $20 at the time.
• The short term note receivable was received from a customer who had previously charged her purchase
• Assume all other transactions involved cash
34. (8) Net cash flow from 2011 operations was:
35. (8) Net cash flow from 2011 investing activities was:
36. (8) Net cash flow from 2011 financing activities was:
37. The indirect method of preparing the operating portion of the statement of cash flows requires certain amounts to be added back and subtracted from net income to arrive at cash flow from operations.
If all the individual amounts that should be added back to and subtracted from net income were summed into a single number, what would that total be?
My work is below:
#34.
From sales/customers = 200 sales 50 account receivable 50 note recieable = 100
Inventory/payments = 35 accounts payable 80 cost of goods sold = 45
Expenses = 10 interest espense 7 supply expense 11 salary expense = 28
=27.
#35.
Purchase of asset = 100X20 + 200X20 + 900X20 = 24,000
Sold = 10000X20 = 200000
= 176,000. no idea if i did that correct or not.
#36.
Common stock 100X10,000 + APIC 100X10,000 = 200,000.
#37.
It is asking for a specific number. I know all you have to look at is the income statement. you have to start with the net income. If you actually use net income, the it would be 48 + depreciation expense of 30 + expenses(only cash) which i guess is 28 + loss on sale of equipment and investments which is 14 so the net cash for indirect method would be 120. but its not asking for net income to be factored into the answer so the answer would be 72. it is my guess for now, but im sure its incorrect.
Aug 29, 2021 | Uncategorized
There are two exercises i have provide you with the excel template to work on. thank you
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Highlanders
The Highlanders is a nationally recognized drum and bagpipers group that performs in parades and official ceremonies from weddings to inaugurations to funerals. The group consist of 18 bagpipers and 10 drummers plus a director and is headquartered in Lochlomond, Virginia. To be a member of this prestigious group, candidates must pass a talent recital and be able to contribute financially to the general operation of the organization. There never seems to be a shortage of candidates interested in applying for membership in the Highlanders. The members must also have an outgoing personality because they are ambassadors for their organization and serve as representatives for their city and state.
In recognition of their national prominence, the Highlanders have been part of the governor’s inauguration for the past 40 years. They also regularly appear in Scottish festivals throughout the mid Atlantic region. Many of the members have Scottish ties in their genealogy, but that is not a requirement for membership.
While the Highlanders receive financial compensation from the members, there is still a considerable amount of funds, which must be secured from other sources. The members must also pay for their own instruments, which they own, but which must comply with standards of the organization. Many of the members have at least two bagpipes or drums just in case one might break during a performance. Members also have to buy their own uniforms, which include custom kilts, shoes, socks, jackets and hats. It is also wise to include a second uniform especially if they have to perform in inclement weather.
The organization has a bus and two equipment vans. They also have a rental office with a staff of two to take care of booking events, maintaining equipment, seeking financial support, maintaining a web site, and overseeing other operating activities. The vehicles are also located at this site and extra uniforms and musical equipment are stored at the office. The Highlanders often practice in the office parking lot on weekends when they are not booked for a performance.
Jake Priode has been a member of the Highlanders for 6 years as a bagpiper. He has played his instrument for over 15 years, and it took him three years of auditions before there was a vacancy and he joined the organization. Typically Jake pays $250 per year in uniform costs. Every year he buys a new uniform which last about 3 years, so Jake has 3 complete uniforms in supply at all times along with a few extra items especially hats and socks for special occasions.
Jake also spends between $800 and $1,000 every year for instrument and music costs. He has 2 bagpipes and a few replacement parts. He also has to buy music that the group will use in performances. Since the Highlanders do a lot of traveling for events, many of which are not fully funded, Jake needs to pay some food and lodging costs. Last year he paid a total of $1,700 for these costs. Finally, the Highlanders try to raise enough supplementary funds to support the overhead cost of operations of the organizations, but members are expected to contribute some funds if there is a budget shortfall. Last year, Jake paid $525 to the Highlanders which went to staff salaries and vehicle maintenance costs.
In spite of the costs and time commitment, Jake is totally devoted to the Highlanders as are most of the members. Where else can he have the opportunity to perform with the instrument he loves to play, perform at prestigious ceremonies, and have the opportunity to represent his homeland of Scotland. He also enjoys the chance to share with interested bystanders some of the heritage of the Highlanders and bagpipe music.
The city is also very proud of the Highlanders. The city council has frequently recognized the organization and the credibility they bring to the city and area. The Highlanders also provide free publicity for the city as the city name is on the base drum and banner carried in parades. When the Highlanders perform in the mid Atlantic region, they have the chance to advertise the Lochlomond Scottish Highland Games and Festival, which are a major tourist attraction for the city each August. The Highlanders also sponsor a drum and bagpipers marching band competition at the festival, which brings in some of the best groups in the eastern United States.
Next year, the Highlanders have been invited to perform in the Presidential Inaugural Parade in Washington DC and also participate in the swearing in ceremony plus they have been asked to represent the State of Virginia and the nation of Scotland in the Rose Parade in California. These performances are in addition to an already busy schedule, which includes at least 20 parades, and performance at 8 festivals along with numerous weddings, personal events and funerals.
The director of the Highlanders, Harry O’Leary, realizes that there could be a significant financial obligation to the Highlanders for the coming year. They would like to get special uniforms for the Presidential Inauguration and Rose Bowl parade plus the travel cost to Los Angles and lodging in the area could be very expensive. Cost of going to Washington DC will not be that extensive, but, lodging cost could be expensive and scarce with all of the activities going on at the time. Budgeting and control of funds was never a talent of Harry’s, so he asked Jack, who recently received his MBA, for some assistance.
While Jake and the other members were excited about the opportunities for next year, they were a little concerned about the additional costs, especially going to the Rose Parade, which could add up to over $1,000 per member. Jake suggested that the Highlanders should try to find some supplemental sources of funds to help in the anticipated costs of these and other events. However, the Highlanders would have to develop a good budget and financial statements to present to sponsoring organizations before requesting funding support.
Harry asked Jake if he could develop financial statements for the Highlanders and a budget for the next year. Jake stated that he would need financial records for this last year and requested that the staff help him in determining costs for attending the various events. Jake and Harry both felt that member support for travel and operation costs should not exceed $1,500 per member next year.
Leslye Jones, the office manager, worked with Jake in obtaining critical financial information. The organization has a 10 year old bus with 100,000 miles on it. The bus originally cost $62,000 and has been paid in full. Jake thinks the bus is half way through its useful life. One of the vans was purchased 4 years ago for $20,000 and is paid in full. It has 75,000 miles on it and should have 6 more years of useful life. The second van was purchased last year for $30,000. The van has a useful life of 10 years and has a current loan balance of $25,000. The 12% loan has 55 months remaining with a payment of $593 per month. Maintenance on these vehicles was $2,200 last year, and that is expected to increase to $2,500 for next year.
The Highlanders spends $4,300 per year on music and music related supplies. The rent on the office space is $1,600 per month and that is expected to remain unchanged. Utilities total $200 per month. Leslye anticipates that office supplies currently at $100 per month will increase to $150 per month. The telephone cost will be $75 per month, which includes long distance service. The web site has an annual charge of $300 and Leslye says she annually pays a high school student $500 to update the web page and add customizing features.
The Highlanders also have $3,500 of musical equipment $1,800 of music supplies, and $4,200 of office equipment. These items are all paid in full. Next year, the organization anticipates purchasing $2,000 of additional music equipment. They also plan to purchase a second computer for $4,500 and some new computer software for $650. There is a cash balance in the checking account of $1,000 and a certificate of deposit of $2,500.
The salary for Leslye is $25,000 plus $10,000 in employee benefits. The organization would like to give her a $1,000 raise next year. The second employee is a part time maintenance person who also drives the bus to most functions. This employee is paid on an hourly basis of $14.60 per hour plus there is an additional 20% allowance for employee benefits. Last year this employee worked 1,400 hours. Next year, that is anticipated to increase to 1,600 hours. The pay rate will increase to $15.00 per hour.
Travel costs absorbed by the Highlanders was $5,000 over and above that paid for by the members last year. That cost is expected to increase to $8,000 next year with the Rose Parade event. Other event relates costs to the organization equaled $3,500 last year and this should increase to $5,000 for the coming year. Leslye also thought it would be good to include $2,800 for miscellaneous expenses.
The Highlanders is considered as a nonprofit organization, so they do not have to pay taxes on any income. Individuals and other organizations can make charitable contributions to the Highlanders for tax deduction purposes. When the group performs at ceremonies and other functions, they often receive an honorarium. Last year the honorariums totaled $13,000. Next year, it is hoped that that total will increase to $16,500.
Jake does not believe that honorariums and member contributions will be enough to balance the budget, especially if the group goes to the Rose Parade and incurs those additional costs. Last year the city of Lochlomond gave the Highlanders $37,500 for operational support, and other organizations contributed a total of $8,650. There is going to have to be a much greater effort at fund raising or possible getting a grant or more city support if the Highlanders are able to meet budget.
Required:
- What is a typical range in annual costs contributed by Jake into this hobby of performing with the Highlanders?
- Compute a balance sheet for the Highlanders as of today. (Assume December 31, 20×0 for today’s date.)
- Calculate a budgeted income statement for the Highlanders for the year 20×1.
- What is the projected total amount of excess funds or shortage for the budget year 20×1?
- Suggest ways the Highlanders can earn extra income for 20×1.
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Please see attached. Thanks for your help.
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Fishy Farm Fishy Farm is a small business located in the mountains of southwestern Virginia. The business is actually a commercial fish hatchery dedicated to raising the finest freshwater sport fish in the area including trout, bass and perch. The area has an abundance of fresh water clear mountain streams, which provide the natural resource for fish breading and raising. JB Nathan is the founder and owner of Fishy Farm. An avid fisherman himself, JB has always had an interest in this type of business.
Aug 29, 2021 | Uncategorized
Critical Thinking Assignment
Dawson Company manufactures three types of computer games: Skyhawk, Seahawk, and Sharks. It allocates overhead to the games based on the number of direct labor hours worked on each product. The results of the most recent period follow:
|
Skyhawk |
Seahawk |
Sharks |
| Units produced and sold |
9,000 |
8,000 |
7,000 |
| Selling Price |
$45.00 |
$30.00 |
$25.00 |
| Less: |
|
|
|
| Direct materials per unit |
5.50 |
4.25 |
3.00 |
| Direct labor cost per unit |
9.00 |
2.00 |
3.00 |
| Manufacturing overhead per unit |
27.00 |
6.00 |
9.00 |
| Gross Margin |
3.50 |
17.75 |
10.00 |
| Less: |
|
|
|
| Selling cost per unit |
2.25 |
1.50 |
1.25 |
| Administration cost per unit |
3.75 |
3.00 |
2.75 |
| Net Income (loss) per unit |
$(2.50) |
$13.25 |
$6.00 |
The manager of Dawson Company is concerned that the Skyhawk game seems to be a net loser and he is considering whether to discontinue it. He has asked you to analyze the situation and make a recommendation. Your analysis reveals that Dawson Company has three levels of overhead – faculty sustaining, batch related, and unit related – and that the appropriate overhead rates are $6.00 per square foot, $1,000 per production run, and $4 per unit, respectively. Resource usage during the past period follows. In addition, you discover that administrative costs are fixed while selling costs are variable per unit.
|
Skyhawk |
Seahawk |
Sharks |
| Square feet occupied |
10,000 |
12,500 |
15,000 |
| Production runs |
9 |
12 |
12 |
Required:
- Determine whether Dawson Company should drop any game.
- Write a memo to the manager with your recommendation.
Aug 29, 2021 | Uncategorized
In this assignment, you will calculate ratios and analyze the data collected in
M1: Assignment 2. You will compare ratios from the SMH data to ratios calculated from the comparative facilities.
Measure the liquidity, debt, and operating ratios of the FP and NFP organizations, particularly the following:
- Liquidity
- Current ratio
- Acid test ratio
- Operating performance
- Return on assets
- Operating profit total and percentage
- Investment yield
- Return on equity
- Management efficiency
- Days in accounts receivable (AR)
- Days inventory on hand
- Days cash on hand
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Jokkmok Industries
Mr. Rosen is the manager of a division of Jokkmok Industries. He is one of several managers being considered for the position of CEO, as the current CEO is retiring in a year.
All divisions use standard absorption costing. The division has the capacity to produce 50,000 units a quarter and quarterly fixed overhead amounts to $700,000. Mr. Rosen has been looking at the report for the first three months of the year and is not happy with the results.
Division Income Statement
For the Quarter Ending June 30, 2013
| Production: 25,000 units |
|
|
|
|
|
|
| Sales (25,000 units) |
|
$2,500,000 |
| Cost of goods sold |
|
1,800,000 |
|
|
|
|
|
Gross profit |
|
700,000 |
| Selling & general expenses |
|
350,000 |
| Net income |
|
$350,000 |
The sales forecast for the second quarter is 25,000 units. Mr. Rosen had budgeted second quarter production at 25,000 units but changes it to 50,000 units, which is total capacity for a quarter. The sales forecasts for each of the last two quarters of the year remain at 25,000 units. Actual fixed costs incurred remain constant in total and variable costs remain constant on per unit basis.
Required:
Computations:
- Convert the divisional absorption income statement to a contribution margin income statement for the quarter. Click here for an exampleshowing how to convert from one approach to another. This example is for guidance only and the numbers have no bearing on Jokkmok Industries. You can also find several videos on YouTube that explain the difference between the two types of income statements.
- Prepare absorption and contribution margin income statements for the succeeding quarter for the division.
- Compute production costs per unit for both approaches and for both quarters.
Discussion:
- Did Mr. Rosen improve his performance for the second quarter? Indicate the information you used for your assessment.
- Can you make any suggestions for reporting in the future?
- Do you think Mr. Rosen should be seriously considered for the CEO position? Why or why not?
- Discuss three shortcomings of the absorption approach for internal decision making.
Modular Case Assignment Expectations
It is important to answer the questions as posed.The discussion should be from 3 to 5 pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.
Aug 29, 2021 | Uncategorized
BAO2203 Corporate Accounting Assignment
Case study (Replicated)
Aviator Airways Ltd and Eagle Airlines Ltd
This comparative study of accounting policies adopted by two international airlines for the depreciation of aircraft, spares and spare engines provides an insight into the differences in accounting policy that may emerge, even when accounting practice in the jurisdictions involved is regulated.
- Non current assets
- Depreciation
- Depreciable amount
- Useful
- Comparability of results
- Financial statement analysis
Aviator Airways Ltd (Aviator) and Eagle Airlines Limited (Eagle) both operate in the international aviation industry. Aviator is Australia’s largest airline, having been formed in 1920 and the Eagle was formed in 1972, although its origins date back to 1947, and is based in Asia Pacific region.
Both companies operate a diverse airline fleet. Aircraft, spares and spare engines collectively constitute a major asset of such corporations as is demonstrated by reference to the 2012 Statements of financial position of these two companies. In the case of Aviator, this non current asset, shown as ‘Property plant and equipment’ at a stated written down value (i.e., carrying amount) of $9 753.7 million, represented 55.5 per cent of the total group assets of $17 574.2 as at 30 June 2012. For eagle, this fixed asset category, disclosed as ‘Aircraft, spares and spare engines’ at a written down value of $12 464.5 million, constituted 62.4 per cent of total group assets as at 31 March 2012 of $19 990 million. Accordingly, the accounting policies adopted in depreciating such assets over their useful lives assume importance in assessing the financial performance and position of airline operator.
In the case of Aviator, the ‘Depreciation and amortisation’ policy for aircraft, spares and spare engines was disclosed in Note 1 (n) of the ‘Notes to the financial statements’ for the year ending 30 June 2012. The relevant portion of this note is reproduced as follows:
Depreciation and amortisation
Depreciation and amortisation are provided on a straight line basis on all items of property, plant and equipment except for freehold and leasehold land. The depreciation and amortisation rates of owned assets are calculated so as to allocate the costs or valuation of an asset, less any estimated residual value, over the asset’s estimated useful life to the Aviator Group. Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. The costs of improvements to assets are amortised over the remaining useful life of the asset or the estimated life of the improvement, whichever is the shorter. Assets under finance lease are amortised over the term of the relevant lease or, where it is likely the Aviator Group will obtain ownership of the asset, the life of the asset.
The principal asset depreciation and amortisation periods and estimated residual value percentages (for aircraft, spares and spare engines) are:
|
Years |
Residual values % |
| Jet aircraft and engines |
20 |
20 |
| Non jet aircraft and engines |
10 – 20 |
20 |
| Aircraft spare parts |
15 – 20 |
20 |
These rates are in line with those for the prior year, with the exception of the residual value assumption on wide bodied aircraft (Boeing 747 and 767 and Airbus A330 aircraft) which was revised from 2 per cent to 20 per cent.
Depreciation and amortisation rates and residual values are reviewed annually and reassessed having regard to commercial and technological developments and the estimated useful life of assets to the Aviator Group.
On the other hand, Eagle reported its policy relating to the ‘Depreciation of fixed assets’ at Note 2 (g), entitled ‘Accounting policies’. The portion of this note pertaining to aircraft, spares and spare engines is reproduced hereunder:
Depreciation of fixed assets
Fixed assets are depreciated on a straight line basis at rates which are calculated to write down their cost to their estimated residual values at the end of their operational lives. Operational lives and residual values are reviewed annually in the light of experience and changing circumstances.
Fully depreciated assets are retained in the financial statements until they are no longer in use. No depreciation is charged after assets are depreciated to their residual values.
Aircraft fleet
The Group depreciates its new passenger aircraft, spares and spare engines over 15 years to 10 per cent residual values.
For used passenger aircraft, the Group depreciates them over the remaining life (15 years less age of aircraft) to 10 per cent residual values.
The Group depreciates its new freighter aircraft over 15 years to 20 per cent residual values. For used freighter aircraft, the Group depreciates them over the remaining life (15 years less age of aircraft) to 20 per cent residual value.
Aviator provided the following more specific information on aircraft, spares and spare engines in Note12, ‘Property, plant and equipment’, to the financial statements for the year ending 30 June 2012. This information has been extracted from the group accounts:
|
At cost $m |
Accumulated depreciation $m |
Written down value $m |
| Total aircraft and engines |
13 358.9 |
3 989.1 |
9 369.8 |
| Total aircraft spare parts |
750.7 |
366.8 |
383.9 |
|
|
|
|
Note: the amounts are based on the average useful life estimate 18 years and 20% residual value
For Eagle, Note 17, entitled ‘fixed asset’, stated similar information with respect to aircraft, spares and spare engines as at 31 March 2012. The relevant information extracted from the group accounts is set out as follows:
|
At cost $m |
Accumulated depreciation $m |
Written down value $m |
| Total aircraft and engines |
17 718.1 |
5 848.8 |
11 869. 3 |
| Total aircraft spare parts |
1306.1 |
710.9 |
595.2 |
|
|
|
|
Note: the amounts are based on the average useful life estimate 15 years and 12% residual value
For the year ended 30 June 2012, Aviator reported a group ‘net profit’ of $648.8 million. Eagle reported a group ‘net profit’ of $895.3 million for the year ended 31 March 2012.
Additional information on the operations of the two companies
Aviator has larger domestic operation than the international flights. Hence it has more short haul flight passengers. On the other hand, Eagle has very small domestic operations but larger international operations compared to Aviator. It carried almost 1.5 times international passengers than that of Aviator in the 2011/2012 financial year. Hence, Eagle is concentrated on long haul flight. Arguably, there are higher costs and wear and tear on aircraft from short haul operations compared to long haul operations with more take offs and landings relative to passengers carried, plus higher tarmac and terminal fees, and passenger ‘handling ‘costs. Further, the company websites show that the average fleet age* of Eagle airlines was 5 years while the Aviator aircrafts was 10 years in the 2012 financial year.
*The average fleet age is calculated by taking an average of the age of every aircraft used by a company in a particular year.
Required:
1.Review the 2012 annual report of any (one) national aircraft company (listed in the Australian/ Malaysian or Chinese Stock Exchange) and comment on its depreciation policy in estimating the useful lives of long lived assets, such as aircraft used by major international commercial carriers based on the guidance provided under relevant accounting standards (AASB/IASB).
2.Based on your analysis of the case study, provide a discussion on the
significance of depreciation policy in terms of its impact on the financial statements and financial ratios of companies under the same industry that adopt varying depreciation policies.
**apply the useful life and residual value estimates of Aviator to Eagle and vice versa.
Aug 29, 2021 | Uncategorized
|
The Business School
BULAW 5916 TAXATION – Law & Practice
Assignment
Semester 2 2013 |
INSTRUCTIONS
- See the Instructions and Assessment Criteria in the Course Description and make sure you follow them!
- Please answer all parts of the question
- Attached to this document is a Checklist to be filled in by you and attached to your essay/assignment. Read this now before you start your research. If you have followed this checklist, there is a good chance you will do well.
- All work presented for assessment in this course must comply with the
format outlined in the University’s
Presentation of Academic Work
publication, available from the bookshop or on line at
www.ballarat.edu.au/generalguide.
- All essays must be accompanied by a signed official cover sheet (‘Plagiarism Declaration Form’), available at www.ballarat.edu.au/ard/business/student_info_webct.shtml and lodged as appropriate for your campus.
- You MUST reference in the body of the essay every time you use information from other people. This requires you to keep a track of where you are taking information from and then writing the reference up. You should use the Harvard/APA style; and use the University’s new Presentation of Academic Work. The Library’s website also has a citation style guide site. If you plagiarise (intentionally OR unintentionally) you will be given zero: see Regulation 6.1.1 for more details.
- DUE DATE: You will be advised by your Lecturer but Week 9 should be taken as a guide. Please check with the Course Description for details of where and when to submit your assignment. If you need an extension you must ask for one BEFORE the due date (unless this is impossible).
- The assignment should not exceed approximately 2000 words.
- The assignment is worth 25%.
Assignment
Part A [Approx 50%]
Explain why the payment to the taxpayer in
FCT v Dixon (1952) 86 CLR 540 was assessable income but the payment in
Scott v FCT (1966) 117 CLR 514 was not.
In your answer you should include (but not necessarily be limited to) the following:
- A brief statement in your own words of the facts of the cases.
- Identify the issues raised and the relevant legislation in the context of ITAA97.
- Identify any cases and other sources of information relevant to the issues and legislation.
- Apply the law to the facts stating clearly why one taxpayer was assessable and the other was not.
Part B [Approx 50%]
Nigel is a professional percussionist and performs with a number of bands and orchestras. In order to practice, he set aside a special room in his house that is soundproof and contains a variety of electronic sound equipment. The room is used only for practice or performance related purposes. He pays council rates, interest on the house mortgage, repairs and maintenance telephone and electricity expenses in connection with the house. He believes he should be able to claim tax deductions for all these costs together with depreciation on the room and equipment.
Explain the tax position to Nigel. In you answer you should:
- Identify the tax issues that are raised and the relevant sections of the legislation.
- Identify any cases and other sources of law or information that apply.
- Apply the law to the facts.
- Express a conclusion in regard to the issues identified and indicate any other information required.
University of Ballarat – The Business School
CHECKLIST TO BE ATTACHED TO ASSIGNMENT IN BULAW 5916
Name: ……………………………………………………………..
Student No. ………………………………..
Please check that you have done the following. Tick the boxes to show you have!
- Submitted an assignment that is your own work. (You may discuss the essay topics with others but you cannot copy another’s work, give your work to someone else to copy, or work closely with another student on how to structure or write the essay.)
- The assignment is no more than 2000 words long (excluding abstract, references, bibliography).
- Read and tried to address the criteria in the Course Description.
- Read and addressed the issues raised in the University’s Presentation of Academic Work
- Read Regulation 6.1.1, Plagiarism and asked questions if you are unsure about what it means.
- Referenced direct quotes (use quotation marks or indent) AND summarising from another person’s work in the body of the essay. (This includes internet sources).
- Indicated what referencing style you have chosen Harvard/APA and USED IT.
- Answered all parts to the question.
- Used headings (even though this is not a report, headings are encouraged to assist structure and flow).
- Proof read the assignment for spelling, punctuation and grammar errors.
- Where required, used relevant sections of legislation, legal rules/principles
- Where required, used cases to support your points or arguments. These cases can be obtained from textbooks, or the CCH online libraries, articles found via AGIS PLUS TEXT database etc.
- Put case citations in the body of the work as well as listing the case in the List of References.
- Discussed the issues as required and put arguments and gave your view.
- Used a range of resources.
- Included a title page with your name, student number, course code and name and lecturer’s name.
- Have a margin so comments can be added; put page numbers and your name and student number on each page.
Signed by student: ____________________________________________
Aug 29, 2021 | Uncategorized
BUTTERFLIES
Lisa and Mark, the third generation of the Gilbert family, had successfully taken the family business from one small café in Appleton to a profitable multi site restaurant business. Realizing in the late ‘70s that healthy eating was a trend with staying power, they had changed both the name and nature of “Gilbert’s”, their grandfather’s corner café, transforming it into “Butterflies”, a restaurant specializing in light and healthy food.
Butterflies had grown from strength to strength. The first location was such a success that Lisa and Mark were encouraged to open a second… and then a third… until today they had five such restaurants within a 30 miles radius of Appleton. People love the fine food and the beautiful surroundings, and customers came from a wide area to experience the delights of Butterflies.
The twins were discussing their potential sixth restaurant.
Lisa: Well I think that the Oakley site would be a great place for the new Butterflies. It’s a really good location, the right size buildings, loads of parking space, and best of all we already own it outright. What’s your problem?
Mark: No problem with any of that. I’m just concerned that we might be missing something. Sure, we know that we can make money if we open a Butterflies, but perhaps we should look at the alternatives we could always just sell the property and do something else with the money. lets face it we should be able to get at least 300,000 pounds for it if we put it on the market tomorrow.
Lisa: Yes, but I’d much rather set up a new Butterflies there. We get a lot of customers from out Oakley way this is a chance to capitalize on their goodwill. Remember that market research work I commissioned about this in February?
Mark: I should think so it cost us 3,000 pounds.
Lisa: Money well spent though. It showed that there is definite potential for a Butterflies out at Oakley lots of our customers thought it was a good idea, and lots of new people too.
Mark: Okay then lets look at the figures. What are we talking about?
Lisa: Well I reckon that a restaurant that size should take about 500,000 pounds a year; although in the first year we’d probably only do 75% of that due to the start up. But with out basic cost of food running at only about 40% of sales, that gives us a gross profit of some 300,000 a year and I reckon that about 90% of that would be customers who aren’t eating at the other Butterflies restaurants already, so that’s got to be worth going for!
Mark: Yes, but we’d have to knock overheads off that. What are we looking at there? Chefs, waiters, kitchen staff, heat and light, rates, cleaning, laundry, those fresh flowers you insist we always have… have you got any numbers?
Lisa: Of course ive got numbers! I reckon that wed have fixed costs of about 160,000 pounds a year, plus depreciation of 15,000 pounds. That includes the cost of a manager to run it. I think we should persuade Mike Barnett to do that.
Mark: Mike Barnett? Isn’t he due to retire this year?
Lisa: Yes, in june, just when we plan to open Oakley. But im sure he’d stay on abit longer, and we could just bring in this replacement a couple of months early to enable him to leave the Allerton site in April to work at the new location. I reckon we could persuade him to defer his retirement bonus for one more year and set up Oakley for us. And he’d do it for 18,000 pounds a year – which is the same, as we’d have to pay any other manager, but Mike’s experience would make it much easier. Then at the end of his extra year we pay him his 1,000 pounds retirement bonus…
Mark: Pehaps you’d better make that 1,500 if he’d going us such a favour.
Lisa: … Okay, 1,5—pounds, and then we bring in someone new. Still at 18,000 pounds though. How am I doing do far?
Mark: Fine. Now tell me how much we’ll have to spend on setting it up.
Lisa: Well, probably about 100,000 pounds for decoration and equipment.
Mark: Ouch!
Lisa: Yes, but don’t panic that includes 20,000 pounds for the cost of kitchen equipment transferred out of the Childwall site. Remember we need to get some better stuff for there because business has grown so quickly? I figured that rather than sell it off for a tiny amount…
Mark: we’d probably get 5,000 pounds for it !
Lisa: don’t interrupt! Yes, rather than sell it off like we did last time, why not use the old equipment in the new restaurant? It’s perfectly serviceable. And it cost us 20,000 pound last year, so why not use it ?
Mark: Great idea. I suppose that we can also use the Oakley site to help cover our central overheads: our offices, your salary and mine, accountants’ fees, and all that stuff. What does that work out to… we’d charge it about 15,000 pounds a year I suppose?
Lisa: Yes, it must cover its fair share of the costs, so that sounds reasonable. And there’s a couple of other points we’d need to consider financing all of the basic inventories all that “working capital” stuff that dad used to keep on about. What shall we say inventories run at about 5% of sales?
Mark: Sounds about right to me. Lets run the numbers.
Required:
Please “run the numbers” for Mark and Lisa:
- Prepare a cash flow forecast for the appropriate period. Assume that the restaurant will be run for six years, at the end of which the building could be sold for 300,000 pounds but the equipment will have no value at all. Also assume that tax will be calculated at 30% of profits ignoring depreciation, and that there are no tax allowances available on any of the equipment. Tax is paid in the year after the profit is made.
- Note that Mark and Lisa require a return of at least 14%. Should they go ahead with the Oakley expansion?
Aug 29, 2021 | Uncategorized
Assignment 1. Do not answer the questions at the end of the case material. Use the information in the Butterflies case material to: 1. Prepare a cash flow forecast. Assume that the business will be run for 6 years, and then the building will be sold for 300,000. The equipment will be depreciated straight line over the life of the restaurant. The tax rate is 30%. 2. If the required return of the investors is 14% should the expansion proceed? 3. Conduct a sensitivity analysis which explores the impact on the viability of the project of: a. The level of sales b. The cost of food as a percentage of sales and c. Working capital as a percentage of sales 4. Write a report to Lisa and Mark which uses your answers to 1, 2 and 3 as the basis for a recommendation on the investment
Aug 29, 2021 | Uncategorized
• BUACC 5930 • Accounting Concepts and Practices • Semester 2, 2013 • Group Assignment You are an accountant at MYB Group Accountants & Investment Advisors. You have been approached by a group of investors for your professional advice on investing in Woolworths Ltd. Your client wishes to adopt an investment strategy that seeks to maximise both financial return and social good. Required: Go to: http://www.woolworthslimited.com.au/annualreport/2012/ and access the company’s annual report for 2012 Prepare a report for your client. Your report should include: a. A description of the core business of the company including full details of its operating activities. b. A discussion on any significant issues emerging from the Chairman’s Report. c. A discussion on any significant issues emerging from the Managing Directors’ Report d. A discussion on company’s Corporate Governance Statement. e. A calculation of the key financial ratios for 2012. f. An overall assessment of the company and your recommendation on investing in the company. In making an overall assessment, you may conduct additional research on Woolworths too. For example, http://www.news.com.au/business/woolworths betting on booze profits as it looks to expand hotel empire/story e6frfm1i 1226223987450 Please note the following: • Format: Business report • Contribution to overall assessment: 20% • Length: 2000 – 2200 words • Due date: 25 September, 2013 • Your work must comply with the University’s General Guide for the Presentation of Academic Work. http://www.ballarat.edu.au/current students/assistance, support and services/academic support/general guide for the presentation of academic work • This is a group assignment. Each group needs to have 2 to 3 members in it. Please organise yourselves into groups. • Please make sure that names and ID numbers of all group members are stated on the cover sheet of your submission. As this is a group assignment, each member of a group is awarded the same mark. Working in groups has its pros and cons. I am sure that you will hold constructive and energetic group discussions on the issues at hand. In case of any disagreements, you will be able to resolve them in a democratic and rational way. There will be times when you may have to agree to disagree with each other. Invariably different group members bring different skills to a project; it is up to you to make the best of it. I believe one can learn a lot by discussing the issues with one’s colleagues. If you happen to find your group members are “not pulling their weight” or there are problems with any member’s commitment, then please try to resolve those issues amongst yourselves. Open and honest communication always helps. If you are unable to resolve these issues, you are most welcome to see me and we will try to sort out the problems together. Do this as soon as possible and certainly before the due date. Please adapt this to suit your group, particularly the last two paragraphs. BUACC5930, Semester 2, 2013, Group Assignment Names: Student Numbers: Bases of assessment HD P F Technical component: accuracy in calculations. Format: The IBCAR outline as per The General Guide for the Presentation of Academic Work. Content: Identification of relevant issues. Research: Selection of relevant material. A demonstration of critical evaluation of the issues. Expression: clarity, style (formal and academic), coherence in writing, grammar, punctuation, spellings and sentence structure. Expression of your view (and not a catalogue of quotes/ others’ ideas). A logical flow of argument at both the paragraph level and the overall text level. Use of supporting arguments. Use of literature to support the argument. Referencing procedure (within the text, and at the end of the text). Appropriately styled and punctuated bibliography. Overall Presentation – including cover page, line spacing, page numbering. GRADE:
Aug 29, 2021 | Uncategorized
Week 2 Case Study 3: FROSTY LTD FROSTY LTDFFROSTY LTD Issues to be addressed: Are the preference shares debt or equity, or are there component parts? Are the dividends an expense, or a distribution of profits? How does one handle the increase in redemption price ie. the extra 50c per share? 1. Define liabilities, equity, and expenses under the Conceptual Framework 2010, as well as the essential characteristics of each. Begin with liabilities.
Aug 29, 2021 | Uncategorized
Martin Jenkins who is 47 years of age carries on a newspaper business. He has two employees to help him publish a monthly magazine, and he operates from premises located in Footscray. He returns his income on a cash basis. He has come to you for advice regarding the following issues and wants you to prepare his tax return for the year ended 30 June 2013.
Issue 1
- Cash received from clients in 2012 13 amounted to $274,000. (This amount excludes the $10,000 advance fees he received).
- Unpaid accounts as at 30 June 2013 were $9,000.
- Unpaid accounts as at 30 June 2012 were $4,000.
- On 21 June 2013 Martin received $10,000 advance fees for services not yet rendered to a particular client.
Issue 2
- On 15 July 2012 Martin paid $1,000 subscription to the Newspaper Industry Golf Club association to entertain his business clients at ‘business lunches’ where various business issues were discussed and negotiated.
Issue 3
- During the financial year Martin incurred $21,000 legal fees in defending a defamation lawsuit as a consequence of an article written by a journalist he employs.
Issue 4
- During the financial year Martin made a $30,000 concessional contribution to his complying superannuation fund.
Issue 5
- On 1 February 2013 Martin expanded his business operations and purchased a shop in Geelong.
- On 2 February 2013 he incurred $29,750 painting all the interior rooms which were in a state of disrepair, and he moved in one week later.
- On 1 March 2013 he incurred $8,000 moving trading stock from his old premises to his new shop in Geelong.
Issue 6
To help finance the purchase of his new shop in Geelong Martin did the following:
1. Shares:
Sold the following shares:
2 March 2005 1000 BAN Ltd Purchase price $40,000
19 September 2012 1000 – BAN Ltd Sale price $170,000
2. Rare Rolls Royce
- On 16 September 2012 Martin reluctantly sold his prized and extremely rare 1910 Rolls Royce to the Petrol Head Vintage Car Museum for $87,000. He purchased the car on 9 August 2006 for $17,000 and spent $21,000 to restore it back to its original condition. He also paid $1,500 in advertising costs to sell it.
3. Art work
- On 17 September 2012 Martin sold a painting that he purchased on 13 February 1984 for $30,000. The sale price was $64,000.
4. Block of land
- On 17 October 2012 Martin gave a gift of a block of land to his daughter for her 21st birthday. He purchased the land on 11 July 2006 for $140,000. The market value of the land at the time of the gift was $200,000.
At the end of the 2011 12 financial year Martin had a prior year net capital loss of $9,000 from his share transactions.
Issue 7
- On 1 August 2012 Martin paid $94,000 for a new Ford that he uses for business use. (The rate of depreciation is 22.5%) Calculate the amount of depreciation he can claim in 2012 13.
Issue 8
- Martin and his wife resided in a property that is owned by Martin’s family company. The company sold the property on 19 June 2013 for $650,000. The family company originally purchased the property on 3 October 2009 at a cost of $450,000. Martin has sought your advice regarding the tax issues relating to the sale of this property.
Issue 9
- On 1 August 2012 Martin purchased a new printing press for his publishing business. The invoice from the supplier showed the following:
- Printing press $140,000
- Delivery fee $1,000
- Installation and testing fee $1,000
- Annual insurance fee $8,000
$150,000
- The new printing press has an effective life of 5 years and Martin wants to claim the maximum amount possible in 2012 13.
Issue 10
- Advice Martin whether he can claim a tax deduction or tax offset for any of the following transactions:
- $100 meal expenses incurred while travelling overnight on business
- During the financial year Martin incurred net medical expenses totalling $3,620
- On 14 April 2013 Martin made a $3,000 superannuation contribution to his spouse’s complying superannuation fund. (his wife earned $9,000 in 2012 13)
Issue 11
- Due to his heavy workload Martin maintains a home office where he finds it convenient to complete some business reports at home. During the financial year he incurred the following expenses:
- $415 ‘running expenses’ such as cleaning costs, depreciation and repairs of your computer and office furniture, heating/cooling, lighting and telephone calls.
- $3,000 occupancy expenses’ such as mortgage interest, council rates, house insurance, rent and repairs.
Issue 12
- On 9 April 2013 Martin was informed that one of his clients who owed him $7,000 was declared bankrupt and will receive no payment. He has approached you for advice as it whether he can claim the bad debt as a tax deduction.
Required
(1) With respect to each numbered issue, advise where appropriate what expenditure Martin can legally claim or income or capital gain he must include as part of his assessable income. All your answers
must be supported with relevant sections of the ITAA (and where appropriate) relevant case law and income tax rulings. Your answer(s) to each numbered issue must be recorded under the heading
Schedule A. Your answers should be based on legislation and tax rates applicable to the
2012 13 financial year.
(2) Your report
must not exceed a length of 1,500 words and must be typed. Reports in excess of 1,500 words will be penalised one mark per 100 words above this limit.
(3) The assignment will constitute
25% of your final mark. The marks will be allocated as follows:
- 90% of the marks for technical analysis and research
- 10% of the marks for presentation (such as effective use of headings, identification of relevant references and bibliography).
(4) The assignment must be submitted no later than
Monday 16 September 2013 (3.00 pm).
Late assignments will be penalised at the rate of 10% per day, that is, an assignment is marked out of 90% for 1 day late, 80% for 2 days late, etc. and
after 5 working days, assignments will attract zero marks.
You must:
- Provide a progress report of your assignment in class in week 4
- Submit a substantially completed draft copy of your assignment for inspection in class in week 7
(5) Your answer to each identified issue
must be clear and concise and in point form. Also all necessary calculations must be provided.
(6) Students may complete their assignment
in groups of two or three
.
(7) For the purposes of this assignment the
Goods and Service Tax is to be ignored.
Administration Issues
Assignment Submission
Your written assignment must be submitted to the level 7 Assessment collection centre on or before
16 September 2013. The centre is open from 9.00 am to 4.00 pm Monday to Friday except public holidays. Students must attach an assignment cover sheet to the front of the assignment. The cover sheet is available when you log on to https://online.mit.edu.au/ams/
Return of Assignments
All assignments will be marked and made available for collection by students within a minimum of three weeks from the submission date. Assignments can be collected from lecturer or the Assessment collection centre on level 7.
Aug 29, 2021 | Uncategorized
Assignment 19 Managerial Accounting
Assume that you are preparing for a second interview with a manufacturing company. The company is impressed with your credentials but has indicated that it has several qualified applicants. You anticipate that in this second interview, you must show what you offer over other candidates. You learn the company currently uses a periodic inventory system and is not satisfied with the timeliness of its information and its inventory management. The company manufactures custom order holiday decorations and display items. To show your abilities, you plan to recommend that it use a cost accounting system.
Instructions: In preparation for the interview, write a memo to the CFO of the company outlining the following:
1) Your cost accounting system recommendation and why it is suitable for this company.
2) A general description of the documents that the proposed cost accounting system requires.
3) How the documents in part 2 facilitate the operation of the cost accounting system.
To receive full credit you must answer all parts of the question in the memo, in WORD and attach. Your memo must be at least 3 paragraphs, but no more than one page. Your file must end in .doc or .docx
You will be graded on how well you address the questions. Addressing the questions involves identifying relevant facts, applying the chapter concepts,, and answering each question completely. Proper APA formatting is expected and required (cited sources, reference page, etc.). Supplement and synthesize your analysis with outsides scholarly sources. For assistance with APA citations, please visit the following links: The American Psychological Association Website: http://www.apastyle.org/
Aug 29, 2021 | Uncategorized
John R. Lane (SSN 123 44 6666) lives at 1010 Ipsen Street, Yorba Linda, California 90102. John, a single taxpayer, age 66, provided 100% of his cousin’s support. The cousin lives in Arizona. He wants to take advantage of the presidential election campaign check off. John is an accountant. Other relevant information includes Salary $20,000 Taxable pension 31,000 Interest income 300 IRA deduction 5,000 Itemized deductions(from Schedule A) 6,000 Withholding 6,000 Assume that Schedule A, if necessary, has already been completed. Complete Form 1040.
John R. Lane (SSN 123 44 6666) lives at 1010 Ipsen Street, Yorba Linda, California 90102. John, a single taxpayer, age 66, provided 100% of his cousin’s support. The cousin lives in Arizona. He wants to take advantage of the presidential election campaign check off. John is an accountant. Other relevant information includes
Salary $20,000
Taxable pension 31,000
Interest income 300
IRA deduction 5,000
Itemized deductions(from Schedule A) 6,000
Withholding 6,000
Assume that Schedule A, if necessary, has already been completed. Complete Form 1040.
Aug 29, 2021 | Uncategorized
Halon Norway, the Norwegian subsidiary of a U.S. company, Halon, Inc., has the following balance sheet:
|
Assets (NKr thousands)
|
Liabilities (NKr thousands)
|
|
Cash, marketable securities
|
7,000
|
Accounts payable
|
14,000
|
|
Accounts receivable
|
18,000
|
Short term debt
|
8,000
|
|
Inventory
|
31,000
|
Long term debt
|
45,000
|
|
Net fixed assets
|
63,000
|
Equity
|
52,000
|
| |
NKr119,000
|
|
NKr119,000
|
a. At the current spot rate of $0.21/NKr, calculate Halon Norway’s accounting exposure under the current/noncurrent, monetary/nonmonetary, temporal, and current rate methods.
b. Suppose the Norwegian krone depreciates to $0.17. Produce balance sheets for Halon Norway at the new exchange rate under each of the four alternative translation methods.
c. Relate these gains and losses to the exposure calculations performed in part (a) combined with the exchange rate change. Where would these translation gains or losses show up in the balance sheets prepared for part (b)?
Aug 29, 2021 | Uncategorized
A Polish corporate treasurer expects to receive a €11 million payment in 90 days from a German customer. The current spot rate is €0.29870:zl1 and the 90 day forward rate is €0.29631:zl1. In addition, the annualized three month euro and zloty interest rates are 9.8% and 12.3%, respectively.
a. What is the hedged value of the euro receivable using the forward contract?
b. Describe how the Polish treasurer could use a money market hedge to lock in the zloty value of the euro receivable. What is the hedged value of the euro receivable? What is the effective forward rate that the treasurer can obtain using this money market hedge?
c. Given your answers in parts a and b, is there an arbitrage opportunity? How could the treasurer take advantage of it?
d. At what 90 day forward rate would interest rate parity hold?
Aug 29, 2021 | Uncategorized
Dow Chemical has sold SFr 25 million in chemicals to Ciba Geigy. Payment is due in 180 days.
|
Spot rate:
|
$0.7957/SFr
|
|
180 day forward rate
|
$0.8095/SFr
|
|
180 day U.S. dollar interest rate (annualized)
|
5.25%
|
|
180 day Swiss franc interest rate (annualized)
|
1.90%
|
|
180 day call option at $0.80/SFr
|
2% premium
|
|
180 day put option at $0.80/SFr
|
1% premium
|
a. What is the hedged value of Dow’s receivable using the forward market hedge? the money market hedge?
b. What alternatives are available to Dow to use currency options to hedge its receivable? Which option hedging strategy would you recommend?
c. Which of the hedging alternatives analyzed in parts (a) and (b) would you recommend to Dow? Why?
Aug 29, 2021 | Uncategorized
* Metalgesselschaft, a leading German metal processor, has scheduled a supply of 20,000 metric tons of copper for October 1. On April 1, copper is quoted on the London Metals Exchange at £562 per metric ton for immediate delivery and £605 per metric ton for delivery on October 1. Monthly storage costs are £10 for a metric ton in London and DM 30 in Hamburg, payable on the first day of storage. Exchange rate quotations are as follows: The pound is worth DM 3.61 on April 1 and is selling at a 6.3% annual discount. The opportunity cost of capital for Metalgesselschaft is estimated at 8% annually, and the pound sterling is expected to depreciate at a yearly rate of 6.3% throughout the next 12 months.
Compute the DM cost for Metalgesselschaft on April 1 of the following options:
*Problem contributed by Laurent Jacque.
a. Buy 20,000 metric tons of copper on April 1 and store it in London until October 1.
b. Buy a forward contract of 20,000 metric tons on April 1, for delivery in six months. Cover sterling debt by purchasing forward pounds on April 1.
c. Buy 20,000 metric tons of copper on October 1.
Can you identify other options available to Metalgesselschaft? Which one would you recommend?
Aug 29, 2021 | Uncategorized
A proposed foreign investment involves a plant whose entire output of 1 million units per annum is to be exported. With a selling price of $10 per unit, the yearly revenue from this investment equals $10 million. At the present rate of exchange, dollar costs of local production equal $6 per unit. A ten percent devaluation is expected to lower unit costs by $0.30, while a fifteen percent devaluation will reduce these costs by an additional $0.15. Suppose a devaluation of either 10 percent or 15 percent is likely, with respective probabilities of .4 and .2 (the probability of no currency change is .4). Depreciation at the current exchange rate equals $1 million annually, while the local tax rate is 40 percent.
a. What will annual dollar cash flows be if no devaluation occurs?
b. Given the currency scenario described above, what is the expected value of annual after tax dollar cash flows assuming no repatriation of profits to the United States?
Aug 29, 2021 | Uncategorized
200000000 15 120000000 105000000 25000000 24000000 20000000 20000000 21000000 21000000 115000000 115000000 169000000 155000000 0.1 0.15 15 Name: Date: Instructor: Course: Managerial Accounting, 4 th Edition by James Jiambalvo Solving Managerial Accounting Problems Using Microsoft Excel for Windows Templates by Rex A Schildhouse PROBLEM 9 4. Present Value and “What If” Analysis National Cruise Line, Inc.
Aug 29, 2021 | Uncategorized
Course: Managerial Accounting, 4 th Edition by James Jiambalvo Solving Managerial Accounting Problems Using Microsoft Excel for Windows Templates by Rex A Schildhouse Exercise E10 8 Direct Materials Purchases Budget Roehler Industrial has estimated that production for the next five quarters will be: Production Information Quarter 1, 2011 units Quarter 2, 2011 Quarter 3, 2011 Quarter 4, 2011 Quarter 1, 2012 Finished units of production require pounds of raw material per unit.
Aug 29, 2021 | Uncategorized
Can you please see the attachments and help to answer them in the specific format? Someone else tried and got them wrong; I attached what they did wrong as well.
Aug 29, 2021 | Uncategorized
Analyzing a company of your choice and making comparisons.
The Session Long Project provides an opportunity to apply ideas and concepts for each module to a real world situations. The assignment has two parts.
Part I
Your specific assignment for this week is to select an organization for your project.You must choose a publicly held company. Indicate the name of the company, a link to the homepage of the company and links to at least two other sources of financial information. Also, comment on your interest in the company and how you expect to benefit from the analysis.
Part II
Assess the financial position of your company and compare it to one of its competitors. The emphasis is on cash flow for this analysis.
- Compute the return on assets, profit margin and asset utilization rate for your company and its competitor.
- Assess your company’s competitive financial position.
- Compute the free cash flow for your company and its competitor.
- Assess your company’s relative cash position and comment on its receipt and use of cash during the year.
Modular SLP Assignment Expectations
Always include the name of the organization(s), time period covered and source of information. It is important to answer the questions as posed.The document should be from 2 to 4 pages and written in a clear and concise manner. Don’t forget to include tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatiblespreadsheet when computations are involved. You can turn in the spreadsheet instead of the Word document. The content should be equivalent to the page length suggested for a word processing document.
Aug 29, 2021 | Uncategorized
You are required to do a ratio analysis of a financial statement of any listed manufacturing company. The analysis of data should be for the last four years. The analysis must include DuPont analysis and brief interpretation. Assignment for Financial Management Prepare a report on the financing and dividend decision/behavior of any listed manufacturing company. Take past 5 year data for your analysis.
Aug 29, 2021 | Uncategorized
Migrating to a new accounting information system is not an easy task. Many firms have struggled with this process, even though our textbook makes the process seem quite straightforward. Recently, IBM recapped some of the lessons learned in migrating to a new accounting information system within the federal government. These lessons can be applied to any accounting information system project. Others have developed their own recommendations for best practices and lessons learned involving implementing accounting information systems. However, in order to appreciate what IBM and others are proposing, we need to apply lessons learned to a real life situation involving the failure to implement an accounting system properly.
For this assignment, research the Internet or Strayer databases for information related to a real life accounting information system failure and best practices, as well as lessons learned from implementing the accounting system. In addition to information that you may find during your research, please use the following IBM article to complete the assignment: (http://www.businessofgovernment.org/article/what we know now lessons learned implementing federal financial systems projects).
Write a ten to twelve (10 12) page paper in which you:
- Identify three to five (3 5) factors that contributed to the accounting information system failure within the business that you have identified. Indicate the impact to the business. Provide support for your rationale.
- Assess senior management responsibility for the failure in question. Specify what the senior management could have done differently to avoid the failure. Provide support for your rationale.
- Evaluate whether the most significant failure occurred within the system design, implementation, or operational phase of the process. Indicate what the company could have done to avoid the failed outcome. Provide support for your rationale.
- Evaluate how implementing best practices would have reduced the chances for failure. Provide support for your rationale.
- Based on your research, develop a list of between four (4) and six (6) best practices that organizations should use today to reduce the chances for failure. Provide support for your rationale.
- Using the information provided by IBM and others, indicate which of the principles designed to provide insight into effective and efficient strategies on how to best deploy financial management systems, which were outlined within the related article, should serve as an example of what not to do when establishing the foundation for a firm to follow. Your proposed foundation should consist of at least two (2) principles, but no more than six (6). Provide support for your rationale.
- Use at least three (3) quality resources in this assignment. Note: Wikipedia and similar Websites do not qualify as quality resources.
Your assignment must follow these formatting requirements:
- Be typed, double spaced, using Times New Roman font (size 12), with one inch margins on all sides; citations and references must follow APA or school specific format. Check with your professor for any additional instructions.
- Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
Aug 29, 2021 | Uncategorized
C2 1 Choice of Accounting Method Slanted Building Supplies purchased 32 percent of the voting shares of Flat Flooring Company in March 20X3. On December 31, 20X3, the officers of Slanted Building Supplies indicated they ltding needed advice on whether to use the equity method or cost method in reporting their ownership in Flat Flooring.
Required a. What factors should be considered in determining whether equity method reporting is appropriate? b. Which of the two methods tA likely to show the larger reported contribution to Slanted’s earn ings in 20X4? Explain. c. Why might the use of the equity method become more appropriate as the percentage of owner ship increases?
Aug 29, 2021 | Uncategorized
60000 10000 200000 259800 P1 37 Journal Entries Journal entries to record acquisition of Light Steel net assets: Cash Record finder’s fee and transfer costs. Record audit fees and stock registration fees. Cash Accounts Payable Bonds Payable Record merger with Light Steel Company. Goodwill Total a. Balance in investment account, December 31, 20X7 Cumulative earnings since acquisition Cumulative dividends since acquisition Proportion of stock held by True Corporation Total Amount Debited to Investment Account Purchase Amount b. c. d.
Aug 29, 2021 | Uncategorized
Assessment question and detail
Must be 1000 words
Must include the below reference.
Must include the below case.
Its should be related CSR (CORPORATE SOCIAL RESPONSIBLE)
IT MUST DISCUSS ABOUT 2 THE ARTICLE WICH ARE
· Chin, MK, Hambrick, DC and Treviño, LK 2013, ‘Political Ideologies of CEOs: The Influence of Executives’ Values on Corporate Social Responsibility’, Administrative Science Quarterly, Vol. 58, No. 2, pp. 197–232.
· McShane, L and Cunningham, P 2012, ‘To Thine Own Self Be True? Employees’ Judgments of the Authenticity of Their Organisation’s Corporate Social Responsibility Program’, Journal of Business Ethics, Vol. 108, No. 1, pp. 81–100.
Your article should be answer for these questions .
a. Do you believe that the leadership group of an organisation can have a significant impact on how a CSR agenda and its related activities are developed and implemented?
b. In terms of the leadership theories discussed in lectures, are the comments by Chin, Bambrick and Treviño (2013) more aligned with the behavioural theories of leadership (i.e. the notion that leaders are ‘hard wired’) than they are with contingency theories of leadership (i.e. the notion that leaders are flexible and adaptable)?
c. Is it possible to talk about superficial (unauthentic) CSR as compared to embedded (authentic) CSR? Alternatively, do organisations either have or do not have CSR? What arguments would support either of these views?
d. What role do followers (in the sense of employees) have in developing and implementing CSR broadly or specifically, with respect to particular CSR activities, within an organisation? Is it a necessary and sufficient condition for leadership to be involved in developing CSR top down (which may result in superficial CSR), but only a necessary condition in terms of developing embedded CSR (with the sufficient condition being bottom up involvement and engagement of employees or followers)?
Becoming a corporate socially responsible (CSR) organisation is probably more an imperative today than what it was in the last decades of the previous century. Although Robins (2008) considers that CSR has not been clearly defined or delineated and that the CSR has not been universally accepted by all corporations or organisations, decisions about corporate social responsibility are seen as important and most likely made by the organisations’ senior managers (Robbins, 2008, p. 335). There is support for this top down approach to implementing and managing CSR in the discussion by Chin, Hambrick and Treviño (2013) about the impact that conservative as compared to liberal CEOs have on their organisations’ CSR agenda. It would appear that even when it is not their own idea these CEOs exert significant influence on the suggestions of others (such as to embrace CSR or not). From another perspective, the study by Chin, Hambrick and Treviño (2013) also challenges the view that ‘one size fits all’ when considering the classical or neo liberal view of the organisation. CEOs identified as more liberal in their political ideology see CSR as a central part of their organisation’s business strategy, whereas conservative CEOs see CSR activities as more cosmetic and related to corporate image and reputation (Chin, Hambrick and Treviño, 2013, p. 222). In addition, when looking at a company such as Yahoo7! (presented in the Week 3 lecture), it would appear that lower level staff are also actively involved in CSR activities as well and so may make their own contributions to CSR beyond their senior managers’ influences. McShane and Cunningham (2012) further consider this issue of CSR and bottom up employee acceptance or participation in CSR activities rather than the process merely being top down (leaders’ views on CSR). They also consider employees’ perceptions of their organisations’ CSR activities in terms of whether these activities are seen as ‘authentic’ or otherwise. Within the context of this discussion, your response should focus on the following questions:
e. Do you believe that the leadership group of an organisation can have a significant impact on how a CSR agenda and its related activities are developed and implemented?
f. In terms of the leadership theories discussed in lectures, are the comments by Chin, Bambrick and Treviño (2013) more aligned with the behavioural theories of leadership (i.e. the notion that leaders are ‘hard wired’) than they are with contingency theories of leadership (i.e. the notion that leaders are flexible and adaptable)?
g. Is it possible to talk about superficial (unauthentic) CSR as compared to embedded (authentic) CSR? Alternatively, do organisations either have or do not have CSR? What arguments would support either of these views?
h. What role do followers (in the sense of employees) have in developing and implementing CSR broadly or specifically, with respect to particular CSR activities, within an organisation? Is it a necessary and sufficient condition for leadership to be involved in developing CSR top down (which may result in superficial CSR), but only a necessary condition in terms of developing embedded CSR (with the sufficient condition being bottom up involvement and engagement of employees or followers)?
Your response MUST include discussion for the following sources, viz.:
Chin, MK, Hambrick, DC and Treviño, LK 2013, ‘Political Ideologies of CEOs: The Influence of Executives’ Values on Corporate Social Responsibility’, Administrative Science Quarterly, Vol. 58, No. 2, pp. 197–232.
McShane, L and Cunningham, P 2012, ‘To Thine Own Self Be True? Employees’ Judgments of the Authenticity of Their Organisation’s Corporate Social Responsibility Program’, Journal of Business Ethics, Vol. 108, No. 1, pp. 81–100.
Optional references – you DO NOT need to use these in your essay:
Robins, F 2008, ‘Why corporate social responsibility should be popularised but not imposed’, Corporate Governance, Vol. 8, No. 3, pp. 330 341. (Article provides a good background to the area of corporate social responsibility (even though supporting more the classical view than the socio economic view.)
Mayer, DM, Aquino, K, Greenbaum, RL and Kuenzi, M 2012, ‘Who Displays Ethical Leadership, and Why does it Matter? An Examination of Antecedents and Consequences of Ethical Leadership’, Academy of Management Journal, Vol. 55, No. 1, pp. 151–171. (Article considers the issue of social learning in terms of interactions between leaders and followers.)
In addition to the required sources shown above, you should use AT LEAST TWO other references that you have found. A superior answer will also include some real world examples as part of the evidence that supports your claims and arguments. The format of this assessment item should follow a discussion essay format with a brief introduction, a body and a brief conclusion. For further help on how to write an essay, see the ‘College of Business Essay/Report Writing Guide’ which is available in the ‘Assessments’ folder on the Management Dynamics vUWS site.
You also need to support any claims that you make by using relevant research literature, concentrating on peer reviewed or scholarly sources. Note that newspaper articles and Wikipedia are not considered scholarly sources due to issues about peer review of the material presented. However, you can use newspaper articles and Wikipedia to obtain a general understanding on a topic that you are researching. Where scholarly sources are used then appropriate citing and referencing of these sources should be completed as part of your submission.
Aug 29, 2021 | Uncategorized
SFAC No. 6, paragraph 25: “Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.”
- IASB The Conceptual Framework for Financial Reporting, Chapter 4, paragraph 4.4(a): “An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.”
- The Boards’ working definition as of October 2008 from the Joint Project on Conceptual Framework, Phase B – Elements and Recognition: “An asset of an entity is a present economic resource to which the entity has a right or other access that others do not have.”
Required
- Read each definition and compare and contrast the FASB and IASB versions and then compare to the Boards’ definition.
- What is the best definition and why?
- Review the following items and evaluate if they should be recorded as an asset under the Boards’ definition defined above. Focus on “… present economic resource” and “… right or other access” in your analysis. Complete the table provided.
Aug 29, 2021 | Uncategorized
Please show details how to get the answers1. The work in process inventory account of a manufacturing company shows a balance of $3,000 at the end of an accounting period. The job cost sheets of the two incomplete jobs show charges of $500 and $300 for direct materials, and charges of $400 and $600 for direct labor. From this information, it appears that the company is using a predetermined overhead rate as a percentage of direct labor costs. What percentage is the rate? 2. The break even point in dollar sales for Rice Company is $480,000 and the company’s contribution margin ratio is 40 percent. If Rice Company desires a profit of $84,000, how much would sales have to total? 3. Williams Company’s direct labor cost is 25 percent of its conversion cost. If the manufacturing overhead for the last period was $45,000 and the direct material cost was $25,000, how much is the direct labor cost?
4. Grading Company’s cash and cash equivalents consist of cash and marketable securities. Last year the company’s cash account decreased by $16,000 and its marketable securities account increased by $22,000. Cash provided by operating activities was $24,000. Net cash used for financing activities was $20,000. Based on this information, was the net cash flow from investing activities on the statement of cash flows a net increase or decrease? By how much? 5. Gladstone Footwear Corporation’s flexible budget cost formula for supplies, a variable cost, is $2.82 per unit of output. The company’s flexible budget performance report for last month showed an $8,140 unfavorable spending variance for supplies. During that month, 21,250 units were produced. Budgeted activity for the month had been 20,900 units. What is the actual cost per unit for indirect materials? 6. Lyons Company consists of two divisions, A and B. Lyons Company reported a contribution margin of $60,000 for Division A, and had a contribution margin ratio of 30 percent in Division B, when sales in Division B were $240,000. Net operating income for the company was $22,000 and traceable fixed expenses were $45,000. How much were Lyons Company’s common fixed expenses? 7. Atlantic Company produces a single product. For the most recent year, the company’s net operating income computed by the absorption costing method was $7,800, and its net operating income computed by the variable costing method was $10,500. The company’s unit product cost was $15 under variable costing and $24 under absorption costing. If the ending inventory consisted of 1,460 units, how many units must have been in the beginning inventory? Final Examination 3 8. Black Company uses the weighted average method in its process costing system. The company’s ending work inprocess inventory consists of 6,000 units, 75 percent complete with respect to materials and 50 percent complete with respect to labor and overhead. If the total dollar value of the inventory is $80,000 and the cost per equivalent unit for labor and overhead is $6.00, what is the cost per equivalent unit for materials? 9. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine hours. The performance report for July showed that actual maintenance costs totaled $11,315 and that the associated rate variance was $146 unfavorable. If 7,300 machine hours were actually worked during July, what is the budgeted maintenance cost per machine hour? 10. The cost of goods sold in a retail store totaled $650,000. Fixed selling and administrative expenses totaled $115,000 and variable selling and administrative expenses were $420,000. If the store’s contribution margin totaled $590,000, how much were the sales? 11. Denny Corporation is considering replacing a technologically obsolete machine with a new state of the art numerically controlled machine. The new machine would cost $600,000 and would have a 10 year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $20,000 per year to operate and maintain, but would save $125,000 per year in labor and other costs. The old machine can be sold now for scrap for $50,000. What percentage is the simple rate of return on the new machine rounded to the nearest tenth of a percent? (Ignore income taxes in this problem.) 4 Final Examination 12. Lounsberry Inc. regularly uses material O55P and currently has in stock 375 liters of the material, for which it paid $2,700 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $6.35 per liter. New stocks of the material can be purchased on the open market for $7.20 per liter, but it must be purchased in lots of 1,000 liters. You’ve been asked to determine the relevant cost of 900 liters of the material to be used in a job for a customer. What is the relevant cost of the 900 liters of material O55P? 13. Harwichport Company has a current ratio of 3.0 and an acid test ratio of 2.8. Current assets equal $210,000, of which $5,000 consists of prepaid expenses. The remainder of current assets consists of cash, accounts receivable, marketable securities, and inventory. What is the amount of Harwichport Company’s inventory? 14. Tolla Company is estimating the following sales for the first six months of next year: January $350,000 February $300,000 March $320,000 April $410,000 May $450,000 June $470,000 Sales at Tolla are normally collected as 70 percent in the month of sale, 25 percent in the month following the sale, and the remaining 5 percent being uncollectible. Also, customers paying in the month of sale are given a 2 percent discount. Based on this information, how much cash should Tolla expect to collect during the month of April? Final Examination 5 15. Trauscht Corporation has provided the following data from its activity based costing system: The company makes 360 units of product P23F a year, requiring a total of 725 machine hours, 85 orders, and 45 inspection hours per year. The product’s direct materials cost is $42.30 per unit and its direct labor cost is $14.55 per unit. The product sells for $132.10 per unit. According to the activity based costing system, what is the product margin for product P23F? 16. Williams Company’s direct labor cost is 30 percent of its conversion cost. If the manufacturing overhead for the last period was $59,500 and the direct materials cost was $37,000, what is the direct labor cost? 17. In a recent period, 13,000 units were produced, and there was a favorable labor efficiency variance of $23,000. If 40,000 labor hours were worked and the standard wage rate was $13 per labor hour, what would be the standard hours allowed per unit of output? 18. The balance in White Company’s work in process inventory account was $15,000 on August 1 and $18,000 on August 31. The company incurred $30,000 in direct labor cost during August and requisitioned $25,000 in raw materials (all direct material). If the sum of the debits to the manufacturing overhead account total $28,000 for the month, and if the sum of the credits totaled $30,000, then was Finished Goods debited or credited? By how much? Activity Cost Pool Total Cost Total Activity Assembly $704,880 44,000 machine hours Processing orders $91,428 1,900 orders Inspection $117,546 1,950 inspection hours 6 Final Examination 19. A company has provided the following data: Sales 4,000 units Sales price $80 per unit Variable cost $50 per unit Fixed cost $30,000 If the dollar contribution margin per unit is increased by 10 percent, total fixed cost is decreased by 15 percent, and all other factors remain the same, will net operating income increase or decrease? By how much? 20. For the current year, Paxman Company incurred $175,000 in actual manufacturing overhead cost. The manufacturing overhead account showed that overhead was overapplied in the amount of $9,000 for the year. If the predetermined overhead rate was $8.00 per direct labor hour, how many hours were worked during the year?
Aug 29, 2021 | Uncategorized
Assessment
Report
Due date:
09 Sep 2013
Length:1500 words
Task
You are required to research APES110 The Code of Ethics for Professional Accountants.
After researching APES110 prepare a report that addresses the following:
·Background information (How and why APES110 was written e.g. who authored it? Why was it adopted? etc.)
·Explain the relationship between a profession and a code of ethics
·Describe what a code of ethics/conduct/ professional behavior is and why is it important
·Describe what ethics and professional conduct means to you (Accountant)
Choose a code of ethics/conduct for another profession (e.g. medical professionals, marketers) Compare andcontrastthe code with APES110. Are there any principles common to both? How do they differ? Are some principles particular to accounting or are they all transferable to other professions?
Your report should consist of:
·Title page;
·Table of contents;
·Executive Summary;
·Introduction
·Bodyof the report answering the questions listed above;
·Conclusion; and
·References(APA reference style – 6
th version)
Rationale
Ethics and professional conduct are extremely important in the workplace and different professions have different requirements and expectations of their members. Accountants are expected to comply with APES110. Furthermore, as part of your entry into CPA Australia or ICAA, you will undertake an ethics module. Knowledge of your professional code of ethics should stand you in good stead for your future studies, and for your professional development.
Marking criteria
Students will be graded according to the level which they demonstrate:
- Communication skills
- Problem solving skills
- Ability to analyse information
- Ability to present information in a coherent and well structured report
- Ability to write in report format
- Ability to follow presentation guidelines
Presentation
Your work must be in a
report format
. Please refer to the FoB(Faculty of Business) Writing Skills resource (Topic 7)for advice regarding report writing: http://bit.ly/FoBAcademic Writing Skills
Use 1.5 or 2.0 spacing.
Use 2.5 cm margins both sides in order for markers to be able to provide their feedback.
Use Times New Roman font 12pt
For more reference:
http://www.apesb.org.au/attachments/1 APES%20110%20Code%20of%20Ethics%20for%20Professional%20Accountants%20December%202010%20 %20Final.pdf
Aug 29, 2021 | Uncategorized
Winfrey Co.’s March 31 inventory of raw materials is $150,000. Raw materials purchases in April are $400,000, and factory payroll cost in April is $220,000. Overhead costs incurred in April are: indirect materials, $30,000; indirect labor, $14,000; factory rent, $20,000; factory utilities, $12,000; and factory equipment depreciation, $30,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $380,000 cash in April. Costs of the three jobs worked on in April follow.
|
Job 306 |
Job 307 |
Job 308 |
|
| Balances on March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
| Direct materials |
|
$ |
14,000 |
|
|
$ |
18,000 |
|
|
|
|
|
| Direct labor |
|
|
18,000 |
|
|
|
16,000 |
|
|
|
|
|
| Applied overhead |
|
|
9,000 |
|
|
|
8,000 |
|
|
|
|
|
| Costs during April |
|
|
|
|
|
|
|
|
|
|
|
|
| Direct materials |
|
|
100,000 |
|
|
|
170,000 |
|
|
$ |
80,000 |
|
| Direct labor |
|
|
30,000 |
|
|
|
56,000 |
|
|
|
120,000 |
|
| Applied overhead |
|
|
? |
|
|
|
? |
|
|
|
? |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Status on April 30 |
Finished (sold) |
Finished (unsold) |
|
In process |
|
I need help findings this :
|
Compute gross profit for April.(Omit the “$” sign in your response.)
|
| 4.2 |
Show how to present the inventories on the April 30 balance sheet.(Omit the “$” sign in your response.)
|
| Inventories |
| Raw materials |
$ |
| Goods in process (Job 308) |
|
| Finished goods (Job 307) |
|
|
|
| Total inventories |
$ |
|
|
|
Aug 29, 2021 | Uncategorized
Compute goodwill on consolidation: Alpha purchased all shares of 100 million pounds of Beta. The terms of sale agreement included exchange of 3 shares of alpha for 2 shares of beta. On 1apr 2012, Market value of alpha’s shares were 20 pounds and beta was 27 pounds. the terms included payment of additional 2.42 pounds per share provided profits of of beta exceeds the targeted value which is probable by 85%. Beta had: Net assets of fair value 2400 million pounds. Intangibles not recognized in books: customer relationships of 200 million pounds, employee expertise of 80 million pounds, In process R&D of 10 million pounds which didn’t meet IFRS conditions. Legal and professional fees were 2.4 million pounds, including cost of issue of shares which were 400000 pounds. Cost of director’s time 200000 pounds. estimated life of goodwill on acquisition. Annual discount rate 10%.
Aug 29, 2021 | Uncategorized
Each tranche has the same exercise price— the market price of the stock on the grant date, or $ 23 on January 1, 2010. Explain why the option fair value increases with the vesting date. Management 120B Page | 2 2. Consider only the first option tranche vesting on December 31, 2010, and suppose that the price of Starbucks’ common stock is $ 40 on that date. Determine the compensation expense that Starbucks would record in 2010 for this first option tranche. No stock options are exercised by employees that year. 3. Suppose that the price of Starbucks’ common stock falls to $ 35 as of December 31, 2011. Considering only the first two option tranches, determine the compensation expense that Starbucks would record in 2011. No stock options are exercised by employees that year. 4. At the beginning of 2012, employees exercise 10,000 of the 2010 options. Employees hand over the 10,000 options along with $ 23 per option— the exercise price— and receive from the company an equal number of shares. The price of Starbucks’ common stock is $ 35 per share on the exercise date. Prepare the journal entry Starbucks will use to record this transaction. 5. In 2009, Starbucks’ shareholders approved a management proposal to allow for a onetime stock option exchange program, designed to provide employees an opportunity to exchange certain outstanding but underwater stock options for a lesser amount of new options granted with lower exercise prices. Under this proposal, employees could exchange options granted with an exercise price greater than $ 19 and receive new options with an exercise price of about $ 15. A total of 14.3 million stock options were tendered by employees and 4.7 million of new stock options were granted. According to the company’s financial statement note: “No incremental stock option expense was recognized for the exchange because the fair value of the new options, using standard employee stock option valuation techniques, was approximately equal to the fair value of the surrendered options they replaced.” Explain why a company might offer employees the opportunity to exchange underwater stock options for new options with a lower exercise price? 6. Explain how management determined that only 4.7 million of new options would be granted in exchange for the 14.3 million options tendered. In other words, why might management be reluctant to grant 10.0 million of the new options?
Aug 29, 2021 | Uncategorized
Page | 1 MANAGEMENT 120B CASE 2 Starbucks Corporation EMPLOYEE STOCK OPTION ACCOUNTING Objective: Employee stock option accounting at Starbucks Corporation Starbucks Corp., the passionate purveyors of coffee and everything else that goes with a full and rewarding coffeehouse experience, included the following table in its 2009 annual report: Total stock based compensation and ESPP expense recognized in the consolidated financial statements Fiscal Year Ended ( in millions) Sep 27, 2009 Sep 28, 2008 Sep 30, 2007 Stock option expense $ 61.6 $ 57.6 $ 92.3 RSU expense 16.6 5.6 — ESPP expense 5.0 11.8 11.6 Total stock based compensation expense on the consolidated statements of earnings $ 83.2 $ 75.0 $ 103.9 Total related tax benefit $ 29.3 $ 24.0 $ 35.3 Starbucks maintains several share based compensation plans that permit the company to grant employee stock options, restricted stock, and restricted stock “units” or RSUs. Starbucks also has an employee stock purchase plan (“ESPP”) that allows participating employees to buy shares at a discounted price. At some companies, the discount can be as much as 15% lower than the prevailing market price. Stock options to purchase Starbucks’ common shares are granted at an exercise price equal to the market price of the stock on the date of grant. Most options become exercisable in four equal installments beginning one year from the date of the grant and expire 10 years from the date of grant. Suppose Starbucks issues 100,000 employee stock options on January 1, 2010, and that one fourth of the options vest in each of the next four years, beginning on December 31, 2010. For financial reporting purposes, the company elects to separate the total award into four groups (or tranches) according to the year in which each vests. Starbucks then measures the compensation cost for each vesting date tranche as if it was a separate award. The following table provides details about each vesting tranche: Vesting Date Shares Vesting Fair Value per Option Dec. 31, 2010 25,000 $ 2.00 Dec. 31, 2011 25,000 $ 3.20 Dec. 31, 2012 25,000 $ 4.80 Dec. 31, 2013 25,000 $ 7.00 Requirements Prepare a letter to the President of Starbucks to answer the following questions. 1. Each tranche has the same exercise price— the market price of the stock on the grant date, or $ 23 on January 1, 2010. Explain why the option fair value increases with the vesting date. Management 120B Page | 2 2. Consider only the first option tranche vesting on December 31, 2010, and suppose that the price of Starbucks’ common stock is $ 40 on that date. Determine the compensation expense that Starbucks would record in 2010 for this first option tranche. No stock options are exercised by employees that year. 3. Suppose that the price of Starbucks’ common stock falls to $ 35 as of December 31, 2011. Considering only the first two option tranches, determine the compensation expense that Starbucks would record in 2011. No stock options are exercised by employees that year. 4. At the beginning of 2012, employees exercise 10,000 of the 2010 options. Employees hand over the 10,000 options along with $ 23 per option— the exercise price— and receive from the company an equal number of shares. The price of Starbucks’ common stock is $ 35 per share on the exercise date. Prepare the journal entry Starbucks will use to record this transaction. 5. In 2009, Starbucks’ shareholders approved a management proposal to allow for a onetime stock option exchange program, designed to provide employees an opportunity to exchange certain outstanding but underwater stock options for a lesser amount of new options granted with lower exercise prices. Under this proposal, employees could exchange options granted with an exercise price greater than $ 19 and receive new options with an exercise price of about $ 15. A total of 14.3 million stock options were tendered by employees and 4.7 million of new stock options were granted. According to the company’s financial statement note: “No incremental stock option expense was recognized for the exchange because the fair value of the new options, using standard employee stock option valuation techniques, was approximately equal to the fair value of the surrendered options they replaced.” Explain why a company might offer employees the opportunity to exchange underwater stock options for new options with a lower exercise price? 6. Explain how management determined that only 4.7 million of new options would be granted in exchange for the 14.3 million options tendered. In other words, why might management be reluctant to grant 10.0 million of the new options?
Aug 29, 2021 | Uncategorized
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qI hereby certify that no part of this assignment or product has been copied from any other student’s work or from any other source except where due acknowledgement is made in the assignment.
qNo part of the assignment/product has been written/produced for me by any other person except where collaboration has been authorised by the subject lecturer/tutor concerned.
qI am aware that this work may be reproduced and submitted to plagiarism detection software programs for the purpose of detecting possible plagiarism(which may retain a copy on its database for future plagiarism checking).
Signature:______________________________________
Note:An examiner or lecturer/tutor has the right to not mark this assignment if the above declaration has not been signed (or your name entered above in the case of an online submission through vUWS).
200571 Management Dynamics
Written assignment #1: Organisation Studies, CSR and Leadership
(Graded; worth 15% of total marks)
Purpose
This written assessment is the first of two that provides students with an exercise to assist in their understanding of two important areas of enquiry in management, viz.: the issues, concepts, themes and principles associated with corporate social responsibility and the leadership shown by managers in adopting, embracing and possibly embedding corporate social responsibility within their organisations. As indicated in the lectures, corporate social responsibility is associated more with a socio economic view of the organisation whereas the pursuit or focus on maximizing profits (as well as possibly maximizing shareholder returns) is associated more with the neo liberal or classical view of the organisation.There are some questions still about whether or not adopting, embracing and embedding corporate social responsibility has either a short term (unlikely) or long term (more likely) benefit. This would appear to add more weight and responsibility onto the organisation’s leaders if the organisation is to become socially responsible.This written assignment provides you with an opportunity to demonstrate your level of information literacy and your ability to present a cogent and coherent piece of writing that includes appropriate critical analysis relevant to what is outlined below in terms of this assessment.THAT IS, MERELY REPORTING WHAT OTHERS SAY DOES NOT CONSTITUTE AN EFFECTIVE ANSWER TO THIS ASSESSMENT. In your critical analysis you should consider the views of others and then argue on what is their contribution in terms of leadership and corporate social responsibility.Completing this assignment will assist you to achieve learning outcomes 1, 2, and 3 shown in the unit outline.
Assessment
Becoming a corporate socially responsible (CSR) organisation is probably more an imperative today than what it was in the last decades of the previous century.Although Robins (2008) considers that CSR has not been clearly defined or delineated and that the CSR has not been universally accepted by all corporations or organisations, decisions about corporate social responsibility are seen as important and most likely made by the organisations’ senior managers (Robbins, 2008, p. 335).There is support for this top down approach to implementing and managing CSR in the discussion by Chin, Hambrick and Treviño (2013) about the impact that conservative as compared to liberal CEOs have on their organisations’ CSR agenda.It would appear that even when it is not their own idea these CEOs exert significant influence on the suggestions of others (such as to embrace CSR or not).From another perspective, the study by Chin, Hambrick and Treviño (2013) also challenges the view that ‘one size fits all’ when considering the classical or neo liberal view of the organisation.CEOs identified as more liberal in their political ideology see CSR as a central part of their organisation’s business strategy, whereas conservative CEOs see CSR activities as more cosmetic and related to corporate image and reputation (Chin, Hambrick and Treviño, 2013, p. 222).In addition, when looking at a company such as Yahoo7! (presented in the Week 3 lecture), it would appear that lower level staff are also actively involved in CSR activities as well and so may make their own contributions to CSR beyond their senior managers’ influences.McShane and Cunningham (2012) further consider this issue of CSR and bottom up employee acceptance or participation in CSR activities rather than the process merely being top down (leaders’ views on CSR). They also consider employees’ perceptions of their organisations’ CSR activities in terms of whether these activities are seen as ‘authentic’ or otherwise.Within the context of this discussion, your response should focus on the following questions:
a. Do you believe that the leadership group of an organisation can have a significant impact on how a CSR agenda and its related activities are developed and implemented?
b. In terms of the leadership theories discussed in lectures, are the comments by Chin, Bambrick and Treviño (2013) more aligned with the behavioural theories of leadership (i.e. the notion that leaders are ‘hard wired’) than they are with contingency theories of leadership (i.e. the notion that leaders are flexible and adaptable)?
c. Is it possible to talk about superficial (unauthentic) CSR as compared to embedded (authentic) CSR?Alternatively, do organisations either have or do not have CSR? What arguments would support either of these views?
d. What role do followers (in the sense of employees) have in developing and implementing CSR broadly or specifically, with respect to particular CSR activities, within an organisation?Is it a necessary and sufficient condition for leadership to be involved in developing CSR top down (which may result in superficial CSR), but only a necessary condition in terms of developing embedded CSR (with the sufficient condition being bottom up involvement and engagement of employees or followers)?
Your response MUST include discussion for the following sources, viz.:
Chin, MK, Hambrick, DC and Treviño, LK 2013, ‘Political Ideologies of CEOs: The Influence of Executives’ Values on Corporate Social Responsibility’, Administrative Science Quarterly, Vol. 58, No. 2, pp. 197–232.
McShane, L and Cunningham, P 2012, ‘To Thine Own Self Be True?Employees’ Judgments of the Authenticity of Their Organisation’s Corporate Social Responsibility Program’, Journal of Business Ethics, Vol. 108, No. 1, pp. 81–100.
Optional references – you DO NOT need to use these in your essay:
Robins, F 2008, ‘Why corporate social responsibility should be popularised but not imposed’, Corporate Governance, Vol. 8, No. 3, pp. 330 341. (Article provides a good background to the area of corporate social responsibility (even though supporting more the classical view than the socio economic view.)
Mayer, DM, Aquino, K, Greenbaum, RL and Kuenzi, M 2012, ‘Who Displays Ethical Leadership, and Why does it Matter?An Examination of Antecedents and Consequences of Ethical Leadership’, Academy of Management Journal, Vol. 55, No. 1, pp. 151–171. (Article considers the issue of social learning in terms of interactions between leaders and followers.)
In addition to the required sources shown above, you should use AT LEAST TWO other references that you have found.A superior answer will also include some real world examples as part of the evidence that supports your claims and arguments.The format of this assessment item should follow a discussion essay format with a brief introduction, a body and a brief conclusion. For further help on how to write an essay, see the ‘College of Business Essay/Report Writing Guide’ which is available in the ‘Assessments’ folder on the Management Dynamics vUWS site.
You also need to support any claims that you make by using relevant research literature, concentrating on peer reviewed or scholarly sources.Note that newspaper articles and Wikipedia are not considered scholarly sources due to issues about peer review of the material presented.However, you can use newspaper articles and Wikipedia to obtain a general understanding on a topic that you are researching.Where scholarly sources are used then appropriate citing and referencing of these sources should be completed as part of your submission.
Submission details, Due Date and Turnitin
Your assignmentMUST be submitted online using this assignment template through the relevant Turnitin assignment drop box, in the Management Dynamics vUWS site, on or before 11:45PM Sunday of Week 6 (8 September 2013).Assignments submitted after this time may be subject to a late penalty.
The Turnitin drop box in the Management Dynamics vUWS site should be used forTEXT MATCHING PURPOSES AND ASSIGNMENT SUBMISSION.Using the Turnitin drop box for text matching means that you wish to generate and inspect a Turnitin originality report which highlights pieces of text for which Turnitin has found a match.Where proper acknowledgement is in place you will not need to do anything; where proper acknowledgement is not in place you will need to make changes to your assignment. If you have made changes to your assignment you can re submit it to Turnitin which will over write the existing version of your assignment as well as generate another Turnitin originality report (note that there is a delay of up to 24 hours in getting an originality report for this second or any subsequent submission of your assignment). Students should aware that the percentage of matches in the originality report may be misleading due to matching of text in the template and so students should concentrate on the text matched in their own written work.
As soon as you are happy that no further changes are necessary to your assignment you will then need to submit the final version of your assignment to the Turnitin assignment drop box.THAT IS,IT IS YOUR RESPONSIBILITY THAT A FINAL VERSION OF YOUR ASSIGNMENT IS UPLOADED ON OR BEFORE THE DUE DATE.UNDER NO CURCUMSTANCES WILL THE EXCUSE THAT THE WRONG DOCUMENT WAS UPLOADED BE ACCEPTED.
Length
1000 words (± 100 words).Given the short length of this assessment item you should aim to be clear and concise in your writing in order to adhere to the word limit. Avoid lengthy descriptions, particularly of any material presented in lectures, in your text or from other sources.Do not use direct quotations but rather paraphrase what is discussed in your sources. Note this word count does NOT include the words used to compile your ‘References’ section at the end of your submission.
Format
Given the assessment asks for a response to specific questions, it is not strictly a discussion essay but you still need to follow the essay format for this assessment. As stated above, acknowledgement of any information sources must occur through using an in text citation as well as a reference entry in the ‘References’ section at the end of the essay for each source used.For more information on formatting citations and reference entries go to ‘Referencing & Citation’ on the UWS Library Website by clicking on the following link:
http://library.uws.edu.au/citing.php
The essay should be well formatted with discussion of one idea in each paragraph.The language used should be formal rather than informal and should also be both clear and grammatically sound.Your written text should not include any spelling errors.If in doubt on either of these issues then refer to the OWL website, which can be accessed by using the following link:
http://owl.english.purdue.edu/owl/resource/747/01/
Presentation
1. Make sure that you insert your assignment into this assignment template before uploading to the Turnitin assignment drop box.
2. As you are adopting an essay format for this assessment, you should NOT use headings or sub headings.
3. Entries should be put into the footer where requested by this template.
4. The font to be used for this assignment is either Arial or Times New Roman script, 12 point font size, 1.5 line spacing, and left justified.
5. You also need to familiarise yourself with the Academic Misconduct Policy regarding plagiarism and collusion.
Start your assignment here
Aug 29, 2021 | Uncategorized
| Characteristics of Accounting |
Net profit reported in the income statement is one of the key measurements of a company. It tells the reader how much income the company has made after the expenses they had to pay.
The formula for net profit is:
Revenues – Expenses = Net Profit
We may have several different types of expenses which will be listed out by category. The income statement like other financial statements will need to follow GAAP in order to be considered accurate. International Financial Reporting Standards, or IFRS, are used by international companies and are less detailed than GAAP.
Characteristics of Accounting Information
In order for accounting information to be useful, it must be relevant, reliable, comparable, and consistent. It should be useful for evaluating and predicting the future.
- Primary Qualities are Relevance and Reliability
- Predictive Value (Relevance)
- Feedback Value (Relevance)
- Timeliness (Relevance)
- Verifiability (Reliability)
- Representational Faithfulness (Reliability)
- Neutrality (Reliability)
- Secondary Qualities are Comparability and Consistency
Assumptions Underlying Financial Reporting
There are some assumptions that we expect are in place. Here is a list of the assumptions and their basic definitions:
- Separate entity assumption: We expect that the business is separate from the owners and that funds are co mingled.
- Monetary unit assumption: We expect that the numbers will be measured in dollars and be measurable.
- Time period assumption: We expect that we can divide the transactions into meaningful time periods.
- Going concern assumption: We expect that the company will continue to stay in business in the future.
Principles Underlying Financial Statements
There are also principles that guide the way that we report financial items and here is a list and basic definitions:
- Historical cost principle: we record transactions at the cost we paid for it and do not change the value as time passes.
- Revenue recognition principle: we record revenue when we earn it, not necessarily when cash is received.
- Matching principle: we match expenses in the same period where their applicable revenue was earned.
- Full disclosure principle: all important events are fully disclosed in the financial statements.
- Materiality and conservatism: constraints that limit or control GAAP.
|
| Elements of the Financial Statements |
- A complete set of financial statements includes—income statement, balance sheet, statement of cash flows, and notes to the financial statements.
- There are many different elements that we will use in preparation of the financial statements.
The list is as follows:
- Assets
- Liabilities
- Equity
- Investments by owners
- Distributions to owners
- Comprehensive income
- Revenues
- Expenses
- Gains
- Losses
An understanding of the accounting equation is one of the most important areas to grasp at this point since future weeks will continue to build on this understanding. To understand the equation itself, you first need to understand the different categories and what goes into them:
Assets are resources controlled by a business. These are items that are of value to the business. Examples include: cash, accounts receivable, inventory, supplies, prepaid expenses, buildings, land, equipment, vehicles, patents, copyrights, goodwill, and others.
Liabilities are claims by a creditor or other party on the company’s resources. Basically this is the debt of the company and includes any items that they might owe for. Examples include: accounts payable, notes payable, wages payable, interest payable, taxes payable, bonds payable, and others.
Owners’ Equityare contributions to the business made by owners as well as any profits that have been kept inside of the company. Examples include: capital stock and retained earnings which are the most common accounts. Revenues and Expenses are accounts that are closed into retained earnings after the fiscal year, and so also indirectly affect the owners’ equity account.
Accounting Equation
Accounting is built on the foundation that everything must balance and equal out to show that we have recognized events correctly. The accounting equation is the foundation that accounting is built on:
Assets = Liabilities + Owners’ Equity
What this means is that if we have an increase on one side of this equation then we need to either have a decrease on the same side or an increase on the other side to keep this in balance.
You will see assets categorized into current and noncurrent assets; liabilities will be current and noncurrent liabilities. Equity will include contributed capital and retained earnings. This enables companies to prepare a classified balance sheet showing subtotals in each category. |
| The Accounting Cycle |
A company’s accounting system is kept in the general ledger. A general ledger is a record of each account and the transactions that affected the balance during the year.
We have specific steps of handling accounting transactions in order to get them to the ledger. The journal is the location where we store each individual transaction. The journal is recorded in chronological order and we will end up transferring out the transactions to their individual ledger account. This transfer process is referred to as posting which is the posting from the journal into the individual accounts. This is much like a personal checkbook in that you keep a record of your deposits and payments chronologically but in order to know how much you spent in a specific area, you would need to transfer those amounts out into individual account ledgers.
Here is the list of the complete accounting cycle which we will discuss next:
- Record transactions in the journal
- Post the journal entries to the general ledger
- Prepare an unadjusted trial balance
- Prepare adjusting entries and post them to the general ledger
- Prepare an adjusted trial balance
- Prepare the financial statements
- Close the temporary accounts
- Prepare a post closing trial balance
Now, let’s begin a discussion on the different steps:
Accounting Cycle #1 (Record transactions in the journal):
In the journal, we use debits and credits to represent actual entries to the individual accounts. We use the term debit to show that we entered something on the left side of the account (T account). We use the term credit to represent a right side entry.
For asset and expense accounts, a debit entry means that we increased it. A credit entry to either of these categories means that we decreased it.
Liabilities, stockholders’ equity, accounts, and revenue accounts are the opposite, and a debit means that we decreased the account and a credit means that we increased the account.
Debits must always = Credits. This system allows us to make sure everything stays in balance.
Journalize the Transaction
A journal entry is a record of the transaction in terms of debits and credits. Here are some rules of journal entries:
- There is always at least 1 debit and 1 credit
- Debits are on the left and credits are on the right
- Debits (amount) = Credits (amount)
As previously mentioned, assets and expenses are increased with a debit and decreased with a credit. Liabilities and owners’ equity are increased with a credit and decreased with a debit. Students often struggle when they first are learning journal entries in trying to remember how to treat everything. Here is a helpful hint that will help you learn how to handle the cash account which is very often involved in the transaction.
Helpful Hint:
First, clear your mind of any banking terms you are familiar with such as debit card. Accounting terms were in place before banking terms and unfortunately, ever since the invention of debit cards, students have been confused. Once your mind is cleared, proceed to the next paragraph.
When we get money, we “D” deposit it. “D” in deposit is like “D” in debit |
| Debits and Credits |
When we spend money, we write a “C” check. “C” in check is like “C” in credit.
So, when you review a transaction involving cash, if we got some, you would think of this hint and remember that we deposit cash and that must be a debit to cash. If we are paying out money, you would associate this with writing a check and credit the account. If you have a good understanding of ½ of the transaction, it will be easier to remember if you debit or credit the other account.
All other assets are handled like cash. When we get some, we debit them, when we get rid of some, we credit the account. Liabilities and stockholders’ equity are on the opposite side as the assets so they are handled the opposite way. |
| Journal Entries |
Let’s walk through each journal entry that needs to be prepared:
| Transaction Number |
Account Name |
Debit Amount |
Credit Amount |
| 1 |
Cash
Common Stock
(We have more cash now which is an asset, so we debit that, and we also have more contributed capital, so that is a credit.) |
$20,000 |
$20,000 |
| 2 |
Equipment
Cash
(We have more equipment which is an asset, and so we need to debit that, and less cash which is also an asset, so we need to credit that account.) |
$5,000 |
$5,000 |
| 3 |
Cash
Sales
(We have more cash now which is an asset, so we debit that, and we also received that cash due to sales, so we need to increase that revenue account as well which is a credit for an increase.) |
$35,000 |
$35,000 |
| 4 |
Cash
Notes Payable
(We have more cash now which is an asset, so we debit that, and also more liability now since we borrowed this, so our liabilities will need to be increased with a credit.) |
$9,000 |
$9,000 |
| 5 |
Rent Expense
Cash
(We spend money on rent, so we have more expense now which is a debit and less cash now which is an asset, so that is a credit.) |
$2,000 |
$2,000 |
| 6 |
Wages Expense
Cash
(We spend money on wages, so we have more expense now which is a debit, and less cash now which is an asset, so that is a credit.) |
$10,000 |
$10,000 |
| 7 |
Utilities Expense
Cash
(We spend money on utilities, so we have more expense now which is a debit, and less cash now which is an asset, so that is a credit.) |
$3,000 |
$3,000 |
| 8 |
Notes Payable
Cash
(We have paid off some of our liability, so now we owe less debt and have to debit the liability to reduce it, and also less cash which is an asset, so we have to credit that to show a decrease.) |
$4,000 |
$4,000 |
| 9 |
Accounts Receivable
Sales
(We have sold some of our services and we now have more owed to us which is a receivable and resource, so it is an asset which we debit to show an increase. We also received this receivable through sales, so we have an increase in sales also, which is shown as a credit.) |
$10,000 |
$10,000 |
|
| Posting Journal Entries to the General Ledger |
As you approach the concept of journal entries, remember that practice will help so take advantage of your reading examples and also these examples. The more you do these, the higher your understanding levels will reach.
Accounting Cycle #2 (Post the journal entries to the general ledger):
As noted above, the general ledger is a set of individual accounts. We can use t accounts to simplify the general ledger group and will follow the same rules of the left side being the debit and right side being the credit.
So, if we had $20,000 that we received from an investor and our transaction was a debit to cash for $20,000 and a credit to common stock for $20,000, we would record this in the cash and common stock accounts as follows: (These are T accounts—Left side is debit and right side is credit.)
| Cash |
|
Common Stock |
| $20,000 |
|
|
|
$20,000 |
|
|
|
|
|
Every cash transaction we then have will either be a debit or credit to this account and likewise with other accounts. So, if we borrow $10,000 from the bank in a long term note, we will debit the cash account for $10,000 which will now give us a balance of $30,000 if that was all we had for the period. We would also have a new account for the notes payable we would enter the $10,000 into.
Once all transactions have been entered into the t accounts, we need to total each one.
If there are debits and credits into the account, we take the difference between the two side totals and then the final total will be the side of the higher number so if we have $100,000 in debits to cash and $45,000 in credits to cash, the balance will be $55,000 ($100,000 $45,000) and that will be on the debit side since that is the bigger number.
The side that we enter to when we have an increase is what we consider the normal balance. So, if we normally show an increase to the debit side on all asset accounts, we will consider the normal balance to be a debit for all asset accounts so we can expect the balance to be a debit. We normally show an increase as a credit to any liability accounts, so we expect liability accounts to have a normal balance of a credit. Here is a summary of normal balances:
Normal Balances: (These balances are normally posted in the trial balance.)
Assets: Debit
Liabilities: Credit
Stockholders’ Equity: Credit
Revenues: Credit
Expenses: Debit
There will be exceptions related to contra accounts such as dividends, which is an equity account but reduces the balance like expenses do. |
| Preparing an Unadjusted Trial Balance |
Accounting Cycle #3 (Prepare an unadjusted trial balance):
Once we have all of the balances in each individual ledger account, we are ready to prepare an unadjusted trial balance. This is a report showing all debit and credit balances and each account and is used to verify that the debits equal the credits and also to give us a chance to review any accounts that might need to be adjusted. Here is a sample unadjusted trial balance:
Account Debit Credit
Cash $100
Accounts Receivable $300
Inventory $900
Common Stock $800
Accounts Payable $ 200
Sales $3,000
Rent Expense $400
Office Supplies Expense $700
TOTALS $3,200 $3,200
If the totals do not balance, you will need to go back and review each journal entry to make sure that it balances and then check your transfer from the journal to the ledger to make sure you put the amounts in the correct column. Finally, if you still can’t locate this, re add up each individual ledger account to double check your balances there.
Accounting Cycle #4 (Prepare adjusting entries and post them to the general ledger):
Under the accrual method, there will be items that need to be adjusted at the end of the period in order to bring certain accounts to their correct balances. We have briefly mentioned a couple of examples of this in the revenue and expense section related to the unearned revenue account and prepaid expense account. Here is an overall summary of the different categories of adjusting entries:
- Deferred (prepaid) Expenses: We have paid for an expense in advance of using it such as rent expense or insurance expense or supplies. These need to be booked as an asset initially and at the end of the year, as part of the adjusting entries, you need to review the balance and adjust it for any usage that has happened.
Example:
Original Entry: Prepaid $1,000 for 1 month rent:
Debit Prepaid Rent $1,000
Credit Cash $1,000
Adjusting Entry: When used up
Debit Rent Expense $1,000
Credit Prepaid Rent $1,000 |
| Preparing Adjusting Entries |
- Accrued Revenues: These are revenues that we have earned but not yet billed for. We need to look for year end transactions that might not have made it to the books and increase our accounts receivable account and decrease our revenue account.
Example: no entry has been done:
Adjusting Entry: Provided services to a client that we haven’t billed for yet for $2,000.
Debit Accounts Receivable $2,000
Credit Revenue $2,000
- Accrued Expenses: These are expenses that we have incurred but have not recognized them as an entry yet. We need to review for these transactions and make sure to recognize an expense and corresponding liability in the correct period. Accrued wages would be an example of this.
Example: no entry has been done:
Adjusting Entry: Owed wages at the end of the year for $3,000 that will be paid next month.
Debit Wages Expense $3,000
Credit Wages Payable $3,000
- Depreciation Expense: This is the deduction of a portion of the cost of a fixed asset over its useful life. When we buy an asset, all of its cost goes onto the balance sheet as a fixed asset and as time passes, we move a portion of that onto the income statement through depreciation based on the depreciation method chosen.
Example: no entry has been done:
Adjusting Entry: Calculated depreciation on fixed assets of $5,000
Debit Depreciation Expense $5,000
Credit Accumulated Depreciation $5,000
All adjusting entries involve at least 1 income statement account and 1 balance sheet account and never involve cash. |
| Preparing Adjusting Entries Example |
Next, let’s look at the second adjusting entry. We have wages that have not been recognized. Think about what the journal entry would look like and see below to confirm that you are correct.
So, here is what the complete solution looks like along with the ending balances in each column which are calculated:
|
Assets |
Liabilities |
Equity (Retained Earnings) |
| Year end amounts before correction |
$163,000 |
$22,000 |
$141,000 |
| Adjusting Entry A: |
|
|
|
| Decrease Prepaid Insurance |
($1,000) |
|
|
| Increase Insurance Expense |
|
|
($1,000) |
| Adjusting Entry B: |
|
|
|
| Increase Wages Payable |
|
$500 |
|
| Increase Wages Expense |
|
|
($500) |
| Year end corrected amounts |
$162,000 |
$22,500 |
$139,500 |
|
| Preparing the Adjusted Trial Balance and Financial Statements |
Accounting Cycle #5 (Prepare the adjusted trial balance.):
This is the same process as step #3 in that you prepare another trial balance but this time, you will have the new balances after the adjusting entries have been done. Again, you will want to make sure that the debits and credits balance and that all accounts look reasonable.
Accounting Cycle #6 (Prepare the financial statements.):
Using the adjusted trial balance, you are now ready to prepare the financial statements. Here are the 4 financial statements that need to be prepared and the order:
- The first financial statement you will need to prepare is the income statement which will have all revenues and expenses on this statement.
- The statement of changes in shareholder’s equity statement is next. You will need the net income from the income statement in order to calculate the total shareholder’s equity so this statement can’t be prepared until the income statement is done.
- The balance sheet is next and will list out all assets, liabilities, and shareholder’s equity balances. The shareholder’s equity balance will come from the statement of changes in the shareholder’s equity statement so the balance sheet can’t be prepared before that statement is done.
- The final statement is the statement of cash flows and this will be a record of all transactions related to cash. We will need to get the cash balance and some account changes from the balance sheet in order to prepare a statement of cash flows.
Accounting Cycle #7 (Close the temporary accounts.):
Once you have prepared the adjusting entries and financial statements following that, you are ready to close out the period to get ready for the new period. All revenue and expense accounts should be closed out to retained earnings so that they can have a $0 opening balance for the new period since the income statement just looks at a specific period of time. The dividends account should also be closed when there is a balance. |
| Closing Process Example |
The closing process includes 2 different journal entries. The first entry is the closing of the revenue account into retained earnings. Since the revenue account normally has a credit balance, we will need to debit that account for the balance to create a $0 balance and offset it against retained earnings so the journal entry will look like this:
Debit revenue accounts $X
Credit retained earnings $X
The second entry is the closing of the expense accounts into retained earnings. Since the expense accounts normally have a debit balance, we will need to credit these accounts for the balance to create a $0 balance and offset it against retained earnings so the journal entry will look something like this:
Debit retained earnings $X
Credit cost of goods sold $X
Credit expense account #1 $X
Credit expense account #2 $X
Credit expense account #3, and so on $X |
| The Final Step in the Accounting Cycle |
Accounting Cycle #8 (Prepare a post closing trial balance.):
Preparing the post closing trial balance allows for a check of the accounts still in the general ledger to make sure no temporary accounts remain, and that the accounting equation is still in balance. This is another trial balance but now will have the latest balances after the closing of the accounts.
Now that we have looked at the different examples under the accrual basis, you should have gained a better understanding of the different time periods that we recognize revenues and expenses in, because there can be a big difference if it is not done correctly on the financial statements. We have now been through the complete accounting cycle so you can see what happens from the beginning steps throughout the period to the closing process.
As you have seen, there are many transactions that involve the cash account which makes internal controls especially important in this area. The company will analyze the risks associated with cash and collections and put controls to minimize risk. Cash is a temptation for theft due to the nature of its use. Therefore, as a company we need to work to have a strong safeguarding of cash and other controls put into place such as bank reconciliations.
Bank Reconciliation
A bank reconciliation is a comparison between the records of the bank and the records in the books and adjusting for any discrepancies. Due to the timing of transactions and other things that we might not know about in our books, the bank statement balance and the book balance will most likely not match. We need to prepare a bank reconciliation making adjustments to each applicable side. It is a critical part of controlling cash. Here is a template that is often used to prepare this:
| Bank Statement |
General Ledger (Book) |
| Ending balance per bank statement |
$X |
Ending balance per books |
$X |
| + Deposits in transit |
+ $X |
+ Bank collections |
+ $X |
| Outstanding checks |
$X |
+ Interest earned |
+ $X |
| +/ Bank errors |
+/ $X |
Bank service charge |
$X |
|
|
NSF checks |
$X |
|
|
+ / Book errors |
+/ $X |
|
|
|
|
| Ending balance per bank statement |
$X |
Ending balance per books |
$X |
|
Aug 29, 2021 | Uncategorized
- Identify the key information about the holiday as set out in brochure.
- Critically analyse the package using the principles of contract law found in case law and categorise the statements into representations, terms, conditions and warranties.
- Critically analyse and identify any material in the brochure which is potentially;
- unconscionable
- misleading or deceptive
- false representation
- bait advertising
- offers gifts or prizes
Aug 29, 2021 | Uncategorized
Wendy’s was founded on the concept of old fashioned hamburgers. Each hamburger is a square patty, which is served directly from the grill when a customer places an order. During peak periods, cooks must estimate demand and have a sufficient supply of hamburgers cooking when customers arrive. Hamburgers that become too well done cannot be served because they don’t meet Wendy’s specifications for “hot and juicy.” Thus Wendy’s invented Wendy’s chili made with overdone hamburgers. Wendy’s chili is made daily by the assistant manager or an experienced crew member.
Aug 29, 2021 | Uncategorized
Lone Company Trial Balance:
Account Title: Debit: Credit:
Cash $18,000
Accounts Recievable 165,000
Inventories:
Materials 5700
Work in process 42500
Finished goods 22200
Plant assets 200,000
Accumulated depriciation 71,000
Accounts payable 133,000
Wages Payable 1500
Common stock 140,000
retained earnings 107,900
Sales Revenue
Cost of goods sold
Manufacturing overhead
Marketing & general expenses
Total 453,400 453,400
April balances in subsidiary ledgers:
Materials subledger: paper, $4,500; indirect materials, $1200.
Work in process: Job 120, $42,500; Job 121 $0.
Finished goods: Large stars, $9300; small stars, $12,900.
April Transactions:
a Collections on account $141,000
b Marketing & general expenses incurred & paid $31,000
c Payments on account $41,000
d Materials purchased on credit: Paper $23,000; Indirect materials $4,200
e Materials used in production (requisitioned):
Job 120 paper $500; Job 121 paper $7,700
f Wages incurred & assigned during April, $43,000. Labor time records for the month: job 120, $3500; job 121, $16,600; indirect labor $22,900.
g wages paid in April include: the balance in the wages payable account for March 31 & $40,300 of wages incurred in April.
h depriciation of plant & equiptment $3,200
i Manufacturing overhead was allocated at a predetermined rate of 80% of direct labor cost.
j Jobs completed during the month: job 120. 500,000 large stars at total cost of $49,300.
k Credit sales on account: all of job 120 for $133,000
l closed the manufacturing overhead account to cost of goods sold.
1. Journalize the transactions for the company. Lone uses a perpetual inventory system. (record debits first then credits)
Begin with transaction (a), collections on account $141,000
Aug 29, 2021 | Uncategorized
Frank is considering making an IRA contribution. Frank is single and is not covered by a retirement plan at work. He was born in January 1976. His salary is $60,000. He plans to begin making contributions to an IRA when he is age 30 and will continue making contributions until he reaches age 65. He anticipates he will have a 28% marginal tax rate during the years he contributes to the IRA. He will be age 66 when he starts withdrawing funds from the IRA and plans to withdraw the money over 16 years. He anticipates that he will have a 15% marginal tax rate during retirement. He anticipates a 5% rate of return both before and during retirement.
a. How much will Frank have accumulated on the day he retires if he contributes $3,000 a year to (1) a traditional IRA, (2) a Roth IRA, and (3) a regular savings account?
b. What will Frank’s annual after tax income be during his retirement years for (1) a traditional IRA, (2) a Roth IRA, and (3) a regular savings account?
c. How would your answers change to parts (a) and (b) if Frank begins making his $3,000 annual contribution at age 40 instead of at age 30?
Aug 29, 2021 | Uncategorized
Comparative balance sheets and the income statements for Ellis Company are presented below:
Ellis Company
Balance Sheets
December 31, Year 1 and Year 2
| |
Year 2
|
Year 1
|
|
Assets
|
|
|
|
Current assets:
|
|
|
|
Cash
|
$ 45,000
|
$ 30,000
|
|
Accounts receivable
|
38,000
|
40,000
|
|
Inventory
|
67,000
|
60,000
|
|
Total current assets
|
150,000
|
130,000
|
|
Long term investments
|
162,000
|
200,000
|
|
Plant and equipment
|
278,000
|
150,000
|
|
Accumulated depreciation
|
(52,000)
|
(50,000)
|
|
Total assets
|
$538,000
|
$430,000
|
Liabilities and stockholders’ equity
|
Current liabilities:
|
$ 36,000
|
$ 40,000
|
|
Accrued liabilities
|
24,000
|
30,000
|
|
Total current liabilities
|
60,000
|
70,000
|
|
Bonds payable
|
20,000
|
30,000
|
|
Mortgage payable
|
100,000
|
|
|
Deferred income taxes
|
15,000
|
20,000
|
|
Total liabilities
|
195,000
|
120,000
|
|
Stockholders’ equity:
|
|
|
|
Common stock
|
295,000
|
270,000
|
|
Retained earnings
|
48,000
|
40,000
|
|
Total stockholders’ equity
|
343,000
|
310,000
|
|
Total liabilities and stockholders’ equity
|
$538,000
|
$ 430,000
|
Ellis Company
Income Statement
For the Year Ended December 31, Year 2
|
Sales
|
$150,000
|
|
Less cost of goods sold
|
76,500
|
|
Gross margin
|
73,500
|
|
Less operating expenses
|
16,000
|
|
Net operating income
|
57,500
|
|
Less loss on sale of investment
|
2,500
|
|
Income before taxes
|
55,000
|
|
Less income taxes
|
22,000
|
|
Net income
|
$ 33,000
|
Summary of transactions for Year2:
* During Year 2, the company sold for cash of $35,500 long term investments with a cost of $38,000 when purchased.
* All sales were on credit.
* The company paid a cash dividend of $25,000.
* Bonds payable of $25,000 were retired by issuing common stock. The bonds retired were equivalent to the market value of the $25,000 stock issued.
* An addition to one of the company’s buildings was completed on December 31, Year 2, at a cost of $128,000. The company gave an interest bearing mortgage for $100,000 and paid $28,000 in cash.
* Bonds payable were sold for $15,000 cash at par value.
Required:
a. Using the indirect method, determine the net cash provided by operating activities for Year 2.
b. Using the direct method, determine the net cash provided by operating activities for Year 2.
c. Using the net cash provided by operating activities figure from either part a or b, prepare a statement of cash flows for Year 2.
Aug 29, 2021 | Uncategorized
Hesselbaum Retail Corporation’s most recent Income Statement and comparative Balance Sheet is as follows:
Hesselbaum Retail Corporation
Income Statement
For the Year Ended December 31, Year 2
|
Sales
|
$118,000
|
|
Less cost of goods sold
|
56,000
|
|
Gross margin
|
62,000
|
|
Less operating expenses
|
37,000
|
|
Net operating income
|
25,000
|
|
Less loss on sale of equipment
|
2,000
|
|
Income before taxes
|
23,000
|
|
Less income taxes
|
9,000
|
|
Net income
|
$ 14,000
|
Hesselbaum Retail Corporation
Comparative Balance Sheet
At December 31, Year 2, and Year 1
| |
Year 2
|
Year 1
|
|
Assets
|
|
|
|
Cash
|
$12,000
|
$ 4,000
|
|
Accounts receivable, net
|
29,000
|
7,000
|
|
Merchandise inventory
|
36,000
|
21,000
|
|
Prepaid expenses
|
6,000
|
8,000
|
|
Equipment
|
72,000
|
88,000
|
|
Accumulated depreciation
|
(60,000)
|
(57,000)
|
|
Total assets
|
$95,000
|
$71,000
|
Liabilities and stockholders’ equity
|
Accounts payable
|
$17,000
|
$ 9,000
|
|
Wages payable
|
6,000
|
1,000
|
|
Taxes payable
|
2,000
|
3,000
|
|
Common stock
|
50,000
|
42,000
|
|
Retained earnings
|
20,000
|
16,000
|
|
Total liabilities and stockholders’ equity
|
$95,000
|
$71,000
|
No direct exchange transactions occurred at Hesselbaum during Year 2. No equipment was purchased during Year 2. The accumulated depreciation on the equipment sold was $9,000. Cash dividends of $10,000 were declared and paid during Year 2. Hesselbaum uses the direct method to prepare its statement of cash flows.
Required:
Prepare Hesselbaum’s operating activities section of its Year2 statement of cash flows.
Aug 29, 2021 | Uncategorized
Carr Company’s comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
| |
Ending
|
Beginning
|
| |
Balance
|
Balance
|
|
Cash
|
$ 3,000
|
$ 23,000
|
|
Accounts receivable
|
83,000
|
71,000
|
|
Inventory
|
39,000
|
47,000
|
|
Prepaid expenses
|
9,000
|
15,000
|
|
Long term investments
|
240,000
|
200,000
|
|
Plant and equipment
|
515,000
|
480,000
|
|
Accumulated depreciation
|
(320,000)
|
(295,000)
|
|
Total assets
|
$569,000
|
$541,000
|
|
Accounts payable
|
$ 9,000
|
$ 25,000
|
|
Accrued liabilities
|
24,000
|
17,000
|
|
Taxes payable
|
16,000
|
21,000
|
|
Bonds payable
|
160,000
|
200,000
|
|
Deferred taxes
|
33,000
|
25,000
|
|
Common stock
|
170,000
|
140,000
|
|
Retained earnings
|
157,000
|
113,000
|
|
Total liabilities and owners’ equity
|
$569,000
|
$541,000
|
Income Statement
|
Sales
|
$850,000
|
|
Less cost of goods sold
|
450,000
|
|
Gross margin
|
400,000
|
|
Less operating expenses
|
270,000
|
|
Net operating income
|
130,000
|
|
Less income taxes
|
39,000
|
|
Net income
|
$ 91,000
|
The company declared and paid $47,000 in cash dividends during the year.
Required:
Construct in good form the operating activities section of the company’s statement of cash flows for the year using the direct method.
Aug 29, 2021 | Uncategorized
Carmel Company’s comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
| |
Ending
|
Beginning
|
| |
Balance
|
Balance
|
|
Cash
|
$ 49,000
|
$ 30,000
|
|
Accounts receivable
|
23,000
|
30,000
|
|
Inventory
|
63,000
|
49,000
|
|
Prepaid expenses
|
13,000
|
19,000
|
|
Long term investments
|
260,000
|
200,000
|
|
Plant and equipment
|
520,000
|
500,000
|
|
Accumulated depreciation
|
(256,000)
|
(224,000)
|
|
Total assets
|
$672,000
|
$604,000
|
|
Accounts payable
|
$ 20,000
|
$ 35,000
|
|
Accrued liabilities
|
30,000
|
17,000
|
|
Taxes payable
|
15,000
|
11,000
|
|
Bonds payable
|
100,000
|
150,000
|
|
Deferred taxes
|
23,000
|
16,000
|
|
Common stock
|
100,000
|
70,000
|
|
Retained earnings
|
384,000
|
305,000
|
|
Total liabilities and owners’ equity
|
$672,000
|
$604,000
|
Income Statement
|
Sales
|
$810,000
|
|
Less cost of goods sold
|
390,000
|
|
Gross margin
|
420,000
|
|
Less operating expenses
|
290,000
|
|
Net operating income
|
130,000
|
|
Less income taxes
|
39,000
|
|
Net income
|
$ 91,000
|
The company declared and paid $12,000 in cash dividends during the year.
Required:
Construct in good form the operating activities section of the company’s statement of cash flows for the year using the direct method.
Aug 29, 2021 | Uncategorized
The following information is taken from the Operating Activities section of the statement of cash flows for the Parks Company for the year just ended:
|
Net income
|
|
$15,000
|
|
Adjustments to convert net income to cash basis:
|
|
|
|
Accounts receivable
|
$ 3,000
|
|
|
Gain on sale of equipment
|
(3,000)
|
|
|
Inventory
|
(7,000)
|
|
|
Accounts payable
|
4,000
|
|
|
Depreciation expense
|
11,000
|
|
|
Interest payable
|
(1,000)
|
|
|
Prepaid expenses
|
2,000
|
|
|
Income tax payable
|
(7,000)
|
2,000
|
|
Net cash inflow from operating activities
|
|
$17,000
|
The following information is taken from the company’s income statement for the year just ended:
|
Sales
|
$96,000
|
|
Cost of goods sold
|
42,000
|
|
Gross margin
|
54,000
|
|
Operating Expenses
|
29,000
|
|
Net operating income
|
25,000
|
|
Gain on sale of equipment
|
3,000
|
|
Income before taxes
|
28,000
|
|
Income taxes
|
13,000
|
|
Net income
|
$15,000
|
Required:
a. For each of the adjustments to convert net income to the cash basis, indicate whether the account increased or decreased.
b. Determine the net cash provided by operating activities using the direct method.
You need not prepare the formal operating activities section of the statement of cash flows but you should show the adjustments that must be made to sales, expenses, and so forth and the cash flow balances of sales, expenses, etc.
Aug 29, 2021 | Uncategorized
Daugherty Company’s comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
| |
Ending
|
Beginning
|
| |
Balance
|
Balance
|
|
Cash
|
$ 7,000
|
$ 21,000
|
|
Accounts receivable
|
71,000
|
47,000
|
|
Inventory
|
62,000
|
44,000
|
|
Prepaid expenses
|
2,000
|
9,000
|
|
Long term investments
|
310,000
|
240,000
|
|
Plant and equipment
|
370,000
|
370,000
|
|
Accumulated depreciation
|
(214,000)
|
(186,000)
|
|
Total assets
|
$608,000
|
$545,000
|
|
Accounts payable
|
$ 69,000
|
$ 48,000
|
|
Accrued liabilities
|
2,000
|
17,000
|
|
Taxes payable
|
28,000
|
13,000
|
|
Bonds payable
|
140,000
|
170,000
|
|
Deferred taxes
|
27,000
|
17,000
|
|
Common stock
|
90,000
|
70,000
|
|
Retained earnings
|
252,000
|
210,000
|
|
Total liabilities and owners’ equity
|
$608,000
|
$545,000
|
Income Statement
|
Sales
|
$940,000
|
|
Less cost of goods sold
|
510,000
|
|
Gross margin
|
430,000
|
|
Less operating expenses
|
270,000
|
|
Net operating income
|
160,000
|
|
Less income taxes
|
48,000
|
|
Net income
|
$112,000
|
The company declared and paid $70,000 in cash dividends during the year.
Required:
a. Construct in good form the operating activities section of the company’s statement of cash flows for the year.
b. Construct in good form the investing activities section of the company’s statement of cash flows for the year.
c. Construct in good form the financing activities section of the company’s statement of cash flows for the year.
Aug 29, 2021 | Uncategorized
Dawson Company’s comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
| |
Ending
|
Beginning
|
| |
Balance
|
Balance
|
|
Cash
|
$ 49,000
|
$ 22,000
|
|
Accounts receivable
|
50,000
|
71,000
|
|
Inventory
|
84,000
|
52,000
|
|
Prepaid expenses
|
17,000
|
13,000
|
|
Long term investments
|
240,000
|
180,000
|
|
Plant and equipment
|
430,000
|
430,000
|
|
Accumulated depreciation
|
(277,000)
|
(237,000)
|
|
Total assets
|
$593,000
|
$531,000
|
|
Accounts payable
|
$ 43,000
|
$ 61,000
|
|
Accrued liabilities
|
33,000
|
19,000
|
|
Taxes payable
|
37,000
|
25,000
|
|
Bonds payable
|
110,000
|
160,000
|
|
Deferred taxes
|
31,000
|
19,000
|
|
Common stock
|
70,000
|
50,000
|
|
Retained earnings
|
269,000
|
197,000
|
|
Total liabilities and owners’ equity
|
$593,000
|
$531,000
|
Income Statement
|
Sales
|
$680,000
|
|
Less cost of goods sold
|
300,000
|
|
Gross margin
|
380,000
|
|
Less operating expenses
|
250,000
|
|
Net operating income
|
130,000
|
|
Less income taxes
|
39,000
|
|
Net income
|
$ 91,000
|
The company declared and paid $19,000 in cash dividends during the year.
Required:
a. Construct in good form the operating activities section of the company’s statement of cash flows for the year.
b. Construct in good form the investing activities section of the company’s statement of cash flows for the year.
c. Construct in good form the financing activities section of the company’s statement of cash flows for the year.
Aug 29, 2021 | Uncategorized
Read the attached Sun City Savings and Loan Company case. Answer the following: In the last sentence of the case, Johnson states, “there could be serious consequences to several different parties whatever decision he (Johnson) makes.
Aug 29, 2021 | Uncategorized
1 1 LAW 315 TAXATION LAW SPRING SESSION 2013 Assessment task – Take Home Test Instructions: This assignment counts for 15% of the total marks for this subject and has a maximum word length of 2000 words (footnotes are not included in word count). The assignment is to be attempted individually. The marks for each scenario/question are of different value. Please note that you must acknowledge all sources of information. Plagiarism will not be tolerated and you will be penalised if you commit plagiarism. Please see pages 7 9 of the Subject Outline and the Faculty site for additional information in relation to acknowledgement, referencing, plagiarism and format of work. http://www.uow.edu.au/content/groups/public/@web/@law/documents/doc/uow0948 13.pdf Date Due: No later than 4.00 PM Monday 2 September, 2013 The purpose of this exercise is for each student to explore the application of taxation law learned during weeks 1 to 5. Please note that extensions of time for submission of this completed task will only be granted in exceptional circumstances. Please see the reference on page 8 of the Subject Outline and the Faculty site in relation to Special Consideration, Extensions, Late Submission of Written Work and Penalties. http://www.uow.edu.au/content/groups/public/@web/@law/documents/doc/uow0948 13.pdf Copy: Students must keep a copy of their answers in case the originals go astray. In your answer, refer to case law and legislation when necessary to support your answer. 2 2 Question 1 Juan is a Puerto Rican resident employed by a Puerto Rican company. Juan is sent to Australia to work on a short term project to assist with the establishment of a branch of this company in Australia. Juan worked in Australia for 30 days. Throughout this time, Juan continued to receive a salary from his employer. The salary was paid into his Puerto Rican bank account. During the year Juan earned A$155,000 from his employment. Required: Advise whether Juan has to pay Australian Tax on any of his salary? In your answer, refer to case law and legislation when necessary to support your answer. [5 Marks] Question 2 Are all receipts of a taxpayer that carries on a business income in nature? In your answer, refer to case law and legislation when necessary to support your answer. [4 Marks] Question 3 On 1st October 2012, company EndX Pty. Ltd. purchased a new car for $45,000, inclusive of GST. Registration amounting to $450 was paid before delivery on 1st October 2012. 3 3 The car was made available to Mick, a company employee. Due to lack of storage facilities at the company premises, Mick took the car home to be garaged each night. Expenses incurred by the company on the motor vehicle for the 2012/2013 fringe benefits years were as follows: Stamp Duty $700 Repairs and Maintenance $800 Fuel and oil $500 Supply and fitting of air conditioning for business purposes $2,000 According to the employee’s log book, the car travelled 50,000 kilometres in the period 1st October 2012 to 31st March 2013 of which 30,000 kilometres was for business related travel. The employee paid the company $1,200 towards the cost of fuel for private use. The company is electing to use the operating cost method to value the car fringe benefit. Required: Determine the fringe benefits tax payable by the employer company in respect of the car fringe benefit for the 2012/2013 fringe benefits tax year. All expenses were inclusive of the Goods and Services Tax. In your answer, refer to legislation when necessary to support your answer. [6 Marks]
Aug 29, 2021 | Uncategorized
Accounting standard and theory
Students must submit a critique of an academic article deemed to be seminal to their main area of research. Details about the format, structure and assessment criteria for the critique are presented below. Remember that the critique is due in weeks 8.
Aug 29, 2021 | Uncategorized
Corresponds to CLO 1(a) Which of the following interrelationships is not important to understand when preparing financial statements: (Points : 8) Total payments on the balance sheet should equal the cash payments for operating activities on the statement of cash flows. Net income from the income statement is used in the retained earnings statement. The ending retained earnings from the retained earnings statement is used in the stockholders’ equity section of the balance sheet.
Aug 29, 2021 | Uncategorized
UNIVERSITY OF SUNDERLAND SUNDERLAND BUSINESS SCHOOL APC311 INTERNATIONAL FINANCIAL REPORTING October 2013 THE assessment ASSIGNMENT Hand In Date: 1st October 2013 by 04.00pm
Aims:
1. To allow students to explore in greater detail the major learning outcomes of the module and to demonstrate a detailed knowledge and understanding thereof.
2. To assess students’ ability to
(i) appropriately summarise and structure information (ii) evaluate relevant information from a given set of literature (iii) understand and argue the chosen relevant information, and (iv) present it in an appropriate written form
I
Aug 29, 2021 | Uncategorized
Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
Direct labor cost for standard are $55,500, machine hours are 1,150, and setup hours are 100. For custom, the direct labor costs are 97,200, machine hours are 1,270, and setup hours are 380.
?
.:.
Total estimated overhead costs are $304,000. Overhead cost allocated to the machining activity cost pool is $195300, and $108,700 is allocated to the machine setup activity cost pool.
Instructions
(a) Compute the overhead rate using the traditional (plantwide) approach. The predetermined overhead rate is _____% of direct labor cost
(b) Compute the overhead rates using the activity based costing approach.
(c) Determine the difference in allocation between the two approaches.
Aug 29, 2021 | Uncategorized
ACC3TAX Assessment 1
Tim Brown is employed by John West, the UK parent company located in Liverpool, England. On the 1st of December 2012 Tim was transferred to Echuca to work for Simplot Australia for a period of five years. This company is a leading Australian Food Manufacturer whose iconic brands include John West. Tim lived in a house owned by Simplot Australia and leased his Liverpool residence. During the year ended 30th June 2103 the following transactions took place:
- Salary from John West in Liverpool (1 July 2012 to 30 November 2012) $25,000
- Salary from Simplot Australia $62,000
- Bonus on commencement of work – paid by Simplot Australia $4,500
- Productivity Bonus (paid 5th July 2013) $2,500
- Interest on an Australian Bank Deposit $500
- Rental Income for their residence in Liverpool $4,000
- Interest Income from New York Bank
- (15% withholding tax has been paid) $425
Required:
(a) Calculate Tim’s Australian taxable income and Australian tax payable for the year ending 30.06.2013 |
Aug 29, 2021 | Uncategorized
Have attached question details
Aug 29, 2021 | Uncategorized
Details are int file attached
Aug 29, 2021 | Uncategorized
Topic 4 – Corporate Social Responsibility
Situation:
Corporate Social Responsibility is not a luxury anymore, it is a requirement of all firms no matter how big or small.
Task: Complete the below questions
- What is Corporate Social Responsibility?
- Legitimacy theory speaks of a ‘social contract’ between organizations and the society in which it exists. It also speaks of a ‘legitimacy gap’ when this relationship breaks down. Explain these concepts.
- Stakeholder theory speaks of an ethical and a managerial branch. Explain the differences between these two branches and including the relevant assumptions of both.
- Explain the link between stakeholder theory and an organization’s voluntary disclosure of sustainability reports
- Should sustainability reports be included in an entity’s financial report? Explain why or why not.
Aug 29, 2021 | Uncategorized
An audit is being undertaken for Atlantic Ltd for the year ended 30 June 2013. While assessing the risk of material misstatement you identify that a large number of debtors are exceeding 60 days where credit terms are 30 days.
During your analysis the following figures were extracted:
Year end 30/6/2012 – Provision for Doubtful Debts $35,000, Sales $3,500,000
Year end 30/6/2013 Provision for Doubtful Debts $570,000, Sales $5,700,000
The profit for the year ended 30/6/2013 is $1,500,000.
Questions:
- The doubtful debts policy in Atlantic’s accounting policy manual is that 1% of sales should be deemed to be doubtful debts. Discuss the relevance of the company policy to the firms’ treatment of doubtful debts for the year ended 30/6/2013? How would the auditor determine whether the 30/6/2013 doubtful debts calculation for 2013 is reasonable?
(7 Marks)
- Materiality is an important part of audit considerations. Discuss the nature of materiality and the basis for its calculation. With reference to the audit of Atlantic Ltd, if the calculation of doubtful debts is found to be overstated, explain at what level (or at what amount) you would expect the variance to be material and therefore request the company to alter their estimate in the accounts.
(8 marks)
(Total 15 Marks)
Aug 29, 2021 | Uncategorized
In January, the accountant for a corporation, is feeling pressure to complete the annual financial statements. The company president has said he needs up to date financial statement to share with the bank the next day at a meeting that has been called to discuss the corporation obtaining loan financing for a special building project. The accountant knows that she will not be able to gather all the needed information in the next 24 hours to prepare the entire set of adjusting entries. Those entries must be posted before the financial statements accurately portray the company’s performance and financial position for the fiscal period ended Dec. 31, of the previous year. The accountant decides to estimate several expense accruals at the last minute. When deciding on estimates for the expenses, low estimates were used because the accountant does not want to make the financial statements look worse than they are. The financial statements are finished before the deadline and the accountant gives them to the president without mentioning that several account balances are estimates that she provided.
Required: Identify several courses of action that the accountant could have taken instead of the one she took.
Aug 29, 2021 | Uncategorized
Jim’s Landscaping is the business of maintaining and improving yards in surrounding areas. The company bases its overhead cost budgets on the following data
Variable overhead costs:
Supplies $4 per yard
Machine maintenance $2 per yard
Chemicals $6 per yard
Fixed overhead costs:
Salaries and wages $2300 per month
Machine maintenance $800 per month
Utilities $400 per month
Rent $1100 per month
In June, the following actual costs were incurred for 83 yards:
Supplies $320
Machine maintenance $180
Chemicals $500
Salaries and wages $2500
Depreciation $800
Utilities $450
Rent $1100
This is what I started with:
Variable overhead costs:
Supplies $4 per yard
Machine maintenance $2 per yard
Chemicals $6 per yard
Total variable cost $12
Fixed overhead cost
Salalries and wages $2,300 per month
Depreciation $ 800 per month
Utilities $ 400 per month
Rent $1,100 per month
Total Overhead cost $4,600
Aug 29, 2021 | Uncategorized
the jinwa corporation sells two brands of wine glasses: Plain and Chic. jinwa provides the following information for sales in the month of June 2009:
Static budget total contribution margin $5,600
Budgeted units to be sold of all glasses 2,000 units
Budgeted contribution margin per unit of Plain $2 per unit
Budgeted contribution margin per unit of Chic $6 per unit
Total Sales quantity variance $1400 U
Actual sales mix % of Plain 60%
All variances are to be computed in contribution margin terms
Required:
1. Calculate the sales quantity variance for each product for june 2009
2. Calculate the individual product and total sales mix variances for june 2009. Calculate the individual product and total sales volume variances for June 2009.
Aug 29, 2021 | Uncategorized
On July 1, 2012, Brower Industries Inc. issued $2,500,000 of 5 year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $2,405,781. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Journalize the entry to record the amount of cash proceeds from the sale of the bonds. For a compound transaction, if an amount box does not require an entry, leave it blank or enter “0”.
***this part i got correct*** but its the next to i’m not understanding where the numbers come from
Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank or enter “0”.)
a.The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the straight line method. (Round to the nearest dollar.)
b.The interest payment on June 30, 2013, and the amortization of the bond discount, using the straight line method. (Round to the nearest dollar.)
**i am apparently getting the discount on bonds payable correct but i’m unable to figure out how to calculate the interest or the cash i keep getting it incorrect**
Aug 29, 2021 | Uncategorized
You have just completed Phase I of your audit of accounts receivable, which is a material account for your client. You now have an understanding of the design of internal controls for that account. You are about to test those controls. You have evaluated inherent risk for this account at 60%. The desired level of audit risk for this account has been set at 6%. Based on your understanding of the design of the control system, if controls are operating as designed, there is a 70% chance that controls will prevent or detect material misstatements, but of course, you can only rely on controls to the extent that you test them.
Choose a level of control risk and a level of detection risk that, in combination, will provide you with exactly the desired level of audit risk, that is consistent with the above facts, and that complies with professional standards.
Aug 29, 2021 | Uncategorized
karim and rahim sole traders were doing business separately.on january 1997 their balance sheets showed the following postings: Karim cash:rs15000 rahim cash:rs20000 karim account receivable:rs30000 rahim account recievable:rs40000 karim office equipment:rs70000 rahim office equipment:rs60000 karim allowance for depreciation office equipment:rs40000 rahim allowance for depreciation office equipment:rs35000 karim allowance for bad debts: rs3000 rahim allowance for bad debts:rs1500 karim account payable:rs32000 rahim account payable:rs30000.
On January 1, 1997 they decide to form a partnership by merging their businesses. All the assets and liabilities were turned over to the new firm on the following agreed values.
Required:Give the necessary entries in the general journal of newly formed partnership of karim and rahim as on jan 1,1997.
Aug 29, 2021 | Uncategorized
Kasten Company manufactures bowling balls through two processes: Molding and Packaging. In the Molding Department, the urethane, rubber, plastics, and other materials are molded into bowling balls. In the Packaging Department, the balls are placed in cartons and sent to the finished goods warehouse. All materials are entered at the beginning of each process. Labor and manufacturing overhead are incurred uniformly throughout each process. Production and cost data for the Molding Department during June 2008 are presented below.
Production Data
June
Beginning work in process units 0
Units started into production 21,200
Ending work in process units 2,120
Percent complete ending inventory 60%
Cost Data
Materials $209,880
Labor 53,424
Overhead 119,568
Total $382,872
Aug 29, 2021 | Uncategorized
Kelton Co., which produces and sells skiing equipment, is financed as follows:
Bonds payable, 8% (issued at face amount)….20,000,000
preferred $2 stock, $10 par….20,000,000
common stock, $25 par……..20,000,000
Income tax is estimated at 40% of income.
Determine the earnings per share on common stock, assuming that the income before bond interest and income tax is (a) $10,000,000, (b) $12,000,000, and (c) $14,000,000.
Enter answers in dollars and cents, rounding to the nearest whole cent.
a. Earnings per share on common stock $
b. Earnings per share on common stock $
c. Earnings per share on common stock $
Particularly, I’m not sure how to determine the number of outstanding shares
Aug 29, 2021 | Uncategorized
Laura Eddy Opened Eddy’s Carpet cleaners on March 1, the following transactions were completed.
Mar 1 Invested$ 10,353 cash in the business
1 Purchased used truck for $5960, paying $2980 in cash and the balance on account.
3 Purchased cleaning supplies for $1,187 on account.
5 Paid $1,704 cash on one year insurance policy effective March 1.
14 Billed customers $4,883 for cleaning services.
18 Paid $1,454 cash on amount owed on truck and $461 on amount owed on cleaning supplies.
20 Paid $1,928 cash for employee salaries.
21 Collected $1,377 cash from customers billed on March 14.
28 Billed customers $2,394 for cleaning services.
31 Paid gas and oil on truck for month, $218.
31 Withdrew $753 cash for personal use.
Journalize the March entries.
Prepare a trial balance at March 31 on a worksheet, enter the following adjusting entries and complete the worksheet.
1. Earned but unbilled revenue at MArch 31 was $825.
2.Depreciation on equipment for the month was $247.
3. One twelfth of the insurance expired.
4. An inventory count shows $385 nof cleaning supplies on hand at March 31.
5. Accrued but unpaid employee salaries were $486.
ACC 560 wk 2 ….pdf
Jounal entry…..docx
Jounal entry ….xlsx
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