Job costing, accounting for manufacturing overhead, budgeted rates. The Solomon Company uses a job costing system at its Dover, Delaware, plant. The plant has a Machining Department and a Finishing Department. Solomon uses normal costing with two direct cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the Machining Department, with machine hours as the allocation base, and the Finishing Department, with direct manufacturing labor costs as the allocation base). The 2009 budget for the plant is as follows:
1. Prepare an overview diagram of Solomon’s job costing system.
2. What is the budgeted overhead rate in the Machining Department In the Finishing Department?
3. During the month of January, the job cost record for Job 431 shows the following:
Compute the total manufacturing overhead allocated to Job 43.
4. Assuming that Job 431 consisted of 200 units of product, what is the cost per unit?
5. Amounts at the end of 2009 are as follows:
Compute the under or over allocated manufacturing overhead for each department and for the Dover plant as a whole.
6. Why might Solomon use two different manufacturing overhead cost pools in its job costingsystem?
can someone help me how to do this please? ..I am not good at all with accounting.
All Star, Inc., is considering an investment in one of two machines. The sewing machine will increase productivity from sewing 150 baseballs per hour to sewing 260 per hour. The contribution margin per unit is $0.54 per baseball. Assume that any increased production of baseballs can be sold. The second machine is an automatic packing machine for the golf ball line. The packing machine will reduce packing labor cost. The labor cost saved is equivalent to $25 per hour. The sewing machine will cost $360,000, have an eight year life, and will operate for 1,700 hours per year. The packing machine will cost $120,000, have an eight year life, and will operate for 1,600 hours per year. All Star seeks a minimum rate of return of 15% on its investments.
Present Value of an Annuity of $1 at Compound
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
1.833
1.736
1.690
1.626
1.528
3
2.673
2.487
2.402
2.283
2.106
4
3.465
3.170
3.037
2.855
2.589
5
4.212
3.791
3.605
3.353
2.991
6
4.917
4.355
4.111
3.785
3.326
7
5.582
4.868
4.564
4.160
3.605
8
6.210
5.335
4.968
4.487
3.837
9
6.802
5.759
5.328
4.772
4.031
10
7.360
6.145
5.650
5.019
4.192
a. Determine a present value factor for anannuity of $1 which can be used in determining the internal rate of return. If required, round your answers to three decimal places.
b. Using the factor determined in part (a) and the present value of an annuity of $1 table above, determine the internal rate of return for the proposal. %
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“Distinguishing repairs versus betterments. Disney World experienced damage from a tornado at Space Mountain, one of its most popular attractions. It paid $30,200 to replace steel reinforcements to the structure damaged by the tornado, $86,100 for a new roof torn off by the tornado, $26,900 for a new air conditioning system that was housed on the roof, and $12,600 to replace carpeting damaged by water. Disney World estimates that higher quality steel used as replacements added 20% more structural support in terms of weight bearing capacity. The new air conditioning system provides 25% more cooling power than the unit previously installed in the attraction. Compute the amount of these expenses that Disney World should treat as a repair and the amount it should treat as a betterment.”
I assumed that the betterments equaled $30,200*.2+$26,900*.25=$12765 and repair would equal the total costs minus the betterment costs, $143,035. I also just tried assuming just the improvement to the A/C system was considered a betterment. However, these answers are all wrong. Thanks for any help!
Hickory Company manufactures two products”14,000 units of Product Y and 6,000 units of Product Z. The company uses a plant wide overhead rate based on direct labor hours. It is considering implementing an activity based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z: Activity Cost Pool Activity Measure Estimated Overhead Cost Expected Activity Machining …………………………. Machine hours $200,000 10,000 MHs Machine setups …………………. Number of setups $100,000 200 setups Production design ………………. Number of products $84,000 2 products General factory ………………….. Direct labor hours $300,000 12,000 DLHs Activity Measure Product Y Product Z Machining …………………………. 7,000 3,000 Number of setups ………………. 50 1 50 Number of products ……………. 1 1 Direct labor hours ………………. 8,000 4,000 QUESTIONS: 1. What is the company’s plantwide overhead rate? 2. Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y? How much is allocated to Product Z? 3. What is the activity rate for the Machining activity cost pool? 4. What is the activity rate for the Machine Setups activity cost pool? 5. What is the activity rate for the Product Design activity cost pool? 6. What is the activity rate for the General Factory activity cost pool? 7. Which of the four activities is a batch level activity? Why? 8. Which of the four activities is a product level activity? Why? 9. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? 10. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? 11. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y? What percentage is allocated to Product Z? 12. Using the ABC system, what percentage of the Machining costs is assigned to Product Y? What percentage is assigned to Product Z? Are these percentages similar to those obtained in question 11? Why? 13. Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y? What percentage is assigned to Product Z? Are these percentages similar to those obtained in question 11? Why? 14. Using the ABC system, what percentage of the Product Design cost is assigned to Product Y? What percentage is assigned to Product Z? Are these percentages similar to those obtained in question 11? Why? 15. Using the ABC system, what percentage of the General Factory cost is assigned to Product Y? What percentage is assigned to Product Z? Are these percentages similar to those obtained in question 1 ? Why?
High Tech Inc. is a virtual store that stocks a variety of calculators in their warehouse. Customer orders are placed, the order is picked an dpackaged, and then shipped to the customer. A fixed order quantity inventory control system (FQS) helps monitor and control these SKUs. The following information is for one of the calculators that they stock, sell and ship.
Average demand 12.5 calculators per week
Lead time 3 weeks
Order cost $20/order
Holding cost 1.20/calculator/year
Number of weeks 52 weeks per year
Standard deviation of weekly demand 3.75 calculators
SKU service level 90%
Curront on hand inventory 35 calculators
Scheduled receipts 20 calculators
Backorders 2 calculators
A. What is the Economic Order Quantity?
B. What is the total annual order and inventory holding costs for the EOQ?
C. What is the reorder point without safety stock?
D. What is the reorder point with safety stock?
E. Based on the previous info, should a fixed order quantity be placed, and if so, for how many calculators?
High Tension Transformers, Inc., manufactures heavy duty transformers for electrical switching stations. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the following data:
Year 1
Year 2
Year 3
Inventories:
Beginning (units)
180
150
160
Ending (units)
150
160
200
Variable costing net operating income
$292,400
$269,200
$251,800
The company’s fixed manufacturing overhead per unit was constant at $450 for all three years.
ebook & resources
8.
Required:
1.
Determine each year’s absorption costing net operating income. (Amounts to be deducted should be indicated with a minus sign.)
Reconciliation of Variable Costing and Absorption Costing Net Operating Incomes
Year 1
Year 2
Year 3
Variable costing net operating income
$
$
$
Add (deduct) fixed manufacturing overhead cost deferred in (released from) inventory under absorption costing
Absorption costing net operating income
$
$
$
9.
2.
In Year 4, the company’s variable costing net operating income was $240,200 and its absorption costing net operating income was $267,200.
a.
Did inventories increase or decrease during Year 4?
Increased
Decreased
b.
How much fixed manufacturing overhead cost was deferred or released from inventory during Year 4?
Fixed manufacturing overhead cost (Click to select) released from deferred in inventory during Year 4
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.
Activity
Cost
Cost Driver
Material handling
$320,000
Number of parts
Material insertion
2,950,000
Number of parts
Automated machinery
897,000
Machine hours
Finishing
256,000
Direct labor hours
Packaging
256,000
Orders shipped
Total
$4,679,000
The following information pertains to the three product lines for next year:
Economy
Standard
Deluxe
Units to be produced
10,000
7,000
2,300
Orders to be shipped
1,170
740
240
Number of parts per unit
10
20
30
Machine hours per unit
1
3
6
Labor hours per unit
2
2
2
rev: 10_29_2012
What is HiTech’s pool rate for the material handling activity closest to?
$16.57 per part.
$3.20 per part.
$1.04 per part.
$8.29 per labor hour.
A rate other than those listed above.
What is HiTech’s pool rate for the automated machinery activity closest to?
$58.00 per machine hour.
$20.52 per labor hour.
$20.02 per machine hour.
$50.42 per unit.
A rate other than those listed above.
What is HiTech’s pool rate for the finishing activity closest to?
$6.63 per machine hour.
$6.63 per unit.
A rate other than those listed above.
$6.63 per labor hour.
$9.13 per unit.
What is HiTech’s pool rate for the packaging activity closest to?
$6.49 per machine hour.
A rate other than those listed above.
$6.63 per labor hour.
$11.91 per unit.
$119.07 per order shipped.
Under an activity based costing system, what is the per unit overhead cost of Economy? (Do not round your intermediate calculations round your final answer to 2 decimal places.)
What is HiTech’s pool rate for the material handling activity closest to?
A rate other than those listed above.
$1.04 per part.
$3.20 per part.
$8.29 per labor hour.
$16.57 per part.
What is HiTech’s pool rate for the automated machinery activity closest to?
A rate other than those listed above.
$20.02 per machine hour.
$50.42 per unit.
$58.00 per machine hour.
$20.52 per labor hour.
What is HiTech’s pool rate for the finishing activity closest to?
$9.13 per unit.
$6.63 per machine hour.
A rate other than those listed above.
$6.63 per unit.
$6.63 per labor hour.
What is HiTech’s pool rate for the packaging activity closest to?
$6.63 per labor hour.
$6.49 per machine hour.
$11.91 per unit.
A rate other than those listed above.
$119.07 per order shipped.
Under an activity based costing system, what is the per unit overhead cost of Economy? (Do not round your intermediate calculations round your final answer to 2 decimal places.)
Holvey Company makes three products in a single facility. Data concerning these products follow: The mixing machines are potentially the constraint in the production facility. A total of 6,300 minutes are available per month on these machines. Direct labor is a variable cost in this company Products A B C Sales price per unit $70 $92.40 $85.90 Direct Materials 34 50.50 56.90 Direct Labor 21.40 24 14.80 Variable Man. Over. 1.20 $ .60 $ .50 Var. Selling cost per unit 1.80 2.30 2.10 Mixing Minutes per unit 1.20 .80 .40 Monthly Demand in Units 2,000 4,000 2,000 Required (SHOW ALL WORK) :a. How many minutes of mixing machine time would be required to satisfy demand for all three products? b. How much of each product should be produced to maximize net operating income? (Round off to the nearest whole unit.) c. Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity?(Round off to the nearest whole cent.) Please show all work
Hot Air Highlights (HAH) is considering the purchase of two new hot air balloons so that it can expand its desert sunset tours. Various information about the proposed investment follows: (Use Table 2 &Table 4.)
Initial investment (for two hot air balloons)
$
361,000
Useful life
8
years
Salvage value
$
49,000
Annual net income generated
$
33,212
HAH’s cost of capital
14
%
Required:
Help HAH evaluate this project by calculating each of the following:
(a)
Accounting rate of return. (Round your answer to 2 decimal places. Omit the “%” sign in your response.)
Accounting rate of return
%
(b)
Payback period. (Round your answer to 2 decimal places.)
Payback period
years
(c)
Net present value (NPV). (Negative amount should be indicated by a minus sign.Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Net present value
$
(d)
Recalculate the NPV assuming HAH’s cost of capital is 20 percent. (Negative amount should be indicated by a minus sign. Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Net present value
$
Lancer Corp. has the following information available about a potential capital investment:
Initial investment
$
1,309,200
Annual net income
$
216,000
Expected life
8
years
Salvage value
352,000
Lancer’s cost of capital
10
%
9. value:
10.00 points
Requirement 1:
Calculate the project’s net present value. (Round your intermediate calculations to 4 decimal places and round your final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Net present value
$
check my workeBook Links (2)references
Worksheet
Difficulty: Medium
10. value:
10.00 points
Requirement 3:
Calculate the net present value using a 17 percent discount rate. (Negative amount should be indicated by a minus sign. Round your intermediate calculations to 4 decimal places and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Net present value
$
Midway Printing Co. is considering the purchase of new electronic printing equipment. It would allow Midway to increase its net income by $63,030 per year. Other information about this proposed project follows:
Initial investment
$
330,000
Useful life
7
years
Salvage value
$
92,000
11. value:
10.00 points
Requirement 1:
Calculate the accounting rate of return for Midway. (Round your answer to 2 decimal places. Omit the “%” sign in your response.)
Accounting rate of return
%
Worksheet
Difficulty: Easy
12. value:
10.00 points
Requirement 2:
Calculate the payback period for Midway. (Round your answer to 2 decimal places.)
Payback period
years
value:
10.00 points
Dayton Corp has $2.00 million to invest in new projects. The company’s managers have presented a number of possible options that the board must prioritize. Information about the projects follows:
Project A
Project B
Project C
Project D
Initial investment
$
560,000
$
240,000
$
800,000
$
955,000
Present value of future cash flows
775,000
420,000
1,210,000
1,570,000
Requirement 1:
Is Dayton able to invest in all of these projects simultaneously?
(Click to select)NoYes
Requirement 2:
(a)
Calculate the profitability index for each project. (Round your answers to 4 decimal places.)
Profitability Index
Project A
Project B
Project C
Project D
(b)
In order of preference, rank the four projects in terms of profitability index for Dayton.
Hurren Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or Hours
Standard Price or Rate
Standard Cost PerUnit
Direct materials
3.5 grams
$7.00 per gram
$24.50
Direct labor
0.7 hours
$10.00 per hour
$7.00
Variable overhead
0.7 hours
$7.00 per hour
$4.90
The company reported the following results concerning this product in June.
Originallybudgetedoutput
8,400
units
Actual output
8,300
units
Raw materials used in production
28,290
grams
Actual direct labor hours
5,500
hours
Purchases of raw materials
30,900
grams
Actual price of raw materials purchased
$7.10
per gram
Actual direct labor rate
$10.90
per hour
Actual variable overhead rate
$6.70
per hour
The company applies variable overhead on the basis of direct labor hours. The direct materials price variance is computed when the materials are purchased.
The labor rate variance for June is:(Round your intermediate calculations to 2 decimal places.)
Hurren Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or Hours
Standard Price or Rate
Standard Cost PerUnit
Direct materials
3.6 grams
$6.00 per gram
$21.60
Direct labor
0.8 hours
$11.00 per hour
$8.80
Variable overhead
0.8 hours
$6.00 per hour
$4.80
The company reported the following results concerning this product in June.
Originallybudgetedoutput
8,100
units
Actual output
8,000
units
Raw materials used in production
28,300
grams
Actual direct labor hours
6,000
hours
Purchases of raw materials
31,000
grams
Actual price of raw materials purchased
$6.10
per gram
Actual direct labor rate
$11.90
per hour
Actual variable overhead rate
$5.70
per hour
The company applies variable overhead on the basis of direct labor hours. The direct materials price variance is computed when the materials are purchased.
The variable overhead rate variance for June is:(Round your intermediate calculations to 2 decimal places.)
Hurren Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or Hours
Standard Price or Rate
Standard Cost PerUnit
Direct materials
3.1 grams
$5.00 per gram
$15.50
Direct labor
0.6 hours
$14.00 per hour
$8.40
Variable overhead
0.6 hours
$5.00 per hour
$3.00
The company reported the following results concerning this product in June.
Originallybudgetedoutput
8,800
units
Actual output
8,700
units
Raw materials used in production
26,000
grams
Actual direct labor hours
3,200
hours
Purchases of raw materials
30,500
grams
Actual price of raw materials purchased
$5.10
per gram
Actual direct labor rate
$14.90
per hour
Actual variable overhead rate
$4.70
per hour
The company applies variable overhead on the basis of direct labor hours. The direct materials price variance is computed when the materials are purchased.
On April 1, 2008, Vandolay loans a $10,000 note to a customer opening a new store. The note, which bears 10% annual interest, becomes due on March 31, 2009. Prepare the required journal entry.
Note Receivable
Cash
On December 31, 2008, Vandolay accrued interest for the portion of the year that the note was outstanding. Prepare the required adjusting journal entry.
Interest Receivable
Interest Revenue
HW 8 ‘ 4, CONTINUED
On March 31, 2009, Vandolay received all interest and principal for the note. Prepare the required journal entry for the receipt of interest:.
Interest Receivable
Beg. Bal
750
Interest Revenue
[Cash account omitted]
Prepare the required journal entry for the receipt of principal.
I need answers to the following questions 2 28 involving costs and 3 46 involving a problem with 2 28 Consider the following costs that were incurred during the current year: 1. Tire costs incurred by Ford Motor Company. 2. Sales commissions paid to the sales force of Dell Inc. 3. Wood glue consumed in the manufacture of Thomasville f urniture. 4. Hourly wages of refinery security guards employed by ExxonMobil Corporation. 5. The salary of a financial vice president of Hewlett Packard. 6. Advertising costs of Coca Cola. 7. Straight line depreciation on factory machinery of Boeing Corporation. 8. Wages of assembly line personnel of Whirlpool Corporation. 9. Delivery costs on customer shipments of Ben & Jerry’s i ce c ream. 10. Newsprint consumed in printing The New York Times. 11. Plant insurance costs of Texas Instruments. 12. Glass costs incurred in light bulb manufacturing of General Electric. Required: Evaluate each of the preceding and determine whether the cost is ( a ) a product cost or a period cost, ( b ) variable or fixed in terms of behavior, and ( c ) for the product costs only, whether the cost is properly classified as direct material, direct labor, or manufacturing overhead. Item 1 is done as an example: Tire costs: Product cost, variable, direct material 3 46 Finlon Upholstery, Inc. uses a job order costing system to accumulate manufacturing costs. The company’s work in process on December 31, 20×1, consisted of one job (no. 2077), which was carried on the year end balance sheet at $156,800. There was no finished goods inventory on this date. Finlon applies manufacturing overhead to production on the basis of direct labor cost. (The budgeted direct labor cost is the company’s practical capacity, in terms of direct labor hours, multiplied by the budgeted direct labor rate.) Budgeted totals for 20×2 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year follow. Direct material used …………………………………………………………………………….. $ 5,600,000 Direct labor ………………………………………………………………………………………… 4,350,000 Indirect material used …………………………………………………………………………… 65,000 Indirect labor ……………………………………………………………………………………… 2,860,000 Factory depreciation …………………………………………………………………………….. 1,740,000 Factory insurance ……………………………………………………………………………….. 59,000 Factory utilities …………………………………………………………………………………… 830,000 Selling and administrative expenses ………………………………………………………… 2,160,000 Total ……………………………………………………………………………………………… $17,664,000 Job no. 2077 was completed in January 20×2; there was no work in process at year end. All jobs produced during 20×2 were sold with the exception of job no. 2143, which contained direct material costs of $156,000 and direct labor charges of $85,000. The company charges any under or overapplied overhead to Cost of Goods Sold. Required: 1. Determine the company’s predetermined overhead application rate. 2. Determine the additions to the Work in Process Inventory account for direct material used, direct labor, and manufacturing overhead. 3. Compute the amount that the company would disclose as finished goods inventory on the December 31, 20×2, balance sheet. 4. Prepare the journal entry needed to record the year’s completed production. 5. Compute the amount of under or overapplied overhead at year end, and prepare the necessary journal entry to record its disposition. 6. Determine the company’s 20×2 cost of goods sold. 7. Would it be appropriate to include selling and administrative expenses in either manufacturing overhead or cost of goods sold? Briefly explain. Thank you.
IGNORE ANY NUMBER IS PART THREE I CANNOT GET THEM NOT TO SHOW UP THEY ARE NOT CORRECT> I NEED ASSISTANCE WITH THIS PART
Bamboo You, Inc. This company manufactures bamboo picture frames that sell for $23 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 18 minutes to build, and the labor rate averages $9.00 per hour.
Bamboo You has the following inventory policies:
Ending finished goods inventory should be 30 percent of the next month’s sales.
Ending raw materials inventory should be 30 percent of the next month’s production.
Expected unit sales (frames) for the upcoming months follow:
March
280
April
260
May
310
June
390
July
370
August
450
Variable manufacturing overhead is incurred at a rate of $.30 per unit produced. Annual fixed manufacturing overhead is estimated to be $7,200 ($600 per month) for an expected production of 3,972 units for the year. Selling and administrative expenses are estimated at $670 per month plus $.60 per unit sold.
rev: 03 08 2011
Requirement 1:
Calculate the budgeted sales revenue for Bamboo You, Inc., for the second quarter (April, May, and June). Include each month as well as the quarter 2. (Omit the “$” sign in your response.)
April
May
June
2nd Quarter
Budgeted sales revenue
$
$
$
$
r
Requirement 2:
Calculate the production budget for Bamboo You, Inc., for the second quarter (April, May, and June). Include each month as well as the quarter 2.
April
May
June
2nd Quarter
Budgeted production
rev: 03 08 2011
Requirement 3:
Calculate the Raw materials purchases budget for Bamboo You, Inc., for the second quarter (April, May, and June). Include each month as well as the quarter 2. (Round your answers to the nearest whole number.Omit the “$” sign in your response.)
Compute the net cash flow from operating activities section of the 2010 statement of cash flows using the indirect method.(Omit the “$” sign in your response.)
Here is information for Zeus Ltd. for the 2012 calendar year:
Total credit sales
$6,600,000
Accounts receivable at December 31
2,500,000
Accounts receivable written off during year
96,000
Accounts receivable later recovered (after write off but before year end)
16,000
At the end of the year, uncollectible accounts were estimated to total $104,000 based on an aging schedule. Instructions
(a)
What amount of bad debts expense will Zeus record if Allowance for Doubtful Accounts has an opening credit balance of $40,000 on January 1?
(b)
Assume the same facts as in (a) except that there is a $20,000 opening credit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Zeus record?
(c)
What are the advantages of using the allowance method of reporting bad debts expense?
Intermediate Accounting II (Capitalization of Interest Ch.10) Early in 2012, Dobbs Corporation engaged Kiner, Inc. to design and construct a complete modernization of Dobb’s manufacturing facility. Construction was begun on June 1, 2012 and was completed on December 21, 2012. Dobbs made the following payments to Kiner, Inc. during 2012 Date Payment June 1, 2012 4,800,000 August 31, 2012 7,200,000 December 31, 2012 6,000,000 In order to help finance the construction, Dobbs issued the following during 2012: 1. 4,000,000 of 10 year, 9% bonds payable, issued at par on May 31, 2012 with interest payable annually on May 31. 2. 1,000,000 shares of no par common stock, issued at $10 per share on October 1, 2012. In addition to the 9% bonds payable the only debt outstanding during 2012 was a 1,000,000, 12% note payable dated January 1, 2008 and due January 1, 2018, with interest payable annually on January 1. Instructions: Compute the amounts of each of the following (show computations) 1. Weighted average accumulated expenditures qualifying for capitalization of interest cost. 2. Avoidable interest incurred during 2012. 3. Total amount of interest cost to be capitalized during 2012.
Jain Simmons Company needs 10,000 units of a certain part to be used in production. If Jain Simmons buys the part from Sullivan Company instead of making the part itself, Jain Simmons could not use its present facilities for another manufacturing activity. Sixty percent of the fixed overhead applied will continue regardless of what decision is made. The following quantitative information is by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″>available regarding the situation presented:
by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″>
Cost to make the part:
Direct material $6
Direct labor 24
Variable overhead 12
Fixed overhead applied 15
$57
Cost to buy the part $53
by Savings Explorer” href=”http://sjc.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do#” class=”c2″> A. In deciding whether to make or buy the part, what is Jain Simmons total relevant cost to make the part?
B. Which alternative (make or buy) is more desirable for Jain Simmons and by what amount?
C. Suppose that Jain Simmons Company is in the area of the country with high unemployment and that it is unlikely that displaced employees will find other by Savings Explorer” href=”http://onlinesolutionproviders.blogspot.com/2012/02/jain simmons company needs 10000 unitsl#” class=”c6″>employment. How might that impact your decision?
On January 1, 2007, Powell Company purchased a building and machinery that have the following useful
lives, residual value, and costs.
Building, 25 year estimated useful life, $4,000,000 cost, $400,000 residual value
Machinery, 10 year estimated useful life, $500,000 cost, no residual value
The building has been depreciated under the straight line method through 2011. In 2012, the company decided to switch to the double declining balance method of depreciation for the building. Powell also decided to change the total useful life of the machinery to 8 years, with a residual value of $25,000 at the end of that time. The machinery is depreciated using the straight line method.
Instructions
(a) Prepare the journal entry necessary to record the depreciation expense on the building in 2012.
(2 marks)
(b) Compute depreciation expense on the machinery for 2012. (2 marks)
The following production data were taken from the records of the Finishing Department for June:
Inventory in process, 6 1,
25% completed
1,500 units
Transferred to finished goods
during June
5,000 units
Equivalent units of production
during June
5,200 units
Determine the number of equivalent units of production in the June 30 Finishing Department inventory, assuming that the first in, first out method is used to cost inventories. Assume the completion percentage of 25% applies to both direct materials and conversion costs.
Self check Answers for XBRL Module Exercises Exercise 1 Go to https://xbrlviewer.bowne.com/. Select 4NET Software, Inc. from the left hand menu Select Quarterly Report (2012 06 30) Explore the information available in the viewer (do not access the Charts, they are temporarily down for maintenance). Locate the following information. You may insert screenshots for your responses. What is the company’s CIK (SEC Central Index Key) number? and What is the company’s Ticker Symbol and fiscal yearend? Exercise 2 Go to Footlocker. com.
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ACCT 614 XBRL Study Module and Homework This is a self paced study module with a graded homework assignment due in your assignment folder no later than the date shown in the related Conference and Course Schedule. In each section, I offer lecture notes on aspects of XBRL that take you to vetted XBRL resources that offer review of the concepts covered in the lecture. During this activity, remember, we do not have to learn a lot of XBRL code. What we have to learn is 1) the terminology, 2) how to read some code (similar to reading html code from an Internet doc), 3) how to select appropriate code from an XBRL taxonomy, and 4) how to check code in financial statements. At the end of module are several homework problems that you will submit for grading. Background on XBRL eXtensible Business Reporting Language (XBRL) is a language for the electronic communication of business and financial data and has been implemented by International Financial Reporting Standards (IFRS), the United States Generally Accepted Accounting Principles (U.S. GAAP), and many other national and international accounting standards bodies. In the United States, the Securities and Exchange Commission (SEC) requires public companies to file their financial statements in XBRL. The following article from Accounting Web provides a good summary to date of the path to XBRL compliance and the SEC’s filing requirements: ? HYPERLINK “http://www.accountingweb.com/topic/accounting auditing/public companies must submit xbrl exhibits sec 2011” ?Public companies must submit XBRL exhibits to SEC in 2011?. Essentially, we are now in “Phase 3”, details of which are available by visiting: ? HYPERLINK “http://www.sec.gov/spotlight/xbrl/xbrlsummaryinfophase3 051011.shtml” ?Summary of XBRL for Phase 3?. The FASB reports that This [XBRL] standard is maintained by XBRL International, an international non profit consortium of approximately 450 major companies, organizations, and government agencies…
The following selected information was extracted from the 20×1 accounting records of Lone Oak Products:
Raw material purchases
$
175,000
Direct labor
254,000
Indirect labor
108,000
Selling and administrative salaries
133,000
Building depreciation*
80,000
Other selling and administrative expenses
195,000
Other factory costs
343,000
Sales revenue ($130 per unit)
1,495,000
*Seventy five percent of the company’s building was devoted to production activities; the remaining 25 percent was used for selling and administrative functions.
Inventory data:
January 1
December 31
Raw material
$
15,800
$
18,200
Work in process
35,900
62,100
Finished goods*
111,100
97,900
*The January 1 and December 31 finished goods inventory consisted of 1,350 units and 1,190 units, respectively.
Requirement 1:
Calculate Lone Oak’s manufacturing overhead for the year. (Omit the “$” sign in your response.)
Manufacturing overhead
$
Requirement 2:
Calculate Lone Oak’s cost of goods manufactured. (Omit the “$” sign in your response.)
Cost of goods manufactured
$
Requirement 3: Compute the company’s cost of goods sold. (Omit the “$” sign in your response.)
Cost of goods sold
$
Requirement 4: Determine net income for 20×1, assuming a 30% income tax rate. ( Omit the “$” sign in your response.)
Net income
$
Requirement 5: Determine the number of completed units manufactured during the year. (Round your final answer to the nearest whole number.)
The following selected transactions occurred for Bleumortier Corporation. The company has a March 31 year end and adjusts accounts annually.
Jan.5
Sold $18,000 of merchandise to Brooks Limited, terms n/30. The cost of goods sold was $12,000.
Feb.1
Bleumortier has introduced its own credit card. Morgan Ltd. used the card to buy merchandise for $6,000 that cost Bleumortier $4,000. Interest on unpaid balances after 30 days is charged at 18% per annum (1.5% per month).
2
Accepted a four month, 6%, $18,000 promissory note from Brooks for the balance due. Interest is payable at maturity. (See January 5 transaction.)
3
Sold $13,400 of merchandise costing $8,800 to Gauthier Company and accepted Gauthier’s two month, 6% note in payment. Interest is payable at maturity.
26
Sold $8,000 of merchandise to Mathias Corp., terms n/30. The cost of the merchandise sold was $5,400.
Mar.6
Sold $4,000 of merchandise that cost $3,000 to Superior Limited. Superior paid using a bank credit card that has a 3% fee.
31
Accepted a two month, 7%, $8,000 note from Mathias for the balance due. Interest is payable at maturity. (See February 26 transaction.)
31
Adjusted any accrued interest at year end on notes and credit card receivables.
Apr.1
Collected full payment from Morgan Ltd.
3
Collected the Gauthier note in full. (See February 3 transaction.)
May31
The Mathias note of March 31 is dishonoured. It is expected that Mathias will eventually pay the amount owed.
June1
Collected the Brooks note in full. (See February 2 transaction.)
Instructions Record the transactions. Round your answers to the nearest dollar.
The following are the transactions for Smiley, Inc.
1.
The company is authorized to sell 1,000,000 shares of $10 par value common stock and 50,000 shares of $100 par value 6 percent preferred stock.
2.
As of the end of the current year, the company has actually sold 550,000 shares of common stock at $12 per share
3.
It has also sold 40,000 shares of preferred stock at $110 per share.
4.
40,000 shares have been repurchased at $60 per share and are currently being held in treasury to be used to meet the future requirements of a stock option plan that the company intends to implement.
a.
Prepare the general journal entries required to record all of the above transactions.(In cases where no entry is required, please select the option “No journal entry required” for your answer to grade correctly. Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.)
General Journal
Debit
Credit
1.
(Click to select)Dividends payableNo journal entry requiredCashPreferred stockAdditional paid in capital on common stockTreasury stockCommon stockCapital stock
(Click to select)Treasury stockDividends payableCashPreferred stockCommon stockAdditional paid in capital on common stockNo journal entry requiredCapital stock
2.
(Click to select)CashAdditional paid in capital on common stockDividends payableNo journal entry requiredTreasury stockOffice equipmentPreferred stockCommon stock
(Click to select)Common stockNo journal entry requiredPreferred stockOffice equipmentCashDividends payableTreasury stockAdditional paid in capital on common stock
(Click to select)No journal entry requiredDividends payableCashOffice equipmentPreferred stockTreasury stockCommon stockAdditional paid in capital on common stock
3.
(Click to select)Office equipmentCommon stockNo journal entry requiredPreferred stockTreasury stockCashAdditional paid in capital on preferred stockDividends payable
(Click to select)CashNo journal entry requiredDividends payableOffice equipmentTreasury stockPreferred stockCommon stockAdditional paid in capital on preferred stock
(Click to select)Preferred stockCommon stockNo journal entry requiredCashDividends payableAdditional paid in capital on preferred stockTreasury stockOffice equipment
4.
(Click to select)Additional paid in capital on preferred stockOffice equipmentPreferred stockTreasury stockNo journal entry requiredCommon stockCashDividends payable
(Click to select)Office equipmentTreasury stockNo journal entry requiredAdditional paid in capital on preferred stockPreferred stockCashCommon stockDividends payable
b.
Prepare the stockholders’ equity section of Smiley’s balance sheet to reflect the transactions you have recorded.(Input all amounts as positive values. Omit the “$” sign in your response.)
Stockholders’ Equity
(Click to select)CashRetained earningsPreferred stockTreasury stockCapital stock
$
(Click to select)Common stockRetained earningsTreasury stockCashCapital stock
$
Additional paid in capital:
(Click to select)Preferred stockCashTreasury stockRetained earningsCapital stock
(Click to select)Retained earningsCashCapital stockTreasury stockCommon stock
Total paid in capital
$
(Click to select)Add: dividendsLess: Treasury stockLess: dividendsAdd: Treasury stockCapital stock
The following unit data were assembled for the assembly process of the Super Co. for the month of June. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process.
Units
Beginning work in process
5,000
(60% complete)
Units started in September
51,000
Ending work in process
4,000
(30% complete)
The number of equivalent units produced with respect to direct materials costs is:
Whole Foods Market, Inc. included these statements in its 2010 annual report.
Required: A: Compute the following for 2010 and 2009:
1. Net profit margin, 2. Total asset turnover (use the year end assets), 3. Return on assets (use year end assets), 4. Operating income margin, 5. Return on operating assets (use year end assets), 6. Sales to fixed assets (use year end assets), 7. Return on investment (use year end balance sheet accounts), 8. Return on total equity (use year end equity), 9. Gross profit margin. B: Comment on the trends in (a).
Whole Foods Market, Inc. Consolidated Balance Sheets (in thousands) September 26, 2010 and September 27, 2009:
Assets: Current assets : Cash and cash equivalents (for 2010) $131,996; (for 2009) $430,130; Short term investments avalble for sale securities (for 2010) 329,738, (for 2009) 0; Restricted cash (for 2010) 86,802; (for 2009) 71,023; Accounts receivable (for 2010) 133,346, (for 2009) 104,731; Merchandise inventories (for 2010) 323,487 (for 2009) 310,602; Prepaid expenses and other current assets (for 2010) 54,686, (for 2009) 51,137; Deferred income taxes (for 2010) 101,464, (for 2009) 87,757; Total current assets (for 2010) 1,161,519, (for 2009) 1,055,380; Property and equipment, net of accumulated depreciation and amortization (for 2010) 1,886,130, (for 2009) 1,897,853; Long term investments available for sale securities (for 2010) 96,146, (for 2009) 0; Goodwill (for 2010) 665,224, (for 2009) 658,254; Intangible assets, net of accumulated amortization (for 2010) 69,064, (for 2009) 73,035; Deferred income taxes (for 2010) 99,156, (for 2009) 91,000; Other assets (for 2010) 9,301, (for 2009) 7,866; Total assets (for 2010) 3,986,540, (for 2009) 3,783,388; Liabilites and Shareholders Equity: Current LiabilitesL Current installments of long term debt and capital lease obligations (for 2010) $410; (for 2009) $389; Accounts payable (for 2010) 213,212, (for 2009) 189,597; Accrued payroll, bonus and other benefits due team members (for 2010) 244,427, (for 2009) 207,983; Dividends payable (for 2010) 0, (for 2009) 8,217; Other current liabilities (for 2010) 289,823, (for 2009) 277,838; Total current liabilities (for 2010) 747,872, (for 2009) 684,024; Long term debt and capital lease obligations, less current installments (for 2010) 508,288, (for 2009) 738,848; Deferred lease liabilities (for 2010) 294,291, (for 2009) 250,326; Other long term liabilities (for 2010) 62,831, (for 2009) 69,262; Total liabilities (for 2010) 1,613,282, (for 2009) 1,742,460; Series A redeemable preferred stock, $0.10 par value, 425 shares authorized; zero and 425 shares issued and outstanding at 2010 and 2009, respectively (for 2010) 0, (for 2009) 413,052; Shareholders Equity: Common stock, no par value, 300,000 shares authorized; 172,033 and 140,542 shares issued and outstandng at 2010 and 2009, respectively (for 2010) 1,773,897, (for 2009) 1,283,028; Accumulated other comprehensive income (loss) (for 2010) 791, (for 2009) 13,367; Retained earnings (for 2010) 598,570, (for 2009) 358,215; Total shareholders equity (for 2010) 2,373,258, (for 2009) 3,783,388; Whole Foods Market, Inc. Consolidated Statements of Operations (in thousands, except per share amounts) Fiscal years ended September 26, 2010, September 27, 2009 and September 28, 2008: Sales (for 2010) $9,005,794, (for 2009) $8,031,620, (for 2008) $7,953,912; Cost of goods sold and occupancy costs (for 2010) 5,870,393, (for 2009) 5,277,310, (for 2008) 5,247,207; Gross profit (for 2010) 3,135,401, (for 2009) 2,754,310, (for 2008) 2,706,705; Direct store expenses (for 2010) 2,375,716, (for 2009) 2,145,809, (for 2008) 2,107,940; General and administrative expenses (for 2010) 272,449, (for 2009) 243,749, (for 2008) 270,428; Pre opening expenses (for 2010) 38,044, (for 2009) 49,218, (for 2008) 55,554; Relocation, store closure and lease termination costs (for 2010) 11,217, (for 2009) 31,185, (for 2008) 36,545; Operating income (for 2010) 437,975, (for 2009) 284,349, (for 2008) 236,238; Interest expense (for 2010) 33,048, (for 2009) 36,856, (for 2008) 36,416; Investment and other income (for 2010) 6,854, (for 2009) 3,449, (for 2008) 6,697; income before taxes (for 2010) 411,781, (for 2009) 250,942, ((for 2008) 206,519; Provision for income taxes (for 2010) 165,948, (for 2009) 104,138, (for 2008) 91,995; Net income (for 2010) 245,833, (for 2009) 146,804, (for 2008) 114,524; Preferred stock dividends (for 2010) 5,478, (for 2009) 28,050, (for 2008) 0; Income available to common shareholders (for 2010) 240,355, (for 2009) 118,754, (for 2008) 114,524; Basic earings (for 2010) 1.45, (for 2009) 0.85, (for 2008) 0.82; Weighted average shares outstanding (for 2010) 166.244, (for 2009) 140,414, (for 2008) 139,886; Diluted earnings per share (for 2010) 1.43, (for 2009) 0.85, (for 2008) 0.82; Weighted average shares outstanding diluted basis (for 2010) 171,710, (for 2009) 140,414, (for 2008) 140,011; Dividends declared per common share (for 2010) 0, (for 2009) 0, (for 2008) 0.60.
PLEASE HELP ME WITH THIS I JUST DO NOT UNDERSTAND HOW TO DO THIS !!!!!!!! MY GRADE DEPENDS ON THIS QUESTION!!!!
Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a 3 year tax life, and the allowed depreciation rates for such property are 33%, 45%, 15%, and 7% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project’s 10 year expected life. What is the Year 1 cash flow? Equipment cost (depreciable basis) $65,000 Sales revenues, each year $60,000 Operating costs (excl. deprec.) $25,000 Tax rate 35.0% Lasik Vision Inc. recently analyzed the project whose cash flows are shown below. However, before Lasik decided to accept or reject the project, the Federal Reserve changed interest rates and therefore the firm’s WACC. The Fed’s action did not affect the forecasted cash flows. By how much did the change in the WACC affect the project’s forecasted NPV? Old WACC: 8.00% New WACC: 11.25% Year 0 1 2 3 Cash flows $1,000 $410 $410 $410
Fortuna Company issued 70,000 shares of $1 par stock, with a fair value of $20 per share, for 80% of the outstanding shares of Acappella Company. The firms had the following separate balance sheets prior to the acquisition:
Book values equal fair values for the assets and liabilities of Acappella Company, except for the property, plant, and equipment, which have a fair value of $1,600,000.
Required: a. What is the Goodwill/Gain associated with the acquisition:________________________
b. What is the Non Controlling Interest recorded in the consolidated balance sheet:______________
c. What is the balance of the assets and liabilities side of the consolidated balance sheet after the acquisition:________________
d.Record the two elimination entries associated with the acquisition of the company
Franklin Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for January.
Account Work in Process”Papermaking Department
Account No.
Date
Item
Debit
Credit
Balance
Debit
Credit
Jan.
1
Bal., 6,800 units, 80% completed
4,352
31
Direct materials, 36,300 units
58,080
62,432
31
Direct labor
16,760
79,192
31
Factory overhead
9,420
88,612
31
Goods transferred, 40,500 units
?
?
31
Bal., 2,600 units, 90% completed
?
I am looking for the $ amount of work in process that is transferred to converting department
Frieden Company’s contribution format income statement for the most recent month is given below: Sales (41,000 units) $ 1,189,000 Variable expenses 832,300 Contribution margin 356,700 Fixed expenses 285,360 Net operating income $ 71,340 Required: 1. New equipment has come on the market that would allow Frieden Company to automate a portion of its operations. Variable expenses would be reduced by $8.70 per unit. However, fixed expenses would increase to a total of $642,060 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. 4.)Refer to the original data. Rather than purchase new equipment, the marketing manager argues that the company’s marketing strategy should be changed. Instead of paying sales commissions, which are included in variable expenses, the marketing manager suggests that salespersons be paid fixed salaries and that the company invest heavily in advertising. The marketing manager claims that this new approach would increase unit sales by 50% without any change in selling price; the company’s new monthly fixed expenses would be $356,700; and its net operating income would increase by 25%. Compute the break even point in dollar sales for the company under the new marketing strategy. (Omit the “$” sign in your response.)
Fullerton Waste Management purchased land and a warehouse for $600,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition: broker’s commission, $30,000; title insurance, $3,000; miscellaneous closing costs, $6,000. Assume that Fullerton decides to use the warehouse rather than demolish it. An independent appraisal estimates the fair values of the land and warehouse at $420,000 and $280,000, respectively
Determine the amounts Fullerton should capitalize as the cost of the land and the building.
Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days. A recently employed MBA has considered Fullerton’s inventory problem from the EOQ model viewpoint. If the following constitute the relevant data, how does the current policy compare with the optimal policy? Ordering cost = $10 per order Carrying cost = 20% of purchase price Purchase price = $10 per unit Total sales for year = 1,000 units Safety stock = 0 a. Total costs will be the same, since the current policy is optimal. b. Total costs under the current policy will be less than total costs under the EOQ by $10. c. Total costs under the current policy exceed those under the EOQ by $3. d. Total costs under the current policy exceed those under the EOQ by $10. e. Cannot be determined due to insufficient informatio
Garr Co. issued $3,000,000 of 12%, 5 year convertible bonds on December 1, 2012 for $3,013,000 plus accrued interest. The bonds were dated April 1, 2012 with interest payable April 1 and October 1. Bond premium is amortized each interest period on a straight line basis. Garr Co. has a fiscal year end of September 30.
On October 1, 2013, $1,500,000 of these bonds were converted into 20,000 shares of $15 par common stock. Accrued interest was paid in cash at the time of conversion.
Instructions
(a)Prepare the entry to record the interest expense at April 1, 2013. Assume that interest payable was credited when the bonds were issued (round to nearest dollar).
(b)Prepare the entry to record the conversion on October 1, 2013. Assume that the entry to record amortization of the bond premium and interest payment has been made.
Gentile Corporation makes a product with the following standard costs:
Standard Quality or Hours
Standard Price or Rate
Inputs
Direct materials
7.5 kilos
$9.00 per kilo
Direct labor
1.0 hours
$15.60 per hour
Variable overhead
1.0 hours
$5.40 per hour
The company produced 6,200 units in May using 37,930 kilos of direct material and 4,500 direct labor hours. During the month, the company purchased 41,540 kilos of the direct material at $6.30 per kilo. The actual direct labor rate was $16.90 per hour and the actual variable overhead rate was $5.10 per hour.
The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased.
The variable overhead efficiency variance for May is:
Gladstone Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2009, the accounting records for the most popular item in inventory showed the following: Transactions Units Unit Cost Beginning inventory, January 1, 2009 2,000 $ 6.00 Transactions during 2009: a. Purchase, January 30 2,000 9.00 b. Sale, March 14 ($12 each) (1,400 ) c. Purchase, May 1 1,000 10.00 d. Sale, August 31 ($10 each) (1,500 ) Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31, 2009, under each of the following inventory costing methods. For Specific Identification, assume that the March 14, 2009, sale was selected two fifths from the beginning inventory and three fifths from the purchase of January 30, 2009. And that the sale of August 31, 2009, was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1, 2009. (Do not round Weighted average cost per unit. Round your final answers to the nearest dollar amount. Omit the “$” sign in your response.) How to calculate Specific identification for ending inventory and cost of goods sold??? Goods avail for sale Ending Inventory Cost of goods sold d. Specific identification. $40000 $ $
Gore Range Carpet Cleaning is a family owned business in Eagle Vail, Colorado. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.95 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers”particularly those located on more remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity based costing. After some discussion, a simple system consisting of four activity cost pools seemed to be adequate. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 10,000 hundred square feet Travel to jobs Miles driven 50,000 miles Job support Number of jobs 1,800 jobs Other (organization sustaining and idle capacity costs) None Not applicable The total cost of operating the company for the year is $340,000, which includes the following costs: Wages $ 140,000 Cleaning supplies 25,000 Cleaning equipment depreciation 10,000 Vehicle expenses 30,000 Office expenses 60,000 President’s compensation 75,000 Total cost $ 340,000 Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages 75 % 15 % 0 % 10 % 100 % Cleaning supplies 100 % 0 % 0 % 0 % 100 % Cleaning equipment depreciation 70 % 0 % 0 % 30 % 100 % Vehicle expenses 0 % 80 % 0 % 20 % 100 % Office expenses 0 % 0 % 60 % 40 % 100 % President’s compensation 0 % 0 % 30 % 70 % 100 % Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first stage allocation of costs to the activity cost pools. (Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.) Cleaning Carpets Travel to Jobs Job Support Other Total Wages $ $ $ $ $ Cleaning supplies Cleaning equipment depreciation Vehicle expenses Office expenses President’s compensation Total cost $ $ $ $ $ 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places. Omit the “$” sign in your response.) Activity Cost Pool Activity Rate Cleaning carpets $ per hundred square feet Travel to jobs $ per mile Job support $ per job 3. The company recently completed a 6 hundred square foot carpet cleaning job at the Lazy Bee Ranch”a 52 mile round trip from the company’s offices in Eagle Vail. Compute the cost of this job using the activity based costing system. (Round your intermediate calculations and final answer to 2 decimal places. Omit the “$” sign in your response.) Cost $ 4. The revenue from the Lazy Bee Ranch was $137.70 (6 hundred square feet at $22.95 per hundred square feet). Prepare a report showing the margin from this job. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.) Gore Range Carpet Cleaning Customer Margin”Activity Based Costing $ Costs: $ $
Gourley Clinic uses client visits as its measure of activity. During August, the clinic budgeted for 3,500 client visits, but its actual level of activity was 3,410 client visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
Fixed element per month
Variable element per client visit
Revenue
”
$39.60
Personnel expenses
$35,600
$10.80
Medical supplies
1,600
7.60
Occupancy expenses
8,600
1.60
Administrative expenses
5,600
0.7
Total expenses
$51,400
$20.70
The activity variance for administrative expenses in August would be closest to:
$63 F
$123 F
$63 U
$123 U
Hurren Corporation makes a product with the following standard costs:
Inputs
Standard Quantity or Hours
Standard Price or Rate
Standard Cost PerUnit
Direct materials
5.1 grams
$5.00 per gram
$25.50
Direct labor
1.4 hours
$16.00 per hour
$22.40
Variable overhead
1.4 hours
$5.00 per hour
$7.00
The company reported the following results concerning this product in June.
Originallybudgetedoutput
6,000
units
Actual output
5,900
units
Raw materials used in production
28,450
grams
Actual direct labor hours
5,200
hours
Purchases of raw materials
32,500
grams
Actual price of raw materials purchased
$5.10
per gram
Actual direct labor rate
$16.90
per hour
Actual variable overhead rate
$4.70
per hour
The company applies variable overhead on the basis of direct labor hours. The direct materials price variance is computed when the materials are purchased.
Harrison Company makes two products and uses a conventional costing system in which a single plant wide predetermined overhead rate is computed based on direct labor hours. Data for the two products for the upcoming year follow:
Rascon Parcel Direct materials cost per unit………………….. $ 13.50 $ 22.40 Direct labor cost per unit…………………………..$ 6.00 $ 3.00 Direct labor hours per unit………………………. 0.40 0.20 Number of units produced……………………….20,000 80,000
These products are customized to some degree for specific customers.
Required: 1. The company’s manufacturing overhead costs for the year are expected to be $576,000. Using the company’s conventional costing system, compute the unit product costs for the two products.
2. Management is considering an activity based costing system in which half of the overhead would continue to be allocated on the basis of direct labor hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:
Rascon Parcel Total Engineering design time (in hours)…….. 3,000 3,000 6,000
Compute the unit product costs for the two products using the proposed ABC system.
3. Explain why the product costs differ between the two systems.
CVP, target operating income, service firm Snow Leopard Daycare provides daycare for children Mondays through Fridays. Its monthly variable costs per child are as follows:
Lunch and snacks $150
Educational supplies 60
Other supplies (paper products, toiletries, etc.) 20
Total$230
Monthly fixed costs consist of the following:
Rent $2,150
Utilities 200
Insurance 250
Salaries 2,350
Miscellaneous 650
Total $5,600
Snow Leopard charges each parent $580 per child.
Required
1. Calculate the breakeven point.
2. Snow Leopard’s target operating income is $10,500 per month. Compute the number of children who must be enrolled to achieve the target operating income.
3. Snow Leopard lost its lease and had to move to another building. Monthly rent for the new building is $3,150. At the suggestion of parents, Snow Leopard plans to take children on field trips. Monthly costs of the field trips are $1,300. By how much should Snow Leopard increase fees per child to meet the target operating income of $10,500 per month, assuming the same number of children as in requirement 2?
CVP, target operating income, service firm Teddy Bear Daycare provides daycare for children Mondays through Fridays. Its monthly variable costs per child are:
?
Teddy Bear charges each parent$600 per child.
1. Calculate the breakeven point.
2. Teddy Bear’s target operating income is $10,400 per month. Compute the number of children who must be enrolled to achieve the target operating income.
3. Teddy Bear lost its lease and had to move to another building. Monthly rent for the new building is $3,000. At the suggestion of parents, Teddy Bear plans to take children on field trips. Monthly costs of the field trips are $1,000. By how much should Teddy Bear increase fees per child to meet the target operating income of $10,400 per month, assuming the same number of children as in requirement2?
DCF, accrual accounting rate of return, working capital, evaluation of performance, no income taxes. Century Lab plans to purchase a new centrifuge machine for its New Hampshire facility. The machine costs $137,500 and is expected to have a useful life of eight years, with a terminal disposal value of $37,500. Savings in cash operating costs are expected to be $31,250 per year. However, additional working capital is needed to keep the machine running efficiently. The working capital must continually be replaced, so an investment of $10,000 needs to be maintained at all times, but this investment is fully recoverable (will be ?ocashed in??) at the end of the useful life. Century Lab’s required rate of return is 14%. Ignore income taxes in your analysis. Assume all cash flows occur at year end except for initial investment amounts.
1. Calculate net present value.
2. Calculate internal rate of return.
3. Calculate accrual accounting rate of return based on net initial investment. Assume straight line depreciation.
4. You have the authority to make the purchase decision. Why might you be reluctant to base your decision on the DCF methods?
Delphi Company has developed a new product that will be marketed for the first time during the next fiscal year. Although the marketing department estimates that $35,000 units could be sold at $36 per unit, Delphi’s management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed expenses associated with the new product are budgeted at $450,000 for the year. The variable expenses of the new product are $16 per unit.
Required:
How much units of the new product must Delphi sell during the next fiscal year in order to break even on the product?
What is the profit Delphi would earn on the new product if all of the manufacturing capacity allocated by management is used and the products is sold for $36 per unit?
Denominator level choices, changes in inventory levels, effect on operating income. Koshu Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for 2011:
There are no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The production volume variance is written off to cost of goods sold. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory.
Required
1. What is the production volume variance in 2011 when the denominator level is
(a) Theoretical capacity,
(b) Practical capacity, and
(c) Normal capacity utilization?
2. Prepare absorption costing–based income statements for Koshu Corporation using theoretical capacity, practical capacity, and normal capacity utilization as the denominator levels.
3. Why is the operating income under normal capacity utilization lower than the other two scenarios?
4. Reconcile the difference in operating income based on theoretical capacity and practical capacity with the difference in fixed manufacturing overhead included ininventory.
Denominator level problem Thunder Bolt, Inc., is a manufacturer of the very popular G36 motorcycles. The management at Thunder Bolt has recently adopted absorption costing and is debating which denominator level concept to use. The G36 motorcycles sell for an average price of $8,200. Budgeted fixed manufacturing overhead costs for 2012 are estimated at $6,480,000. Thunder Bolt, Inc., uses subassembly operators that provide component parts. The following are the denominator level options that management has been considering:
a. Theoretical capacity—based on three shifts, completion of five motorcycles per shift, and a 360 day year—3 x 5 x 360 = 5,400.
b. Practical capacity—theoretical capacity adjusted for unavoidable interruptions, breakdowns, and so forth—3 x 4 x 320 = 3,840.
c. Normal capacity utilization—estimated at 3,240 units.
d. Master budget capacity utilization—the strengthening stock market and the growing popularity of motorcycles have prompted the marketing department to issue an estimate for 2012 of 3,600 units.
Required
1. Calculate the budgeted fixed manufacturing overhead cost rates under the four denominator level concepts.
2. What are the benefits to Thunder Bolt, Inc., of using either theoretical capacity or practical capacity?
3. Under a cost based pricing system, what are the negative aspects of a master budget denominator level? What are the positive aspects?
Department and activity cost rates, service sector Radhika’s Radiology Center (RRC) performs x rays, ultrasounds, CT scans, and MRls. RRC has developed a reputation as a top Radiology Center in the state. RRC has achieved this status because it constantly re examines its processes and procedures. RRC has been using a single, facility wide overhead allocation rate. The VP of Finance believes that RRC can make better process improvements if it uses more disaggegated cost information. She says, ?oWe have state of the art medical imaging technology. Can’t we have state of the art accounting technology???
RRC operates at capacity. The proposed allocation bases for overhead are as follows:
1. Calculate the budgeted cost per service for X rays, Ultrasounds, CT scans, and MRIs using direct technician labor costs as the allocation basis.
2. Calculate the budgeted cost per service of X rays, Ultrasounds, CT scans, and MRIs if RRC allocated overhead costs using activity based costing.
3. Explain how the disaggregation of information could be helpful to RRC’s intention to continuously improve their services.
Dim Witt is the county commissioner of Clueless County. He decided to institute tolls for local ferry boat passengers. After the tolls had been in effect for four months, Astra Astute, county accountant, noticed that collecting $1,450 in tolls incurred a daily cost of $2,000. The toll is $0.50 per passenger.
a. How many people are using the ferry boats each day?
b. If the $2,000 cost is entirely fixed, how much must each passenger be charged for the toll process to break even? How much must each passenger be charged for the toll process to make a profit of $250 per day?
c. Assume that only 80 percent of the $2,000 is fixed and the remainder varies by passenger. If the toll is raised to $0.60 per person, passenger volume is expected to fall by 10 percent. If the toll is raised and volume falls, will the county be better or worse off than it is currently and by what amount?
d. Assume that only 80 percent of the $2,000 is fixed and the remainder varies by passenger. If passenger volume will decline by 5 percent for every $0.20 increase from the current $0.50 rate, at what level of use and toll amount would the county first make a profit?
e. Discuss the saying ?oWe may be showing a loss, but we can make it up in volume.??
Downward demand spiral Spirelli Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility, and has purchased several expensive pieces of equipment. In 2011, the company’s first year, Spirelli budgets for production and sales of 25,000 units, compared with its practical capacity of 50,000. The company’s cost data follow:
Variable manufacturing costs per unit:
Direct materials $ 24
Direct manufacturing labor 36
Manufacturing overhead12
Fixed manufacturing overhead$ 700,000
Required
1. Assume that Spirelli uses absorption costing, and uses budgeted units produced as the denominator for calculating its fixed manufacturing overhead rate. Selling price is set at 120% of manufacturing cost. Compute Spirelli’s selling price.
2. Spirelli enters the market with the selling price computed previously. However, despite growth in the overall market, sales are not as robust as had been expected, and a competitor has priced its product $15 lower than Spirelli’s. Enrico Spirelli, the company’s president, insists that the competitor must be pricing its product at a loss, and that the competitor will be unable to sustain that. In response, Spirelli makes no price adjustments, but budgets production and sales for 2012 at 22,000 units. Variable and fixed costs are not expected to change. Compute Spirelli’s new selling price. Comment on how Spirelli’s choice of budgeted production affected its selling price and competitive position.
3. Recompute the selling price using practical capacity as the denominator level of activity. How would this choice have affected Spirelli’s position in the marketplace? Generally, how would this choice affect the production volume variance?
Economic order quantity for retailer. Fan Base (FB) operates a megastore featuring sports merchandise. It uses an EOQ decision model to make inventory decisions. It is now considering inventory decisions for its Los Angeles Galaxy soccer jerseys product line. This is a highly popular item. Data for 2009 are:
Each jersey costs FB $40 and sells for $80. The $7 carrying cost per jersey per year comprises the required return on investment of $4.80 (12% x $40 purchase price) plus $2.20 in relevant insurance, handling, and theft related costs. The purchasing lead time is 7 days. FB is open 365 days a year
1. Calculate the EOQ.
2. Calculate the number of orders that will be placed each year
Economic order quantity, effect of parameter changes (continuation of 20 16). Athletic Textiles (AT) manufactures the Galaxy jerseys that Fan Base (FB) sells to its customers. AT has recently installed computer software that enables its customers to conduct ?oone stop?? purchasing using state of the art Web site technology. FB’s ordering cost per purchase order will be $30 using this new technology.
1. Calculate the EOQ for the Galaxy jerseys using the revised ordering cost of $30 per purchase order Assume all other data from Exercise 20 16 are the same. Comment on the result
2. Suppose AT proposes to ?oassist?? FB. AT will allow EB customers to order directly from the AT Web site. AT would ship directly to these customers. AT would pay $10 to FB for every Galaxy jersey purchased by one of FB’s customers. Comment qualitatively on how this offer would affect inventory management at FB. What factors should FB consider in deciding whether to accept AT’s proposal?
Effect of different order quantities on ordering costs and carrying costs, EOQ. Soothing Meadow, a retailer of bed and bath linen, sells 380,000 packages of Mona Lisa designer sheets each year. Soothing Meadow incurs an ordering cost of $57 per purchase order placed with Mona Lisa Enterprises and an annual carrying cost of $12.00 per package. Liv Carrol, purchasing manager at Soothing Meadow, seeks your help: She wants to understand how ordering and carrying costs vary with order quantity.
?
Required
1. Complete the table for Liv Carrol. What is the EOQ? Comment on your results.
2. Mona Lisa is about to introduce a Web based ordering system for its customers. Liv Carrol estimates that Soothing Meadow’s ordering costs will reduce to $30 per purchase order. Calculate the new EOQ and the new annual relevant costs of ordering and carrying inventory.
3. Liv Carrol estimates that Soothing Meadow will incur a cost of $2,150 to train its two purchasing assistants to use the new Mona Lisa system. Will Soothing Meadow recoup its training costs within the first year ofadoption?
Effect of different order quantities on ordering costs and carrying costs, EOQ. Koala Blue, a retailer of bed and bath linen, sells 234,000 packages of Mona Lisa designer sheets each year Koala Blue incurs an ordering cost of $81 per purchase order placed with Mona Lisa Enterprises and an annual carrying cost of $11.70 per package. Liv Carrol, purchasing manager at Koala Blue, seeks your help: She wants to understand how ordering and carrying costs vary with order quantity.
1. Complete the preceding table for Liv Carrol. What is the EGG? Comment on your results.
2. Mona Lisa is about to introduce a Web based ordering system for its customers. Liv Carrol estimates that Koala Blue’s ordering costs will be reduced to $49 per purchase order. Calculate the new EGG and the new annual relevant costs of ordering and carrying inventory,
3. Liv Carrol estimates that Koala Blue will incur a cost of $2,000 to train its two purchasing assistants to use the now Mona Lisa system. Help Liv Carrol present a case to upper management showing that Koala Blue will be able to recoup its training costs within the first year ofadoption.
Effects of differing production levels on absorption costing income. Metrics to minimize inventory buildups. Effects of differing production levels on absorption costing income: Metrics to minimize inventory buildups. University Press produces textbooks for college courses. They recently hired a new editor, Leslie White, to handle production and sales of books for an introduction to accounting course. Leslie’s compensation depends on the gross margin associated with sales of this book. Leslie needs to decide how many copies of the book to produce. The following information is available for the fall semester 2010:
?
The fixed cost allocation rate is based on expected sales and is therefore equal to
$120,000/10,000 books = $12 per book
Leslie has decided to produce either 10,000, 12,000, or 16,000 books.
1. Calculate expected gross margin if Leslie produces 10,000, 12,000, or 16,000 hooks. (Make sure you include the production volume variance as part of cost of goods sold)
2. Calculate ending inventory in units and in dollars for each production level.
3. Managers who are paid a bonus that is a function of gross margin may be inspired to produce product in excess of demand to maximize their own bonus. The chapter suggested metrics to discourage managers from producing products in excess of demand. Do you think the following metrics will accomplish this objective? Show your work.
a. Incorporate a charge of 10% of the cost of the ending inventory as an expense for evaluating the manager.
b. Include non financial measures when evaluating management and rewardingperformance.
Electron, Inc. is a semiconductor company based in San Jose. In 2009, it produced a new router system for its corporate clients. The average wholesale selling price of the system is $1,200 each. For 2009, Electron estimates that it will sell 10,000 router systems and so produces 10,000 units. Actual 2009 sales are 8,960 units. Electron’s actual 2009 costs are:
?
1. Calculate the operating income under variable costing.
2. Each router unit produced is allocated $165 in fixed manufacturing costs. If the production volume variance is written off to cost of goods sold, and there are no price, spending, or efficiency variances, calculate the operating income under absorption costing.
3. Explain the differences in operating incomes obtained in requirement 1 and requirement 2.
4. Electron’s management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this create for the supervisors? Do you think this new bonus plan is a good idea? Explainbriefly.
EOQ for a retailer. The Cloth Center sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high quality merchandise. The purchasing officer of the Cloth Center has collected the following information:
The purchasing lead time is 2 weeks. The Cloth Center is open 250 days a year (50 weeks for 5 days a week).
1. Calculate the EOQ for denim cloth.
2. Calculate the number of orders that will be placed each year
EOQ for manufacturer. Lakeland Company, which produces lawn mowers, purchases 18,000 units of a rotor blade part each year at a cost of $60 per unit Lakeland requires a 15% annual rate of return on investment In addition, the relevant carrying cost (for insurance, materials handling, breakage, and so on) is $6 per unit per year The relevant ordering cost per purchase order is $150.
1. Calculate Lakeland’s EOQ for the rotor blade part.
2. Calculate Lakeland’s annual relevant ordering costs for the EOQ calculated in requirement 1.
3. Calculate Lakeland’s annual relevant carrying costs for the EOQ calculated in requirement 1.
4. Assume that demand is uniform throughout the year and known with certainty so that there is no need for safety stocks. The purchase order lead time is half a month. Calculate Lakeland’s reorder point for the rotor blade part.
For each of the following independent situations, determine whether any of the expenditures qualify as deductible education expenses in connection with a trade or business (Reg. Sec. 1.162 5). Are the expenditures classified as for AGI or from AGI deductions?__________________________________________________________________________________________________a. Law school tuition and books for an IRS agent who is pursuing a law degree: $2,000_____________________________________________________________________________________________b. Continuing professional accounting education expenses of $1,900 for a self employed CPA: travel, $1,000 (including $200 meals); registration fees, $800; books, $100.______________________________________________________________________________________________c. Tuition and books acquired for graduate education courses required under state law for a schoolteacher in order to renew a provisional certificate: $1,000._____________________________________________________________________________________________d. Bar review courses for a recent law school graduate: $1,000.
The following is a partially completed lower section of a departmental expense allocation spreadsheet for Stoneham. It reports the total amounts of direct and indirect expenses for the four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Maintenance department expense to be allocated to Fabrication OPERATING COSTS Purchasing $32,000 Maint.$18,000 Fabricaton$96,000 Assembly $62,000 No. of Purchase orders………………………………………………………………..16………………………..4 Sq. Ft of Space………………………………………………………………………….3,300…………………2,700
Contribution margin, gross margin, and margin of safety Mirabella Cosmetics manufactures and sells a face cream to small ethnic stores in the greater New York area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Mirabella’s cost structure..
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e download the template for Exercise 3 31.
1. Recast the income statement to emphasize contribution margin.
2. Calculate the contribution margin percentage and breakeven point in units and revenues for June 2008.
3. What is the margin of safety (in units) for June 2008?
4. If sales in June were only 8,000 units and Mirabella’s tax rate is 30%, calculate its netincome
Cost allocation, downward demand spiral. Cayzer Associates operates a chain of 10 hospitals in the Los Angeles area. Its central food catering facility, Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,300,000 meals a year. In 2012, based on estimates from each hospital controller, Mealman budgeted for 975,000 meals a year. Budgeted fixed costs in 2012 were $1,521,000. Each hospital was charged $6.46 per meal—$4.90 variable costs plus $1.56 allocated budgeted fixed cost. Recently, the hospitals have been complaining about the quality of Mealman’s meals and their rising costs. In mid 2012, Cayzer’s president announces that all Cayzer hospitals and support facilities will be run as profit centers. Hospitals will be free to purchase quality certified services from outside the system. Ron Smith, Mealman’s controller, is preparing the 2013 budget. He hears that three hospitals have decided to use outside suppliers for their meals; this will reduce the 2013 estimated demand to 780,000 meals. No change in variable cost per meal or total fixed costs is expected in 2013.
Required
1. How did Smith calculate the budgeted fixed cost per meal of $1.56 in 2012?
2. Using the same approach to calculating budgeted fixed cost per meal and pricing as in 2012, how much would hospitals be charged for each Mealman meal in 2013? What would their reaction be?
3. Suggest an alternative cost based price per meal that Smith might propose and that might be more acceptable to the hospitals. What can Mealman and Smith do to make this price profitable in the long run?
Cost hierarchy. Hamilton, Inc., manufactures boom boxes (music systems with radio, cassette, and compact disc players) for several well known companies. The boom boxes differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2011:
a. Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $1,450,000
b. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $850,000
c. Cost of indirect materials, $275,000
d. Costs incurred to set up machines each time a different product needs to be manufactured, $630,000
e. Designing processes, drawing process charts, making engineering process changes for products, $775,000
f. Machine related overhead costs such as depreciation, maintenance, production engineering, $1,500,000 (These resources relate to the activity of running the machines.)
g. Plant management, plant rent, and plant insurance, $925,000
Required
1. Classify each of the preceding costs as output unit level, batch level, product sustaining, or facility sustaining. Explain each answer.
2. Consider two types of boom boxes made by Hamilton, Inc. One boom box is complex to make and is produced in many batches. The other boom box is simple to make and is produced in few batches. Suppose that Hamilton needs the same number of machine hours to make each type of boom box and that Hamilton allocates all overhead costs using machine hours as the only allocation base. How, if at all, would the boom boxes be miscosted? Briefly explain why.
3. How is the cost hierarchy helpful to Hamilton in managing its business?
CVP alternative cost structures. Kids Lemonade Stand (KLS) is run by Sarah, who sells lemonade for $0.50 per glass. Lemons, sugar and water cost $0.15 per glass. Sarah’s friend, Jessica, helps out by squeezing the lemons for $0.10 each. (Each lemon will provide enough juice for 2 glasses of lemonade.) Sarah uses tables, chairs and pitchers that belong to David who gathered the furniture when he had the stand last summer David charges $6 per day for use of the furniture.
1. How many glasses of lemonade does Sarah have to sell each day to breakeven?
2. Sarah wants to earn $3 per day after expenses. How many glasses does she have to sell to earn $ 3.
3. David wants more money, so he has offered to squeeze all the lemons Sarah needs for $1 .70 per day. If Sarah hires David instead of Jessica, how many glasses will Sarah have to sell each day to breakeven?
4. At what sales level will Sarah be indifferent between hiring Jessica or David to squeeze the lemons? At what sales levels would she prefer to (a) hire Jessica (b) hire David?
CVP analysis, changing revenues and costs Sunny Spot Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Canadian Air. Sunny Spot’s fixed costs are $23,500 per month. Canadian Air charges passengers $1,500 per round trip ticket.
Calculate the number of tickets Sunny Spot must sell each month to
(a) Break even and
(b) Make a target operating income of $17,000 per month in each of the following independent cases.
Required
1. Sunny Spot’s variable costs are $43 per ticket. Canadian Air pays Sunny Spot 6% commission on ticket price.
2. Sunny Spot’s variable costs are $40 per ticket. Canadian Air pays Sunny Spot 6% commission on ticket price.
3. Sunny Spot’s variable costs are $40 per ticket. Canadian Air pays $60 fixed commission per ticket to Sunny Spot. Comment on the results.
4. Sunny Spot’s variable costs are $40 per ticket. It receives $60 commission per ticket from Canadian Air. It charges its customers a delivery fee of $5 per ticket. Comment on the results.
CVP analysis, income taxes (CMA, adapted) R. A. Ro and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past five years. However, increased competition has led Mr. Ro, the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company’s present growth. To prepare for next year’s marketing campaign, the company’s controller has prepared and presented Mr. Ro with the following data for the current year, 2011: Variable cost (per bowl)
1. What is the projected net income for 2011? Required
2. What is the breakeven point in units for 2011?
3. Mr. Ro has set the revenue target for 2012 at a level of $550,000 (or 22,000 bowls). He believes an additional marketing cost of $11,250 for advertising in 2012, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2012 if the additional $11,250 is spent and the revenue target is met?
4. What is the breakeven point in revenues for 2012 if the additional $11,250 is spent for advertising?
5. If the additional $11,250 is spent, what are the required 2012 revenues for 2012 net income to equal 2011 net income?
6. At a sales level of 22,000 units, what maximum amount can be spent on advertising if a 2012 net income of $60,000 isdesired?
CVP analysis, income taxes, sensitivity. (CMA, adapted) Agro Engine Company manufactures and sells diesel engines for use in small farming equipment. For its 2012 budget, Agro Engine Company estimates the following:
Selling price $ 3,000
Variable cost per engine $ 500
Annual fixed costs $3,000,000
Net income $1,500,000
Income tax rate 25%
The first quarter income statement, as of March 31, reported that sales were not meeting expectations. During the first quarter, only 300 units had been sold at the current price of $3,000. The income statement showed that variable and fixed costs were as planned, which meant that the 2012 annual net income projection would not be met unless management took action. A management committee was formed and presented the following mutually exclusive alternatives to the president:
a. Reduce the selling price by 20%. The sales organization forecasts that at this significantly reduced price, 2,000 units can be sold during the remainder of the year. Total fixed costs and variable cost per unit will stay as budgeted.
b. Lower variable cost per unit by $50 through the use of less expensive direct materials. The selling price will also be reduced by $250, and sales of 1,800 units are expected for the remainder of the year.
c. Reduce fixed costs by 20% and lower the selling price by 10%. Variable cost per unit will be unchanged. Sales of 1,700 units are expected for the remainder of the year.
Required
1. If no changes are made to the selling price or cost structure, determine the number of units that Agro Engine Company must sell (a) to break even and (b) to achieve its net income objective.
2. Determine which alternative Agro Engine should select to achieve its net income objective. Show your calculations.
CVP analysis, income taxes, sensitivity. (CMA, adapted) Almo Company manufactures and sells adjustable canopies that attach to motor homes and trailers. For its 2009 budget Almo estimates the following:
The May income statement reported that sales were not meeting expectations. For the first five months of the year, only 350 units had been sold at the established price, with variable costs as planned, and it was clear that the net income projection for 2009 would not be reached unless some actions were taken. A management committee presented the following mutually exclusive alternatives to the president
a. Reduce the selling price by $40. The sales organization forecasts that at this significantly reduced price, 2,700 units can be sold during the remainder of the year Total fixed costs and variable cost per unit will stay as budgeted.
b. Lower variable cost per unit by $10 through the use of less expensive direct materials and slightly modified manufacturing techniques. The selling price will also be reduced by $30, and sales of 2,200 units are expected for the remainder of the year
c. Reduce fixed costs by $10,000 and lower the selling price by 5%. Variable cost per unit will be unchanged. Sales of 2,000 units are expected for the remainder of the year
1. If no changes are made to the selling price or cost structure, determine the number of units that Almo Company must sell (a) to break even and (b) to achieve its net income objective.
2. Determine which alternative Almo should select to achieve its net income objective. Show you calculations.
CVP analysis, international cost structure differences Knitwear, Inc., is considering three countries for the sole manufacturing site of its new sweater: Singapore, Thailand, or the United States. All sweaters are to be sold to retail outlets in the United States at $32 per unit these retail outlets add their own markup when selling to final customers. Fixed costs and variable cost per unit (sweater) differ in the three countries.
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngrenfcost13e and download the template for Exercise 3 26.
1. Compute the breakeven point for Knitwear, Inc., in each country in (a) units sold (b) revenues.
2. If Knitwear, Inc., plans to produce and sell 800,000 sweaters in 2009, what is the budgeted operating income for each of the three manufacturing locations? Comment on theresults.
CVP analysis, margin of safety (CMA, adapted) Technology Solutions sells a ready to use software product for small businesses. The current selling price is $300. Projected operating income for 2011 is $490,000 based on a sales volume of 10,000 units. Variable costs of producing the software are $120 per unit sold plus an additional cost of $5 per unit for shipping and handling. Technology Solutions annual fixed costs are $1,260,000.
Required:
1. Calculate Technology Solutions breakeven point and margin of safety in units.
2. Calculate the company’s operating income for 2011 if there is a 10% increase in unit sales.
3. For 2012, management expects that the per unit production cost of the software will increase by 30%, but the shipping and handling costs per unit will decrease by 20%. Calculate the sales revenue Technology Solutions must generate for 2012 to maintain the current year’s operating income if the selling price remains unchanged, assuming all other data as in the original problem.
CVP analysis, multiple cost drivers Susan Wong is a distributor of brass picture frames. For 2008, she plans to purchase frames for $30 each and sell them for $45 each. Susan’s fixed costs are expected to be $240,000. Susan’s only other costs will be variable costs of $60 per shipment for preparing the invoice and delivery documents, organizing the delivery, and following up for collecting accounts receivable. The $60 cost will be incurred each time Susan ships an order of picture frames, regardless of the number of frames in the order
1. a. Suppose Susan sells 40,000 picture frames in 1,000 shipments in 2008. Calculate Susan’s 2008 operating income.
b. Suppose Susan sells 40,000 picture frames in 800 shipments in 2008. Calculate Susan’s 2008 operating income.
2. Suppose Susan anticipates making 500 shipments in 2008. How many picture frames must Susan sell to break even in 2008?
3. Calculate another breakeven point for 2008, different from the one described in requirement 2. Explain briefly why Susan has multiple breakeven points.
CVP analysis, sensitivity analysis Hoot Washington is the newly elected leader of the Republican Party. Media Publishers is negotiating to publish Hoot’s Manifesto, a new book that promises to be an instant best seller the fixed costs of producing and marketing the book will be $500,000. The variable costs of producing and marketing will be $4.00 per copy sold. These costs are before any payments to hoot negotiates an up front payment of$3 million, plus a 15% royalty rate on the net sales price of each book. The net sales price is the listed bookstore price of $30, minus the margin paid to the bookstore to sell the book. The normal bookstore margin of 30% of the listed bookstore price is expected to apply.
1. Prepare a PV graph for Media Publishers.
2. How many copies must Media Publishers sell to (a) break even and (b) earn a target operating income of $2 million?
3. Examine the sensitivity of the breakeven point to the following changes:
a. Decreasing the normal bookstore margin to 20% of the listed bookstore price of $30.
b. Increasing the listed bookstore price to $40 while keeping the bookstore margin at 30%.
The following transactions, adjusting entries, and closing entries were completed by King Furniture Co. during a three year period. All are related to the use of delivery equipment. The double declining balance method of depreciation is used.
2008
Jan. 7. Purchased a used delivery truck for $45,600, paying cash.
Feb. 27. Paid garage $130 for changing the oil, replacing the oil filter, and tuning the engine on the delivery truck.
Dec. 31. Recorded depreciation on the truck for the fiscal year. The estimated useful life of the truck is eight years, with a residual value of $10,000 for the truck.
2009
Jan. 8. Purchased a new truck for $75,000, paying cash.
Mar. 13. Paid garage $200 to tune the engine and make other minor repairs on the used truck.
Apr. 30. Sold the used truck for $30,000. (Record depreciation to date in 2009 for the truck.)
Dec. 31. Record depreciation for the new truck. It has an estimated trade in value of $13,500 and an estimated life of 10 years.
2010
July 1. Purchased a new truck for $82,000, paying cash.
Oct. 4. Sold the truck purchased January 8, 2009, for $53,000. (Record depreciation for the year.)
Dec. 31. Recorded depreciation on the remaining truck. It has an estimated residual value of $15,000 and an estimated useful life of 10 years.
Instructions
Journalize the transactions and the adjusting entries.
CVP analysis, shoe stores (continuation of 3 38). Refer to requirement 3 of Problem 3 38. In this problem, assume the role of the owner of WalkRite.
1. Calculate the number of units sold at which the owner of WalkRite would be indifferent between the original salary plus commissions plan for salespeople and the higher fixed salaries only plan.
2. As owner, which sales compensation plan would you choose if forecasted annual sales of the new store were at least 55,000 units? What do you think of the motivational aspect of your chosen compensation plan?
3. Suppose the target operating income is $168,000. How many units must be sold to reach the target operating income under (a) the original salary plus commissions plan and (b) the higher fixed salaries only plan?
4. You open the new store on January 1, 2011, with the original salary plus commission compensation plan in place. Because you expect the cost of the shoes to rise due to inflation, you place a firm bulk order for 50,000 shoes and lock in the $19.50 price per unit. But, toward the end of the year, only 48,000 shoes are sold, and you authorize a markdown of the remaining inventory to $18 per unit. Finally, all units are sold. Salespeople, as usual, get paid a commission of 5% of revenues. What is the annual operating income for the store?
CVP, sensitivity analysis Technology of the Past (TOP) produces old fashioned simple corkscrews. Last year was not a good year for sales but TOP expects the market to pick up this year. Last year’s income statement was:
?
To take advantage of the anticipated growth in the market, TOP is considering the following courses of action.
1. Do nothing. If TOP does nothing, it expects sales to increase by 10%.
2. Spend $2,000 on a new advertising campaign that is expected to increase sales by 50%.
3. Raise the price of the corkscrew to $5. This is expected to decrease sales quantities by 20%.
4. Redesign the classic corkscrew and increase the selling price to $6 while increasing the variable cost by $1 per corkscrew. The sales level is not expected to change from lastyear.
CVP analysis, shoe stores. The WalkRite Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men’s shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. WalkRite is considering opening another store that is expected to have the revenue and cost relationships shown here:
Consider each question independently: Required
1. What is the annual breakeven point in (a) units sold and (b) revenues?
2. If 35,000 units are sold, what will be the store’s operating income (loss)?
3. If sales commissions are discontinued and fixed salaries are raised by a total of $81,000, what would be the annual breakeven point in (a) units sold and (b) revenues?
4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues?
5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.30 per unit in excess of the breakeven point, what would be the store’s operating income if 50,000 units weresold?
CVP computations Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2011. Variable cost per unit is $60 and total fixed costs are $1,640,000.
1. Calculate (a) contribution margin and (b) operating income.
2. Garrett’s current manufacturing process is labor intensive. Kate Schoenen, Garrett’s production manager, has proposed investing in state of the art manufacturing equipment, which will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of Schoenen’s proposal affect your answers to (a) and (b) in requirement 1?
3. Should Garrett accept Schoenen’s proposal? Explain.
CVP, Not for profit Monroe Classical Music Society is a not for profit organization that brings guest artists to the community’s greater metropolitan area. The Music Society just bought a small concert hall in the center of town to house its performances. The mortgage payments on the concert hall are expected to be $2,000 per month. The organization pays its guest performers $1,000 per concert and anticipates corresponding ticket sales to be $2,500 per event. The Music Society also incurs costs of approximately $500 per concert for marketing and advertising. The organization pays its artistic director $50,000 per year and expects to receive $40,000 in donations in addition to its ticket sales.
Required
1. If the Monroe Classical Music Society just breaks even, how many concerts does it hold?
2. In addition to the organization’s artistic director, the Music Society would like to hire a marketing director for $40,000 per year. What is the breakeven point? The Music Society anticipates that the addition of a marketing director would allow the organization to increase the number of concerts to 60 per year. What is the Music Society’s operating income/(loss) if it hires the new marketing director?
3. The Music Society expects to receive a grant that would provide the organization with an additional $20,000 toward the payment of the marketing director’s salary. What is the breakeven point if the Music Society hires the marketing director and receives the grant?
Aqua Gear, in business since 2008, makes swimwear for professional athletes. Analysis of the firm’s financial records for the current year reveals the following:
Average swimsuit selling price ………….$70
Variable swimsuit expenses
Direct material …………………………… 28
Direct labor ………………………………. 12
Variable overhead ……………………….. 8
Annual fixed cost
Selling …………………………….. $10,000
Administrative ……………………… 24,000
The company’s tax rate is 40 percent. Samantha Waters, company president, has asked you to help her answer the following questions.
a. What is the break even point in number of swimsuits and in dollars?
b. How much revenue must be generated to produce $40,000 of pre tax earnings? How many swimsuits would this level of revenue represent?
c. How much revenue must be generated to produce $40,000 of after tax earnings? How many swimsuits would this represent?
d. What amount of revenue would be necessary to yield an after tax profit equal to 20 percent of revenue?
e. Aqua Gear is considering purchasing a faster sewing machine that will save $6 per swimsuit in cost but will raise annual fixed cost by $40,000. If the equipment is purchased, the company expects to make and sell an additional 5,000 swimsuits. Should the company make this investment?
f. A marketing consultant told Aqua Gear managers that they could increase the number of swimsuits sold by 30 percent if the selling price was reduced by 10 percent and the company spent $10,000 on advertising. The company has been selling 3,000 swimsuits. Should the company make the changes advised by the consultant?
Atlantic Coast Railroad Company wishes to evaluate three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:
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Instructions
1. Assuming that the desired rate of return is 20%, prepare a net present value analysis for each proposal. Use the present value of $1 table appearing in this chapter.
2. Determine a present value index for each proposal. Round to two decimal places.
3. Which proposal offers the largest amount of present value per dollar of investment?Explain.
the attached assignment is for Masters, doing your best to get me a geat grade is highly appreciated.
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Accounting in Business (Accounting Financial & Management) Submitting your Assignment 1. Assignments should be typed, 10 or 11 point font size (Times Roman or similar if possible) double spaced with a 4 cm margin on the right side of the page with the page size specified as UK A4. All pages must be numbered. 2. use MS Office 2003/2007, therefore any submission from a newer system should be saved using an appropriate format. Assignment Part A: Gorton Gardens (40 marks) Gloria Greene has worked for several years for a regional chain of garden centres, starting as one of the gardeners and rising to branch manager. She has now decided to re locate to her home town and set up her own business trading under the name of Gorton Gardens Ltd (‘GG’). She is preparing a business plan that she can take to banks and venture capitalists to seek finance and which will also help to guide her in the process of setting up and starting up the business, and has asked you for your help with the financial part of this (i.e. a budget). As a starting basis, she has put together some initial forecasts and estimates which are outlined below. The business will consist of a large garden with greenhouses, nurseries, etc. and an attached shop. This shop will sell part of the output from the garden. She plans to sell the rest to 2 different groups of business customers: (i) businesses with offices and reception areas which they wish to keep decorated with office plants and flowers under ongoing contracts; (ii) hospitality and similar businesses which will wish to buy plants and flowers for corporate entertainment events, weddings, etc. She is planning and forecasting: ?shop ?office plants ?hospitality businesses ??Selling price per product* ?£3.00 ?£2.00 ?£2.50 ??Credit terms ?no credit (cash sales only) ?1 month ?2 months ??Proportion of total sales ?25% ?40% ?35% ?? * NB: in reality, businesses like garden centres will…
Backflush costing and JIT production. Road Warrior Corporation assembles handheld computers that have scaled down capabilities of laptop computers. Each handheld computer takes 6 hours to assemble. Road Warrior uses a JIT production system and a backflush costing system with three trigger points:
Purchase of direct materials
Completion of good finished units of product
Sale of finished goods
There are no beginning inventories of materials or finished goods. The following data are for August 2008:
Road Warrior records direct materials purchased and conversion costs incurred at actual costs. When finished goods are sold, the backflush costing system ?opulls through?? standard direct material cost ($102 per unit) and standard conversion cost ($28 per unit). Road Warrior produced 26,800 finished units in August 2008 and sold 26,400 units. The actual direct material cost per unit in August 2008 was $102, and the actual conversion cost per unit was $27.
1. Prepare summary journal entries for August 2008 (without disposing of under or overallocated conversion costs).
2. Post the entries in requirement 1 to T accounts for applicable Inventory: Materials and In Process Control, Finished Goods Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.
3. Under an ideal JIT production system, how would the amounts in your journal entries differ from those in requirement1?
a) List and describe four potential problems with a “traditional” overhead allocation system.
b) List and describe four “red flags” that may indicate you should consider revising your overhead allocation system.
Question #2
a) Describe the differences between unit related, batch related, and product sustaining activities. Give one example of each type of activity.
b) Describe the difference between transaction drivers and duration drivers. When would one type be preferred over the other?
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Question #1 a) List and describe four potential problems with a “traditional” overhead allocation system. b) List and describe four “red flags” that may indicate you should consider revising your overhead allocation system. Question #2 a) Describe the differences between unit related, batch related, and product sustaining activities. Give one example of each type of activity. b) Describe the difference between transaction drivers and duration drivers. When would one type be preferred over the other?
Bobbie’s Bagel Shop sells only coffee and bagels. Bobbie estimates that every time she sells one bagel, she sells four cups of coffee. The budgeted cost information for Bobbie’s products for 2011 follows:
Required:
1. How many cups of coffee and how many bagels must Bobbie sell in order to break even assuming the sales mix of four cups of coffee to one bagel, given previously?
2. If the sales mix is four cups of coffee to one bagel, how many units of each product does Bobbie need to sell to earn operating income before tax of $28,000?
3. Assume that Bobbie decides to add the sale of muffins to her product mix. The selling price for muffins is $3.00 and the related variable costs are $0.75. Assuming a sales mix of three cups of coffee to two bagels to one muffin, how many units of each product does Bobbie need to sell in order to break even? Comment on the results.
Brady Company uses normal costing in its job costing system. The company produces custom bikes for toddlers. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows
Additional information follows:
a. Direct materials purchased during December were $65,400.
b. Cost of goods manufactured for December was $225,000.
c. No direct materials were returned to suppliers.
d. No units were started or completed on December 31.
e. The manufacturing labor costs for the December 31 working day: direct manufacturing labor, $3,850, and indirect manufacturing labor, $950.
f. Manufacturing overhead has been allocated at 120% of direct manufacturing labor costs through December 30.
Required:
1. Prepare journal entries for the December 31 payroll.
2. Use T accounts to compute the following:
a. The total amount of materials requisitioned into work in process during December
b. The total amount of direct manufacturing labor recorded in work in process during December
c. The total amount of manufacturing overhead recorded in work in process during December.
d. Ending balance in work in process, December 31
e. Cost of goods sold for December before adjustments for under or overallocated manufacturing overhead
3. Prepare closing journal entries related to manufacturing overhead. Assume that all under or overallocated manufacturing overhead is closed directly to Cost of GoodsSold.
Calypso Canvas makes canvas window awnings. You have been asked to predict the potential effects of some proposed company changes. The following information is available:
Variable cost per unit
Direct material ……………………$18.40
Direct labor ………………………. 13.00
Production overhead ………………. 8.60
Selling expenses …………………… 4.60
Administrative expenses …………… 3.00
Annual fixed cost
Production overhead ……….. $1,200,000
Selling ………………………. 960,000
Administrative ……………… 480,000
The selling price is $94.00 per unit, and expected sales volume for the current year is 150,000 units. Following are some changes proposed by various members of the company.
1. Engineers suggest that adding color accents to each unit at a cost of $14.40 would increase product sales by 20 percent.
2. The sales manager suggests that a $520,000 increase in advertising will increase sales by 15 percent.
3. The sales force believes that lowering the price by 5 percent will increase demand in units by 10 percent.
a. Compute the current break even point in units and dollars.
b. Compute the current margin of safety in dollars, in units, and as a percentage.
c. Compute the independent effects on profit and dollar break even point of each of the suggestions. For each proposal, advise company management about acceptability.
Capacity management, denominator level capacity concepts Capacity management, denominator level capacity concepts match each of the following items with one or more of the denominator level capacity concepts by putting the appropriate letter(s) by each item:
a. Theoretical capacity
b. Practical capacity
c.Normal capacity utilization
d. Master budget capacity utilization
1.Measures the denominator level in terms of what a plant can supply
2. Is based on producing at full efficiency all the time
3. Represents the expected level of capacity utilization for the next budget period
4. Measures the denominator level in terms of demand for the output of the plant
5. Takes into account seasonal, cyclical, and trend factors
6. Should be used for performance evaluation
7. Represents an ideal benchmark
8. Highlights the cost of capacity acquired but not used
9. Should be used for long term pricing purposes
10. Hides the cost of capacity acquired but not used
11. If used as the denominator level concept, would avoid the restatement of unit costs when expected demand levels change
Capital budget methods, no income taxes Riverbend Company runs hardware stores in a tristate area. Riverbend’s management estimates that if it invests $250,000 in a new computer system, it can save $67,000 in annual cash operating costs. The system has an expected useful life of eight years and no terminal disposal value. The required rate of return is 8%. Ignore income tax issues in your answers. Assume all cash flows occur at year end except for initial investment amounts.
Required
1. Calculate the following for the new computer system:
a. Net present value
b. Payback period
c. Discounted payback period
d. Internal rate of return (using the interpolation method)
e. Accrual accounting rate of return based on the net initial investment (assume straight line depreciation)
2. What other factors should Riverbend consider in deciding whether to purchase the new computer system?
Capital budgeting methods, no income taxes. City Hospital, a non profit organization, estimates that it can save $28,000 a year in cash operating costs for the next 10 years if it buys a special purpose eye testing machine at a cost of $110,000. No terminal disposal value is expected. City Hospital’s required rate of return is 14%. Assume all cash flows occur at year end except for initial investment amounts.
1. Calculate the following for the special purpose eye testing machine:
a. Net present value
b. Payback period
c. Internal rate of return
d. Accrual accounting rate of return based on net initial investment (Assume straight line depreciation.)
2. What other factors should City Hospital consider in deciding whether to purchase the special purpose eye testing machine?
Capital budgeting with uneven cash flows, no income taxes. Southern Cola is considering the purchase of a special purpose bottling machine for $23,000. It is expected to have a useful life of 4 years with no terminal disposal value. The plant manager estimates the following savings in cash operating costs:
Southern Cola uses a required rate of return of 16% in its capital budgeting decisions. Ignore income taxes in your analysis. Assume all cash flows occur at year end except for initial investment amounts.
Calculate the following for the special purpose bottling machine:
1. Net present value
2. Payback period
3. Internal rate of return
4. Accrual accounting rate of return based on net initial investment (Assume straight line depreciation Use the average annual savings in cash operating costs when computing the numerator of the accrual accounting rate ofreturn.)
Casper Karts manufactures a three wheeled shopping cart that sells for $60. Variable manufacturing and variable selling cost are, respectively, $35 and $10 per unit. Annual fixed cost is $975,000.
a. What is the contribution margin per unit and the contribution margin ratio?
b. What is the break even point in units?
c. How many units must the company sell to earn a pre tax income of $900,000?
d. If the company’s tax rate is 40 percent, how many units must be sold to earn an after tax profit of $750,000?
e. If labor costs are 60 percent of the variable manufacturing cost and 40 percent of the fixed cost, how would a 10 percent decrease in both variable and fixed labor costs affect the break even point?
f. Assume that the total market for three wheeled shopping carts is 600,000 units per year and that Casper Karts currently has 18 percent of the market. The company wants to obtain a 25 percent market share and also wants to earn a pre tax profit of $1,350,000. By how much must variable cost be reduced? Provide some suggestions for variable cost reductions.
Choosing between compensation plans, operating leverage (CMA, adapted) Marston Corporation manufactures pharmaceutical products that are sold through a network of external sales agents. The agents are paid a commission of 18% of revenues. Marston is considering replacing the sales agents with its own salespeople, who would be paid a commission of 10% of revenues and total salaries of $2,080,000. The income statement for the year ending December 31, 2008, under the two scenarios is shown here.
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If you want to use Excel to solve this problem, go to the Excel Lab at www.prenhall.com/horngren/cost13e download the template for Problem 3 43.
1. Calculate Marston’s 2008 contribution margin percentage, breakeven revenues, and degree of operating leverage under the two scenarios.
2. Describe the advantages and disadvantages of each type of sales alternative.
3. In 2009, Marston uses its own salespeople, who demand a 15% commission. If all other cost behavior patterns are unchanged, how much revenue must the salespeople generate in order to earn the same operating income as in2008?
Choosing cost drivers, activity based costing, activity based management. Pumpkin Bags (PB) is a designer of high quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a year, and then moves on to the next trend. The bags are all made on the same fabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:
Other budget information follows:
1. Identify the cost hierarchy level for each cost category. Required
2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
3. Calculate the budgeted cost per unit of cost driver for each cost category.
4. Calculate the budgeted total costs and cost per unit for each product line.
5. Explain how you could use the information in requirement 4 to reducecosts.
Choosing cost drivers, activity based costing, activity based management. Annie Warbucks runs a dance studio with childcare and adult fitness classes. Annie’s budget for the upcoming year is as follows:
Other budget information follows:
Required
1. Determine which costs are direct costs and which costs are indirect costs of different programs.
2. Choose a cost driver for the indirect costs and calculate the budgeted cost per unit of the cost driver. Explain briefly your choice of cost driver.
3. Calculate the budgeted costs of each program.
4. How can Annie use this information for pricing? What other factors should sheconsider?
Medical Associates is a large for profit group practice. Its dividends are expected to grow at a constant rate of 7 percent per year into the foreseeable future. The firm’s last dividend (D0) was $2, and its current stock price is $23.
The firm’s beta coefficient is 1.6; the rate of return on 20 year T bonds is 9 percent; and the expected rate of return on the market, as reported by a large financial services firm, is 13 percent.The firm’s target capital structure calls for 50 percent debt financing, the interest rate required on the business’s new debt is 10 percent, and its tax rate is 40 percent. Questions
a. What is Medical Associate’s cost of equity estimate according to the DCF method?b. What is the cost of equity estimate according to the CAPM?c. On the basis of your answers to Parts a and b, what would be your final estimate for the firm’s cost of equity?d. What is your estimate for the firm’s corporate cost of capital?
To complete this assignment, download Problem Set 4 Cost of Capital.xlsx, perform the calculations, answer the questions above. The solved problem set should consist of a single, well organized document that contains your work. Solutions should be explained briefly using no more than a short paragraph.
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Medical Associates is a large for profit group practice. Its dividends are expected to grow at a constant rate of 7 percent per year into the foreseeable future. The firm’s last dividend (D0) was $2, and its current stock price is $23. The firm’s beta coefficient is 1.6; the rate of return on 20 year T bonds is 9 percent; and the expected rate of return on the market, as reported by a large financial services firm, is 13 percent. The firm’s target capital structure calls for 50 percent debt financing, the interest rate required on the business’s new debt is 10 percent, and its tax rate is 40 percent. a. What is Medical Associate’s cost of equity estimate according to the DCF method? b. What is the cost of equity estimate according to the CAPM? c. On the basis of your answers to Parts a and b, what would be your final estimate for the firm’s cost of equity? d. What is your estimate for the firm’s corporate cost of capital? ?????????????????????????????????????????????????????????????
Comparison of variable costing and absorption costing. Hinkle Company uses standard costing. Tim Bartina, the new president of Hinkle Company, is presented with the following data for 2009:
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1. At what percentage of denominator level was the plant operating during 2009?
2. How much fixed manufacturing was included in the 2008 and the 2009 ending inventory under overhead absorption costing?
3. Reconcile and explain the difference in 2009 operating incomes under variable and absorption costing.
4. Tim Bartina is concerned: He notes that despite an increase in sales over 2008, 2009 operating income has actually declined under absorption costing. Explain how thisoccurred.
Compute the answers to each of the following independent situations.
a. Orlando Ray sells liquid and spray mouthwash in a sales mix of 1:2, respectively. The liquid mouthwash has a contribution margin of $10 per unit; the spray’s CM is $5 per unit. Annual fixed cost for the company is $100,000. How many units of spray mouthwash would Orlando Ray sell at the break even point?
b. Piniella Company has a break even point of 4,000 units. At BEP, variable cost is $6,400 and fixed cost is $1,600. If one unit over breakeven is sold, what will be the company’s pre tax income?
c. Montreal Company’s product sells for $10 per bottle. Annual fixed costs are $216,000 and variable cost is 40 percent of selling price. How many units would Montreal Company need to sell to earn a 25 percent pre tax profit on sales?
d. York Mets Company has a BEP of 2,800 units. The company currently sells 3,200 units at $65 each. What is the company’s margin of safety in units, in sales dollars, and as a percentage?
Contribution margin, decision making Lurvey Men’s Clothing’s revenues and cost data for 2011 are as follows:
Mr. Lurvey, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $30,000 variable costs, which vary with sales volume, and $15,000 (fixed) costs.
Required:
1. Compute the contribution margin of Lurvey Men’s Clothing.
2. Compute the contribution margin percentage.
3. Mr. Lurvey estimates that he can increase revenues by 15% by incurring additional advertising costs of $13,000. Calculate the impact of the additional advertising costs on operatingincome.
ABC, product costing at banks, cross subsidization. National Savings Bank (NSB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 7% annual interest rate on their average deposit. NSB earns an interest rate spread of 3% (the difference between the rate at which it lends money and the rate it pays depositors) by lending money for home loan purposes at 10%. Thus, NSB would gain $60 on the interest spread if a depositor had an average Premier Account balance of $2,000 in 2011 ($2,000 x 3% = $60). The Premier Account allows depositors unlimited use of services such as deposits, withdrawals, checking accounts, and foreign currency drafts. Depositors with Premier Account balances of $1,000 or more receive unlimited free use of services. Depositors with minimum balances of less than $1,000 pay a $22 a month service fee for their Premier Account.
NSB recently conducted an activity based costing study of its services. It assessed the following costs for six individual services. The use of these services in 2011 by three customers is as follows:
Assume Holt and Graham always maintain a balance above $1,000, whereas Turner always has a balance below $1,000.
Required
1. Compute the 2011 profitability of the Holt, Turner, and Graham Premier Accounts at NSB.
2. Why might NSB worry about the profitability of individual customers if the Premier Account product offering is profitable as a whole?
3. What changes would you recommend for NSB’s PremierAccount?
ABC, retail product line profitability. Family Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as:
The revenues, cost of goods sold, store support costs, and activity area usage of the three product lines are:
Under its simple costing system, FS allocated support costs to products at the rate of 30% of cost of goods sold.
1. Use the simple costing system to prepare a product line profitability report for ES.
2. Use the ABC system to prepare a product line profitability report for FS.
3. What new insights does the ABC system in requirement 2 provide to FS managers?
ABC, wholesale, customer profitability. Villeagas Wholesalers operates at capacity and sells furniture items to tour department store chains (customers). Mr. Villeagas commented, ?oWe apply ABC to determine product line profitability. The same ideas apply to customer profitability, and we should find out our customer profitability as well.?? Villeagas Wholesalers sends catalogs to corporate purchasing departments on a monthly basis. The customers are entitled to return unsold merchandise within a six month period from the purchase date and receive a full purchase price refund. The following data were collected from last year’s operations:
Villeagas has calculated the following activity rates.
Customers pay the transportation costs. The cost of goods sold averages 80% of sales.
Determine the contribution to profit from each chain last year. Comment on your solution.
Absorption costing and production volume variance alternative capacity bases Earth’s Best Light (EBL), a producer of energy efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, EBL has decided to evaluate its financial performance using absorption costing income. The production volume variance is written off to cost of goods sold. The variable cost of production is $2.70 per bulb. Fixed manufacturing costs are $1,015,000 per year. Variable and fixed selling and administrative expenses are $0.40 per bulb sold and $200,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, EBL can sell the bulbs for $9.60 each.
EBL is deciding among various concepts of capacity for calculating the cost of each unit produced. Its choices are as follows:
Theoretical capacity 725,000 bulbs
Practical capacity 406,000 bulbs
Normal capacity 290,000 bulbs (average expected output for the next three years)
Master budget capacity 175,000 bulbs expected production this year
Required
1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit.
2. Suppose EBL actually produces 250,000 bulbs. Calculate the production volume variance using each level of capacity to compute the fixed manufacturing overhead allocation rate.
3. Assume EBL has no beginning inventory. If this year’s actual sales are 175,000 bulbs, calculate operating income for EBL using each type of capacity to compute fixed manufacturing cost per unit.
Absorption costing and production volume variance alternative capacity bases. Earth Light First (ELF), a producer of energy efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, ELF has decided to evaluate its financial performance using absorption costing income. The production volume variance is written off to cost of goods sold. The variable cost of production is $2.50 per bulb. Fixed manufacturing costs are $1,000,000 per year. Variable and fixed selling and administrative expenses are $0.25 per bulb sold and $250,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, ELF can sell the bulbs for $9.00 each.
ELF is deciding whether to use, when calculating the cost of each unit produced:
1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit.
2. Calculate the production volume variance using each level of capacity to compute the fixed manufacturing overhead allocation rate and this year’s production of 220,000 bulbs.
3. Assuming ELF has no beginning inventory, calculate operating income for ELF using each type of capacity to compute fixed manufacturing cost per unit and this year’s sales of 200,000bulbs.
Absorption versus variable costing Grunewald Company manufacturers a professional grade vacuum cleaner and began operations in 2011. For 2011, Grunewald budgeted to produce and sell 20,000 units. The company had no price, spending, or efficiency variances, and writes off production volume variance to cost of goods sold. Actual data for 2011 are given as follows:
Required
1. Prepare a 2011 income statement for Grunewald Company using variable costing.
2. Prepare a 2011 income statement for Grunewald Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirement 1 and requirement 2.
4. Grunewald’s management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this create for the supervisors? What modifications could Grunewald management make to improve such a plan? Explainbriefly.
Absorption, variable, and throughput costing EnRG Inc. produces trail mix packaged for sale in convenience stores in the Northeast section of the United States. At the beginning of April 2008, EnRG has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50,000 bags per month. EnRG plans to produce to demand, 50,000 bags in April. However, many of the employees take vacation in June, so EnRG plans to produce 70,000 bags in May and only 30,000 bags in June.
Costs for the three months are expected to remain unchanged. The costs and revenues for April, May and June are expected to be:
Suppose the actual costs, market demand, and levels of production for April, May, and June are as expected.
1. Compute operating income for April, May, and June under variable costing.
2. Compute operating income for April, May, and June under absorption costing. Assume that the denominator level for each month is that month’s expected level of output.
3. Compute operating income for April, May, and June under throughput costing.
4. Discuss the benefits and problems associated with using throughputcosting.
Accounting for manufacturing overhead. Consider the following selected cost data for the Pittsburgh Forging Company for 2008.
Budgeted manufacturing overhead costs $7,500,000
Budgeted machine hours 250,000
Actual manufacturing overhead costs $7,300,000
Actual machine hours 245,000
The company uses normal costing. Its job costing system has a single manufacturing overhead cost pool. Costs are allocated to jobs using a budgeted machine hour rate. Any amount of under or over allocation is written off to Cost of Goods Sold.
1. Compute the budgeted manufacturing overhead rate.
2. Prepare the journal entries to record the allocation of manufacturing overhead.
3. Compute the amount of under or over allocation of manufacturing overhead. Is the amount material?
Activity based costing The job costing system at Smith’s Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs; Job 215, an order of 15 intricate personalized frames, and Job 325, an order of 6 standard personalized frames. The controller wants you to compare overhead allocated under the current simple job costing system and a newly designed activity based job costing system. Total budgeted costs in each indirect cost pool and the budgeted quantity of activity driver are as follows:
Information related to Job 215 and Job 325 follows. Job 215 incurs more batch level costs because it uses more types of materials that need to be purchased, moved, and inspected relative to Job 325.
Job 215 Job 325
Number of purchase orders 25 8
Number of material moves 10 4
Machine hours 40 60
Number of inspections 9 3
Units produced 15 6
1. Compute the total overhead allocated to each job under a simple costing system, where overhead is allocated based on machine hours.
2. Compute the total overhead allocated to each job under an activity based costing system using the appropriate activity drivers.
3. Explain why Smith’s Custom Framing might favor the ABC job costing system over the simple job costing system, especially in its biddingprocess.
Activity based costing, manufacturing. Open Doors, Inc., produces two types of doors, interior and exterior. The company’s simple costing system has two direct cost categories (materials and labor) and one indirect cost pool. The simple costing system allocates indirect costs on the basis of machinehours. Recently, the owners of Open Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Open Doors production for the most recent year follows:
The owners have heard of other companies in the industry that are now using an activity based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect cost pool for Open Doors, six activities were identified as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Open Doors collected the following data related to the indirect cost activities:
Marketing costs were determined to be 3% of the sales revenue for each type of door.
Required
1. Calculate the cost of an interior door and an exterior door under the existing simple costing system.
2. Calculate the cost of an interior door and an exterior door under an activity based costing system.
3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity based costing systems differ in the cost of an interior and exterior door?
4. How might Open Door, Inc., use the new cost information from its activity based costing system to address the declining market share for interiordoors?
Activity based costing, service company Quikprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Quikprint classifies its various printing jobs as standard jobs or special jobs. Quikprint’s simple job costing system has two direct cost categories (direct materials and direct labor) and a single indirect cost pool. Quikprint operates at capacity and allocates all indirect costs using printing machine hours as the allocation base.
Quikprint is concerned about the accuracy of the costs assigned to standard and special jobs and therefore is planning to implement an activity based costing system. Quikprint’s ABC system would have the same direct cost categories as its simple costing system. However, instead of a single indirect cost pool there would now be six categories for assigning indirect costs: design, purchasing, setup, printing machine operations, marketing, and administration. To see how activity based costing would affect the costs of standard and special jobs, Quikprint collects the following information for the fiscal year 2009 that just ended.
?
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 5 21.
1. Calculate the cost of a standard job and a special job under the simple costing system.
2. Calculate the cost of a standard job and a special job under the activity based costing system.
3. Compare the costs of a standard job and a special job in requirements 1 and 2. Why do the simple and activity based costing systems differ in the cost of a standard job and a special job?
4. How might Quikprint use the new cost information from its activity based costing system to better manage itsbusiness?
Allocation and proration of overhead. Franklin & Son Printing designed and printed sales brochures, catalogues, and pamphlets. The business was dissolved in early 1763.
Franklin & Son Printing used a normal costing system. It has two direct cost pools, materials and labor and one indirect cost pool, overhead. Overhead was charged to printing jobs on the basis of direct labor cost. The following information was known about the firm for 1762.
?
There was no work in process on Jan. 1, 1762 and there were two jobs in process on Dec. 31, 1762. The first job had used ?L25 of materials so far and ?L20 of labor. The second job had used ?L15 worth of material and ?L32 of labor. Franklin & Son Printing had no finished goods inventories because all printing jobs were based on orders that when completed, were transferred to cost of goods sold.
1. Compute the overhead allocation rate.
2. Calculate the balance in ending work in process and in cost of goods sold.
3. Calculate under or overallocated overhead.
4. Calculate the ending balances in work in process and cost of goods sold if the under or overallocated overhead amount is:
a. Written off to cost of goods sold
b. Prorated using the ending balance (before proration) in cost of goods sold and work in process control accounts.
5. Which of the methods in requirement4would you choose?Explain.
Allocation and proration of overhead. Tamden, Inc., prints custom marketing materials. The business was started January 1, 2010. The company uses a normal costing system. It has two direct cost pools, materials and labor and one indirect cost pool, overhead. Overhead is charged to printing jobs on the basis of direct labor cost. The following information is available for 2010.
Budgeted direct labor costs $150,000
Budgeted overhead costs $180,000
Costs of actual material used $126,500
Actual direct labor costs $148,750
Actual overhead costs $176,000
There were two jobs in process on December 31, 2010: Job 11 and Job 12. Costs added to each job as of December 31 are as follows:
Tamden, Inc., has no finished goods inventories because all printing jobs are transferred to cost of goods sold when completed.
Required
1. Compute the overhead allocation rate.
2. Calculate the balance in ending work in process and cost of goods sold before any adjustments for under or overallocated overhead.
3. Calculate under or overallocated overhead.
4. Calculate the ending balances in work in process and cost of goods sold if the under or overallocated overhead amount is as follows:
a. Written off to cost of goods sold
b. Prorated using the ending balance (before proration) in cost of goods sold and work in process control accounts
5. Which of the methods in requirement 4 would you choose? Explain.Tamden, Inc., has no finished goods inventories because all printing jobs are transferred to cost of goods sold whencompleted.
Allocation of costs to activities, unused capacity. Harmon Academy, a private school for boys, serves 500 students: 200 in the middle school (grades 6—8) and 300 in the high school (grades 9—12). Each school has its own assistant principal, and there is one principal, Brian Smith, for all of Harmon Academy For any single student, almost all of Harmon’s costs are indirect Harmon currently has five indirect cost categories, which are listed in column A of the following table. Smith wants to develop an activity based costing system for the school. He identifies four activities—academic instruction, administration, sports training and community relationships—related to the educational enterprise, which are shown in columns B, C, D, and Eat the following table. Smith and his team identify number of students as the cost driver of academic instruction and administration: costs, and the number of team sports offered by the school as the cost driver of sports training costs. The cost of maintaining community relationships—dealing with the town board and participating in local activities—is a facility sustaining cost that the school has to incur each year. This table shows the percentage costs in each line item used by each activity.
?
If you want to use Excel to solve this exercise, go to the Excel Lab at www.prenhall.com/horngren/cost13e download the template for Exercise 5 22.
1. What is the overall cost of educating each student? Of this cost, what percentage is the cost of academic instruction, of administration’?
2. Smith is dismayed at the high cost of sports training. Further examination reveals that $300,000 of those costs are for ice hockey, a sport pursued by a total of 40 students. What would the overall cost of educating each student be if the ice hockey program is eliminated and its cost saved?
3. For the 2010 school year, Harmon charges an annual fee of $1,000for any student who wants to play ice hockey. As a result, 10 of the less motivated students drop the sport. Assuming the costs of the school in 2010 are the same as in 2009, what is the overall cost of educating each student in 2010?
4. Consider the costs of the academic instruction activity and assume they are fixed in the short run. At these costs, Harmon could serve 600 students. What is the cost of the academic instruction resources used by Harmon’s current 500 students? What is the cost of unused academic instruction capacity? What actions can Smith take to reduce the cost of academic instruction per student in the short run in the longrun?
Alternate cost structures, uncertainty, and sensitivity analysis. Edible Bouquets (EB) makes and sells flower bouquets. EB is considering opening a new store in the local mall. The mall has several empty shops and ER is unsure of the demand for its product. The mall has offered ER two alternative rental agreements. The first is a standard fixed rent agreement where EB will pay the mall $5,000 per month. The second is a royalty agreement where the mall receives $10 for each bouquet sold. ER estimates that a bouquet will sell for $50 and have a variable cost of $30 to make (including the cost flowers, and commission for the salesperson).
1. What is the breakeven point in units under each rental agreement?
2. For what range of sales levels will EB prefer (a) the fixed rent agreement (b) the royalty agreement?
3. If EB signs a sales agreement with a local flower stand, it will save $5 in variable costs per bouquet. How would this affect your answer in requirement 2?
4. Do this question only if you have covered the chapter appendix in your class. ER estimates that the store is equally likely to sell 200, 400, 600, 800 or 1,000 arrangements. Using information from the original problem, prepare a table that shows the expected profit at each sales level under each rental agreement. What is the expected value of each rental agreement? Which rental agreement should EB choose?
Roseville Medical Roseville Medical manufactures a single product called the Gripper. Under the direction of physiotherapists patients with hand injuries use the Gripper to restore, to the extent possible, normal hand functions. The Gripper has the following per unit revenue and costs: Revenue $20.00 Direct Materials Cost 7.00 Direct Labour Cost 4.00 Variable Overhead 3.00 Contribution Margin per Unit $6.00 The sales manager at Roseville Medical believes that, at this price, Roseville Medical can sell a maximum of Grippers of 350,000 per year. Roseville Medical has fixed manufacturing costs of $1,000,000 per year and fixed selling, administrative, and general expenses of $500,000 per year. The variable overhead associated with the Gripper reflects the variable overhead associated with the Gripper’s consumption of machine time which is 0.05 hours per unit. Roseville Medical incurs $60.00 of variable overhead costs for each hour the machines are used. There are 20,000 hours of machine time available each year. Required: In all the following questions ignore taxes and show all calculations. 1. How many Grippers must Roseville Medical sell in order to breakeven? 2. How many Grippers must Roseville Medical sell in order to earn a target profit of $500,000? 3. The Roseville Medical sales manager has come up with an idea for a new product called the Gripper Plus which could be produced on the existing machines. The sales manager believes that Roseville Medical could sell a maximum of 100,000 units of the Gripper Plus. The Gripper Plus has the following per unit revenues and costs: Revenue $35.00 Direct Materials Cost 10.00 Direct Labour Cost 8.00 Variable Overhead 6.00 Contribution Margin per Unit $11.00 Given this information how many units of the Gripper Plus, if any, should Roseville Medical produce? 4. How, if at all, would your answer to part 3 change if the revenue per unit of the Gripper Plus was $38.00 per unit? 5. Consider the setting in Part 4. Suppose now that a contractor has offered to do contract manufacturing for Roseville Medical. The contractor would supply as many units of the Gripper Plus as Roseville Medical requires. What is the maximum (ceiling price) that Roseville Medical should be willing to pay for each Gripper Plus unit the contractor supplies and how many would Roseville Medical buy at this price? 6. The production manager believes that with an adaptation of the existing machines, costing $500,000, the time required to make each product could be reduced by 10%. If the adaptation is expected to last a maximum of 2 years is this change financially attractive? Use the setting in part 4 above to answer this question. 7. Return now to the basic data in part 1 of this case. That is, ignore all the changes mentioned in parts 2 6. Roseville Medical has the opportunity to replace the existing machine with a new machine costing $400,000 (net of the salvage value of the old machine). Each Gripper would require 1/15 hour per unit on the new machine and the variable overhead costs associated with each hour of the new machine would be $40.00. If the new machine would last 3 years, is this replacement financially attractive?
Alternate cost structures, uncertainty, and sensitivity analysis. Stylewise Printing Company currently leases its only copy machine for $1,000 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement Stylewise would pay a commission for its printing at a rate of $10 for every 500 pages printed. The company currently charges $0.15 per page to its customers. The paper used in printing costs the company $.03 per page and other variable costs, including hourly labor amount to $.04 per page.
Required
1. What is the company’s breakeven point under the current leasing agreement? What is it under the new commission based agreement?
2. For what range of sales levels will Stylewise prefer (a) the fixed lease agreement (b) the commission agreement?
3. Do this question only if you have covered the chapter appendix in your class. Stylewise estimates that the company is equally likely to sell 20,000; 40,000; 60,000; 80,000; or 100,000 pages of print. Using information from the original problem, prepare a table that shows the expected profit at each sales level under the fixed leasing agreement and under the commission based agreement. What is the expected value of each agreement? Which agreement should Stylewise choose?
Alternative allocation bases for a professional services firm. The Wolfson Group (WO) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of the direct professional costs billed). The three professionals in W6 and their rates per professional hour are: WG has just prepared the May 2009 bills for two clients. The hours of professional time spent on each client are as follows:
1. What amounts did WG bill to Seattle Dominion and Tokyo Enterprises for May 2009? 2. Suppose support services were billed at $50 per professional labor hour (instead of 30% of professional labor costs). How would this change affect the amounts WG billed to the two clients for May 2009? Comment on the differences between the amounts billed in requirements 1 and 2.
3. How would you determine whether professional labor costs or professional labor hours is the more appropriate allocation base for WG’s support services?
Alternative allocation bases for a professional services firm. The Walliston Group (WG) provides tax advice to multinational firms. WG charges clients for
(a) Direct professional time (at an hourly rate) and
(b) Support services (at 30% of the direct professional costs billed). The three professionals in WG and their rates per professional hour are as follows:
Professional Billing Rate per Hour
Max Walliston $640
Alexa Boutin 220
Jacob Abbington 100
WG has just prepared the May 2011 bills for two clients. The hours of professional time spent on each client are as follows:
Required
1. What amounts did WG bill to San Antonio Dominion and Amsterdam Enterprises for May 2011?
2. Suppose support services were billed at $75 per professional labor hour (instead of 30% of professional labor costs). How would this change affect the amounts WG billed to the two clients for May 2011? Comment on the differences between the amounts billed in requirements 1 and 2.
3. How would you determine whether professional labor costs or professional labor hours is the more appropriate allocation base for WG’s supportservices?
Alternative denominator level capacity concepts effect on operating income. Lucky Lager has just purchased the Austin Brewery. The brewery is two years old and uses absorption costing. It will ?osell?? its product to Lucky Lager at $45 per barrel. Paul Brandon, Lucky Lager’s controller, obtains the following information about Austin Brewery’s capacity and budgeted fixed manufacturing costs for 2009:
1. Compute the budgeted fixed manufacturing overhead rate per barrel for each of the denominator level capacity concepts. Explain why they are different.
2. In 2009, the Austin Brewery reported these production results:
There are no variable cost variances. Fixed manufacturing overhead cost variances are written off to cost of goods sold in the period in which they occur. Compute the Austin Brewery’s operating income when the denominator level capacity is (a) theoretical capacity, (b) practical capacity, and (c) normal capacityutilization.
Due to erratic sales of its sole product”a high capacity battery for laptop computers”PEM, Inc., has been experiencing difficulty for some time. The company’s contribution format income statement for the most recent month is given below:
Sales (19,500 units at $30 per unit)
$585,000
Variable expenses
409,500
Contribution margin
175,500
Fixed expenses
180,000
Net operating loss
$(4,500)
Requirement 1:
Compute the company’s CM ratio and its break even point in both units and dollars.
CM ratio
%
Break even point in units
units
Break even point in dollars
$
Requirement 2:
The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, by how much will the company’s net operating income increase or decrease? (Use the incremental approach in preparing your answer.)
Net operating income
$
(Click to select)increasedecrease
Requirement 3:
Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $60,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted?(Net loss should be indicated by a minus sign. Omit the “$” sign in your response.)
Sales
$
Variable expenses
Contribution margin
Fixed expenses
(Click to select)Net operating lossNet operating income
$
Requirement 4:
Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would help sales. The new package would increase packaging costs by 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $9,750?(Round units to nearest whole unit.)
Sales
units
Requirement 5:
Refer to the original data. By automating certain operations, the company could reduce variable costs by $3 per unit. However, fixed costs would increase by $72,000 each month.
(a)
Compute the new CM ratio and the new break even point in both units and dollars.(Round units to nearest whole unit, CM ratio to nearest whole percent. Omit the “%” and “$” signs in your response.)
CM ratio
%
Break even point in units
units
Break even point in dollars
$
(b)
Assume that the company expects to sell 26,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)(Omit the “$” and “%” signs in your response.)
ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS ‘
AGING OF ACCOUNTS RECEIVABLE METHOD
Part 1 ‘ In 2009, Vandolay reported $300,000 in sales. The company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Vandolay Industries accountants prepared the following Aging of Accounts Receivable:
Customer
Total
Number of days unpaid
0 30
30 60
60 90
Over 90
Alpha Sales
$ 700
$ 700
Gamma Manufacturing Co.
1,900
$ 1,900
Delta Shipping Corp.
2,200
$2,200
Epsilon Industries
6,000
$6,000
Theta Manufacturing
1,800
1,800
Zeta Industries
600
600
Other customers
136,800
88,100
26,900
9,800
12,000
Totals
$150,000
$90,000
$30,000
$12,000
$18,000
Vandolay accountants believe that receivables 0 30 days old have a 2% chance of noncollection. Receivables 30 60 days old have a 4% chance of noncollection. Receivables 60 90 days old have an 8% chance of noncollection. Receivables over 90 days old have a 20% chance of noncollection. The company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the required adjusting journal entry.
Bad Debt Expense
Allowance for Doubtful Accounts
HW 8 ‘ 2, CONTINUED
Part 2 ‘ Assume instead that the company’s allowance for doubtful accounts has an unadjusted debit balance of $400. Prepare the required adjusting journal entry.
In an exchange of assets, Junger Co. received equipment with a fair value equal to the carrying amount of the equipment given up. Junger also contributed cash equal to 10% of the fair value of the exchange. If the exchange is not considered to have commercial substance, Junger should recognize a. A loss equal to the cash (boot) given up. b. A loss determined by the proportion of cash paid to the total transaction value. c. A gain determined by the proportion of cash paid to the total transaction value. d. Neither gain nor loss Bell and Mayo are independent entities. Each owns a tract of land being held for development. However, each would prefer to build on the other s land. Accordingly, they agreed to exchange their land. From an independent appraisal report and the entities records, the following information was obtained: Bell s Land Cost and carrying amount: $80,000, Fair Value: $100,000. Mayo s Land Cost and carrying amount: $50,000, Fair Value: $85,000. Based on the difference in fair values, Mayo paid $15,000 to Bell. If Mayo did not consider the exchange to have commercial substance, at what amount should Mayo record the receipt of land? a $100,000 b $85,000 c $65,000 d $50,000 Delta Enterprises trades an asset that costs $55,000 and had accumulated depreciation of $37,000 for another asset with a fair market value of $20,000. The exchange is deemed to lack commercial substance. Delta pays $500 in cash. Delta s asset has a fair market value of $19,500. Compute Delta s recognized gain or loss on the exchange. a $2,500 loss recognized b $2,500 loss realized but not recognized c $1,500 gain recognized d $1,500 gain realized, but not recognized Superior Camera Shop began using the dollar value LIFO method in 2006 when its ending inventory was costed at $50,000. The 2007 ending inventory at year end prices was $54,000. Calculate Superior Camera Shop s ending inventory assuming 109 percent is an appropriate price index. a $54,000 b $49,541 c $49,500 d $46,000 Which of the following statements is not a probable result of a LIFO liquidation? a Cost of sales will not reflect current costs. b The ending inventory will exceed beginning inventory. c Net income will be higher. d The value of ending inventory will decline. Person Dot Company sold a delivery truck on July 1, 2005, for $5,500. The original cost of the truck was $30,000. Each December 31, Parson s recognized $4,500 of depreciation using the straight line method. On January 1, 2005, the accumulated depreciation was $22,500. The liquidation value for the truck is $3,000 on July 1. Compute Parson s gain or loss on the sale of the truck. a $2,500 gain b $2,000 gain c $2,000 loss d $250 gain
Exercise 16 25 Your answer is incorrect. Try again. On January 1, 2012, Lindsey Company issued 10 year, $3,056,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 21 shares of Lindsey common stock. Lindsey’s net income in 2013 was $315,000, and its tax rate was 40%. The company had 103,000 shares of common stock outstanding throughout 2012. None of the bonds were converted in 2012. (a) Compute diluted earnings per share for 2012. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $ (b) Compute diluted earnings per share for 2012, assuming the same facts as above, except that $1,030,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Lindsey common stock. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $
The expected pretax return on three stocks in divided between dividends and capital gains in the following way: Stock A, Expected Dividend is $0, Expected Capital Gain is $20; Stock B, Expected Dividend is $10.00 and Expected Capital Gain is $10; Stock C Expected Dividend is $20 and Expected Capital Gain is 0. A. If each stock is priced at $100, what are the expected net returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 35%, and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock A Pension_______%, Investor Corporation _____% Individual _________% Stock B Pension ______%, Investor Corporation _____%, Individual _________% Stock C Pension ______%, Investor Corporation _____%, Individual _________% B. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an 10% return after tax, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your ansers to 2 decimal places.) Stock A $_________PO; Stock B $________PO; Stock C $________PO
If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs are $20, what is the break even sales (units) if fixed costs are reduced by $40,000?
flows from operating activities for both the indirect and direct methods are presented for Reverse Logic. All amounts are in thousands (000s). Cash Flows from Operating Activities (Indirect method) Net income $ 164 Adjustments for noncash effects: Depreciation expense 52 Changes in current assets and current liabilities: Increase in accounts receivable (28) Decrease in inventory 40 Increase in prepaid rent (4) Decrease in accounts payable (16) Decrease in income tax payable (8) Net cash flows from operating activities $ 200 Cash Flows from Operating Activities (Direct method) Cash received from customers $ 4,020 Cash paid to suppliers (2,580) Cash paid for operating expenses (1,152) Cash paid for income taxes (88) Net cash flows from operating activities $ 200 Complete the following income statement for Reverse Logic. Assume all accounts payable are to suppliers (operating expenses). (Input all amounts as positive values. Enter your answers in thousands. Omit the “$” sign in your response.) REVERSE LOGIC Income Statement For the Year Ended December 31, 2012 Revenues $ ___________ Expenses: Cost of goods sold $ ______________ Operating expenses ______________ Depreciation expense 52 Income tax expense ________________ Total expenses ________________ Net income $ 164
You are the chief financial officer for a small manufacturing company that has applied for a bank loan. In speaking with the bank loan officer, you are told that two minimum criteria for granting loans are (1) a 40 percent gross margin and (2) operating income of at least 15 percent of sales. Looking at the last four months’ income statements, you find that gross margin has been between 30 and 33 percent, and operating income ranged from 18 to 24 percent of sales. You discuss these relationships with the company president, who suggests that some of the product costs included in Cost of Goods Sold should be moved to the selling and administrative categories so that the income statement will conform to the bank’s criteria.
a. Which types of product costs might be most easily reassigned to period cost classifications?
b. Because the president is not suggesting that any expenses be kept off the income statement, do you see any ethical problems with the request? Discuss the rationale for your answer.
c. Write a short memo to convince the banker to loan funds to the company in spite of its noncompliance with the specified loan criteria.
ABC, cost hierarchy, service (CMA, adapted) Vineyard Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Vineyard aggregates all operating costs of $1,190,000 into a single overhead cost pool. Vineyard calculates a rate per test hour of $17 ($1,190,000 A? 70,000 total test hours). HT uses 40,000 test hours, and ST uses 30,000 test hours. Gary Celeste, Vineyard’s controller, believes that there is enough variation in test procedures and cost structures to establish separate costing and billing rates for HT and ST. The market for test services is becoming competitive. Without this information, any miscosting and mispricing of its services could cause Vineyard to lose business. Celeste divides Vineyard’s costs into four activity cost categories.
a. Direct labor costs, $146,000. These costs can be directly traced to HT, $100,000, and ST, $46,000.
b. Equipment related costs (rent, maintenance, energy, and so on), $350,000. These costs are allocated to HT and ST on the basis of test hours.
c. Setup costs, $430,000. These costs are allocated to HT and ST on the basis of the number of setup hours required. HT requires 13,600 setup hours, and ST requires 3,600 setup hours.
d. Costs of designing tests, $264,000. These costs are allocated to HT and ST on the basis of the time required for designing the tests. HT requires 3,000 hours, and ST requires 1,400 hours.
Required
1. Classify each activity cost as output unit level, batch level, product or service sustaining, or facility sustaining. Explain each answer.
2. Calculate the cost per test hour for HT and ST. Explain briefly the reasons why these numbers differ from the $17 per test hour that Vineyard calculated using its simple costing system.
3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Vineyard’s management use the cost hierarchy and ABC information to better manage its business?
ABC, health care Uppervale Health Center runs three programs: (1) alcoholic rehabilitation (2) drug addict rehabilitation, and (3) aftercare (counseling and support of patients after release from a mental hospital). The center’s budget for 2009 follows: Professional salaries:
Muriel Clayton, the director of the center, is keen on determining the cost of each program.
Clayton compiled the following data describing employee allocations to individual programs:
Eighty patients are in residence in the alcohol program, each staying about six months. Thus, the clinic provides 40 patient years of service in the alcohol program. Similarly, 100 patients are involved in the drug program for about six months each. Thus, the clinic provides 50 patient years of service in the drug program.
Clayton has recently become aware of activity based costing as a method to refine costing systems. She asks her accountant Huey Deluth, how she should apply this technique. Deluth obtains the following information:
1. Consumption of medical supplies depends on the number of patient years.
2. General overhead costs consists of:
3. Other information about individual departments are:
1. a. Selecting cost allocation bases that you believe are the most appropriate for allocating indirect costs to programs, calculate the indirect cost rates for medical supplies; rent and clinic maintenance; administrative costs for patient charts, food, and laundry; and laboratory services.
b. Using an activity based costing approach to cost analysis, calculate the cost of each program and the cost per patient year of the alcohol and drug programs.
c. What benefits can Uppervale Health Center obtain by implementing the ABC system?
2. What factors, other than cost, do you think Uppervale Health Center should consider in
ABC, implementation, ethics. (CMA, adapted) Applewood Electronics, a division of Elgin Corporation, manufactures two large screen television models: the Monarch, which has been produced since 2006 and sells for $900, and the Regal, a newer model introduced in early 2009 that sells for $1,140. Based on the following income statement for the year ended November 30, 2010, senior management at Elgin have decided to concentrate Applewood’s marketing resources on the Regal model and to begin to phase out the Monarch model because Regal generates a much bigger operating income per unit.
Details for cost of goods sold for Monarch and Regal are as follows:
Applewood’s controller, Susan Benzo, is advocating the use of activity based costing and activity based management and has gathered the following information about the company’s manufacturing overhead costs for the year ended November 30, 2010.
After completing her analysis, Benzo shows the results to Fred Duval, the Applewood division president. Duval does not like what he sees. ?oIf you show headquarters this analysis, they are going to ask us to phase out the Regal line, which we have just introduced. This whole costing stuff has been a major problem for us. First Monarch was not profitable and now Regal.?? ?oLooking at the ABC analysis, I see two problems. First, we do many more activities than the ones you have listed. If you had included all activities, maybe your conclusions would be different. Second, you used number of setups and number of inspections as allocation bases. The numbers would be different had you used setup hours and inspection hours instead. I know that measurement problems precluded you from using these other cost allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for these issues. I know you can do better. We can’t afford to phase out either product.??
Benzo knows that her numbers are fairly accurate. As a quick check, she calculates the profitability of Regal and Monarch using more and different allocation bases. The set of activities and activity rates she had used results in numbers that closely approximate those based on more detailed analyses. She is confident that headquarters, knowing that Regal was introduced only recently, will not ask Applewood to phase it out. She is also aware that a sizable portion of Duval’s bonus is based on division revenues. Phasing out either product would adversely affect his bonus. Still, she feels some pressure from Duval to do something.
Required
1. Using activity based costing, calculate the gross margin per unit of the Regal and Monarch models.
2. Explain briefly why these numbers differ from the gross margin per unit of the Regal and Monarch models calculated using Applewood’s existing simple costing system.
3. Comment on Duval’s concerns about the accuracy and limitations of ABC.
4. How might Applewood find the ABC information helpful in managing its business?
5. What should Susan Benzo do in response to Duval’scomments?
ABC, product costing at banks, cross subsidization. First International Bank (FIB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 7% annual interest rate on their average deposit. FIB earns an interest rate spread of 3% (the difference between the rate at which it lends money and the rate it pays depositors) by lending money for home loan purposes at 10%. Thus, FIB would gain $60 on the interest spread if a depositor had an average Premier Account balance of $2,000 in 2008 ($2,000 X 3% $60).
The Premier Account allows depositors unlimited use of services such as deposits, withdrawals, checking accounts, and foreign currency drafts. Depositors with Premier Account balances of $1,000 or more receive unlimited tree use of services. Depositors with minimum balances of less than $1,000 pay a $20 a month service fee for their Premier Account.
FIB recently conducted an activity based costing study of its services. It assessed the following costs for six individual services. The use of these services in 2008 by three customers is as follows:
?
Assume Robinson and Farrell always maintain a balance above $1,000, whereas Skerrett always has a balance below $1,000.
1. Compute the 2008 profitability of the Robinson, Skerrett, and Farrell Premier Accounts at FIB.
2. What evidence is there of cross subsidization among the three Premier Accounts? Why might FIB worry about this cross subsidization if the Premier Account product offering is profitable as a whole?
3. What changes would you recommend for FIB’s PremierAccount?
Dividends Per Share Scan Tech Inc., a developer of radiology equipment, has stock outstanding as follows: 24,000 shares of 2% preferred stock of $75 par, and 100,000 shares of $8 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $19,200; second year, $30,000; third year, $75,000; fourth year, $120,000. Calculate the dividends per share on each class of stock for each of the four years. Round all answers to nearest cent. If no dividends are paid in a given year, enter “0”. 24,000×2%x$75=36,000 Yr 1 Preferred 19200 Dividends Received 19200/24000=.80PS 36,000 19200=$16800 Dividends in arrear Common 0 Yr2 Preferred 30000 Dividends Received 30000/24000=.125 = 1.25PS 16800 (36000 30000)=10800 Common 0 Yr3 Preferred 36000 + 10800 =46800 46800/24000=1.95PS Common 75000 46800=28200 28200/100000=2.82PS Yr4 Preferred 36000 Dividends Received 36000/24000=$1.50PS Common 120000 36000=84000 Dividends Received 84000/100000=.84PS
Division P of Turbo Corporation has the capacity for making 140,000 wheel sets per year and regularly sells 105,000 each year on the outside market. The regular sales price is $100 per wheel set, and the variable production cost per unit is $73. Division Q of Turbo Corporation currently buys 37,300 wheel sets (of the kind made by Division P) yearly from an outside supplier at a price of $94 per wheel set. If Division Q were to buy the 37,300 wheel sets it needs annually from Division P at $89 per wheel set, the change in annual net operating income for the company as a whole, compared to what it is currently, would be:
E7 1 Carl Warren Tina Chester owns and operates Pinebush Print Co. During September, Pinebrush Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy. Cost related to new printing press: 1. Fee paid to factory representative for installation. 2. Freight. 3. Insurance while in transit. 4. New parts to replace those damaged in unloading. 5. Sales tax on purchase price. 6. Special foundation. Costs relate to used printing press: 7. Amount paid to attorney to review purchase agreement. 8. Freight. 9.Installation. 10. Repair of vandalism during installation. 11. Replacement of worn out parts. 12. Repair of damage incurred in reconditioning the press: a. Indicaate which costs incurred in acquiring the new printing press should be recorded as an increase to the asset account. b. Indicate which costs incurred in acquiring the used printing press should be recorded as an increase to the asset account
In an early home game, an NBA team made 63.83 percent of their 94 free throw attempts. In one of their last home games, the team had a free throw percentage equal to 83.95 percent out of 81 attempts. Do basketball teams improve their free throw percentage as their season progresses? Test the hypothesis of equal free throw percentages, treating the early season and late season games as random samples. Use a level of significance of .10.
(a 2)
Identify the decision rule. (Round your answers to 2 decimal places. Negative value should be indicated by minus sign.)
Calculate the Z test statistic value. (Round your answer to 4 decimal places. Negative value should be indicated by a minus sign.)
Entries and Schedules for Unfinished Jobs and Completed Jobs
Staircase Equipment Company uses ajob order cost system. The following data summarize the operations related to production for April 2012, the first month of operations:
Materials purchased on account, $2,340.
Materials requisitioned and factory labor used:
Job
Materials
Factory Labor
No. 301
$3,220
$2,950
No. 302
3,930
3,980
No. 303
2,610
1,950
No. 304
8,820
7,320
No. 305
5,600
5,580
No. 306
4,090
3,540
For general factory use
1,090
4,370
Factory overhead costs incurred on account, $6,150.
Depreciation of machinery and equipment, $2,090.
The factory overhead rate is $70 per machine hour. Machine hours used:
Job
Machine Hours
No. 301
30
No. 302
31
No. 303
22
No. 304
81
No. 305
29
No. 306
42
Total
235
Jobs completed: 301, 302, 303, and 305.
Jobs were shipped and customers were billed as follows: Job 301, $9,920; Job 302, $12,100; Job 303, $17,690.
1. Journalize the entries to record the summarized operations. For a compound transaction, if an amount box does not require an entry, leave it blank or enter “0”.
Entries
Description
Debit
Credit
a.
b.
c.
d.
e.
f.
g.
2. On your own paper, post the appropriate entries to T accounts for Work in Process and Finished Goods. Then, give the following balances:
Work in Process
$
Finished Goods
$
3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.
Schedule of Unfinished Jobs
Job
Direct Materials
Direct Labor
Factory Overhead
Total
$
$
$
$
Balance of Work in Process, April 30
$
4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.
A CPA, while performing an audit, strives to achieve independence in appearance in order to:
A) reduce risk and liability.
B) comply with the generally accepted standards of field work.
C) become independent in fact.
D) maintain public confidence in the profession.
3.
Which of the following is not an underlying premise of an audit?
A) Management must provide the auditor with all information relevant to the preparation and fair presentation of the financial statements.
B) Management and the auditors have responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework
C) Where appropriate, the auditor may obtain information from those charged with governance.
D) The auditors should be provided unrestricted access to those within the entity from whom the auditor determines it necessary to obtain audit evidence.
4. A peer review in which the peer reviewers study and appraise a CPA firm’s system of quality control to perform accounting and auditing work is referred to as a(n): A) Engagement review.
B) Inspection review.
C) Supervision review.
D) System review.
5.
Of the following, which are current types of peer review?
System Review
Engagement Review
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
A) Option A
B) Option B
C) Option C
D) Option D
6. Which AICPA quality control standard would most likely be satisfied when a CPA firm maintains records indicating which partners or employees of the firm were previously employed by the CPA firm’s clients?
A) Professional relationship.
B) Engagement performance.
C) Relevant ethical requirements.
D) Monitoring.
7.
An audit provides reasonable assurance of detecting which of the following types of material illegal acts?
Direct Effect
Without a Direct Effect
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
A) Option A
B) Option B
C) Option C
D) Option D
8.
Authoritative GAAP sources include:
FASB Concepts Statements
FASB Codification
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
A) Option A
B) Option B
C) Option C
D) Option D
9. A procedure in which a quality control partner periodically tests the application of quality control procedures is most directly related to which quality control element?
A) Engagement performance
B) Leadership responsibilities for quality with the firm.
C) Monitoring
D) Human Resources
10. A set of criteria used to determine measurement, recognition, representation, and disclosure of all material items appearing in the financial statements is referred to as a(n) A) Financial reporting framework.
B) Public Company Accounting Oversight Board Criteria.
Colin Davis Machine Company maintains a general ledger account for each class of inventory, debiting such accounts for increases during the period and crediting them for decreases. The transactions below relate to the Raw Materials inventory account, which is debited for materials purchased and credited for materials requisitioned for use. 1. An invoice for $8,100, terms f.o.b. destination, was received and entered January 2, 2008. The receiving report shows that the materials were received December 28, 2007. 2. Materials costing $28,000, shipped f.o.b. destination, were not entered by December 31, 2007, ?obecause they were in a railroad car on the companyâ??s siding on that date and had not been unloaded.?? 3. Materials costing $7,300 were returned to the creditor on December 29, 2007, and were shipped f.o.b. shipping point. The return was entered on that date, even though the materials are not expected to reach the creditorâ??s place of business until January 6, 2008. 4. An invoice for $7,500, terms f.o.b. shipping point, was received and entered December 30, 2007. The receiving report shows that the materials were received January 4, 2008, and the bill of lading shows that they were shipped January 2, 2008. 5. Materials costing $19,800 were received December 30, 2007, but no entry was made for them because ?othey were ordered with a specified delivery of no earlier than January 10, 2008.??
Instructions Prepare correcting general journal entries required at December 31, 2007, assuming that the books have not been closed.
Cruz Company deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2011, its Cash account shows an $11,352 debit balance. Cruz’s June 30 bank statement shows $10,332 on deposit in the bank. a. Outstanding checks as of June 30 total $1,713. b. The June 30 bank statement included a $23 debit memorandum for bank services; Cruz has not yet recorded the cost of these services. c. In reviewing the bank statement, a $90 check written by Cruz Company was mistakenly recorded in Cruz Company’s books at $99. d. June 30 cash receipts of $2,724 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. e. The bank statement included a $5 credit for interest earned on the cash in the bank. Prepare a bank reconciliation for Cruz Company using the above information. (Input all amounts as positive values. Omit the “$” sign in your response.) CRUZ COMPANY Bank Reconciliation June 30, 2011 Bank statement balance $ Book balance $ Add: Add: (Click to select)Interest earnedRecording error on checkDeposit of june 30Outstanding checksBank service charge (Click to select)Recording error on checkOutstanding checksDeposit of june 30Bank service chargeInterest earned (Click to select)Bank service chargeDeposit of june 30Interest earnedOutstanding checksRecording error on check Deduct: Deduct: (Click to select)Recording error on checkInterest earnedOutstanding checksBank service chargeDeposit of june 30 (Click to select)Recording error on checkOutstanding checksDeposit of june 30Bank service chargeInterest earned Adjusted bank balance $ Adjusted book balance $
In the current year Alice reports $150,000 of salary income $20,000 of income from activity X $35,000 and $15,000 losses from activities Y and Z, respectively. All three activities are passive with respect to Alice and are purchased during the current year. ?a. What is the amount of loss that may be deducted with respect to each of these activities? ?b. Compute the amount of loss that must be carried over for each activity. I need to have details. Activity X $20,000 Activity Y (35,000) assuming this is correct Activity Z (15,000) assuming this is correct Net passive loss carryover $(30,000) $35,000 Activity Y: ? = loss carryover ? 35,000 deductible loss $50,000 ? Activity Z: 30,000 = loss carryover ? $15,000 deductible loss $50,000 The amount that may be deducted related to Activity Y is $14,000 The amount that may be deducted related to Activity Z is $? These losses, $? related to Activity Y and $9,000 related to Activity Z, carry over to subsequent years and may be used to offset any income from passive activities. Additionally, any remaining loss attributable to an activity that is disposed of may be deducted in the year of disposal. This is why it is important to allocate the portion of the total net passive loss carryover to each individual activity.
During the current year, the Harlow Corporation which specializes in commercial construction, has the following property transaction C. A fire destroys the company’s supply warehouse. The warehouse originally cost $300,000. and has an adjusted of $200,000. Its fair market value before the fire was $250,000. The insurance company pays Harlow $230,000. which it uses to acquire a warehouse costing $280,000. D. The city of PeaceDale condemns land that Harlow had acquired in 1978 for $22,000. and held as an investment. The city pays Harlow the $195,000. fair market value of the land. Harlow uses the proceeds to acquire a commerical office park for $350,000. Determine the realized and recognized gain or loss on each of Harlow’s property transactions and the basis of any property acquired in each transaction
During the current year, Karen sells her entire interest in Central Corporation common stock for $22,000. She is the sole shareholder, and originally organized the corporation several years ago by contributing $89,000 in exchange for her stock, which qualifies as Sec. 1244 stock. Since its incorporation, Central has been involved in the manufacture of items that protect personal computers from static electricity. Unfortunately, this market is extremely competitive, and Central Corporation incurs substantial losses throughout its existence.**a. Assuming Karen is single, what are the amount and character of the loss recognized on the sale of the Central Corporation stock?**b. Assuming Karen is married and files a joint return, what are the amount and the character of the loss recognized on the sale of the Central Corporation stock?**c. How would your answer to Part a change if Karen had originally purchased the stock from another shareholder rather than organizing the corporation?**d. How might Karen have structured the transaction in Part a to receive a greater tax advantage?**
On December 1, 2009, John and Patty Driver formed a corporation called Susquehanna Equipment Rentals. The new corporation was able to begin operations immediately by purchasing the assets and taking over the location of Rent It, an equipment rental company that was going out of business. The newly formed company uses the following accounts: Cash Income Taxes Payable Accounts Receivable Capital Stock Prepaid Rent Retained Earnings Unexpired Insurance Dividends Office Supplies Income Summary Rental Equipment Rental Fees Earned Accumulated Depreciation Salaries Expense Rental Equipment Maintenance Expense Notes Payable Utilities Expense Accounts Payable Rent Expense Interest Payable Office Supplies Expense Salaries Payable Depreciation Expense Dividends Payable Interest Expense Unearned Rental Fees Income Taxes Expense The corporation performs adjusting entries monthly. Closing entries are performed annually on December 31. During December, the corporation entered into the following transactions: Dec. 1 Issued to John and Patty Driver 20,000 shares of capital stock in exchange for a total of $ 200,000 cash. Dec. 1 Purchased for $ 240,000 all of the equipment formerly owned by Rent It. Paid $ 140,000 cash and issued a one year note payable for $ 100,000. Dec. 1 Paid $ 12,000 to Shapiro Realty as three months’ advance rent on the rental yard and office formerly occupied by Rent It. Dec. 4 Purchased office supplies on account from Modern Office Co., $ 1,000. Payment due in 30 days. (These supplies are expected to last for several months; debit the Office Supplies asset account.) Dec. 8 Received $ 8,000 cash as advance payment on equipment rental from McNamer Construction Company. (Credit Unearned Rental Fees.) Dec. 12 Paid salaries for the first two weeks in December, $ 5,200. Dec. 15 Excluding the McNamer advance, equipment rental fees earned during the first 15 days of December amounted to $ 18,000, of which $ 12,000 was received in cash. Dec. 17 Purchased on account from Earth Movers, Inc., $ 600 in parts needed to repair a rental tractor. (Debit an expense account.) Payment is due in 10 days. Dec. 23 Collected $ 2,000 of the accounts receivable recorded on December 15. Dec. 23 Rented a backhoe to Mission Landscaping at a price of $ 250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks. Dec. 26 Paid biweekly salaries, $ 5,200. Dec. 27 Paid the account payable to Earth Movers, Inc., $ 600. Dec. 28 Declared a dividend of 10 cents per share, payable on January 15, 2010. Dec. 29 Susquehanna Equipment Rentals was named, along with Mission Landscaping and Collier Construction, as a co defendant in a $ 25,000 lawsuit filed on behalf of Kevin Davenport. Mission Landscaping had left the rented backhoe in a fenced construction site owned by Collier Construction. After working hours on December 26, Davenport had climbed the fence to play on parked construction equipment. While playing on the backhoe, he fell and broke his arm. The extent of the company’s legal and financial responsibility for this accident, if any, cannot be determined at this time. (Note: This event does not require a journal entry at this time, but may require disclosure in notes accompanying the statements.) Dec. 29 Purchased a 12 month public liability insurance policy for $ 9,600. This policy protects the company against liability for injuries and property damage caused by its equipment. However, the policy goes into effect on January 1, 2010, and affords no coverage for the injuries sustained by Kevin Davenport on December 26. Dec. 31 Received a bill from Universal Utilities for the month of December, $ 700. Payment is due in 30 days. Dec. 31 Equipment rental fees earned during the second half of December amounted to $ 20,000, of which $ 15,600 was received in cash. Data for Adjusting Entries: a. The advance payment of rent on December 1 covered a period of three months. b. The annual interest rate on the note payable to Rent It is 6 percent. c. The rental equipment is being depreciated by the straight line method over a period of eight years. d. Office supplies on hand at December 31 are estimated at $ 600. e. During December, the company earned $ 3,700 of the rental fees paid in advance by McNamer Construction Co. on December 8. f. As of December 31, six days’ rent on the backhoe rented to Mission Landscaping on December 23 has been earned. g. Salaries earned by employees since the last payroll date (December 26) amounted to $ 1,400 at month end. h. It is estimated that the company is subject to a combined federal and state income tax rate of 40 percent of income before income taxes (total revenue minus all expenses other than income taxes). These taxes will be payable in 2010. Instructions a. Perform the following steps of the accounting cycle for the month of December: Journalize the December transactions. Do not record adjusting entries at this point. Post the December transactions to the appropriate ledger accounts. Prepare the unadjusted trial balance columns of a 10 column worksheet for the year ended December 31. Prepare the necessary adjusting entries for December. Post the December adjusting entries to the appropriate ledger accounts. Complete the 10 column worksheet for the year ended December 31. b. Prepare an income statement and statement of retained earnings for the year ended December 31, and a balance sheet (in report form) as of December 31. c. Prepare required disclosures to accompany the December 31 financial statements. Your solution should include a separate note addressing each of the following areas: (1) depreciation policy, (2) maturity dates of major liabilities, and (3) potential liability due to pending litigation. d. Prepare closing entries and post to ledger accounts. e. Prepare an after closing trial balance as of December 31. f. During December, this company’s cash balance has fallen from $ 200,000 to $ 65,000. Does it appear headed for insolvency in the near future? Explain your reasoning. g. Would it be ethical for Patty Driver to maintain the accounting records for this company, or must they be maintained by someone who is independent of the organization?
Cusic Industries had the following operating results for 2010: sales = $15,300; cost of goods sold = $10,900; depreciation expense = $2,100; interest expense = $520; dividends paid = $500. At the beginning of the year, net fixed assets were $11,800, current assets were $3,400, and current liabilities were $1,900. At the end of the year, net fixed assets were $12,900, current assets were $3,950, and current liabilities were $1,950. The tax rate for 2010 was 40 percent.
a. What is net income for 2010?
b. What is the operating cash flow for 2010?
c. What is the cash flow from assets for 2010? Is this possible? Explain.
d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to stockholders? Explain and interpret the positive and negative signs of your answers in (a) through (d).
Use the following information for Ingersoll, Inc., (assume the tax rate is 34 percent):
Draw up an income statement and balance sheet for this company for 2009 and 2010.
Calculating Cash Flow For 2010, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.
Cash Flows You are researching Time Manufacturing and have found the following accounting statement of cash flows for the most recent year. You also know that the company paid $82 million in current taxes and had an interest expense of $43 million. Use the accounting statement of cash flows to construct the financial statement of cash flows.
Net Fixed Assets and Depreciation On the balance sheet, the net fixed assets (NFA) account is equal to the gross fixed assets (FA) account, which records the acquisition cost of fixed assets, minus the accumulated depreciation (AD) account, which records the total depreciation taken by the firm against its fixed assets. Using the fact that NFA = FA AD, show that the expression given in the chapter for net capital spending, NFAend NFAbeg + D (where D is the depreciation expense during the year), is equivalent to FAend FAbeg.
Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break even level for the project. Guthrie Enterprises needs someone to supply it with 130,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $830,000 to install the equipment necessary to start production; you’ll depreciate this cost straight line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $60,000. Your fixed production costs will be $210,000 per year, and your variable production costs should be $8.50 per carton. You also need an initial investment in net working capital of $75,000. If your tax rate is 35 percent and you require a 14 percent return on your investment, what bid price should you submit?
The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question.
In the previous problem, assume that the price per carton is $14 and find the project NPV. What does your answer tell you about your bid price? What do you know about the number of cartons you can sell and still break even? How about your level of costs?
Solve the previous problem again with the price still at $14—but find the quantity of cartons per year that you can supply and still break even. (Hint: It’s less than 130,000.)
Repeat (b) with a price of $14 and a quantity of 130,000 cartons per year, and find the highest level of fixed costs you could afford and still break even. (Hint: It’s more than $210,000.)
After completing its capital spending for the year, Carlson Manufacturing has $1,000 extra cash. Carlson’s managers must choose between investing the cash in Treasury bonds that yield 8 percent or paying the cash out to investors who would invest in the bonds themselves.
If the corporate tax rate is 35 percent, what personal tax rate would make the investors equally willing to receive the dividend or to let Carlson invest the money?
Is the answer to (a) reasonable? Why or why not?
Suppose the only investment choice is a preferred stock that yields 12 percent. The corporate dividend exclusion of 70 percent applies. What personal tax rate will make the stockholders indifferent to the outcome of Carlson’s dividend decision?
Is this a compelling argument for a low dividend payout ratio? Why or why not?
Net Present Value FIFA rules regarding player contracts are very interesting. If a player wishes to break his contract, the purchasing club must pay the player’s club four times the player’s annual salary multiplied by the number of years left on the contract. The player must pay 10 per cent of this amount personally, and the agent must also pay 10 per cent of the amount from his own pocket. Consider the footballer Cristiano Ronaldo, who was widely rumoured to be leaving Manchester United for Real Madrid during the summer of 2008 (he actually joined in the summer of 2009). At that time Ronaldo was earning €120,000 a week, and had four years of his contract with Manchester United left.
Calculate how much Ronaldo would have personally had to pay Manchester United if he left with 4 years remaining, 3 years remaining, 2 years remaining, and 1 year remaining.
If the appropriate annualized discount rate is 8 per cent, what is the present value to Ronaldo of breaking his contract with 4, 3, 2, 1 and 0 years remaining?
Assume you are Ronaldo’s agent and can personally earn €5 million today from getting Ronaldo to sign a pre contract agreement to join Real Madrid in the future. Calculate the net present value to you if Ronaldo left with 4 years remaining, 3 years remaining, 2 years remaining, and 1 year remaining.
Balloon Payments Mario Guiglini has just sold his hotel and purchased a restaurant with the proceeds. The restaurant is on the Riccione seafront in northern Italy. The cost of the restaurant to Mario is €500,000, and the seller requires a 25 per cent up front payment. Mario is able to pay the up front payment from the proceeds of the hotel sale. He needs to take out a mortgage, and has been able to arrange one with Unicredit Bank that charges a 9 per cent APR. Mario will make equal monthly payments over the next 30 years. His first payment will be due one month from now. However, the mortgage has an eight year balloon payment option, meaning that the balance of the loan could be paid off at the end of year 8. There were no other transaction costs or finance charges. How much will Mario’s balloon payment be in eight years?
Efficient Market Hypothesis Aerotech, a Chinese aerospace technology research firm, announced this morning that it has hired the world’s most knowledgeable and prolific space researchers. Before today, Aerotech’s equity had been selling for RMB100. Assume that no other information is received over the next week, and the Chinese stock market as a whole does not move.
a. What do you expect will happen to Aerotech’s share price?
b. Consider the following scenarios:
c. The share price jumps to RMB118 on the day of the announcement. In subsequent days it floats up to RMB123, then falls back to RMB116.
i. The share price jumps to RMB116 and remains at that level.
ii. The share price gradually climbs to RMB116 over the next week.
iii. Which scenario(s) indicate market efficiency? Which do not? Why?
Lease or Buy Super Sonics Entertainment is considering buying a machine that costs NKr3,500,000. The machine will be depreciated using the 20 per cent reducing balance method. At the end of five years it will be sold at its accounting residual value. The company can lease the machine with year end payments of NKr942,000. The company can issue bonds at a 9 per cent interest rate. If the corporate tax rate is 28 per cent, should the company buy or lease?
Use the following information to solve Problems 19–21. The Wildcat Oil Company is trying to decide whether to lease or buy a new computer assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide £700,000 in annual pre tax cost savings. The system costs £6 million and will be depreciated at 20 per cent reducing balance method. At the end of five years, it will have no value. Wildcat’s tax rate is 28 per cent, and the firm can borrow at 9 per cent. Lambert Leasing Company has offered to lease the drilling equipment to Wildcat for payments of £1,400,000 per year. Lambert’s policy is to require its lessees to make payments at the start of the year.
Lease or Buy High electricity costs have made Farmer Corporation’s chicken plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. The lease payments will be £2,100 for five years, due at the beginning of the year. This machine will save Farmer £6,000 per year through reductions in electricity costs in every year. As an alternative, Farmer can purchase a more energy efficient machine from Basic Machine Corporation (BMC) for £15,000. This machine will save £9,000 per year in electricity costs. A local bank has offered to finance the machine with a £15,000 loan. The interest rate on the loan will be 10 per cent on the remaining balance, and five annual principal payments of £3,000. Farmer has a target debt to asset ratio of 67 per cent. Farmer has a corporation tax rate of 28 per cent. After five years, both machines will be worth nothing. The depreciation method is 20 per cent reducing balance method and the asset will be worthless after 5 years.
a. Should Farmer lease the IPM machine or purchase the more efficient BMC machine?
b. Does your answer depend on the form of financing for direct purchase?
On December 31, 2013, Russell Co. estimated that 4% of its net sales of $410,600 will become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. On May 11, 2014, Russell Co. determined that the B. Vetter account was uncollectible and wrote off $2,053. On June 12, 2014, Vetter paid the amount previously written off.
Prepare the journal entries on December 31, 2013, May 11, 2014, and June 12, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Determining break even price in a reduce or expand decision. QuickCare is a health care franchise that functions as a primary family health clinic, seeing unscheduled patients twenty four hours a day. Several months after the grand opening, a corporate office management engineering study showed that the clinic was experiencing some dips in volume in the midafternoon hours. To increase volume, efficiency, and revenues, the clinic administrator contracted with the area high schools to provide after school physicals for the sports teams. The initial agreement was that QuickCare would charge $100 per exam, the market average. Fixed costs were $30,000 and variable costs are $25 per physical. Although this strategy proved somewhat successful, gross profit margin lagged behind the corporate expectations. To improve margins, the clinic is considering increasing the exam price to $125. QuickCare’s administrator projects that this price increase will cause the high schools to send their athletes to other providers and that volume could drop by 33 percent. Last year, QuickCare performed 1,026 examinations. The administrator feels that if the program closes down, all $30,000 in fixed costs would be saved. ‘ What should QuickCare’s decision be, assuming that this price increase will decrease the number of patients seen by one third? ‘ What price would QuickCare have to charge to make up for the loss of patients? ‘ Using the information from point 1, should QuickCare make the same decision if 40% of the fixed costs are avoidable? Would it be better or worse off? Why?
Determining charges for private pay residents. Shady Grove Nursing Home has 220 private pay residents. The administrator is concerned about balancing the ratio of its private pay to non private pay patients. Non private pay sources reimburse an average of $125 per day whereas private pay residents pay on average 90 percent of full daily charges. The administrator estimates that variable cost per resident per day is $45 for supplies, food, and contracted services, and annual fixed costs are $6,000,000. ‘ What is the daily contribution margin of each non private pay resident? ‘ If 25 percent of the residents are non private pay, what will Shady Rest charge the private pay patients to break even? ‘ What if non private pay payors cover 50 percent of the residents? ‘ The owner of Shady Rest Home insists that the facility earn $80,000 in annual profits. How much must the administrator raise the per day charge for the private insured residents if 25 percent of the residents are covered by non private pay payors?
In this case you are presented with a fact pattern for a taxpayer with various tax planning needs. Given the tax facts and the financial situation of this individual, you are to answer several questions regarding his tax status and to evaluate how he might apply the various strategies and tactics described in this assignment to improve his tax situation.
CASE NARRATIVE
Paul Stephowski is a single, 39 year old attorney with a medium sized law firm in Philadelphia. He earned $49,000 this year and anticipates that his earnings will substantially increase within the next few years.
Paul entered the legal profession later than most attorneys. He spent 5 years in the Navy before entering college at the age of 24. After graduating from college with a degree in English he worked as an editor at Harper House publishers. At the age of 31 he was accepted at William Mitchell School of Law and completed his law study 3 years later. He passed the bar exam immediately after graduation and went to work for a large law firm in his hometown. After 2 years he quit this firm and joined a smaller firm where he felt he had more opportunity for advancement. He has been with this firm for 3 years and plans to make his career there.
Paul rents an apartment downtown one block from his office. He enjoys the city lifestyle and especially likes being able to walk to work in 5 minutes any time of the day or year. He finds it very convenient when entertaining clients or potential clients. Paul belongs to the downtown YMCA and to the Main Line Golf and Racquet Club, both of which he uses principally for recreation, although he does occasionally entertain clients or prospective clients at each of the clubs.
Paul has accumulated a modest portfolio of assets consisting of $25,200 in municipal bonds, $31,500 in stock, $7,900 in a NOW account and $11,000 in zero coupon bonds maturing in 15 years for $50,000. He saved very little while in the Service and has only recently finished repaying his student loans for law school. Although he enjoys a fairly comfortable lifestyle, he has some concerns that he may not be investing an adequate proportion of his earning to provide the financial security he desires. He also feels that as his income rises his tax burden is becoming excessive. The facts he presents are as follows:
Personal facts
Salary $49,000 Single
No dependents
Investment Facts
Dividends 900
Interest on CDs (redeemed early) 475
Long term capital gain 13,370
Short term capital loss 2,405
Interest on municipal bonds 1,764
Early withdrawal penalty on CD 213
Other Facts
State sales tax 515
Contribution to charity 3,427
Received for writing a magazine article 50
Winnings in contest 90
Fees paid to professional organizations 203
Paid for continuing education requirements
of state bar 370
Received as damage award for physical
injuries in an auto accident that occurred
the previous year 2,200
Attended a 3 day National Lawyers Guild
conference in Palm Springs in February;
stayed an additional 2 days for a short
golfing vacation
Round trip airfare 450
Registration fee 1,000
Car rental fees ($32/day) 160
Meals ($42/day) 210
Greens fees and cart rental 100
Room ($110/day) 550
Dues and Fees at Main Line Golf and Racquet
Club 1,875
Dues and fees at YMCA 350
Federal tax withheld 14,750
State and local taxes withheld 2,460
Medical premiums 420
Requirements for Answering the Case
On the basis of the facts as presented, answer the following questions. (You need not be familiar with all the specific tax forms used when actually filing the return.)
Case Study ‘ Leases Page 1352 Accounting, Analysis, and Principles Salaur Company is evaluating a lease arrangement being offered by TSP Company for use of a computer system. Please read the terms found on the bottom of page 1352. 1.Accounting Analyze the lease capitalization criteria for the lease. Prepare the journal entry for Salaur on January 1, 2012. 2.Analysis Discuss the impact of the accounting for this lease for two common ratios: Return on assets and debt to total assets. 3.Principles What elements of faithful representation (completeness, verifiability, neutrality, free from error) is being addressed when a company like Salaur evaluates lease capitalization criteria? Additional info: yearly rental 3,527.25 lease term 3 years Estimated economic life 5 years purchase option 3,000 at the end of 3 years which is approximates fair value renewal option 1 year at 1,500; no penalty for nonrenewal standard renewal clause Fair value at inception lease 10,000 cost of asset to lessor 10,000 Residual value gauranteed 0 unguaranteed 3,000 lessor implicit rate 12% Executory costs paid by: lessor estimated to be 5,0000 per year( included rental euip) Estimated fair value at the end of lease 3,0000
Charter Corporation, which began business in 2013, appropriately uses the installment sales method of accounting for its installment sales. The following data were obtained for sales made during 2013 and 2014:
2013
2014
Installment sales
$
560,000
$
550,000
Cost of installment sales
392,000
467,500
Cash collections on installment sales during:
2013
170,000
125,000
2014
”
160,000
Required:
1.
How much gross profit should Charter recognize in 2013 and 2014 from installment sales?
2.
What should be the balance in the deferred gross profit account at the end of 2013 and 2014?
Chenango Can Company manufactures metal cans used in the food processing industry. A case of cans sells for $25. The variable costs of production for one case of cans are as follows: DIRECT MATERIAL 7.50 DIRECT LABOR 2.50 VARIABLE MANUFACTURING OVERHEAD 6.00 Total variable manufacturing cost per case 16.00 Variable selling and administrative costs amount to $.50 per case. Fixed manufacturing costs are $400,000 per year and fixed selling and administrative cost is $37,500 per year. A unit is one case of cans. YEAR 1 YEAR 2 YEAR 3 FINISHED GOODS INVENTORY IN UNITS, JANUARY 1 0 0 20,000 ACTUAL PRODUCTION IN UNITS 80,000 80,000 80,000 SALES IN UNITS 80,000 60,000 90,000 FINISHED GOODS INVENTORY IN UNITS, DECEMBER 31 0 20,000 10,000 Prepare operating income statements for the first three years of operations using both absorption and variable costing. Reconcile operating income reported under absorption and variable costing for each of its three years of operation. Assume during the fourth year of operations the company ends the year with no inventory on hand. What will be the difference between absorption costing income and variable costing income in year 4. What will be the relationship between total operating income for the four year period as reported under absorption and variable costing?
Holmes Corporation sold $2.200.000,8%, 5 year bonds on January 1, 2014. The bonds were dated January 1, 2014, and pay interest on January 1. Holmes Corporation uses the straight line method to amortize bond premium or discount. (a) Prepare all the necessary journal entries to record the issuance of the bonds and bond interest expense for 2014, assuming that the bonds sold at 102
(b) Prepare journal entries as in part (a) assuming that the bonds sold at 98.
(c) Show the balance sheet presentation for the bond issue at December 31, 2014, using (1) the 102 selling price, and then (2) the 98 selling price.
Clark, a 12 year old child, lives with his parents. During the current year, Clark earned $2,400 delivering newspapers. This was his only income. Clark’s parents file a joint return and claim Clark as a dependent. Considering this information, which of the following statements is correct? The parents may report Clark’s income on their tax return. Clark must use his parents’ tax rate to compute his tax liability. Clark’s taxable income is $1,450. Clark’s taxable income is $0. None of the above. Rhonda is single and receives the following income during the year: $30,000 taxable pension, $6,000 in social security payments, and $1,000 of interest on State of Iowa bonds. What is Rhonda’s adjusted gross income based on the above information? $36,000 $34,500 $33,000 $30,000 None of the above Brian, a calendar year taxpayer, purchased an annuity contract which started paying him $54 each month on June 1, of the current year. The annuity cost him $2,400, and it has an expected return of $7,200. How much of this annuity is includable in gross income for the current year 0 $378 $126 $252 None of the above
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?
Company: BANK OF AMERICA 1. Which method of reporting cash flows from operations does the company use? 2. Compare the net cash provided/used from operations to the net income amount on the income statement for all of the years presented in the annual report. Are these two numbers trending in the same direction? What is the largest adjustment item in the cash flows from operations? 3. What has created the largest inflow and outflow of cash for investing activities? Did investing activities provide or use cash for each of the years presented? 4. Did the financing activities provide or use cash in each of the years presented? What are the stock repurchase and dividend trends of your chosen company? 5. Does the cash provided by operations cover the investing activities? Financing activities? 6. What is the cash conversion cycle for your company in each of the years presented? Please interpret the cycle for each year and its current trend.
A company issued 10%, 5 year bonds with a par value of $2,000,000, on January 1, 2005. Interest is to be paid semiannually each June 30 and December 31. The bonds were sold at $2,162,290 to yield the buyers an 8% annual return. The company uses the effective interest method of amortization.
(1) Prepare the journal entry to record the issuance of the bonds. Dr Cash 2,162.290 Cr Premium on Bonds Payable 162,290 Cr Bonds Payable 2,000,000
(2) Prepare an amortization table for the first two semiannual payment periods using the format shown below.
At issue date: Unamortized Premium 162,290 Carrying Value 2,162,290
A company reports the following beginning inventory and purchases for the month of January. On January 26, the company sells 350 units. 150 units remain in ending inventory at January 31.
Units
Unit Cost
Beginning inventory on January 1
320
$
3.00
Purchase on January 9
80
3.20
Purchase on January 25
100
3.34
Required:
Assume the perpetual inventory system is used and then determine the costs assigned to endinginventory when costs are assigned based on the FIFO method.
The comparative balance sheets for Gould Company as of December 31 are presented below.
GOULD COMPANY
Comparative Balance Sheets
December 31
Assets
2011
2010
Cash
$ 71,290
$ 44,830
Accounts receivable
44,040
62,020
Inventory
151,350
141,860
Prepaid expenses
14,990
21,460
Land
104,900
130,260
Equipment
228,190
154,960
Acc. depr. equipment
(44,620)
(35,020)
Building
199,840
199,840
Acc. depr. building
(60,390)
(39,940)
Total
$709,590
$680,270
Liabilities and Stockholders’ Equity
Accounts payable
$ 48,140
$ 39,560
Bonds payable
259,810
299,710
Common stock, $1 par
199,800
159,900
Retained earnings
201,840
181,100
Total
$709,590
$680,270
Additional information:
Operating expenses include depreciation expense of $41,790 and charges from prepaid expenses of $6,470.
Land was sold for cash at book value.
Cash dividends of $16,160 were paid.
Net income for 2011 was $36,900.
Equipment was purchased for $94,560 cash. In addition, equipment costing $21,330 with a book value of $9,590 was sold for $6,230 cash.
Bonds were converted at face value by issuing 39,900 shares of $1 par value common stock.
Prepare a statement of cash flows for the year ended December 31, 2011, using the indirect method. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, 17, 5, 1. If amount decreases cash flow, use either a negative sign preceding the number eg. 45 or parentheses eg (45).)
Comparative statement data for Lionel Company and Barrymore Company, two competitors, appear below. All balance sheet data are as of December 31, 2014, and December 31, 2013. Lionel Company Barrymore Company 2014 2013 2014 2013 Net sales $1,549,035 $339,038 Cost of goods sold 1,053,345 237,325 Operating expenses 278,825 77,979 Interest expense 7,745 2,034 Income tax expense 61,960 8,476 Current assets 401,584 $388,020 86,450 $ 82,581 Plant assets (net) 596,920 575,610 142,842 128,927 Current liabilities 65,015 75,507 19,618 14,654 Long term liabilities 102,500 84,000 16,711 11,989 Common stock, $5 par 578,765 578,765 137,435 137,435 Retained earnings 252,224 225,358 55,528 47,430 Prepare a vertical analysis of the 2014 income statement data for Lionel Company and Barrymore Company in columnar form. (Round percentages to 1 decimal place, e.g. 12.1%.) Condensed Income Statement For the Year Ended December 31, 2014 Lionel Company Barrymore Company Dollars Percent Dollars Percent
Computer Information Services is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Carol Birch, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. Birch assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department. Service Department User Department Info System Facilities** Computer Programming Consulting Training Total Budgeted Overhead $50,000 $25,000 $75,000 $110,000 $85,000 $345,000 Info systems (hours) 400 1,100 600 900 3,000 Facilities (thousand sq. ft.) 200 400 600 800 2,000 *Allocated on the basis of hours of computer usage. **Allocated on the basis of floor space. Required: Allocate the service department costs to the user departments using the step method.
Conover Company ordered a machine on January 1, 2009, at a purchase price of $20,900. On the date of delivery, January 2, 2009, the company paid $7,500 on the machine and signed a note payable for the balance. On January 3, 2009, it paid $390 for freight on the machine. On January 5, Conover paid installation costs relating to the machine amounting to $1,200. On December 31, 2009 (the end of the accounting period), Conover recorded depreciation on the machine using the straight line method with an estimated useful life of 12 years and an estimated residual value of $3,350.
Requirement 1:
Indicate the effects (accounts, amounts, and + , ‘ , or “NE” for no effect) of each transaction (on January 1, 2, 3, and 5) on the accounting equation. Use the following schedule:
Date
Assets
=
Liabilities
+
Stockholders’ Equity
Jan. 1
(Click to select) Note payable Accounts payable Cash No effect Equipment
(Click to select) 1,200 +390 390 +1,200 20,900 13,400 +13,400 +20,900 NE
(Click to select) Cash Accounts payable Note payable No effect Equipment
(Click to select) +1,200 13,400 20,900 390 1,200 +390 +20,900 NE +13,400
(Click to select) Note payable Accounts payable Equipment Cash No effect
Jan. 2
(Click to select) Accounts payable No effect Cash Equipment Note payable
(Click to select) +1,200 +390 +13,400 1,200 7,500 NE 390 13,400 +7,500
(Click to select) Note payable Equipment Cash No effect Accounts payable
(Click to select) +13,400 1,200 +20,900 +390 +1,200 390 NE 20,900 13,400
(Click to select) Equipment Cash Accounts payable Note payable No effect
(Click to select) +13,400 +20,900 +390 +1,200 20,900 NE 1,200 390 13,400
Jan. 3
(Click to select) Cash Note payable Accounts payable Supplies No effect
(Click to select) +20,900 +390 +13,400 20,900 NE 13,400 +1,200 1,200 390
(Click to select) No effect Note payable Equipment Supplies Accounts payable
(Click to select) +1,200 +13,400 390 20,900 NE 13,400 +20,900 1,200 +390
Jan. 5
(Click to select) No effect Note payable Supplies Accounts payable Cash
(Click to select) +20,900 +13,400 390 +1,200 NE +390 13,400 20,900 1,200
(Click to select) No effect Supplies Equipment Note payable Accounts payable
(Click to select) 20,900 1,200 390 NE +1,200 +13,400 +20,900 +390 13,400
Requirement 2:
Compute the acquisition cost of the machine.(Omit the “$” sign in your response.)
Acquisition cost
$
Requirement 3:
Compute the depreciation expense to be reported for 2009.(Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
Depreciation
$
Requirement 4:
What should be the book value of the machine at the end of 2010?(Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
Continuing Problem P6 45 Accounting for inventory using the perpetual system”LIFO [30’40 min] This problem continues the Draper Consulting situation from Problem 5 43 in Chapter 5. Consider the January transactions for Draper Consulting that were presented in Chapter 5. (Cost data has been removed from the sale transactions.) 3 Requirements 1. Prepare perpetual inventory records for January for Draper using the LIFO perpetual method. (Note: You must figure cost on the 18th, 28th, and 31st.) 2. Journalize and post the January transactions using the perpetual inventory record created in requirement 1. Key all items by date. Compute each account balance, and denote the balance as Bal. 3. Journalize and post the adjusting entries. Denote each adjusting amount as Adj. After posting all adjusting entries, prove the equality of debits and credits in the ledger. Jan 2 Completed a consulting engagement and received cash of $7,800. 2 Prepaid three months’ office rent, $1,650. 7 Purchased 80 units software inventory on account, $1,680, plus freight in, $80. 18 Sold 40 software units on account, $3,500. 19 Consulted with a client for a fee of $1,000 on account. 20 Paid employee salary, $2,055. 21 Paid on account, $1,760. 22 Purchased 240 units software inventory on account, $6,240. 24 Paid utilities, $250. 28 Sold 120 units of software for cash, $4,680. 31 Recorded the following adjusting entries: Accrued salary expense, $685. Depreciation, $100 (Equipment, $30; Furniture, $70). Expiration of prepaid rent, $550. Physical count of inventory, 145 units. I have done really well in this class, but for some reason I am overwhelmed and this problem is now past due. For Jan 20, the template has spaces for 2 debit and 1 credit entries. I am not understanding why that would be. I am also confused because in the last chapter we closed everything out so do we start over or from those closing balances? I could use some help with the entire problem just to make sure that I am doing it right and understand it. So that I am not lost again next week.
The cost of materials transferred into the Rolling Department of Matco Steel Company is $540,300 from the Casting Department. The conversion cost for the period in the Rolling Department is $108,700 ($61,700 factory overhead applied and $47,000 direct labor). The total cost transferred to Finished Goods for the period was $657,700. The Rolling Department had a beginning inventory of $22,700.
A) Journalize the cost of transferred in materials.
______?_________ _______?________
______?_________________?________
B) Journalize the conversion costs. For a compound transaction, if an amount box does not require an entry, leave it blank or enter zero (“0”).
CP6 On December 1, 2012, Ruggiero Company had the account balances shown below. Debits Cash $ 4,800 Accounts Receivable 3,900 Inventory 1,800* Equipment 21,000 $31,500 $31,500 Credits Accumulated Depreciation”Equipment $ 1,500 Accounts Payable 3,000 Common Stock 10,000 Retained Earnings 17,000 $31,500 *(3,000 $0.60) The following transactions occurred during December. Dec. 3 Purchased 4,000 units of inventory on account at a cost of $0.72 per unit. 5 Sold 4,400 units of inventory on account for $0.90 per unit. (It sold 3,000 of the $0.60 units and 1,400 of the $0.72.) 7 Granted the December 5 customer $180 credit for 200 units of inventory returned costing $150. These units were returned to inventory. 17 Purchased 2,200 units of inventory for cash at $0.80 each. 22 Sold 2,000 units of inventory on account for $0.95 per unit. (It sold 2,000 of the $0.72 units.) Adjustment data: 1. Accrued salaries payable $400. 2. Depreciation $200 per month. 3. Income tax expense was $215, to be paid next year. Instructions (a) Journalize the December transactions and adjusting entries, assuming Ruggiero uses the perpetual inventory method (b) Enter the December 1 balances in the ledger T accounts and post the December transactions. In addition to the accounts mentioned above, use the following additional accounts: Cost of Goods Sold, Depreciation Expense, Salaries and Wages Expense, Salaries and Wages Payable, Sales Revenue, Sales Returns and Allowances, Income Tax Expense, and Income Taxes Payable. (c) Prepare an adjusted trial balance as of December 31, 2012. (d) Prepare an income statement for December 2012 and a classified balance sheet at December 31, 2012. (e) Compute ending inventory and cost of goods sold under FIFO, assuming Ruggiero Company uses the periodic inventory system. (f) Compute ending inventory and cost of goods sold under LIFO, assuming Ruggiero Company uses the periodic inventory system. Kimmel, Paul D. (2011 06 28). Financial Accounting: Tools for Business Decision Making, 6th Edition (Page 326). John Wiley & Sons, Inc.. Kindle Edition.
On August 31, 2010 Victory Corporation’s common stock is priced at $40 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows. Assume that the company declares and immediately distributes a 100% stock dividend.
Common stock “$10 par value, 95,000 shares
authorized, 35,000 shares issued and outstanding
$350,000
Paid in capital in excess of par value, common stock
130,000
Retained earnings
480,000
Total stockholders’ equity
#2)
A company has 40,000 shares of common stock outstanding. The stockholders’ equity applicable to common shares is $470,000 and the par value per common share is $10. The book value per share is:?
#3)
Assume Garrison Guitar Company declared a $0.28 per share cash dividend and that the company has 25,000 shares authorized, 19,000 shares issued and 12,000 shares of common stock outstanding. The general journal entry to record the dividend declaration is: ?
#4)
A company paid $.95 in cash dividends per share. Its earnings per share is $3.0 and its market price per share is $35. Its dividend yield equals (rounded):?
#5)
A corporation issued 300 shares of its $5 par value common stock in payment of a $2,070 charge from its accountant for assistance in filing its charter with the state. The entry to record this transaction will include:
960,000
What is the total amount in the Common Stock account immediately after the stock dividend?
A bakery company is considering one capital budgeting project involving the replacement of a sophisticated brick oven, and another capital budgeting project involving research and development into synthetic food substitutes. Which of the following statements is most correct concerning the risk adjusted discount rate(s) for the projects? Answer a. The rate will likely be higher for the replacement project because the likelihood of success is higher. b. The rate will likely be higher for the research and development project because of the uncertainty involved with research and development projects. c. The rate should be the same for both projects because they are being considered by one company with the same common shareholders. d. The rate should be higher for the replacement project because the company is more certain of the returns from a project similar to their existing business.
Bard Manufacturing uses a job order cost accounting system. During one month Bard purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Bard incurred a factory payroll of $150,000, paid in cash, of which $40,000 is classified as indirect labor. Bard uses a predetermined overhead application rate of 150% of direct labor cost. The journal entry to record payment of the factory payroll is: a. Debit Goods in Process Inventory $150,000; credit Factory Payroll $150,000. b. Debit Goods in Process Inventory $150,000; credit Cash $150,000. c. Debit Factory Payroll $150,000; credit Cash $150,000. d. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Factory Payroll $150,000. e. Debit Goods in Process Inventory $110,000; debit Factory Overhead $40,000; credit Cash $150,000.
Baron Corporation has two sequential processing departments: Assembly then Shaping: The Shaping Department reports the following information. Conversion costs are applied evenly throughoutt the process.
Beginning WIP inventory = 8,000 units
Transferred in cost in beginning WIP Inventory = $110,200
Direct Materials cost in beginning WIP inventory = $24,500
Conversion costs in beginning WIP inventory = $22,750
units transferred in = 57,000 units
Transferred in costs = $546,300
Units completed = 52,000
Cost added: direct materials = $167,120
Cost added: conversion costs = $245,570
Ending WIP inventory = 13,000 units
(40% complete for materials and 30% complte for conversion)
The Total cost of units transferred out to finished goods would be closest to. Show calculation.
At the beginning of July, CD City has a balance in inventory of $2,905. The following transactions occur during the month of July. July 3 Purchase CDs on account from Wholesale Music for $1,730, terms 2/10, n/30. July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $120. July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $320. *July 11 Pay Wholesale Music in full* 1 What is the account payable $$? A) Cash? B) Inventory? July 12 Sell CDs to customers on account, $4,900, that had a cost of $2,500. July 15 Receive full payment from customers related to the sale on July 12. July 18 Purchase CDs on account from Music Supply for $1,750, terms 3/10, n/30. July 22 Sell CDs to customers for cash, $3,690, that had a cost of $1,730. July 28 Return CDs to Music Supply and receive credit of $240. *July 30 Pay Music Supply in full* 1 Account Payable 2 Cash Please provide the answer for lines with *
At the beginning of the year, Gaudi Company estimated the following:
Overhead: $432, 000
Direct Labor Hours: 90, 000
Gaudi uses normal costing and applies overhead on the basis of direct labor hours. For the month of January, direct labor hours were 7, 650. By the end of the year, Gaudi showed the following actual amounts:
Overhead: $436, 000
Direct labor hours: 89, 600
Assume the unadjusted Cost of Goods Sold for Gaudi was $707, 000
1. Calculate the predetermined overhead rate for Gaudi.
2. Calculate the overhead applied to production for January.
3. Calculate the total applied overhead for the year. Was overhead over or underapplied? By how much?
4. Calculate adjusted Cost of Goods Sold after adjusting the overhead variance.
Betty incurs the following transaction during the current year. Without considering the transaction, her 2012 AGI is $40,000. Analyze the transactions and answer the following questions: <?xml:namespace prefix = o ns = “urn:schemas microsoft com:office:office” />
A?· On March 10, 2012, she sells a painting for $2,000. Betty is the artist, and she completed the painting in 2007. Her basis for the painting is $50.
A?· On June 18, 2012, she receives $28,500 from the sale of stock purchased by her uncle in 2000 for $10,000, which she inherited on February 20, 2012, as a result of her uncle’s death. The stock’s FMV on that date is $30,000.
A?· On July 30, 2012, she sells land from $25,000 that was received as a gift from her brother on April 8, 2012, when the land’s FMV was $30,000. Her brother purchased the land for $43,000 on October 12, 2004. No gift tax was paid.
a. What is her NSTCL or NSTCG?
b. What is her NLTCL or NLTCG?
c. What is the effect of capital gains and losses on her AiG?
d. What is her capital loss carry forward to the next year?
Blowing Rock Railroad decided to use the high low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Blowing Rock Railroad is a measure of railroad operating activity, termed “gross ton miles,” which is the total number of tons multiplied by the miles moved.
Transportation Costs
Gross Ton Miles
January
$1,384,400
307,000
February
1,543,600
343,000
March
1,090,900
222,000
April
1,479,900
332,000
May
1,241,200
267,000
June
1,591,300
361,000
Determine thevariable cost per gross ton mile and thefixed cost.
The board of directors of Gibson Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $4,000,000, 6%, 20 year bonds at face value. Plan #2 would require the issuance of 100,000 shares of $5 par value common stock which is selling for $40 per share on the open market. Gibson Corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. Assume that income before interest and income taxes is expected to be $800,000 if the new factory equipment is purchased. Instructions Prepare a schedule which shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.
The main focus of this course is to understand rules in International Accounting. One such focus is to understand the major differences in US GAAP and IFRS (International Financial Reporting Standards). The portfolio project is divided into two parts; provide detailed responses to both parts of the project.
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Your project will need to be submitted as one MSWord document. If you use Excel spreadsheets to answer the questions, please copy and paste them into your Word document. You can only submit ONE document for the Portfolio Project, so all of your work needs to be contained in that one document. Please make sure to clearly label your answers and use APA for formatting and style as required. The paper should be 8 10 pages in length. For each of the two parts, discuss and cite at least two credible outside sources other than the assigned textbook. PROBLEM The main focus of this course is to understand rules in International Accounting. One such focus is to understand the major differences in US GAAP and IFRS (International Financial Reporting Standards). The portfolio project is divided into two parts; provide detailed responses to both parts of the project. Part I 1.Provide a detailed history of the convergence project between US GAAP and IFRS. 2. Discuss in detail the major differences between US GAAP and IFRS applications. 3. Provide a list of countries that have adopted IFRS and how cultural differences can impact interpretation of IFRS. Part II 1.Explain Transfer Pricing in detail. 2.Provide a detailed example of how Transfer Pricing can be used successfully by Multinational Corporations. 3.Please discuss in detail various methods of translating foreign currency financial statements.
Bob Lawson is the president of his company; his CFO is Mark Ziegler. Like many entrepreneurs, Bob is more concerned about the big picture and leaves the day to day accounting details up to Mark. Bob reviews the financial statements regularly; however, Mark would like to help him understand how to make better use of the company’s financial statements to gauge the changes in his business and plan for the future. Even though Mark generates all statements in terms of dollars and percents (common size statements), Bob ignores the common size statements. The two have agreed to meet next week.
Mark plans to begin his coaching with the following topics:
Making comparisons using standardized financial statements
Calculating and understanding performance ratios
Determining the company’s profitability and growth
Drawbacks associated with financial statement comparisons
Bob meets next month with a banker to secure a 60 day line of credit. He asks Mark which financial ratios will be of the most interest to the loan officer. How should Mark respond, any why?
(Points : 1) The total debt ratio, times interest earned ratio, or cash coverage ratio to discover the company’s amount of long term debt The inventory turnover, receivables turnover, or asset turnover ratio to judge the firm’s ability to use convert assets to sales The profit margin ratio, ROA ratio, or ROE ratio to understand the profitability of the company The current ratio, quick ratio, or cash ratio to determine the firm’s liquidity
Brady Construction Company contracted to build an apartment complex for a price of $5,000,000. Construction began in 2013 and was completed in 2015. The following are a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars Estimated Costs to Complete Costs Incurred During Year (As of the End of the Year) Situation 2013 2014 2015 2013 2014 2015 1 1,500 2,100 900 3,000 900 ” 2 1,500 900 2,400 3,000 2,400 ” 3 1,500 2,100 1,600 3,000 1,500 ” 4 500 3,000 1,000 3,500 875 ” 5 500 3,000 1,300 3,500 1,500 ” 6 500 3,000 1,800 4,600 1,700 ” Required: Complete the following table. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) Gross Profit (Loss) Recognized % of Completion Completed Contract Situation 2013 2014 2015 2013 2014 2015 1 2 3 4 5 6
Brisky Corporation uses activity based costing to compute product margins. In the first stage, the activity based costing system allocates two overhead accounts equipment depreciation and supervisory expense to three activity cost pools Machining, Order Filling, and Other based on resource consumption. Data to perform these allocations appear below: In the second stage, Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. 7. How much overhead cost is allocated to the Machining activity cost pool under activity based costing in the first stage of allocation? A. $11,000 B. $3,000 C. $14,000 D. $6,200 8. The activity rate for the Machining activity cost pool under activity based costing is closest to: A. $1.40 per MH B. $30.00 per MH C. $0.70 per MH D. $0.55 per MH 9. What is the overhead cost assigned to Product I3 under activity based costing? A. $3,780 B. $14,000 C. $4,560 D. $780 10. What is the product margin for Product I3 under activity based costing? A. $6,400 B. $3,040 C. $7,600 D. $3,820
She buys five deluxe mixers on account from Kzinski Supply Co. for $2,750, terms n/30. She pays $100 freight on the January 4 purchase. Natalie returns one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Cookie Creations credit for the cost of the mixer plus $20 for the cost of freight that was paid on January 6 for one mixer. She collects the amount due from the neighborhood community center that was accrued at the end of December 2011. She sells three deluxe mixers on account for $3,300, FOB destination, terms n/30. The mixers cost $570 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,200, terms n/30. Natalie is concerned that there is not enough cash available to pay for all of the mixers purchased. She issues additional common stock for $1,000. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,200 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2011. Recall that Natalie’s assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. CCC5 Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is to become the exclusive distributor of a line of fine European mixers. The current cost of a mixer is approximately $550, and Natalie would sell each one for $1,100. Natalie comes to you for advice on how to account for these mixers.
Please calculate the Overhead Controllable Variance and the Overhead Volume Variance from the following information. I need to know HOW you came up with this info, so I can backtrack the solution.
Dinkel Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2012.
Costs and Production Data
Actual
Standard
Raw materials unit cost
$2.25
$2.00
Raw materials units used
10,600
10,000
Direct labor payroll
$122,400
$120,000
Direct labor hours worked
14,400
15,000
Manufacturing overhead incurred
$184,500
Manufacturing overhead applied
$189,000
Machine hours expected to be used at normal capacity
42,500
Budgeted fixed overhead for June
$51,000
Variable overhead rate per hour
$3.00
Fixed overhead rate per hour
$1.20
Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.
Compute the overhead controllable variance and the overhead volume variance. PLEASE SHOW YOUR WORK! I am not just interested in the answer. I need to know how you got it.
Calculating break even and graphing. The North Kingstown Cancer infusion therapy division expects tremendous growth over the next year and is projecting the following cost and rate structure for the service. Revenue $750 per patient Costs: Rent $3,600 per month Staff $195,000 per month Leases $10,000 per month Other fixed costs $20,000 per month Pharmaceuticals $500 per patient Intravenous supplies $25 per patient Other patient supplies $25 per patient a. What volume of patients per month will it take for the center to break even? b. What is the break even point in dollars? c. If the clinic needs to make a profit of $75,000 per month, what is the new break even point in volume per month? d. If the clinic needs to make a profit of $75,000 per month, what is the new break even point in revenue?
Candice hires Otto to work as a tax preparer in Candice’s tax return business. The employment contract restricts the ability of Otto to set up a competing business or engage in tax preparation services if Otto leaves Candice’s employ. Otto discovers he likes this kind of work and wants to set up his own tax return business. He asks you whether the restrictions in his contract with Candice will be enforceable. You should tell him that
A.restrictive covenants regarding future employment will be enforceable if they’re reasonable.
B.restrictive covenants regarding future employment will be enforceable if the value of the consideration given for the covenant equals the value of the income loss that would be caused by enforcing the agreement.
C.any restriction regarding employment is unenforceable as against public policy.
D.any restriction regarding employment will be enforceable as long as there was adequate consideration.
Abe and Brenda formed the AB Partnership ten years ago as a general partnership and have been very successful with the business. However, in the current year, economic conditions caused them to lose significant amounts, but they expect the economy and their business to recover and return to profitable operations by next year or the year after. Abe manages the partnership and works full time. Brenda has a full time job as an accountant at an annual salary of $39,000, but she also works in the partnership occasionally. She estimates that she spent about 120 hours working in the partnership this year. Abe has a 40% profits interest, a 50% loss interest and a basis in the partnership interest on December 31st (before this year’s operations). The partnership has no liabilities at December 31st. Neither Abe nor Brenda currently has other investments. The AB Partnership incurs the following amounts during the year.
Ordinary loss $100,000
SEC 1231 Gain 10,000
Tax Exempt Muni Bond Income 14,000
Long Term Capital Loss 14,000
Short Term Capital Loss 136,000
Early next year, the AB Partnership is considering borrowing $100,000 from a local bank to be secured by a mortgage on a building owned by the partnership with $150,000 FMV.
Required: Prepare a presentation to be made to Abe and Brenda discussing this matter. Points to include in your discussion include:
What amounts should Abe and Brenda report on their income tax returns for the current year from the AB Partnership?
What are their bases in the partnership after taking all transactions into account?
According to a study by the American Pet Food Dealers Association, 57 percent of U.S. households own pets. A report is being prepared for an editorial in the San Francisco Chronicle. As a part of the editorial a random sample of 335 households showed 195 own pets. Does this data disagree with the Pet Food Dealers Association data? Use a 0.05 level of significance. (a) State the null hypothesis and the alternate hypothesis. (Round your answers to 2 decimal places.) H0: ? = H1: ? ? (b) State the decision rule for 0.05 significance level. (Round your answers to 2 decimal places.) H0 is rejected if z is not between and . (c) Compute the value of the test statistic. (Round your answer to 2 decimal places.) Value of the test statistic (d) Does this data disagree with the Pet Food Dealers Association data? Use a 0.05 level of significance. H0 is (Click to select)rejectednot rejected. There is (Click to select)sufficientinsufficient evidence to show the proportion has changed.
P12 13A Baucom Manufacturing Corporation was started with the issuance of common stock for $50,000. It purchased $7,000 of raw materials and worked on three job orders during 2012 for which data follow. (Assume that all transactions are for cash unless otherwise indicated.)
Direct raw material used Direct labor Job 1 $1,000 $2,000 Job 2 $2,000 $4,000 Job 3 $3,000 $2,000 Total $6,000 $8,000
Factory overhead is applied using a predetermined overhead rate of $0.60 per direct labor dollar. Jobs 2 and 3 were completed during the period and Job 3 was sold for $10,000 cash. Baucom paid $400 for selling and administrative expenses. Actual factory overhead was $4,300.
Required a. Record the preceding events in a horizontal statements model. The first event for 2012 has been recorded as an example. b. Reconcile all subsidiary accounts with their respective control accounts. c. Record the closing entry for over or underapplied manufacturing overhead in the horizontal statements model, assuming that the amount is insignificant. d. Prepare a schedule of cost of goods manufactured and sold, an income statement, and a balance sheet for 2012.
Ace Bicycle Company produces bicycles. This year’s expected production is 10,000 units. Currently Ace also makes the chains for its bicycles. Ace’s accountant reports the following costs for making the 10,000 chains: Description Per unit Costs Costs for 10,000 Units Direct materials $4.00 $40,000 Direct manufacturing labor 2.00 20,000 Variable manufacturing overhead (power & utilities) 1.50 15,000 Inspection, setup, material handling 2,000 Machine lease 3,000 Allocated fixed plant administration, taxes, and insurance 30,000 Total $110,000 Ace has received an offer from an outside vendor to supply any number of chains. Ace requires at $8.20 per chain. The following additional information is available: a. Inspection, setup, and material handling costs vary with the number of batches in which the chains are produced. Ace produces chains in batch sizes of 1,000 units. Ace estimates that it will produce the 10,000 units in 10 batches. b. The costs for the machine lease are the payments Ace makes for renting the equipment used in making the chains. If Ace buys all its chains from the outside vendor, it does not need this machine. Required: 1. Assume that if Ace purchases the chains from the outside supplier, the facility where the chains are currently made will remain idle. Should Ace accept the outside supplier’s offer at the anticipated production (and sales) volume of 10,000 units? 2. For this question, assume that if the chains are purchased outside, the facilities where the chains are currently made will be used to upgrade the bicycles by adding mud flaps and reflector bars. As a consequence, the selling price on bicycles will be raised by $20. The variable per unit cost of the upgrade would be $18, and additional tolling costs of $16,000 would be incurred. Should Ace make or buy the chains, assuming that 10,000 units are produced (and sold)? The sales manager at Ace is concerned that the estimate of 10,000 units may be high and believes that only 6,200 units will be sold. Production cut back, which opens up more work space. Now there is room to add the mud flaps and reflectors whether Ace goes outside for the chains or makes them in house. At this lower output; Ace will produce the chains in 8 batches of 775 units each. Should Ace purchase the chains from the outside vendor?
Acompany had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
A $296
B $304
C $276
D$280
G $288
Given the following information, determine the cost of goods sold at December 31 using the Weighted Average perpetual inventory method. December 2: 5 units were purchased at $7 per unit. December 9: 10 units were purchased at $9.40 per unit. December 11: 12 units were sold at $35 per unit. December 15: 20 units were purchased at $10.15 per unit. December 22: 18 units were sold at $35 per unit.
Add or drop decision. The Ancome County Health Department is considering using 300 square feet of excess office space to provide a clinic for Healthchek visits. These visits are reimbursed at $67.30 under a Medicaid program. Variable costs per visits are $53.30, and providing the service requires an additional physician assistant and nurse with prorated salaries of $90,000 and $50,000, respectively. The state has mandated efforts to increase the utilization of Medicaid eligibility, so the Department of Social Services is conducting interventions to increase eligibility awareness in the community. As a result, the health department expects 10,000 Healthchek visits in the coming year. Unavoidable overhead costs for the health department are $300,000 per year and will be allocated to each program based on its proportional share of the health department’s total office space of 2,700 square feet. ‘ What are the total contribution margin and total product margin for a Healthchek visit? ‘ Considering the total product margin, should the health department provide the service? ‘ Are there any other considerations that should be taken into account when making this decision?
AE20 12 (Pension Expense, Journal Entries, Statement Presentation) Ferreri Company received the following selected information from its pension plan trustee concerning the operation of the company’s defined benefit pension plan for the year ended December 31, 2012. January , 2012 December 31, 2012 Projected benefit obligation $1,410,100 $1,441,500 Market related and fair value of plan assets 826,200 1,226,120 Accumulated benefit obligation 1,600,000 1,720,000 Accumulated OCI (G/L) Net gain 0 (191,010) The service cost component of pension expense for employee services rendered in the current year amounted to $81,400 and the amortization of prior service cost was $120,000. The company’s actual funding (contributions) of the plan in 2012 amounted to $317,300. The expected return on plan assets and the actual rate were both 10%; the interest/discount (settlement) rate was 10%. Accumulated other comprehensive income (PSC) had a balance of $1,200,000 on January 1, 2012. Assume no benefits paid in 2012. (a) Determine the amount of the components of pension expense that should be recognized by the company in 2012. (b) Prepare the journal entries to record pension expense and the employer’s contribution to the pension plan in 2012. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.) (c) Indicate the pension related amounts that would be reported on the income statement and the balance sheet for Ferreri Company for the year 2012. For my answer I got: Pension Expense 259,790 Other Comprehensive Income (G/L) 191,010 Cash 317,300 Pension Asset / Liability 13,500 Other Comprehensive Income (PSC) 120,000 Income Statement Amount: 311,010 Balance Sheet Liabilities: 151,010 However, the homework system says this is incorrect. Please help?
Requirements: Part a. You have just been appointed to the position of Finance Director for a large multinational corporation. The business operates in about 20 countries around the world and has a very diverse product, service and business portfolio. Some of the businesses within the group buy from one another. You are looking at ways to maximise profits for the corporation as a whole and as such you are investigating different ways to measure the performance of individual managers who each have responsibility for one part of the portfolio. As the organisation’s Finance Director you have been asked to advise the Board of Directors as to which of the following three approaches to measuring performance is best for the organisation: 1) Cost Centre management; or 2) Profit Centre management; or 3) Investment Centre management? Your answer should include a critical review of each approach.
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SUNDERLAND BUSINESS SCHOOL Module: Strategic Management Accounting APC 309 Individual Assignment th Hand in Date: 6 January 2014 General Information Weighting – 100% of the marks for this module This is an individual assignment of 3,000 words (+/ 10%), excluding appendices and bibliography. The word count MUST be shown on the front of the assignment. There are TWO questions to be answered in this assignment. Each question carries a maximum mark of 50%. All of the learning outcomes for the module are being assessed in this assignment. The learning outcomes are shown in the section entitled “Marking Guide”, which is further on in this document. The University’s policy on cheating collusion and plagiarism will be applied to this piece of work. You are required to produce a report which answers the following TWO questions: Requirements: Part a. You have just been appointed to the position of Finance Director for a large multinational corporation. The business operates in about 20 countries around the world and has a very diverse product, service and business portfolio. Some of the businesses within the group buy from one another. You are looking at ways to maximise profits for the corporation as a whole and as such you are investigating different ways to measure the performance of individual managers who each have responsibility for one part of the portfolio. As the organisation’s Finance Director you have been asked to advise the Board of Directors as to which of the following three approaches to measuring performance is best for the organisation: 1) Cost Centre management; or 2) Profit Centre management; or 3) Investment Centre management? Your answer should include a critical review of each approach.Part b. Organisations need to know the cost of products or services they provide for a variety of decision making situations. Critically evaluate the following three approaches to costing products or services: 1. Marginal or variable costing; 2. Full or absorption…
Alice Johnson, Social Security number 222 23 3334, is single taxpayer and is employed as a secretary by State University of Florida. She has the following items pertaining to her income tax return for the current year: ‘ Received a $20,000 salary from her employee, who withheld a $3,000 federal income tax ‘ Received a gift of 1,000 shares of Ace Corporation stock with a $100,000 FMV from her mother. She also received $4,000 of cash dividends from the Ace Corporation. The dividends are qualified dividends. ‘ Received $1,000 of interest income on bonds issued by the City of Tampa. ‘ Received a regular stock dividend (nontaxable under Sec.305) of 50 shares of Ace Corporation stock with a $5,000 FMV. ‘ Alice’s employer paid $2,000 of medical and health insurance premiums on her behalf. ‘ Received $12,000 alimony from her ex husband. ‘ State University provided $60,000 of group term life insurance. Alice is 42 years old and is not a key employee. The table in the text is applicable. ‘ Received a $1,000 cash award from her employer for being designated the Secretary of the Year. ‘ The itemized deduction are $8,000 Complete Form 1040 and accompanying schedules for Alice Johnson’s 2011 return. 1. List the forms and accompanying schedules for Alice Johnson’s federal tax return 2. Line 9a ‘ Total ordinary dividends 3. Line 22 ‘ Total Income 4. Line 43 ‘ Taxable Income 5. Line 60 ‘ Total Tax
Almeda Products, Inc., uses a job order costing system. During the year, the following transactions were completed: a. Raw materials were issued from the storeroom for use in production, $181,900 (80% direct and 20% indirect). b. Employee salaries and wages were accrued as follows: direct labor, $198,800; indirect labor, $82,300; and selling and administrative salaries, $89,400. c. Utility costs were incurred in the factory, $66,200. d. Advertising costs were incurred, $98,400. e. Insurance costs, $21,300 (90% related to factory operations, and 10% related to selling and administrative activities). f. Depreciation was recorded, $180,100 (85% related to factory assets, and 15% related to selling and administrative assets). g. Manufacturing overhead was applied to jobs at the rate of 170% of direct labor cost. h. Goods that cost $701,200 to manufacture according to their job cost sheets were transferred to the finished goods warehouse. i. Sales for the year totaled $1,390,000. The total cost to manufacture these goods according to their job cost sheets was $718,500 1Determine the underapplied or overapplied overhead for the year. (Omit the “$” sign in your response.) 2Prepare an income statement for the year. (Hint: No calculations are required to determine the cost ofgoods sold before any adjustment for underapplied or overapplied overhead.) (Input all amounts as positive values. Omit the “$” sign in your response.)
Annika Company uses activity based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
Expected Activity
Activity Cost Pool Estimated Costs Product A Product B Total
For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company closed, and continues to close, some of these locations. It is apparent that the company will not be able to recover the cost of the assets associated with the closed stores. Thus, the current value of these impaired assets must be written down (see the Case in Point on page 381). A recent Food Lion income statement reports a $9.5 million charge against income pertaining to the write down of impaired assets.
a. Explain why Food Lion must write down the current carrying value of its unprofitable stores. b. Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense.
(Appendix 5A) Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: Answer
a.
variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
b.
variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
c.
variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.
d.
variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
(Appendix 5A) Pungent Corporation manufactures and sells a spice rack. Shown below are the actual operating results for the first two years of operations:
Year 1 Year 2
Units (spice racks) produced 40,000 40,000 Units (spice racks)sold 37,000 41,000 Absorption costing net operating income $44,000 $52,000 Variable costing net operating income $38,000 ????
Pungent’s cost structure and selling price were the same for both years. What is Pungent’s variable costing net operating income for Year 2? Answer
On April 1, 2011, Janine Corporation sold some of its five year, $1,000 face value, 12 percent term bonds dated March 1, 2011, at an effective annual interest rate (yield) of 10 percent. Interest is payable semiannually, and the first interest payment date is September 1, 2011. Janine uses the interest method of amortization. Bond issue costs were incurred in preparing and selling the bond issue. On November 1, 2011, Janine sold directly to underwriters, at lump sum price $1,000 face value, 9 percent serial bonds dated November 1, 2011, at an effective interest rate (yield) of 11 percent. Of these serial bonds, a total of 25 percent is due on November 1, 2011; a total of 30 percent is due on November 1, 2012; and the rest is due on November 1, 2013. Interest is payable semiannually, and the first interest payment date is May 1, 2011. Janine uses the interest method of amortization. Bond issue cost were incurred in preparing and selling the bond issue. Required: a. How would the market price of the term bonds and the serial bonds be determined? b. What alternative methods could be used to account for the bond issue costs for the term bonds in 2011? Which method(s) is (are) considered current GAAP? Which method(s), if any, would affect the calculation of interest expense? Why (For this question, do not assume that Janine opts to use the fair value method to account for the bonds.) c. How would the amount of interest expense for the term bonds and the serial be determined for 2011?
On April 3rd, Snappy Sales decides to establish a $135.00 Petty Cash Account to relieve the burden on Accounting. (a) Journalize this event.
Apr 3
Select Petty CashCash Short and OverAccounts ReceivableSalesCashItem 1
$
Select Petty CashCash Short and OverAccounts ReceivableSalesCashItem 3
$
(b) On April 11th, the petty cash fund has receipts for mail and postage of $32.75, contributions and donations of $25.25, meals and entertainment of $68.00 and $9.75 in cash. Journalize the replenishment of the fund. When required, enter your answers in dollars and cents.
Apr 11
Select SalesMail and Postage ExpensePetty CashCash Short and OverCashItem 5
$
Select Petty CashAccounts PayableContributions and Donations ExpenseCash Short and OverCashItem 7
$
Select Meals and Entertainment ExpensePetty CashAccounts ReceivableCash Short and OverCashItem 9
$
Select Meals and Entertainment ExpenseMail and Postage ExpenseContributions and Donations ExpenseCash Short and OverPetty CashItem 11
$
Select Meals and Entertainment ExpenseMail and Postage ExpensePetty CashCashContributions and Donations ExpenseItem 13
$
(c) On April 12th, Snappy Sales decides to increase petty cash to $175.00. Journalize this event.
Apr 12
Select Petty CashAccounts ReceivableSalesCash Short and OverCashItem 15
$
Select Petty CashAccounts ReceivableSalesCash Short and OverCashItem 17
Assume that the operating results for last year were as follows:
Refer to the original data. Assume that the company sold 42,000 units last year. The sales manager is convinced that a 10% reduction in the selling price, combined with a $62,000 increase in advertising expenditures, would increase annual unit sales by 50%.
a.
Prepare two contribution format income statements, one showing the results of last year’s operations and one showing what the results of operations would be if these changes were made.(Input all amounts as positive values except losses which should be indicated by minus sign. Do not round intermediate calculations. Round proposed units to the nearest whole number. Round your “Per unit” answers to 2 decimal places.)
Last Year 42,000 units
Proposed units
Total
Per Unit
Total
Per Unit
(Click to select) Contribution margin Variable expenses Net operating income (loss) Sales Fixed expenses
$
$
$
$
(Click to select) Sales Variable expenses Contribution margin Net operating income (loss) Fixed expenses
(Click to select) Sales Net operating income (loss) Contribution margin Variable expenses Fixed expenses
$
$
(Click to select) Contribution margin Fixed expenses Sales Net operating income (loss) Variable expenses
(Click to select) Sales Contribution margin Variable expenses Fixed expenses Net operating income (loss)
$
$
b.
Would you recommend that the company do as the sales manager suggests?
No
Yes
6.
Refer to the original data. Assume again that the company sold 42,000 units last year. The president feels that it would be unwise to change the selling price. Instead, he wants to increase the sales commission by $1.80 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach.
The amount by which advertising can be increased is
1. Tricia Corporation is a single product firm that sells its product for $2.50 per unit. Variable expense per unit at Tricia is $1.00. Tricia expects fixed expenses to total $18,000 for next year. How many units would Tricia have to sell next year in order to break even? a)7,200 b) 12,000 c) 30,000 d) 45,000 2. Terres Corporation produces and sells a single product. Data concerning that product appear below: selling price per unit: $100 variable expense per unit: $33 fixed expense per month: $293,460 The break even in monthly dollar sales is closest to: a)$889,273 b) $438,000 c) $293,460 d) $540,244 3. Majid Corporation sells a product for $240 per unit. The product’s current sales are 41,300 units and its break even sales are 36,757 units. What is the margin of safety in dollars? a)$8,821,680 b) $6,608,000 c) $9,912,000 d) $1,090,320 4. The April contribution format income statement of Iannacone Corporation appears below: sales:$60,900 variable expenses: $42,000 contribution margin: $18,900 fixed expenses: $13,500 net operating income:$5400 If the company’s sales increase by 1%, its net operating income should increase by about: a) 9% b) 1% c) 4% d) 11% 5. Hurlex Company produces a single product. Last year, Hurlex manufactured 15,000 units and sold 12,000 units. Production costs for the year were as follows: direct materials: $150,000 direct labor:$180,000 variable manufacturing overhead:$135,000 fixed manufactuing overhead:$210,000 Sales totaled $840,000 for the year, variable selling expenses totaled $60,000, and fixed selling and administrative expenses totaled $180,000. There were no units in the beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company’s net operating income for the year would be: a)$42,000 higher than under absorption costing b) $30,000 higher than under absorption costing c) $30,000 lower than under absorption costing d) $42,000 lower than under absorption costing 6. Younie Corporation has two divisions: the South Division and the West Division. The corporation’s net operating income is $26,900. The South Division’s divisional segment margin is $42,800 and the West Division’s divisional segment margin is $29,900. What is the amount of the common fixed expense not traceable to the individual divisions? a)$56,800 b) $69,700 c) $72,700 d) $45,800 7. Norenberg Corporation manufactures a variety of products. The following data pertain to the company’s operations over the last two years: variable costing net income, last year: $88,600 variable costing net income, this year: $96,100 increase in ending income, last year: $600 units decrease in ending income, this year: $2300 units fixed manufactingoverhead cost per unit:$7 What was the absorption costing net operating income last year? a) $92,800 b) $88,600 c) $84,400 d) $76,700 8. Borich Corporation produces and sells a single product. Data concerning that product appear below: selling price per unit: $150.00 variable expense per unit: $73.50 fixed expense per month: $308,295 The break even in monthly unit sales is closest to: a) 2,055 b) 4,030 c) 4,194 d) 3,426
Enter a 3 D formula in cell C3 on the October worksheet that calculates the overall percentage of total Sunday Orchestra Front tickets sold based on the total available Orchestra Front seating. The 3 D formula must perform several internal calculations, avoid raw numbers, and use an appropriate mix of relative and mixed references to derive the correct percentage. Format the result with Percent Style. The result is 100%, based on the sum of the Sunday Orchestra Front tickets sold divided by the total available tickets for all four weeks. Copy the formula to the remaining cells in the range C3:G6.
1. Zorro Manufacturing had always made its components in house. However, Simpson Components Works had recently offered to supply one component, P7 43, at a price of $5 each. Zorro uses 3,850 units of component P7 43 each year. The absorption cost per unit of this component is as follows:
Direct Materials $1.30
Direct Labor .65
Variable Overhead 2.50
Fixed Overhead 3.00
Total $7.45
The fixed overhead is an allocated expense; none of it would be eliminated if production of component P7 43 stopped.
Required:
a. What are the alternatives facing Zorro Manufacturing with respect to production component P7 43?
b. List the relevant cost for each alternative. Which alternative is better?
10. Journal Entries. Prepare the journal entries necessary in the fund based and government wide journals to record each of the following transactions. Be sure to indicate to which fund your entry(ies) apply in the fund based journal and the type of activity (GT = governmental type activities, BT = business type activities) in the government wide journal. Additionally, if the entry is the same at the government wide level, indicate this with “SAME” and if no entry applies then indicate with “NE”. If a transaction results in multiple entries, YOU SHOULD INDICATE CLEARLY WHETHER EACH ENTRY IS CHANGED, THE SAME, OR RESULTS IN NO ENTRY. (5 points each) (1) During January, property owners were billed for $3,000,000 in property taxes for the current tax years’ levy. Of this amount, 4% is estimated to be uncollectible. (2) The General Fund transferred $100,000 to the Motor Pool Internal Service Fund to be used for general operating purposes. (3) The General Fund received a $2000 water bill from the city’s Water Utility Fund and immediately paid it. (4) The city purchased new computer equipment costing $19,000 by paying $3,000 in cash and signing a long term note payable for $16,000. (5) The following were collected in cash: Current taxes of 400,000, delinquent taxes of 11,000, other revenues of 10,000 from a number of sources. (6) Total payroll was 500,000. Of that amount, the following were withheld: 18,000 for employees’ FICA liability; 60,000 for employees’ federal income tax liability; and 20,000 for state tax. The balance was paid in cash. (7). On July 1, 20×4, Brook City established an appropriate fund to handle the transactions involving the construction of a new city hall. The city approved a $3,000,000, 6 percent, ten year general obligation serial bond issue to finance the project on July 15, 20×4. The bonds were sold for $3,136,696 on August 1, 20×4, with interest (6%) and principal ($300,000) payments beginning August 1, 20×5. The premium will be used to offset the bond principal and interest payment. [Note: You are to make only the August 1, 20×4 entr(ies). The premium is transferred to debt service fund. Effective interest rate is about 5%.] (8). On August 5, 20×4, the city signed a construction contract for the city hall to be built by SteelBuild Construction Co. in the amount of $3,000,000. (9). On February 16, 20×5, the contractor’s bill for $750,000 was received based on certification that the work was one fourth completed. The contractor was paid for one fourth of the contract less a 6% percent retained percentage to ensure performance. (10). On July 6, 20×5, the General Fund transferred $480,000 to the fund responsible for servicing the serial bonds which will be used with the premium to pay for the first interest and principal payment in August. (11). Interest (6% of face value) and principal (1/10 of face value) on the serial bonds was paid on August 1, 20×5. Premium amortization (if necessary) amounts to $23,165. (12). The City of Commerce signs a capital lease for the purchase of machinery on January 1, 20×6. The terms of the lease state that the City will make a $2,000 payment on January 1, 20×6 and equal payments of $2,000 for each January 1 for the next five years, beginning January 1, 20×7. The normal borrowing rate for the City of Commerce is 5%. The 2,000 payment is made on January 1, 20×6.
132.CJ Manufacturing purchased some equipment 3 years ago. The company’s required rate of return is 12%, and the net present value of the project was $(900). Annual cost savings were: $10,000 for year 1; $8,000 for year 2; and $6,000 for year 3. The amount of the initial investment was Year Present Value of 1 at 12% PV of an Annuity of 1 at 12% 1 .893 .893 2 .797 1.690 3 .712 2.402 a$20,116. b$18,678. c$18,316. d$20,478. 2.Roger Industries is considering two capital investment proposals. Estimates regarding each project are provided below: Project XR8 Project AAA Initial investment $800,000 $1,200,000 Annual net income 40,000 84,000 Net annual cash inflow 200,000 284,000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The cash payback period for Project XR8 is a5 years. b10 years. c4 years. d20 years. 3.Roger Industries is considering two capital investment proposals. Estimates regarding each project are provided below: Project XR8 Project AAA Initial investment $800,000 $1,200,000 Annual net income 40,000 84,000 Net annual cash inflow 200,000 284,000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The annual rate of return for Project XR8 is a25%. b50%. c5%. d10% 4.Roger Industries is considering two capital investment proposals. Estimates regarding each project are provided below: Project XR8 Project AAA Initial investment $800,000 $1,200,000 Annual net income 40,000 84,000 Net annual cash inflow 200,000 284,000 Estimated useful life 5 years 6 years Salvage value 0 0 The company requires a 10% rate of return on all new investments. Present Value of an Annuity of 1 Periods 9% 10% 11% 12% 5 3.890 3.791 3.696 3.605 6 4.486 4.355 4.231 4.111 The net present value for Project AAA is a$36,820. b$200,000. c$1,236,820. d$365,824. 5.Taffy Industries is considering purchasing equipment costing $60,000 with a 6 year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight line over its useful life with no salvage value. Taffy Industries requires a 10% rate of return. Present Value of an Annuity of 1 Periods 8% 9% 10% 11% 12% 13% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment? a$1,772 b$27,600 c$5,496 d$3,584 6.Taffy Industries is considering purchasing equipment costing $60,000 with a 6 year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight line over its useful life with no salvage value. Taffy Industries requires a 10% rate of return. Present Value of an Annuity of 1 Periods 8% 9% 10% 11% 12% 13% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate internal rate of return for this investment? a12% b10% c11% d9% 7.Use the following table, Present Value of an Annuity of 1 Periods 8% 9% 10% 1 .926 .917 .909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $840,000 and is expected to generate cash inflows of $336,000 at the end of each year for three years. The net present value of this project is a$85,032. b$10,416. c$504,000. d$850,416.
1.Tangible assets on the balance sheet should include: A. Equipment. B. Taxes payable. C. Trademarks. D. Bonds payable. E. None of the answers are correct. 2.The balance sheet reports: A. The assets, liabilities, gains, and losses for a period of time. B. The changes in assets, liabilities, and equity for a period of time. C. The assets, expenses, and liabilities as of a certain date. D. The probable future benefits, probable future sacrifices, and residual interest for a period of time. E. The financial condition of an accounting entity as of a particular date. 3.Which of the following would be included in operating income? A. Interest income for a manufacturing firm. B. Rent income for a leasing subsidiary. C. Gain from sale of marketable securities for a retailer. D. Dividend income for a service firm. E. None of the answers are correct. 4.Gross profit is the difference between: A. Net income and operating income. B. Revenues and expenses. C. Sales and cost of goods sold. D. Income from continuing operations and discontinued operations. E. Gross sales and sales discounts. 5.Treasury stock is best classified as: A. A current asset. B. A long term investment. C. A contra liability. D. A reduction of stockholders’ equity. E. A reduction of retained earnings. 6.When a company discontinues and disposes of a component segment of its operations, the gain or loss from disposal should be reported as: A. An adjustment to retained earnings. B. A sale of fixed assets in “other” expense. C. An extraordinary item. D. An accounting change. E. A special item after continuing operations and before extraordinary items. 7.Which of the following is not true about a stock dividend? A. With a stock dividend, the firm issues a percentage of outstanding stock as new shares to existing shareholders. B. The overall effect of a stock dividend is to leave total stockholders’ equity and each owner’s share of stockholders’ equity unchanged. C. In theory, with a stock dividend, total market value considering all outstanding shares should not change. D. Since the number of shares changes under a stock dividend, any ratio based on the number of shares must be restated. E. The accounting for a stock dividend, assuming the distribution is relatively small, requires that the par value of the stock be removed from retained earnings. 8.Ownership of debt instruments of the government and other companies that can be readily converted to cash are best reported as: A. Long term investments. B. Cash. C. Marketable securities. D. Intangibles. E. Inventory of near cash items. 9.Which of the following is a recurring item? A. Equity in earnings of nonconsolidated subsidiaries. B. Error of a prior period. C. Discontinued operations. D. Extraordinary gain. E. Cumulative effect of change in accounting principle. 10.Which of the following is a current liability? A. Prepaid insurance. B. Account receivable. C. Unearned rent revenue. D. Building. E. Common stock.
4) If you have frictional unemployment at 2%. If you have natural unemployment at 5% and the labor force is a 100 million and the number of employed are 82 million give this data, u’ll ask to calculate
2010 Dec. 16 Accepted a $10,500, 60 day, 6% note dated this day in granting Todd Duke a time extension on his past due account receivable. 31 Made an adjusting entry to record the accrued interest on the Duke note. 2011 Feb. 14 Received Duke’s payment of principal and interest on the note dated December 16. Mar. 2 Accepted an $7,600, 6%, 90 day note dated this day in granting a time extension on the past due account receivable from Mare Co. 17 Accepted a $3,100, 30 day, 7% note dated this day in granting Jolene Halaam a time extension on her past due account receivable. Apr. 16 Halaam dishonored her note when presented for payment. June 2 Mare Co. refuses to pay the note that was due to Ohlde Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Mare Co.’s accounts receivable. July 17 Received payment from Mare Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 6%. Aug. 7 Accepted an $8,400, 90 day, 10% note dated this day in granting a time extension on the past due account receivable of Birch and Byer Co. Sept. 3 Accepted a $2,350, 60 day, 8% note dated this day in granting Kevin York a time extension on his past due account receivable. Nov. 2 Received payment of principal plus interest from York for the September 3 note. Nov. 5 Received payment of principal plus interest from Birch and Byer for the August 7 note. Dec. 1 Wrote off the Jolene Halaam account against Allowance for Doubtful Accounts.
During 2013, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $860,000. Cost of goods sold totaled $7,950,000 (75% of sales). The company estimates that 10% of all sales will be returned.
Prepare the year end adjusting journal entries to account for anticipated sales returns. (If no entry is required for a particular event, select “No journal entry required” in the first account field.)
27. LO.4 (By product; net realizable value method) Weinberg Canning produces fi llet, smoked salmon, and salmon remnants in a single process. The same amount of disposal cost is incurred whether a product is sold at split off or after further processing. In October 2010, the joint cost of the production process was $142,000. Product Pounds Produced Separate Cost Final Selling Price Fillet 18,000 $3.00 $16.00 Smoked 20,000 5.20 13.00 Remnants 2,000 0.30 1.50 a. Th e remnants are considered a by product of the process and are sold to cat food processors. Allocate the joint cost based on approximated net realizable value at split off . Use the net realizable value method to account for the by product. b. Determine the value of ending Finished Goods Inventory, assuming that 4,000 pounds of salmon fi llets, 2,400 pounds of smoked salmon, and 350 pounds of salmon remnants were sold. (Round cost per pound to the nearest penny.)
3. (30 points)Thompson Company uses a standard cost system for its single product. The following data are available:
Actual experience for the current year:
Purchases of raw materials (30,000 yards at $2.50 per yard) $75,000
Raw materials used 20,000 yards
Direct labor costs (10,000 hours at $8.60 per hour $86,000
Actual variable overhead cost $35,9000
Units produced 4,800 units
Standards per unit of product:
Raw materials 4 yards at $2.6 per yard
Direct labor 2 hours at $9.00 per hour
Variable overhead $21.6 per direct labor hour
Required:
Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:
3. A company receives a per%, day day note for $amt. The total inte… A company receives a 7%, 90 day note for $1,200. The total interest due on the maturity date is (Use a 360 day year): $84.00 $21.00 $44.36 $16.10 $31.00 4. A company has net sales of $sales and average accounts receivable… A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period (rounded)? 476.71 73.00 5.00 .20 12.00 5. On December 31 of the current year, a company’s unadjusted trial… On December 31 of the current year, a company’s unadjusted trial balance included the following: Accounts Receivable, debit balance of $95,500; Allowance for Doubtful Accounts, credit balance of $950. What amount should be debited to Bad Debts Expense, assuming 9% of outstanding accounts receivable at the end of the current year will be uncollectible?: (Round your answer to the nearest dollar amount.) $8,595 $9,545 $716 $7,645 $950 6. Com Company agreed to accept $cas in cash along with an $note, d… Kallah Company agreed to accept $1,500 in cash along with an $9,000, 45 day, 13% note from customer Judith Taylor to settle her $10,500 past due account. How should Kallah record this transaction? Cash 1,500 Note Receivable 9,000 Accounts Receivable ‘ J. Taylor 10,500 Accounts Receivable ‘ J. Taylor 10,500 Note Receivable 9,000 Cash 1,500 Cash 1,500 Note Receivable 9,000 Sales 10,500 Note Receivable 9,000 Sales 9,000 Sales 10,500 Note Receivable 9,000 Cash 1,500 7. Temper Company has credit sales … Temper Company has credit sales of $3.50 million for year 2010. Temper estimates that 1.10% of the credit sales will not be collected. On December 31, 2010, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $2,226. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here: December 31, 2010 Accounts Receivable Age of Accounts Receivable Expected Percent Uncollectible $624,000 Not yet due 1.25% 252,000 1 to 30 days past due 2.00 50,000 31 to 60 days past due 6.50 25,200 61 to 90 days past due 31.95 5,000 Over 90 days past due 66.20 ________________________________________ Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry? 8. Comp Inc. has an annual accounting period which ends on December… Steve Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $43,000 was purchased on September 2. The asset has a $5,000 estimated salvage value. The company uses straight line depreciation and expects the asset to have a 6 year life. What is the total depreciation expense(rounded) for the current year? $6,333.33 $8,000.00 $2,666.67 $2,111.11 $7,166.6 8. A company had average total assets of $ass. Its gross sales were… A company had average total assets of $892,000. Its gross sales were $1,082,000 and its net sales were $1,003,000. The company’s total asset turnover equals (rounded): 1.12 .82 .89 1.08 1.21 9. A company paid $tot, plus a comm% commission and $clo in closing… A company paid $120,000, plus a 8% commission and $6,500 in closing costs for a property. The property included land appraised at $82,500, land improvements appraised at $33,000, and a building appraised at $49,500. What should be the allocation of this property’s costs in the company’s accounting records? Land $60,000; Land Improvements, $24,000; Building, $36,000 Land $24,000; Land Improvements, $36,000; Building, $60,000 Land $68,050; Land Improvements, $27,220; Building, $40,830 Land $82,500; Land Improvements; $33,000; Building; $49,500 Land $27,220; Land Improvements, $40,830; Building, $68,050 10. A company sold a machine that originally cost $cost for $sell ca… A company sold a machine that originally cost $110,000 for $55,000 cash. The accumulated depreciation on the machine was $55,000. The company should recognize a: $82,500 gain $55,000 loss $0 gain or loss $55,000 gain $82,500 los 11. A company purchased a tract of land for its natural resources at… A company purchased a tract of land for its natural resources at a cost of $1,590,000. It expects to mine 2,900,000 tons of ore from this land. The salvage value of the land is expected to be $220,000. The depletion expense per ton of ore is: $.548 $1.82 $.08 $13.18 $.472 12. On December 1, comp Company signed a … On December 1, Martin Company signed a $5,500 3 month 8% note payable, with the principal plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? Use a 360 day year for interest calculation. Round your answer to the nearest dollar. $110 $440 $73 $37 $0 13. An employee earned … An employee earned $41,000 during the year working for an employer. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. The employee’s share of FICA taxes is: $594.50. $2,542.00. $3,136.50. $3,731.00. Zero, since the employee’s pay exceeds the FICA limit. 14. Employees earn vacation pay at the rate of one day per month. Du… Employees earn vacation pay at the rate of one day per month. During July, 27 employees qualify for one vacation day each. Their average daily wage is $150 per day. What is the amount of vacation benefit expense for the month of July? $45,000 $150 $27 $4,050 $1,800
3 year ratio trend analysis for the following company: Home Depot 1 year ratio analysis of the following company: Lowes You will need to complete all the ratios covered in the course and discuss how each ratio is trending and compared against the competitor. Ratios to complete: Profitability Ratios Gross Profit Percentage Net Profit Margin Return on Assets Return on Equity Earnings Per Share Dividend Yield Asset Utilization Ratios Receivable Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Asset Turnover Liquidity Ratio Current Ratio Debt Utilization Ratios Accounts Payable Turnover Financial Leverage Debt to Equity Times Interest Earned So far, I have come up some of it, but I feel like I am doing everything wrong and I’m getting really frustrated and I don’t want to do the Lowe’s one if it’s going to be wrong anyways.
Here is the websites to find the information:
Home Depot: http://investing.businessweek.com/research/stocks/financials/ratios.asp?ticker=HD
Lundberg Corporation”s most recent balance sheet and income statement appear below:
Statement of Financial Position December 31, Year 2 and Year 1 (in thousands of dollars)
Year 2
Year 1
Assets
Current assets:
Cash
$
100
$
110
Accounts receivable
210
220
Inventory
110
120
Prepaid expenses
10
10
Total current assets
430
460
Plant and equipment, net
900
880
Total assets
$
1,330
$
1,340
Liabilities and Stockholders” Equity
Current liabilities:
Accounts payable
$
160
$
170
Accrued liabilities
50
50
Notes payable, short term
100
90
Total current liabilities
310
310
Bonds payable
190
240
Total liabilities
500
550
Stockholders” equity:
Preferred stock, $100 par value, 10%
200
200
Common stock, $1 par value
100
100
Additional paid in capital common stock
110
110
Retained earnings
420
380
Total stockholders” equity
830
790
Total liabilities & stockholders” equity
$
1,330
$
1,340
Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars)
Sales (all on account)
$
1,330
Cost of goods sold
850
Gross margin
480
Selling and administrative expense
292
Net operating income
188
Interest expense
31
Net income before taxes
157
Income taxes (30%)
47
Net income
$
110
Dividends on common stock during Year 2 totaled $50 thousand. Dividends on preferred stock totaled $20 thousand. The market price of common stock at the end of Year 2 was $9.36 per share.
Required:
Compute the following for Year 2:
a.
Gross margin percentage. (Round your answer to 1 decimal place.)
Gross margin percentage
%
b.
Earnings per share of common stock. (Round your answer to 2 decimal places.)
Earnings per share
$
c.
Price earnings ratio. (Roundyourintermediate calculations to 2 decimal places and final answer to 1 decimal place.)
Price earnings ratio
times
d.
Dividend payout ratio. (Roundyourintermediate calculations to 2 decimal places and final answer to 1 decimal place.)
Dividend payout ratio
%
e.
Dividend yield ratio. (Round your answer to 2 decimal places.)
Dividend yield ratio
%
f.
Return on total assets. (Round your intermediate calculations and final answer to 2 decimal places.)
Return on total assets
%
g.
Return on common stockholders” equity. (Round your answer to 2 decimal places.)
Return on common stockholders” equity
%
h.
Book value per share. (Round your answer to 2 decimal places.)
Book value per share
$
i.
Working capital.
Working captial
$
j.
Current ratio. (Round your answer to 2 decimal places.)
Current ratio
k.
Acid test ratio. (Round your answer to 2 decimal places.)
Acid test ratio
l.
Accounts receivable turnover. (Round your answer to 2 decimal places.)
Accounts receivable turnover
m.
Average collection period. (Assume 365 days a year and round your answer to 1 decimal place.)
Average collection period
days
n.
Inventory turnover. (Round your answer to 2 decimal places.)
Inventory turnover
o.
Average sale period. (Assume 365 days a year and round your answer to 1 decimal place.)
Average sale period
days
p.
Times interest earned. (Round your answer to 2 decimal places.)
Times interest earned
q.
Debt to equity ratio. (Round your answer to 2 decimal places.)
6 18. Lila Battle has determined that the annual demand for number 6 screws. Lila, who works in her brother’s hardware store, is in charge of purchasing. She estimates that it costs $10 every time an order is placed. This cost includes her wages, the cost of forms used in placing the order, and so on. Furthermore, she estimates that the cost of carrying one screw in inventory for a year is one half of 1 cent. Assume that the demand is constant throughout the year.
a) How many number 6 screws should Lila order at one time if she wishes to minimize total inventory cost?
b) How many orders per year would be placed? What would the annual ordering cost be?
c) What would the average inventory be? What would the annual holding cost be?
It takes approximately eight working days for an order of number 6 screws to arrive once the order has been placed. (Refer to problem 6 18) The demand for number 6 screws is fairly constant, and on the average, Lila has observed that her brothers’ hardware store sells 500 of these screws each day. Because the demand is fairly constant, Lila believes that she can avoid stock outs completely if she only orders the number 6 screws at the correct time. What is the ROP?
6 55 Western, Corp., produces two products, cigars and chewing tobacco, from a joint process involving the processing of tobacco leave. Joint costs are $60,000 for this process, and yield 2,000 pounds of cigars and 4,000 pounds of chewing tobacco. Cigars sell for $80 per pound, and chewing tobacco sells for $20 per pound. Cigars requiere $80,000 in separable costs, while chewing tobacco requieres $50,000 in separable costs. Chewing tobacco can be processed further (for $30,000 in additional separable costs) into a mint flavored premium chewing tobacco that would sell fot $30 per pound. 1. Should Western process chewing tobacco into premium chewing tobacco? 2. What in the maximun amount the joint costs can increase before (a) in the would not the better to process chewing tabacco fouther into premium chewing tabacco, and (b) it would to better to cease processing tobacco leaves to produce cigars and premium chewing tobacco?
The 6 month CDs consist of two $50,000 certificates, both of which yield 4% interest. One CD matures on January 3, 2012. Nick’s banker tells him that he can renew the CD for one year at 4%. Nick’s stockbroker tells him that he can purchase tax exempt bonds with a yield of 3%. Nick would like you to determine whether the tax exempt bonds provide him a better after tax return than the CD. c. Jolene is concerned that they are not getting the best return on their Corb Company stock. When they purchased the stock in 2001, the $.75 per share dividend was yielding 10% before taxes. However, the rise in market value has far outpaced the dividend growth, and it is yielding only 3.75%, based on the current market value. Jolene thinks they should sell the stock and purchase either the 3% tax exempt securities or the 4% CD if it would be a better deal from an income tax viewpoint. Calculate the tax effect on their 2012 income of selling the shares, and determine whether they should sell the shares and invest the after tax proceeds in tax exempt securities or the 4% CD. Do this calculation after you have determined the best option regarding the CD that matures in January.
6.51 Gulf Coast Fashions sells both designer and moderately price women’s wear in Tampa. Profits have been volatile. Top management is trying to decide which products line to drop. Accountant have reported the following data:
Per Item
Designer
Modernately Priced
Averege selling price
$ 240
$150
Averege variable expenses
120
85
Averege contribution margin
$120
$65
Averege contribution margin percentage
50%
43%
“The store has 8,000 square feet of floor space. If moderately priced goods are sold exclusively. 400 items can be displayed. If designer goods are sold exclusively, only 300 items can be displayed. Moreover, the rate of sale (turnover) of the designer items will be two thirds the rate of moderately price goods.”
1. Prepare and analysis to show which product to drop.
2. What other considerations might affect your decision in number 1?
9. Tayler Company wrote checks totaling $25,620 during October and $27,975 during November. $24,360 of these checks cleared the bank in October, and $27,330 cleared the bank in November. What was the amount of outstanding checks on November 30? A)$1,905
B)$345
C)$915
D)$2,970 11. In the month of November, Coler Company Inc. wrote checks in the amount of $18,500. In December, checks in the amount of $25,316 were written. In November, $16,936 of these checks were presented to the bank for payment, and $21,766 were presented in December. What is the amount of outstanding checks at the end of December? A)$3,550
B)$1,564
C)$5,114
D)$7,100
10. At June 30, Mareska Company has the following bank information: cash balance per bank $7,200; outstanding checks $560; deposits in transit $1,100; credit memo for interest $20; bank service charge $40. What is Mareska’s adjusted cash balance on June 30? A)$7,720
B)$7,760
C)$6,660
D)$7,740
Hope you can help me to get the correct answer thank you so much.
Here are the abbreviated financial statements for Planners Peanuts: Income Statement for 2012 is Sales of $6,000; Cost of $4,700 which gives Net Income of $1,300.00: BALANCE SHEET, YEAR END is Assets for year 2011 of $9,500 and Assets for year 2012 of $10,000 which each year total the same of (9,500 and 10,000); The Debt Equity for year 2011 is $933 and $8,567 which total $9,500.00 and the debt equity for year 2012 is $1,000 and $9,000 which total $10,000. If the dividend payout ratio is fixed at 50%, calculate the required total external financing for growth rates in 2013 of 20%, 25%, and 30%. (DO NOT ROUND INTERMEDIATE CALCULATIONS. ROUND YOUR ANSWERS TO 2 DECIMAL PLACES.) External Financing at 20% is $________________; 25% $__________________ and 30% $____________________?
Target pricing, target cost, and value engineering. Avery, Inc., manufactures component parts. One product, TX40, has annual sales of 50,000 units. Avery sells TX40 for $40.60 per unit. Avery has two direct cost categories (direct materials, direct manufacturing labor) and two activity based indirect cost categories (engineering and testing). All R&D and design costs are included in the engineering cost category. There are no marketing, distribution or customer service costs. The cost driver for engineering is engineer hours, and the cost driver for testing is test hours. Testing costs are variable costs. Engineering costs are fixed costs based on engineering capacity. Information on annual costs includes the following
Direct materials: $14.98 per unit
Direct manufacturing labor: $15 per direct manufacturing labor hour
Engineering: $14 per engineer hour (based on capacity of 25,000 engineering hours)
Testing: $12 per test hour
Each unit of TX40 requires 0.5 direct manufacturing labor hour to produce and 0.25 test hour to test.
1.Calculate the full cost per unit of TX40 at the production level of 50,000 units.
2.What is the markup percentage on the full cost per unit of TX40?
3. The sales manager thinks that Avery can sell 10,000 more units at the $40.60 price if Avery spends $200,000 on marketing by putting advertisements in trade magazines. Avery will not need to do any additional engineering for these units. Is this a good idea?
4. If Avery spends an extra $200,000 on marketing but uses the same markup percentage on the full cost per unit as in requirement 2, calculate the new selling price.
Terry Lawler, managing director of the Chicago Reviewers Group, is examining how overhead costs behave with changes in monthly professional labor hours billed to clients. Assume the following historical data:
Total Overhead Costs Professional Labor Hours Billed to Clients
$335,000 2,000
400,000 3,000
430,000 4,000
472,000 5,000
533,0006,500
582,000 7,500
Required
1. Compute the linear cost function, relating total overhead costs to professional labor hours, using the representative observations of 3,000 and 6,500 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of the Chicago Reviewers Group? Why?
2. What would be the predicted total overhead costs for (a) 4,000 hours and (b) 7,500 hours using the cost function estimated in requirement 1? Plot the predicted costs and actual costs for 4,000 and 7,500 hours.
3. Lawler had a chance to accept a special job that would have boosted professional labor hours from 3,000 to 4,000 hours. Suppose Lawler, guided by the linear cost function, rejected this job because it would have brought a total increase in contribution margin of $35,000, before deducting the predicted increase in total overhead cost, $38,000. What is the total contribution margin actually forgone?
The administrative offices and manufacturing plant of Oakdale Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year:
Tidy House produces a variety of household products. The firm operates 24 hours per day with three daily work shifts. The first shift workers receive ?oregular pay.?? The second shift receives an 8 percent pay premium, and the third shift receives a 12 percent pay premium. In addition, when production is scheduled on weekends, the firm pays an overtime premium of 50 percent (based on the pay rate for first shift employees). Labor premiums are included in overhead. The October 2010 factory payroll is as follows:
Total wages for October for 32,000 hours ………………………………$435,600
Normal hourly wage for first shift employees ………………………….. $12
Total regular hours worked, split evenly among the three shifts ……….. 27,000
a. How many overtime hours were worked in October?
b. How much of the total labor cost should be charged to direct labor? To overhead?
c. What amount of overhead was for second shift and third shift premiums? For overtime premiums?
Top management of Capital Services observed that the budget for the EDP department had been growing far beyond what was anticipated for the past several years. Each year, the EDP manager would demonstrate that increased usage by the company’s non EDP departments would justify a larger appropriation. The administrative vice president commented that she was not surprised because user departments were not charged for the EDP department services and EDP department personnel were creative and eager to continue expanding services. A review of the current year’s statistics of the EDP department revealed the following:
Budgetary appropriation $2,000,000, based on 4,000 hours of run time;
$1,600,000 of this appropriation is related to fixed costs
Actual department expenses Variable, $370,500 (incurred for 3,900 hours of run time)
Fixed, $1,630,000
a. Did the EDP manager stay within his appropriation? Show calculations.
b. Was the EDP department effective? Show calculations. Comment.
c. Was the EDP department efficient? Show calculations. (Hint: Treat variable and fixed expenses separately.)
d. Using the formulas for analyzing variable and fixed costs, calculate the variances incurred by the EDP department.
e. Propose a rate per hour to charge user departments for EDP services. Do you think charging users will affect the demand for services by user departments? Why or why not?
f. Discuss whether it would be ethical to evaluate the EDP department manager based only on comparing budgeted versus actual costs and ignoring differences between budgeted and actual volume.
Weatherguard manufactures mailboxes. The following data represent transactions and balances for December 2010, the company’s first month of operations.
Purchased direct material on account …………………………$248,000
Issued direct material to production …………………………. 186,000
Accrued direct labor payroll ………………………………….. 134,000
Paid factory rent ……………………………………………… 3,600
Accrued factory utilities ……………………………………… 16,200
Recorded factory equipment depreciation …………………… 15,800
Paid supervisor salary ………………………………………… 6,400
Ending Work in Process Inventory (6,000 units) …………….. 35,000
Sales on account ($24 per unit) ………………………………. 648,000
a. How many units were sold in December? How many units were completed in December?
b. What was the total cost of goods manufactured in December?
c. What was the per unit cost of goods manufactured in December?
d. Prepare the journal entries to record the flow of costs for December. Weatherguard uses a perpetual inventory system and a single Manufacturing Overhead Control account. Assume that actual overhead is included in WIP inventory.
1. Barbara was injured in an automobile accident. She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement:
Damages for 25% loss of the use of her right arm Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ $150,000
Medical expense Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦….Ac€¦Ac€¦ 30,000
Loss of wages Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦… 10,000
The defendant’s insurance company is reluctant to pay punitive damages. Also, the company disputes the amount of her loss of wages amount. Instead, the company offers to pay her $210,000 for damages to her arm and $30,000 medical expenses. Assuming Barbara is in the 35% marginal tax bracket, will her after tax proceeds from accepting the offer be equal to what she considers to be her actual damages (listed above)?
1) Beginning WIP inventory is 900 units; completed and transferred out were 3,400 units; and Ending WIP inventory is 800 units. What is the number of units started? Show calculation. a. 3,300 b. 3400 c. 4200 d. 2600 2)Which of the following product is normally used to assign costs to goods that are mass produced? a. LIFO costing b. Fixed costing c. Job costing d. Process costing 3) Mark and Paul grows and sells sweet corn at its possible produce stand. The selling price per dozen is 3.75, variable costs are $1.25 per dozen, and total fixed costs are $750.00. What are breakeven sales in dollars? Show formula a. 300 b. 563 c. 375 d.1,125 4) Cartel Manufacturing produces frisbees using a three step process that includes molding, coloring and finishing. Requisition of materials to molding includes a a. credit to finished good inventory b. debit to manufacturing overhead c. credit to raw materials inventory d. debit to raw materials inventory 5) Henry Cartels produces ornate birdcages. The company’s average average cost per unit is $18.00 when it produces 2,200 birdcages. If $5,500 of the costs are fixed, and the plant manager uses the average cost per unit predict total costs, his forecast for 3,000 birdcages will be. Show calculation. a. $52,000 b. 39,600 c. 14,400 d. 54,000 6) Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55 per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are $80,000 each month. What is the contribution margin ratio?Show calculation a. 60% b. 22% c. 40% d. 250% 7) If the sales price per unit increases while the variable cost per unit and total fixed costs remains constant, which of the following statement is true? a. 1) Beginning WIP inventory is 900 units; completed and transferred out were 3,400 units; and Ending WIP inventory is 800 units. What is the number of units started? Show calculation. a. 3,300 b. 3400 c. 4200 d. 2600 2)Which of the following product is normally used to assign costs to goods that are mass produced? a. LIFO costing b. Fixed costing c. Job costing d. Process costing 3) Mark and Paul grows and sells sweet corn at its possible produce stand. The selling price per dozen is 3.75, variable costs are $1.25 per dozen, and total fixed costs are $750.00. What are breakeven sales in dollars? Show formula a. 300 b. 563 c. 375 d.1,125 4) Cartel Manufacturing produces frisbees using a three step process that includes molding, coloring and finishing. Requisition of materials to molding includes a a. credit to finished good inventory b. debit to manufacturing overhead c. credit to raw materials inventory d. debit to raw materials inventory 5) Henry Cartels produces ornate birdcages. The company’s average average cost per unit is $18.00 when it produces 2,200 birdcages. If $5,500 of the costs are fixed, and the plant manager uses the average cost per unit predict total costs, his forecast for 3,000 birdcages will be. Show calculation. a. $52,000 b. 39,600 c. 14,400 d. 54,000 6) Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55 per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are $80,000 each month. What is the contribution margin ratio? a. 60% b. 22% c. 40% d. 250% 7) If the sales price per unit increases while the variable cost per unit and total fixed costs remain constant, which of the following statement is true? a. The contribution margin increases and the break even point increases b. The contribution margin increases and the break even point decreases c. The contribution margin decreases and the break even point increases d. The contribution margin decreases and the break even point decreases 8) 79 Fitness Club provides monthly membership as well as personal training session. The personal trainers earn 50% of the revenue for all personal training session. The79 Fitness Club also sells nutrition products. Jeans general ledger accounts indicate the following for the year. The front desk staff wages expense remains the same throughout the year. Membership revenue = $140,000 Personal training revenue = $75,000 Product Sales = $65,000 Cost of product sold = $35,000 Front desk staff wages expense = $12,000 Personal trainer wages expense = 0 Space rental expense = $11,000 Straight line depreciation expense = $6,000 Rental insurance expense = $3,000 If a traditional income statement is prepared for the year, what is Gross Profit? Show calculation a. $280,000 b. $315,000 c. $207,5000 d. $245,000
1. A company receives a per%, day day note for $amt. The total inte…A company receives a 7%, 90 day note for $1,200. The total interest due on the maturity date is (Use a 360 day year): 2. A company has net sales of $sales and average accounts receivable…A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period (rounded)? 4. On December 31 of the current year, a company’s unadjusted trial…On December 31 of the current year, a company’s unadjusted trial balance included the following: Accounts Receivable, debit balance of $95,500; Allowance for Doubtful Accounts, credit balance of $950. What amount should be debited to Bad Debts Expense, assuming 9% of outstanding accounts receivable at the end of the current year will be uncollectible?: (Round your answer to the nearest dollar amount.) 5. Com Company agreed to accept $cas in cash along with an $note, d…Kallah Company agreed to accept $1,500 in cash along with an $9,000, 45 day, 13% note from customer Judith Taylor to settle her $10,500 past due account. How should Kallah record this transaction? 6. Temper Company has credit sales …Temper Company has credit sales of $3.50 million for year 2010. Temper estimates that 1.10% of the credit sales will not be collected. On December 31, 2010, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of $2,226. Temper prepares a schedule of its December 31, 2010, accounts receivable by age. Based on past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here: December 31, 2010 Accounts Receivable Age of Accounts Receivable Expected Percent Uncollectible $624,000 Not yet due 1.25% 252,000 1 to 30 days past due 2.00 50,000 31 to 60 days past due 6.50 25,200 61 to 90 days past due 31.95 5,000 Over 90 days past due 66.20 ________________________________________ Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry? 7 Comp Inc. has an annual accounting period which ends on December…Steve Inc. has an annual accounting period which ends on December 31. During the current year a depreciable asset which cost $43,000 was purchased on September 2. The asset has a $5,000 estimated salvage value. The company uses straight line depreciation and expects the asset to have a 6 year life. What is the total depreciation expense(rounded) for the current year? 8 A company had average total assets of $ass. Its gross sales were…A company had average total assets of $892,000. Its gross sales were $1,082,000 and its net sales were $1,003,000. The company’s total asset turnover equals (rounded): 9. A company paid $tot, plus a comm% commission and $clo in closing…A company paid $120,000, plus a 8% commission and $6,500 in closing costs for a property. The property included land appraised at $82,500, land improvements appraised at $33,000, and a building appraised at $49,500. What should be the allocation of this property’s costs in the company’s accounting records? 10. A company sold a machine that originally cost $cost for $sell ca…A company sold a machine that originally cost $110,000 for $55,000 cash. The accumulated depreciation on the machine was $55,000. The company should recognize a: 11. A company purchased a tract of land for its natural resources at…A company purchased a tract of land for its natural resources at a cost of $1,590,000. It expects to mine 2,900,000 tons of ore from this land. The salvage value of the land is expected to be $220,000. The depletion expense per ton of ore is: 12. On December 1, comp Company signed a …On December 1, Martin Company signed a $5,500 3 month 8% note payable, with the principal plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? Use a 360 day year for interest calculation. Round your answer to the nearest dollar. 13. An employee earned …An employee earned $41,000 during the year working for an employer. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. The employee’s share of FICA taxes is: 14. Employees earn vacation pay at the rate of one day per month. Du…Employees earn vacation pay at the rate of one day per month. During July, 27 employees qualify for one vacation day each. Their average daily wage is $150 per day. What is the amount of vacation benefit expense for the month of July?
1. On the designated worksheet, prepare in journal entry form the adjusting journal entries for the following items. (Round all numbers to the nearest dollar) A. On April 30, 2009 a 12 month insurance policy was purchased for $12,000. B. On January 1, 2009, Hullie & Oates paid Gretsky Advertising $36,000 for two years of advertising services. Equal services are provided in year 1 and year 2. C. Hullie & Oates needed some additional storage space so on November 1, 2009 they rented a unit for an annual rate of $16,000. The entire amount was expensed when paid. D. $4,250 of store supplies were purchased during the year and the asset store supplies was increased. $3,850 of these supplies was used during the year. E. $7,500 of office supplies were purchased during the year and were immediately expensed. $1,500 of these supplies remained at the end of 2009. F. On July 1, 2009, Hullie & Oates issued a 9 month note receivable to Shanahan & Co. At an annual interest rate of 7%. Principle and interest will be paid at the end of the 9 months. The note was recorded in Notes Receivable and is the only note outstanding. G. Depreciation for the year is based on the following: Straight line depreciation Store equipment Assets were held for the entire year; Residual Value = $8,000; Service life is estimated to be 10 years. Office equipment Assets were held for the entire year; Residual Value = $4,000; Service life is estimated to be 5 years. H. Sales salaries of $6,200 and office salaries of $4,800 remained unpaid at 12/31/09. I. On October 1, 2009, Hullie & Oates rented a portion of one store to Twist & Chase Co. The contract was for 10 months and Hullie & Oates required the 10 months of cash upfront on October 1st. The rent is being earned equally over the next 10 months. When cash was received, unearned rent was appropriately recorded. J. The note payable was outstanding the entire year and a 5.5% interest rate exists on the note. No interest has been recorded for the year. K. At 12/31/2009, based on the aging method, Hullie & Oates determines that uncollectible accounts are $8,250.
1 It can be expected that companies that sell perishable goods have higher inventory turnover than companies that sell nonperishable goods. T or F
2 The consistency principle requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods. T or F
3 If obsolete or damaged goods can be sold, they will be included in inventory at their net realizable value. T or F
4 When units are purchased at different costs over time, it is simple to determine the cost per unit assigned to invento ry. T or F
5 In applying the lower of cost or market method to inventory valuation, market is defined as the current replacement cost. T or F
6 Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates. T or F
7 If damaged and obsolete goods cannot be sold they are not included in inventory T or F
8 Three key variables determine the dollar value of inventory: (1) inventory quantity, (2) costs of inventory and (3) cost flow assumption. T or F
1. Goods on consignment: A)Are always paid for by the consignee when they take possession of the goods
B)Are goods shipped by the owner to the consignee who sells the goods for the owner
C)Are goods shipped to the consignor who sells the goods for the owner
D)Are reported in the consignee’s books as inventory
E)Are not reported in the consignor’s inventory since they do not have possession of the inventory
5. Damaged and obsolete goods A)Are assigned a value of zero
B)Should be disposed of immediately
C)Are included in inventory at their full cost
D)Are included in inventory at their net realizable value
E)Are never included in inventory
6. On June 30 a company needed to estimate its ending inventory to prepare its second quarter financial statements. The following information is available: Beginning inventory, April 1: $6,000Net sales: $70,000Net purchases: $36,000The company’s gross margin ratio is 12%. Using the gross profit method, the cost of goods sold would be:
A)$61,600
B)$35,200
C)$40,000
D)$8,400
Hope you can show me the correct answer and the steps! This is improtant. Thank you so much.
1)Lakshmi is single and provides you with the following tax information for 2012 Salary $200,000 Bank account interest $1,000 Capital gain on an asset (stock) held for 11 months 4,000 Capital gain on an asset (stock) held for 16 months 9,000 Capital gain on an asset (antique doll) held for 30 months 5,000 Itemized deductions 8,000 Compute her tax liability. (Show all calculations in good form) show your work 2)During the current year, Donna, a single taxpayer, report the following items income of income and expenses Income Salary $86,000 Muncipal bond interest 1,300 Alimony received 24,000 Capital gain on an asset held less than one year $3,000 Rental Income from residential rental house 12,500 Expenses/losses: Interest on principal residence 8.000 Real estate taxes on principal residence 1,000 Capital loss on an asset held less than one year 7,000 Expenses related to rental property Mortgage interest 6,000 Repairs 2,400 Taxes 700 Depreciation 1,200 Compute Donn’s taxable income.(Show all calculation in good form) Show your work 3)Lindsey Forbes, a detective who is single, operates a small pottery activity in her spare time. This year she reported the following income and expense from this activity Revenue from sale of pottery $9,000 Depreciation on potter’s wheel (3,000) Property taxes on shed where she does pottery (1,200) Supplies used such as clay, etc. (6,500) In addition, she had salary of $70,000 and itemized deductions, not including expenses listed above, of $6,100. a. What is the amount of lindsey’s taxable income assuming the activity is classified as a hobby? b. What is the amount of Lindsey’s taxable income assuming the activity is classified as a trade or business? 4) Phoebe’s AGI for the current year is $120,000. Included in this AGI IS $100,000 salary and $20,000 of interest income. In earning the investment income, Phoebe paid investment interest expense of $30,000. She also incurred the following expenditures subject to the 2% of AGI limitation. Investment expenses: Subscriptions to investment journals $500 Investment counseling 1,500 Safe deposit box rental for stock certificates 100 Nonineivestment expenses: Unreimbursed employee business expenses $1,800 Tax return preparation fees (non business related) 500 What is Phoebe’s investment interest expense deduction for the year? 5) Parveen is married and files a joint return. He reports the following items of income and loss for the year: Salary $135,000 Activity A(passive) 13,000 Activity B(nonbusiness rental real estate) (45,000) If Parveen actively participates in the management of Activity B, what is his AGI for the year and what is the passive loss carryover to next year? 6)If a loan actively has made to a related party, what are some considerations for determining whether the loan is a bona fide debt or is in fact, merely a gift? 7)What are some factors which indicate that a debt may be worthless?
1. Liabilities: Must always have a definite date for payment Must sometimes be estimated Must be certain Must involve an outflow of cash Must be for a specific amount 2. Mission Company has three employees: The company is subject to the following taxes: What is Mission Company’s amount for payroll taxes for Clark? $812.20 $1,814.35 $6,234.75 $946.35 $1,002.15 3. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. An employee’s share of both FICA taxes was $3,901.50. Given that this employee did not exceed the FICA earnings limitation, compute gross pay. $269,068.96 $29,846.48 $51,000 $62,927.42 Zero, since the employee’s pay did not exceed the FICA limit 4. The amount of federal income taxes withheld from an employee’s paycheck is determined by: The employee’s annual earnings rate and number of withholding allowances The employee’s credit rating Multiplying the gross pay by 6.2% The amount of social security taxes The employer’s merit rating 5. If Jefferson Company paid a bonus equal to 6% of net income after bonuses and the total bonus distributed was $330,000, how much was net income for the year? $5,035,000 $5,830,000 $6,500,000 $4,480,000 $5,500,000 6. Most employees and employers are required to pay: Federal payroll taxes Both B and C only Local, state and federal payroll taxes State payroll taxes Local payroll taxes 7. Mission Company has three employees: Gross Pay through July Gross Pay for August Smith $3,750 $1,550 Cain 26,900 4,050 Clark 95,700 14,200 ________________________________________ The company is subject to the following taxes: Tax Rate Applied To FICA”Social Security 6.20% First $106,800 FICA”Medicare 1.45 All gross pay FUTA 0.80 First $7,000 SUTA 5.40 First $7,000 ________________________________________ What is Mission Company’s amount for payroll taxes for Smith for the month of August? $96.10 $519.38 $214.68 $734.05 $118.58 8. If a company had net income of $1,486,875 a times interest earned ratio of 4.0, a tax rate of 35%, and operating income of 3,050,000, what would the company’s interest expense be for the year? $762,500 $1,067,500 $725,329 $1,564,000 $371,719 9. A company estimates that warranty expense will be 2% of sales. The company’s sales for the current period is $187,000. The current period’s entry to record the warranty expense is: Warranty Expense 3740 Estimated Warranty Liability 3740 No entry is recorded until the items are returned for warranty repairs. Warranty Expense 3740 Sales 3740 Warranty Liability 3740 Cash 3740 Estimated Warranty Liability 3740 Estimated Warranty Expense 3740 10. Mission Company has three employees: The company is subject to the following taxes: What is the amount that Mission Company will withhold from Smith’s gross pay? $138.50 $62.00 $443.20 $581.70 $76.50 11. A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? $3,000 loss $1,500 gain $3,000 gain $1,500 loss $0 gain or loss 12. On January 1, 2010, Jacob issues $600,000 of 11%, 15 year bonds at a price of 102A??1. Six years later, on January 1, 2016, Jacob retires 30% of these bonds by buying them on the open market at 98A??1. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the journal entry to record the first interest payment on June 30, 2010? 1 Interest expense 33k Disc on bonds payable 500 Cash 32.5k 2 InterestExpesnse 32.5k Premium on bonds payable 500 Cash 33k 3 Interest Expense 33k Cash 33k 4 Cash 33k Interest Expense 33k 5 Interest Expense 32.5k Disc on Bonds Payable 500 Cash 33k 13. A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been written off, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is: $10,000 gain $0 $22,000 gain $22,000 loss $10,000 loss 14. The market value of a bond is equal to: The present value of all future cash payments provided by a bond The present value of all future interest payments provided by a bond The future value of all future interest payments provided by a bond The present value of the principal for an interest bearing bond 15. The future value of all future cash payments provided by a bond A company borrowed $50,000 cash from the bank and signed a 6 year note at 7%. The present value factor for an annuity for 6 years at 7% is 4.7665. The annual annuity payments equal $10,490. The present value of the loan is: $11,004 $50,000 $52,450 $238,325 $10,490 16. A company has bonds outstanding with a par value of $400,000. The unamortized premium on these bonds is $2,000. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? $14,000 gain $0 gain or loss $10,000 loss $14,000 loss $10,000 gain 17. The contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties is called a(n): Bond indenture Mortgage contract Mortgage Installment note Debenture 18. On January 1, 2010, Jacob issues $800,000 of 9%, 13 year bonds at a price of 96A??1. Six years later, on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 105A??1. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the total interest expense for the life of the bond? $963,000 $772,000 $964,000 $936,000 $844,000 19. When a bond sells at a premium: The contract rate is above the market rate The contract rate is below the market rate The contract rate is equal to the market rate It means that the bond is a zero coupon bond The bond pays no interest 20. A company issued 10 year, 12% bonds with a par value of $200,000. The company received $195,868 for the bonds. Using the straight line method, the amount of interest expense for the first semiannual interest period is: $12,334.60. $12,000.00. $12,206.60. $24,206.60. $24,000.00.
1. Liabilities: Must always have a definite date for payment Must sometimes be estimated Must be certain Must involve an outflow of cash Must be for a specific amount 2. Mission Company has three employees: The company is subject to the following taxes: What is Mission Company’s amount for payroll taxes for Clark? $812.20 $1,814.35 $6,234.75 $946.35 $1,002.15 3. The FICA tax for social security is 6.2% and the FICA tax for Medicare is 1.45%. An employee’s share of both FICA taxes was $3,901.50. Given that this employee did not exceed the FICA earnings limitation, compute gross pay. $269,068.96 $29,846.48 $51,000 $62,927.42 Zero, since the employee’s pay did not exceed the FICA limit 4. The amount of federal income taxes withheld from an employee’s paycheck is determined by: The employee’s annual earnings rate and number of withholding allowances The employee’s credit rating Multiplying the gross pay by 6.2% The amount of social security taxes The employer’s merit rating 5. If Jefferson Company paid a bonus equal to 6% of net income after bonuses and the total bonus distributed was $330,000, how much was net income for the year? $5,035,000 $5,830,000 $6,500,000 $4,480,000 $5,500,000 6. Most employees and employers are required to pay: Federal payroll taxes Both B and C only Local, state and federal payroll taxes State payroll taxes Local payroll taxes 7. Mission Company has three employees: Gross Pay through July Gross Pay for August Smith $3,750 $1,550 Cain 26,900 4,050 Clark 95,700 14,200 ________________________________________ The company is subject to the following taxes: Tax Rate Applied To FICA”Social Security 6.20% First $106,800 FICA”Medicare 1.45 All gross pay FUTA 0.80 First $7,000 SUTA 5.40 First $7,000 ________________________________________ What is Mission Company’s amount for payroll taxes for Smith for the month of August? $96.10 $519.38 $214.68 $734.05 $118.58 8. If a company had net income of $1,486,875 a times interest earned ratio of 4.0, a tax rate of 35%, and operating income of 3,050,000, what would the company’s interest expense be for the year? $762,500 $1,067,500 $725,329 $1,564,000 $371,719 9. A company estimates that warranty expense will be 2% of sales. The company’s sales for the current period is $187,000. The current period’s entry to record the warranty expense is: Warranty Expense 3740 Estimated Warranty Liability 3740 No entry is recorded until the items are returned for warranty repairs. Warranty Expense 3740 Sales 3740 Warranty Liability 3740 Cash 3740 Estimated Warranty Liability 3740 Estimated Warranty Expense 3740 10.Mission Company has three employees: The company is subject to the following taxes: What is the amount that Mission Company will withhold from Smith’s gross pay? $138.50 $62.00 $443.20 $581.70 $76.50 11. A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? $3,000 loss $1,500 gain $3,000 gain $1,500 loss $0 gain or loss 12. On January 1, 2010, Jacob issues $600,000 of 11%, 15 year bonds at a price of 102A??1. Six years later, on January 1, 2016, Jacob retires 30% of these bonds by buying them on the open market at 98A??1. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the journal entry to record the first interest payment on June 30, 2010? 1 Interest expense 33k Disc on bonds payable 500 Cash 32.5k 2 InterestExpesnse 32.5k Premium on bonds payable 500 Cash 33k 3 Interest Expense 33k Cash 33k 4 Cash 33k Interest Expense 33k 5 Interest Expense 32.5k Disc on Bonds Payable 500 Cash 33k 13. A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been written off, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is: $10,000 gain $0 $22,000 gain $22,000 loss $10,000 loss 14. The market value of a bond is equal to: The present value of all future cash payments provided by a bond The present value of all future interest payments provided by a bond The future value of all future interest payments provided by a bond The present value of the principal for an interest bearing bond The future value of all future cash payments provided by a bond 15. A company borrowed $50,000 cash from the bank and signed a 6 year note at 7%. The present value factor for an annuity for 6 years at 7% is 4.7665. The annual annuity payments equal $10,490. The present value of the loan is: $11,004 $50,000 $52,450 $238,325 $10,490 16. A company has bonds outstanding with a par value of $400,000. The unamortized premium on these bonds is $2,000. The company retired these bonds by buying them on the open market at 97. What is the gain or loss on this retirement? $14,000 gain $0 gain or loss $10,000 loss $14,000 loss $10,000 gain 17. The contract between the bond issuer and the bondholders, which identifies the rights and obligations of the parties is called a(n): Bond indenture Mortgage contract Mortgage Installment note Debenture 18. On January 1, 2010, Jacob issues $800,000 of 9%, 13 year bonds at a price of 96A??1. Six years later, on January 1, 2016, Jacob retires 20% of these bonds by buying them on the open market at 105A??1. All interest is accounted for and paid through December 31, 2015, the day before the purchase. The straight line method is used to amortize any bond discount. What is the total interest expense for the life of the bond? $963,000 $772,000 $964,000 $936,000 $844,000 19. When a bond sells at a premium: The contract rate is above the market rate The contract rate is below the market rate The contract rate is equal to the market rate It means that the bond is a zero coupon bond The bond pays no interest 20. A company issued 10 year, 12% bonds with a par value of $200,000. The company received $195,868 for the bonds. Using the straight line method, the amount of interest expense for the first semiannual interest period is: $12,334.60. $12,000.00. $12,206.60. $24,206.60. $24,000.00.
1. A quality circle is a group of workers who meet on company time to solve problems of product quality. a. True b. False 2. Capacity is the degree to which the input resources are physically changed by the conversion process. a. True b. False 3. The majority of American workers are employed in service organizations. a. True b. False 4. The purpose of basic research is to discover new knowledge that has some potential use. a. True b. False 5. A synthetic process combines raw materials or components to create a finished product. a. True b. False 6. Purchasing consists of creating a set of specifications from which the product can be produced. a. True b. False 7. The magnitude of a conversion process is the degree to which the resources are physically changed. a. True b. False 8. The availability of skilled and unskilled labor in various geographic areas is a factor in determining plant location. a. True b. False 9. Materials requirements planning is a computerized system that integrates production planning and inventory control a. True b. False 10. Design planning is the development of a plan for converting a product idea into an actual product. a. True b. False 11. The resource or resources that constitute the major input of a conversion process are termed its a. number or numbers of production processes. b. product life cycle. c. focus. d. R&D organization. e. magnitude. 12. Operational planning includes all of the following steps EXCEPT a. estimating market demand. b. comparing market demand with capacity. c. applying for operational funds. d. selecting a planning horizon. e. adjusting products or services to meet demand. 13. A common planning horizon for production is a. six months. b. eighteen months. c. one year. d. one month. e. two years. 14. A scheduling technique that identifies the major activities to complete a project and sequences them based on the time required to perform each one is called a. Six Sigma. b. a Gantt Chart. c. critical path. d. ISO 14000. e. PERT. 15. Design planning is a. a group of similar products that differ only in relatively minor characteristics. b. the process of creating a set of specifications from which the product can be produced. c. the amount of input the facility can process in a given time. d. the development of a plan for converting the product idea into an actual product. e. the period over which the design will be in effect. 16. The process layout is a. used when different sequences of operations are required for creating small batches of different products. b. used when all products undergo the same operations in the same sequence. c. like an assembly line. d. the arrangement of machinery, equipment, and personnel within the facility. e. the arrangement whereby work stations are arranged to match the sequence of operations, and the work flows from station to station. 17. Inventory control is a. the process of managing inventories to minimize inventory costs. b. a technique for scheduling a process or project and maintaining control of the schedule. c. the resource that comprises the major input. d. the system by which materials or supplies arrive at a facility at the time they are needed so that storage is minimized. e. the process of ensuring that materials are at the right place at the right time. 18. A service economy is one in which more effort is devoted to the production of a. services than to the production of goods. b. development rather than research. c. applied rather than basic research. d. steel than to the production of haircuts. e. goods than to the production of services. 19. The goal of applied research is a. to identify new ideas and technical advances that have the potential to result in new goods and services. b. primarily to develop a new product to meet a consumer need at a profit. c. to put new or existing knowledge to use in producing goods and services. d. to disclose new knowledge that has some potential use. e. scientific advancement, without regard for its potential use in the development of goods and services. 20. Planning for production involves three major phases, which a. are capital intensive, monetary intensive, and labor intensive. b. are design planning, product layout, and product design. c. are design planning, facilities planning and site selection, and operational planning. d. together are called the product life cycle. e. together are called the product line.
Roye Kennel uses tenant days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant day. During September, Kennel budgeted for 4,700 tenant days, but its actual level of activity was 4,780 tenant days. Kennel has provided the following data concerning the formulas used in its budgeting and its actual results for September:
Data used in budgeting:
Fixed element per month
Variable element pertenant day
Revenue
”
$35.20
Wages and salaries
$3,600
$8.60
Expendables
1,100
15.10
Facility expenses
7,500
4.10
Administrative expenses
7,600
0.50
Total expenses
$19,800
$28.30
Actual results for September:
Revenue
$144,230
Wages and salaries
$28,660
Expendables
$74,070
Facility expenses
$27,220
Administrative expenses
$7,106
1. The spending variance for expendables in September would be closest to:
$2,000 F
$792 F
$2,000 U
$792 U
The manufacturing overhead budget at Mahapatra Corporation is based on budgeted direct labor hours. The direct labor budget indicates that 9,800 direct labor hours will be required in May. The variable overhead rate is $8.20 per direct labor hour. The company’s budgeted fixed manufacturing overhead is $141,120 per month, which includes depreciation of $18,130. All other fixed manufacturing overhead costs represent current cash flows.
2. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
$203,350
$221,480
$80,360
$122,990
3. Thomasson Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $36,100 per month plus $2,030 per flight plus $1 per passenger. The company expected its activity in April to be 70 flights and 220 passengers, but the actual activity was 69 flights and 225 passengers. The actual cost for plane operating costs in April was $175,010. The activity variance for plane operating costs in April would be closest to:
$3,410 F
$2,025 U
$2,025 F
$3,410 U
Gourley Clinic uses client visits as its measure of activity. During August, the clinic budgeted for 3,650 client visits, but its actual level of activity was 3,590 client visits. The clinic has provided the following data concerning the formulas to be used in its budgeting:
Fixed element per month
Variable element per client visit
Revenue
”
$39.90
Personnel expenses
$35,900
$11.10
Medical supplies
1,900
7.90
Occupancy expenses
8,900
1.90
Administrative expenses
5,900
0.1
Total expenses
$52,600
$21.00
4. The activity variance for administrative expenses in August would be closest to:
1. Scott Company’s variable expenses are 72% of sales. The company’s break even point in dollar sales is $2,450,000. If sales are $60,000 below the break even point, the company would report a a)$43,200 loss b) $60,000 loss c) $16,800 loss d) cannot be determined from the data given. 2. Vandinter Corporation produces and sells a single product. Data concerning that product appear below: selling price: $160.00 variable expense per unit:$32 fixed expense per month:$536,320 The break even in monthly unit sales is closest to a) 8,101 b) 3,352 c) 4,190 d) 16,760 3. Shun Corporation manufactures and sells a hand held calculator. The following information relates to Shun’s operations for last year: unit product cost under variable costing: $5.20 per unit fixed manufacturing overhead cost for the year: $260,000 fixed selling and administrative cost for the year: $180,000 units (calculators) produced and sold: $400,000 What is Shun’s unit product cost under absorption costing for last year? a) $4.10 b) $4.55 c) $5.85 d) $6.30 4. Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations: number of units produced : 8,000 variable cost per unit: direct materials:$37 direct labor: $56 variable manufacturing overhead: $4 variable selling and administrative expense: $2 fixed costs: fixed manufacturing overhead: $312,000 fixed selling and administrative cost: $448,000 There were no beginning or ending inventories. The unit product cost under absorption costing was a) $93 b) $97 c) $136 d) $194 5. Lina Co. produced 100,000 units of its single product during the month of June. Costs incurred during June were as follows: direct materials:$100,000 direct labor:$80,000 variable manufacturing overhead: $ 40,000 fixed manufacturing overhead:$50,000 variable selling and administrative expense: $12,000 fixed selling and administrative cost: $45,000 Assume that direct labor is a variable cost. The unit product cost under absorption costing a) $3.27 b) $2.70 c) $2.20 d) $1.80 6. Higgins Company sells three products, Product A, Product B, and Product C. Sales during June totaled $1,500,000 in the company. The company’s overall contribution margin ratio was 38%, and its fixed expenses totaled $525,000 for the year. Sales by product were: Product A, $750,000; Product B, $450,000; and Product C, $300,000. Traceable fixed expenses were: Product A, $180,000; Product B, $150,000; and Product C, $90,000. The variable expenses were: Product A, $450,000; Product B, $270,000; and Product C, $___?___. The net operating income for the company as a whole for June was: a) $45,000 b) $105,000 c) $150,000 d) $570,000 7. Swifton Company produces a single product. Last year, the company had net operating income of $40,000 using variable costing. Beginning and ending inventories were 22,000 and 27,000 units, respectively. If the fixed manufacturing overhead cost was $3.00 per unit, what was the income using absorption costing? a) $15,000 b) $25,000 c) $40,000 d) $55,000
1. Smitty Corp, whose required rate of return is 10%, is considering the purchase of a new piece of equipment. The internal rate of return of the project, which has a life of 8 years, is 12%. The project would have A.an accounting rate of return greater than 10%. B.a payback period more than 8 years. C.a net present value of zero. D.a net present value greater than zero. 2. How much would you need to deposit now in a savings account that earns 5% interest, compounded annually, in order to withdraw $5,000 at the end of every year for ten years? A.$47,619 B.$47,500 C.$38,609 D.$50,000 3. Summit Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $159,600. The equipment will have an initial cost of $532,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $14,000, what is the accounting rate of return? A.30.00% B.47.11% C.152.37% D.19.28% 4.Hiawatha Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6 year life. There is no salvage value for the equipment. If the hurdle rate is 8%, what is the approximate net present value? Ignore income taxes. A.$924,580 B.$300,000 C.$24,580 D.$900,000 5. Albertville Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July September? A. $742,500 B.$292,500 C.$4,387,500 D.$643,500
Designer Rags makes evening dresses. The following information was gathered from the company records for 2010, the first year of company operations. Work in Process Inventory at the end of 2010 was $31,500.
Direct material purchased on account …………………………..$1,110,000
Direct material issued to production ……………………………. 894,000
Direct labor payroll accrued …………………………………….. 645,000
Depreciation on factory equipment recorded …………………….. 65,100
Factory rent paid ………………………………………………….. 252,000
Sales (all on account) ……………………………………………… 2,862,000
The company’s gross profit rate for the year was 35 percent.
a. Compute the cost of goods sold for 2010.
b. What was the total cost of goods manufactured for 2010?
c. What is Finished Goods Inventory at December 31, 2010?
d. If net income was $250,000, what were total selling and administrative expenses for the year?
e. Prepare journal entries to record the flow of costs for the year, assuming the company uses a perpetual inventory system and a single Manufacturing Overhead Control account and that actual overhead is included in WIP Inventory.
Estimating a cost function, high low method. Laurie Daley is examining customer service costs in the southern region of Capitol Products. Capitol Products has more than 200 separate electrical products that are sold with a 6 month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 10 week period are
1. Plot the relationship between customer service costs and number of service reports. Is the relationship economically plausible?
2. Use the high low method to compute the cost function, relating customer service costs to the number of service reports.
3. What variables, in addition to number of service reports, might be cost drivers of weekly customer service costs of CapitolProducts?
Estimating a cost function, high low method. Reisen Travel offers helicopter service from suburban towns to John F. Kennedy International Airport in New York City. Each of its 10 helicopters makes between 1,000 and 2,000 round trips per year. The records indicate that a helicopter that has made 1,000 round trips in re year incurs an average operating cost of $350 per round trip, and one that has made 2,000 round trips in e year incurs an average operating cost of $300 per round trip.
1. Using the high low method, estimate the linear relationship y = a + bX, where y is the total annual operating cost of a helicopter and X is the number of round trips it makes to JFK airport during the year
2. Give examples of costs that would be included in a and in b
3. If Reisen Travel expects each helicopter to make, on average, 1,200 round trips in the coming year, what should its estimated operating budget for the helicopter fleet be?
High low method and regression analysis. Happy Business College has recently opened a restaurant as part of its hospitality major. For the first 10 weeks the manager did not estimate any costs, but instead hoped revenues would cover costs. One of the new waiters, who happens to be taking a cost accounting class, suggests that the manager take the past known weekly costs and try to determine a cost equation by relating the cost to the number of customers served. The cost and customer data are as follows:
The manager gives this information to the waiter, who runs a regression and gets the following equation:
Weekly total restaurant costs = $2,453 + ($19.04 A? Number of customers per week)
1. Plot the relationship between number of customers per week and weekly total restaurant costs.
2. Estimate the cost equation using the high low method, and draw this line on your graph.
3. Drawthe regression line on your graph. Use your graph to evaluate the regression line using the criteria of economic plausibility, goodness of fit, and significance of the independent variable. Is the cost function estimated using the high low method a close approximation to the cost function estimated using the regression method. Explain briefly.
4. At what point (number of customers) will the expected total cost based on the high low equation equal the expected total cost based on the regressionequation?
High low method, regression analysis. Anna Martinez, the financial manager at the Casa Real restaurant is checking to see if there is any relationship between newspaper advertising and sales revenues at the restaurant She obtains the following data for the past 10 months:
1. Plot the relationship between advertising costs and revenues.
2. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line.
3. Use the high low method to compute the function, relating advertising costs and revenues.
4. Using (a) the regression equation and (b) the high low equation, what is the increase in revenues for each $1,000 spent on advertising within the relevant range? Which method should Martinez use to predict the effect of advertising costs on revenues? Explainbriefly.
Interpreting regression results, matching time periods, ethics Jayne Barbour is working as a summer intern at Mode, a trendy store specializing in clothing for twenty some things. Jayne has been working closely with her cousin, Gail Hubbard, who plans promotions for Mode. The store has only been in business for 10 months, and Valerie Parker, the store’s owner, has been unsure of the effectiveness of the store’s advertising. Wanting to impress Valerie with the regression analysis skills she acquired in a cost accounting course the previous semester, Jayne decides to prepare an analysis of the effect of advertising on revenues. She collects the following data:
Jayne performs a regression analysis, comparing each month’s advertising expense with that month’s revenue, and obtains the following formula:
Required
1. Plot the preceding data on a graph and draw the regression line. What does the cost formula indicate about the relationship between monthly advertising expense and monthly revenues? Is the relationship economically plausible?
2. Jayne worries that if she makes her presentation to the owner as planned, it will reflect poorly on her cousin Gail’s performance. Is she ethically obligated to make the presentation?
3. Jayne thinks further about her analysis, and discovers a significant flaw in her approach. She realizes that advertising done in a given month should be expected to influence the following month’s sales, not necessarily the current month’s. She modifies her analysis by comparing, for example, October advertising expense with November sales revenue. The modified regression yields the following:
What does the revised cost formula indicate? Plot the revised data on a graph. (You will need to discard October revenue and July advertising expense from the data set.) Is this relationship economically plausible?
4. Can Jayne conclude that there is a cause and effect relationship between advertising expense and sales revenue? Why or whynot?
Kalogrides & McMillan CPAs incurred the following costs in performing audits during September 2010. The firm uses a Work in Process Inventory account for audit engagement costs and records overhead in fixed and variable overhead accounts.
a. Prepare journal entries for each of the following transactions:
?c Used $5,000 of previously purchased supplies on audit engagements.
?c Paid $8,000 of partner travel expenses to an accounting conference.
?c Recorded $6,500 of depreciation on laptops used in audits.
?c Recorded $1,800,000 of annual depreciation on the Kalogrides & McMillan Building, located in downtown New York; 65 percent of the space is used to house audit personnel.
Laura Thompson, newly appointed controller of Allied Networking Services Inc. (ANSI), a rapidly growing company, has just been asked to serve as lead facilitator of a team charged with designing a cost management system (CMS) at ANSI. Also serving on the team are Tom Weiss, company president; Susan Turner, vice president of finance; and George Wipple, vice president of marketing.
At the team’s organizational meeting, Weiss suggested that the performance measurements to be built into the CMS should have a primary focus on ANSI’s ultimate goal. Thompson advised the team that it would therefore be necessary for the team to gain consensus on the issue of an appropriate goal on which to focus the emphasis for the CMS’s primary measurements.
When the team members pressed Weiss for what he thought ANSI’s goal should be, he indicated that he believed that maximization of company profits was the most reasonable choice. At this, Wipple chimed in that because sales are the lifeblood of the company, the team should think about making customer satisfaction ANSI’s ultimate goal.
Turner, who had been silently listening to the discussion, was prompted by Thompson to give her opinion on the issue. Turner said that much of the professional literature advocates maximization of shareholder wealth as the ultimate goal of business. She did not see why it should not be the same at ANSI. After all, the stockholders provide the financial capital, take the ultimate risk, and are responsible for organizing the company.
Therefore, she asserted, the primary emphasis of measurements in the CMS should focus on whether or not stockholder wealth is being maximized.
A heated debate ensued. Wipple said, “Look, without customers, the company has no reason for existence how profitable is a company without customers, and how well off would its managers and stockholders be without revenues?” To this, Turner replied, “Without stockholder funds, you have no company!” Weiss responded, “Unless we manage ANSI profitably, there’ll be no company to provide customers with products and services or to provide a basis for stockholder wealth!” The team decided to reconvene after everyone had a chance to assess what had been said.
a. Should the CMS design team be deciding the company’s ultimate goal? If not, who should make such a decision?
b. What do you believe should be the ultimate goal for a business? Defend your answer.
c. Can one group of stakeholders effectively be served at the expense of the other stakeholders? Discuss.
Life cycle product costing. Intentical Inc., manufactures game systems. Intentical has decided to create and market a new system with wireless controls and excellent video graphics. Intentical’s managers re thinking of calling this system the Yew. Based on past experience they expect the total life cycle of the Yew to be four years, with the design phase taking about a year. They budget the following costs for the Yew:
1. Suppose the managers at Intentical price the Yew game system at $110 per unit. How many units do they need to sell to break even?
2. The managers at Intentical are thinking of two alternative pricing strategies.
a. Sell the Yew at $110 each from the outset. At this price they expect to sell 1,500,000 units over its life cycle.
b. Boost the selling price of the Yew in Year 2 when it first comes out to $240 per unit. At this price they expect to sell 100,000 units in Year 2. In Years 3 and 4 drop the price to $110 per unit. The managers expect to sell 1,200,000 units in Years 3 and 4.
Which pricing strategy would you recommend? Explain.
3. What other factors should Intentical consider in choosing its pricingstrategy?
Life cycle costing Fearless Furniture Manufacturing (FFM) has been manufacturing furniture for the home for over 30 years. George Fearless, the owner, has decided he would like to manufacture an executive desk that contains space for not only a laptop dock but also an MP3 player dock. Based on his experience with furniture, he believes the desk will be a popular item for 4 years, and then will be obsolete because technology will have changed again. FFM expects the design phase to be very short; maybe four months. There is no R&D cost because the idea came from George, without any real research. Also, fixed production costs will not be high because FFM has excess capacity in the factory. The FFM accountants have developed the following budget for the new executive desk:
The design cost is for the total period of 4 months. The fixed costs of production, marketing, and distribution are the expected costs PER month. Ignore time value of money.
1. Assume FFM expects to make and sell 16,000 units in the first 32 months (Months 5—36) of production (500 units per month) and 4,800 units (300 per month) in the last 16 months (Months 37—52) of production. If FFM prices the desks at $500 each, how much profit will FFM make in total and on average per desk?
2. Suppose FFM is wrong about the demand for these executive desks, and after the first 36 months it stops making them altogether. It sells 16,000 desks for $400 each with the costs described for months 5—36, and then incurs no additional costs nor generates additional revenues. Will this have been a profitable venture for FFM?
3. Will your answer to requirement 2 change if FFM still must incur the estimated fixed production costs for the whole period through month 52, even if FEM stops making executive desks at the end of 36months?
Matching graphs with descriptions of cost and revenue behavior. Given here are a number of graphs.
The horizontal axis represents the units produced over the year and the vertical axis represents total cost or revenues. Indicate by number which graph best fits the situation or item described. Some graphs may be used more than once; some may not apply to any of the situations.
a. Direct material costs
b. Supervisors’ salaries for one shift and two shifts
c. A cost volume profit graph
d.Mixed costs—for example, car rental fixed charge plus a rate per mile driven
e. Depreciation of plant computed on a straight line basis
f. Data supporting the use of a variable cost rate, such as manufacturing labor cost of $14 per unit produced
g. Incentive bonus plan that pays managers $0.10 for every unit produced above some level of production
h. Interest expense on $2 million borrowed at a fixed rate ofinterest
Multiple regression (continuation of 10 38) Bebe Williams wonders if she should run a multiple regression with both number of setups and number of setup hours, as cost drivers.
Required
1. Run a multiple regression to estimate the regression equation for setup costs using both number of setups and number of setup hours as independent variables. You should obtain the following result: Regression 3: Setup costs = a (b1 No. of setups) + (b2 * * No. of setup hours)
2. Evaluate the multiple regression output using the criteria of economic plausibility goodness of fit, significance of independent variables, and specification of estimation assumptions. (Assume linearity, constant variance, and normality of residuals.)
3. What difficulties do not arise in simple regression analysis that may arise in multiple regression analysis? Is there evidence of such difficulties in the multiple regression presented in this problem? Explain.
4. Which of the regression models from Problems 10 38 and 10 39 would you recommend Bebe Williams use?Explain.
Purchasing Department cost drivers, multiple regression analysis Barry Lee decides that the simple regression analysis used in Problem 10 40 could be extended to a multiple regression analysis. He finds the following results for two multiple regression analyses:
Regression 4: PDC = a + (b1 A? No. of P0’s) + (b2 A? No. of S’s)
Regression 5: PDC = a + (b1 A? No. of P0’s) + (b2 A? No. of S’s) + (b3 A? MP$)
The coefficients of correlation between combinations of pairs of the variables are:
1. Evaluate regression 4 using the criteria of economic plausibility, goodness of fit, significance of independent variables and specification analysis. Compare regression 4 with regressions 2 and 3 in Problem 10 40. Which one of these models would you recommend that Lee use? Why?
2. Compare regression 5 with regression 4. Which one of these models would you recommend that Lee use? Why?
3. Lee estimates the following data for the Baltimore store for next year: dollar value of merchandise purchased, $75,000,000; number of purchase orders, 3,900; number of suppliers, 110. How much should Lee budget for Purchasing Department costs for the Baltimore store for next year?
4. What difficulties do not arise in simple regression analysis that may arise in multiple regression analysis? Is there evidence of such difficulties in either of the multiple regressions presented in this problem? Explain.
5. Give two examples of decisions in which the regression results reported here (and in Problem 10 40) could beinformative.
Regression analysis, Service Company. Bob Jones owns a catering company that prepares food and beverages for banquets and parties. For a standard party the cost on a per person basis is:
Jones is quite certain about his estimates of the food, beverages, and labor costs but is not as comfortable with the overhead estimate. The overhead estimate was based on the actual data for the past 12 months, which are presented here. These data indicate that overhead costs vary with the direct labor hours used. The $14 estimate was determined by dividing total overhead costs for the 12 months by total labor hours.
Jones has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor hours as the independent variable:
y = $48,271 + $3.93X
1. Plot the relationship between overhead costs and labor hours. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of fit, and slope of the regression line.
2. Using data from the regression analysis, what is the variable cost per person for a standard party?
3. Bob Jones has been asked to prepare a bid for a 200 person standard party to be given next month. Determine the minimum bid price that Jones would be willing to submit to recoup variablecosts.
Regression, activity based costing, choosing cost drivers Fitzgerald Manufacturing has been using activity based costing to determine the cost of product X 678. One of the activities, ?oInspection,?? occurs just before the product is finished. Fitzgerald inspects every 10th unit, and has been using ?onumber of units inspected?? as the cost driver for inspection costs. A significant component of inspection costs is the cost of the test kit used in each inspection. Neela McFeen, the line manager, is wondering if inspection labor hours might be a better cost driver for inspection costs. Neela gathers information for weekly inspection costs, units inspected, and inspection labor hours as follows:
Neela runs regressions on each of the possible cost drivers and estimates these cost functions:
Inspection Costs = $977 + ($2.05 * Number of units inspected)
1. Explain why number of units inspected and inspection labor hours are plausible cost drivers of inspection costs.
2. Plot the data and regression line for units inspected and inspection costs. Plot the data and regression line for inspection labor hours and inspection costs. Which cost driver of inspection costs would you choose? Explain.
3. Neela expects inspectors to work 140 hours next period and to inspect 1,100 units. Using the cost driver you chose in requirement 2, what amount of inspection costs should Neela budget? Explain any implications of Neela choosing the cost driver you did not choose in requirement 2 to budget inspectioncosts.
On march first purchased $950 worth of office supplies from cooper products, on credit
on march fifth some of the office supplies bought on march 1 were damaged when received. Returned $200 worth of damaged supplies to cooper
on march ninth $700 to clear chemicals Ltd,. a supplier, to reduce balance owing
on march tenth purchased a new $15000 copier from Conway manufactureres. A down payment of $3000 cash was made, and the balance of $12000 is to be paid later
Select the graph that matches the numbered manufacturing cost data. Indicate by letter which graph best fits the situation or item described.
The vertical axes of the graphs represent total cost and the horizontal axes represent units produced during a calendar year. In each case, the zero point of dollars and production is at the intersection of the two axes. The graphs maybe used more than once.
1. Annual depreciation of equipment where the amount of depreciation charged is computed by the machine hours method.
2. Electricity bill—a flat fixed charge, plus a variable cost after a certain number of kilowatt hours are used, in which the quantity of kilowatt hours used varies proportionately with quantity of units produced.
3. City water bill, which is computed as follows:
The gallons of water used vary proportionately with the quantity of production output.
4. Cost of direct materials, where direct material cost per unit produced decreases with each pound of material used (for example, it 1 pound is used, the cost is $10; if 2 pounds are used, the cost is $19.98; if 3 pounds are used, the cost is $29.94), with a minimum cost per unit of $9.20.
5. Annual depreciation of equipment where the amount is computed by the straight line method. When the depreciation schedule was prepared, it was anticipated that the obsolescence factor would be greater than the wear and tear factor.
6. Rent on a manufacturing plant donated by the city, where the agreement calls for a fixed fee payment unless 200,000 labor hours are worked, in which case no rent is paid.
7. Salaries of repair personnel, where one person is needed for every 1,000 machine hours or less (that is, 0 to 1,000 hours requires one person, 1,001 to 2,000 hours requires two people, and so on)
8. Cost of direct materials used (assume no quantity discounts).
9. Rent on a manufacturing plant donated by the county, where the agreement calls for rent of $100,000 to be reduced by $1 for each direct manufacturing labor hour worked in excess of 200,000 hours, but a minimum rental fee of $20,000 must bepaid.
Tamra Corp. makes one product line. In February 2010, Tamra paid $530,000 in factory overhead costs. Of that amount, $124,000 was for January’s factory utilities and $48,000 was for property taxes on the factory for the year 2010.
February’s factory utility bill arrived on March 12, 2010, and was only $81,000 because the weather was significantly milder than in January. Tamra Corp. produced 50,000 units of product in both January and February 2010.
a. What were Tamra’s actual factory overhead costs for February 2010?
b. Actual per unit direct material and direct labor costs for February 2010 were $24.30 and $10.95. What was actual total product cost for February?
c. Assume that, other than factory utilities, all direct material, direct labor, and overhead costs for Tamra Corp. were equal in January 2010 and February 2010.
Will product cost for the two months differ? How can such differences be avoided?
Target prices, target costs, activity based costing. Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2008:
For 2008, Snappy buys 250,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $4 per tile. Assume Snappy has no fixed costs and no inventories.
1. Calculate Snappy’s operating income for 2008.
2. For 2009, retailers are demanding a 5% discount off the 2008 price. Snappy’s suppliers are only willing to give a 4% discount. Snappy expects to sell the same quantity of marble tiles in 2009 as in 2008. If all other costs and cost driver information remain the same, calculate Snappy’s operating income for 2009.
3. Suppose further that Snappy decides to make changes in its ordering and receiving and storing practices. By placing long run orders with its key suppliers, Snappy expects to reduce the number of orders to 200 and the cost per order to $25 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Snappy expects to reduce the number of loads moved to 3,125 and the cost per load moved to $28. Will Snappy achieve its target operating income of $0.30 per tile in 2009? Show yourcalculations.
Target prices, target costs, value engineering, cost incurrence, locked in costs, activity based costing. Cutler Electronics makes a radio cassette player, CE100, which has 80 components. Cutler sells units each month for $70 each. The costs of manufacturing CE100 are $45 per unit, or $315,000 per month. Monthly manufacturing costs incurred are:
Cutler’s management identifies the activity cost pools, the cost driver for each activity, and the cost per unit of the cost driver for each overhead cost pool as follows:
Cutler’s management views direct material costs and direct manufacturing labor costs as variable with respect to the units of CEI0O manufactured. Over a long run horizon, each of the overhead costs described in the preceding table varies, as described, with the chosen cost drivers.
The following additional information describes the existing design:
a. Testing and inspection time per unit is 2.5 hours.
b. 10% of the CE100s manufactured are reworked.
c. Cutler places two orders with each component supplier each month. Each component is supplied by a different supplier.
d. It currently takes 1 hour to manufacture each unit of CE100.
In response to competitive pressures, Cutler must reduce its price to $62 per unit and its costs by $8 per unit. No additional sales are anticipated at this lower price. However, Cutler stands to lose significant sales if it does not reduce its price. Manufacturing has been asked to reduce its costs by $6 per unit. Improvements in manufacturing efficiency are expected to yield a net savings of $1.50 per radio cassette player, but that is not enough. The chief engineer has proposed a new modular design that reduces the number of components to 50 and also simplifies testing. The newly designed radio cassette player, called ?oNew CE100?? will replace CE100.
The expected effects of the new design are as follows:
a. Direct material cost for the New CE100 is expected to be lower by $2.20 per unit.
b. Direct manufacturing labor cost for the New CE100 is expected to be lower by $0.50 per unit
c. Machining time required to manufacture the New CE100 is expected to be 20% less, but machine hour capacity will not be reduced.
d. Time required for testing the New CE100 is expected to be lower by 20%.
e. Rework is expected to decline to 4% of New CE100s manufactured.
f.Engineering hours capacity will remain the same.
Assume that the cost per unit of each cost driver for CE100 continues to apply to New CE100.
1. Calculate Cutler’s manufacturing cost per unit of New CE100.
2.Will the new design achieve the per unit cost reduction targets that have been set for the manufacturing costs of New CE100? Show your calculations.
3. The problem describes two strategies to reduce costs: (a) improving manufacturing efficiency and (b) modifying product design. Which strategy has more impact on Cutler’s costs? Why? Explainbriefly.
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.
Standard
Custom
Direct labor costs
$40,100
$108,000
Machine hours
1,210
1,310
Setup hours
110
390
Total estimated overhead costs are $299,700. Overhead cost allocated to the machining activity cost pool is $196,700, and $103,000is allocated to the machine setup activity cost pool.
(a)
Compute the overhead rate using the traditional (plantwide) approach. (Round answers to 2 decimal places, e.g. 12.25%.)
Predetermined overhead rate_______________% of direct labor cost
(b)
The parts of this question must be completed in order. This part will be available when you complete the part above.
(c)
The parts of this question must be completed in order. This part will be available when you complete the part above
(parts B and C has to be completed after res[ponding part A, please keep this on mind)
Chapter 10 Partnership Ryan Ross (111 11 1111), Oscar Oleander (222 22 2222), Clark Carey (333 33 3333), and Kim Kardigan (444 44 4444) are equal members in ROCK the Ages, LLC. ROCK serves as agents and managers for prominent musicians in the Los Angeles area. The LLC ’ s Federal ID number is 55 5555555. It uses the cash basis and the calendar year and began operations on January 1, 2001. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon and Burgundy 5 and has had a very profitable year.
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Chapter 10 Partnership Ryan Ross (111 11 1111), Oscar Oleander (222 22 2222), Clark Carey (333 33 3333), and Kim Kardigan (444 44 4444) are equal members in ROCK the Ages, LLC. ROCK serves as agents and managers for prominent musicians in the Los Angeles area. The LLC ’ s Federal ID number is 55 5555555. It uses the cash basis and the calendar year and began operations on January 1, 2001. Its current address is 6102 Wilshire Boulevard, Suite 2100, Los Angeles, CA 90036. ROCK was the force behind such music icons as Rhiannon and Burgundy 5 and has had a very profitable year. The following information was taken from the LLC ’ s income statement for the current year: Revenues: Fees and commissions $4,800,000 Taxable interest income from bank deposits 1,600 Tax exempt interest 3,200 Net gain on stock sales 4,000 Total revenues $4,808,800 Expenses: Advertising and public relations $ 380,000 Charitable contributions 28,000 Section 179 expense 20,000 Employee salaries and wages 1,000,000 Guaranteed payment, Ryan Ross, office manager 800,000 Guaranteed payment, other members 600,000 Entertainment, subject to 50%disallowance 200,000 Travel 320,000 Legal and accounting fees 132,000 Office rentals paid 80,000 Interest expense on operating line of credit 10,000 Insurance premiums 52,000 Tax Returns: You will prepare 3 tax returns during the semester each one will be worth 100 points. Partial credit will be given on the returns. Please use the appropriate drop box. I do not use the software that comes with the textbook, so don’t send me anything prepared with it. I would visit ? HYPERLINK “http://www.irs.gov” ?www.irs.gov? to find the appropriate forms to use for the returns. You must use tax forms for the tax return problems, failure to do so, will result in massive point deduction.
Heather and Nikolay Laubert are married and file a joint income tax return. Their address is 3847 Jackdaw Path, Madison, WI 58493. Nikolay’s Social Security number is 000 00 1111, and Heather’s is 000 00 2222. Nikolay is a mechanical engineer, and Heather is a highly renowned speech therapsit. She is self employed. They report all their income and expenses on the cash method. For 2012, they report the following items of income and expenses:
Gross receipts from Heather’s business : $110,000
Rent on Heather’s office: $12,000
Receivables written off during the year (received in Heather’s business): $1,300
Subscriptions to linguistic journals for Heather: $250
Salary for Heather’s secretary receptionist: $22,000
Nikolay’s salary: 78,000
Qualified medical expenses: 12,000
Property taxes on their personal residence: 4,200
State income tax refund received this year (the tax benefit was received in the prior year from the state income tax deduction) : $400
State income taxes withheld on Nikolay’s salary: $4,600
Federal income taxes withheld on Nikolay’s salary: 12,000
Heathers estimated tax payments: 20,000
Interest paid on residence: 11,000
Income tax preparation fee for the prior year’s return paid this year ($500 is allocated to preparation of Schedule C) : $940
Heather and Nikolay sold the following assets:
Asset Acquired Sold Sales Price Cost
KNA stock 2/12/11 3/13/12 $14,000 $8,000
AEN stock 3/2/12 7/7/12 $ 20,000 $22,000
KLN stock 6/8/07 4/10/12 $ 13,000 $17,000
Motorcycle 5/3/04 9/12/12 $ 2,500 $ 6,000
Heather owned the KLN stock and sold it to her brother, Jacob. Heather and Nikolay used the motorcycle for personal recreation.
In addition to the items above, they donate Miner Corppration stock to their community church. The FMV of the stock on the date it is donated (8/18/12) is $6,200. It cost $2,700 when purchased on 3/12/94. Heather and Nikolay’s home is burglarized during the year. The burglar stole an entertainment system (FMV $3,500; cost $5,000), an antique diamond ring and pendant (FMV $12,000; cost $10,000), and a painting (FMV $1,500; cost $1,300). The insurance company pays $1,500 for the entertainment system, $4,000 for the jewelry, and $500 for the painting.
Compute Heather and Nikolay’s 1040, Schedules A, C, D, and SE, Form 4684, and Form 8283
Post closing trial balance for April 30, 2008 ? Transactions for the month of May 2008 and adjusting entries for May 2008 The following can be download from the Module 8 Assignment page or the Course Information page 1. Journal page to copy and use 2. Ledger page to copy and use 3. Portfolio Project Excel Spreadsheet template with accounts pre entered Kelly Consulting Transactions for May 2008 May 3 Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $1,550. May 5 Received cash from clients on account, $1,750. May 9 Paid cash for a newspaper advertisement, $100 May 13 Paid Office Station Co. for part of the debt incurred on April 5, $400 May 15 Recorded services provided on account for the period May 1 15, $5,100. May 16 Paid part time receptionist for two weeks’ salary including the amount owed on April 13, $750. May 17 Recorded cash from cash clients for fees earned during the period May 1 16, $7,380 May 20 Purchased supplies on account, $500. May 21 Recorded services provided on account for the period May 16 20, $2,900. May 25 Recorded cash from cash clients for fees earned for the period May 17 23, $4,200. May 27 Received cash from clients on account, $6,600. May 28 Paid part time receptionist for two weeks’ salary, $750. May 28 Paid telephone bill for May, $150. May 28 Paid electricity bill for May, $225. May 28 Recorded cash from cash clients for fees earned , $2,875. May 28 Provided services on account $2,200. May 28 Kelly withdrew $7,500 for personal use. Adjusting entries for May 31 are ? Insurance was purchased for a one year period, starting on March 1, 2008. ? Rent was prepaid on January 1, 2008, for a one year period, starting on January 1. ? Office equipment has a 5 year life, with a 2,500 salvage value. ? A supplies inventory count shows an ending balance of $1,235. Portfolio Instructions 1. Record the ending balances from the April 30 post closing trial balance into the ledger sheets or alternatively, you may create T accounts on an Excel spreadsheet. 2. Record journal entries for the May transactions on the journal sheets given or create a spreadsheet configured as a journal sheet. 3. Post the journal entries to the ledger sheets or if you created T accounts post the entries to your T accounts. 4. Enter the ending balances from the ledger or T accounts on to the worksheet trial balance columns. 5. Enter the adjustments directly on to the worksheet. 6. Extend to the adjusted trial balance columns. 7. Extend to the financial statement columns. 8. Prepare the financial statements. 9. Enter the closing entries on to the worksheet. 10. Prepare the post closing trial balance for May. Submit your work in a Portfolio Project Excel worksheet that you download from the Module 8 Assignments page. Make sure all the sections listed below are on the worksheet as a single document with each of the four sections described clearly identified. Make sure you include the following sections in your final Excel Workbook: I. The completed Worksheet on the given downloadable spreadsheet II. Formal income statement, statement of owner’s equity, and balance sheet (These may be prepared on separate tabs on the Excel Workbook where “Worksheet” is the first tab) III. Post Closing Trial Balance for May 31 IV. T Accounts
The Spivak Company was involved in the following treasury stock transactions during 2011;
a. Purchased 80,000 shares of its $1 par value common stock on the market for $2.50 per share.
b. Purchased 16,000 shares of its $1 par value common stock on the market for $2.80 per share.
c. Sold 44,000 share purchased in a for $131,000.
d. Sold the other 36,000 shares purchased in a for $72,000.
e. Sold 6,000 of the remaining shares of treasury stock for $1.60 per share.
f. retired all the remaining shares of treasury stock. All shares originally were issued at $1.50 per share.
Required
1. Record the treasury stock transactions in T accounts.
2. What is the reasoning behind treating the purchase of treasury stock as a reduction in stockholders’ equity as opposed to treating it as an investment asset?
Find two consecutive years of financial statements from a publicly traded company. Conduct a financial analysis and calculate financial ratios.
Deliverable
You have two deliverables for this assignment:
Part 1: A financial statement analysis and statement of cash flows covering the following items:
Statement of cash flow from operating, investing, and financing activities
Income statement horizontal analysis
Balance sheet vertical analysis
Ratio calculations
Gross profit percentage
Merchandise inventory turnover
Accounts receivable turnover
Return on investment
Liquidity ratios
Activity ratios
Debt ratios
Profitability ratios
Market ratios
Part 2: A summary report discussing this company’s accounting cycle, including a paragraph stating why you value the business efficiencies created by solid accounting practices. Provide recommendations for future business activity based upon your assessment. Cite references from your library research to support your conclusions of the company’s performance based upon your analysis and financial ratio evaluations
NB. PLEASE DO IT ON TWO PAGES ONLY.
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Project Overview Find two consecutive years of financial statements from a publicly traded company. Conduct a financial analysis and calculate financial ratios. Deliverable You have two deliverables for this assignment: Part 1: A financial statement analysis and statement of cash flows covering the following items: Statement of cash flow from operating, investing, and financing activities Income statement horizontal analysis Balance sheet vertical analysis Ratio calculations Gross profit percentage Merchandise inventory turnover Accounts receivable turnover Return on investment Liquidity ratios Activity ratios Debt ratios Profitability ratios Market ratios Part 2: A summary report discussing this company’s accounting cycle, including a paragraph stating why you value the business efficiencies created by solid accounting practices. Provide recommendations for future business activity based upon your assessment. Cite references from your library research to support your conclusions of the company’s performance based upon your analysis and financial ratio evaluations NB. PLEASE DO IT ON TWO PAGES ONLY.
Two basic types of tests are performed in the lab”smears and blood tests. During the past month, 2,400 smears and 400 blood tests were performed in the lab.
b.
Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $37,440. This cost is net of a 4% purchase discount. A total of 1,400 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month.
c.
During the past month, 1,400 hours of labor time were used in performing smears and blood tests. The cost of this labor time was $14,700.
d.
The lab’s variable overhead cost last month totaled $9,800.
Cottonwood Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:
Plates:
Three plates are required per lab test. These plates cost $3.25 each and are disposed of after the test is completed.
Labor:
Each smear should require 0.20 hours to complete, and each blood test should require 0.40 hours to complete. The average cost of this lab time is $11.40 per hour.
Overhead:
Overhead cost is based on direct labor hours. The average rate of variable overhead is $6.50 per hour.
Required:
1.
Compute the materials price variance for the plates purchased last month, and compute a materials quantity variance for the plates used last month. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)
Materials price variance
$
Materials quantity variance
$
2.
For labor cost in the lab:
a.
Compute a labor rate variance and a labor efficiency variance. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)
Labor rate variance
$
Labor efficiency variance
$
b.
In most hospitals, three fourths of the workers in the lab are certified technicians and one fourth are assistants. In an effort to reduce costs, Cottonwood Hospital employs only one half certified technicians and one half assistants. Would you recommend that this policy be continued?
Yes
No
3a.
Compute the variable overhead rate and efficiency variances. (Input all amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance.)
Variable overhead rate variance
$
Variable overhead efficiency variance
$
3b.
Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?
. Carver Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Carver’s test equipment is designed to customer specifications, and each system has a selling price in excess of $300,000. The company uses a job order cost system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Carver are presented below. By the end of November all jobs but RX 115 were completed, and all completed jobs had been delivered to customers with the exception of SL 205. Job # XJ 107 ; Balance on 10/31 $118,600; Direct Materials $4,000;Direct Labor $8,400; Machine Hours 150 Job # ST 211 ; Balance on 10/31 $121,450; Direct Materials $2,500;Direct Labor $12,160; Machine Hours 300 Job # XD 108 ; Balance on 10/31 $21,800; Direct Materials $86,400;Direct Labor $36,650; Machine Hours 3100 Job # SL 205 ; Balance on 10/31 $34,350; Direct Materials $71,800;Direct Labor $32,175; Machine Hours 2700 Job # RX 115 ; Balance on 10/31 0 ; Direct Materials $18,990; Direct Labor $21,845; Machine Hours 1400 Required: (a) Determine the balance in the Finished Goods Inventory on November 30. (b) Compute the cost of goods manufactured for November. (c) Compute the Cost of Goods Sold for November. (d) Determine the balance in Work In Process Inventory on November 30. I have calculated the OH rate as $20 per hour Overhead costs are as follows $3,000 Job 107 $6,000 Job 211 $62,000 Job 108 $54,000 Job 205 $28,000 Job 115 Answer to (a) is $192,325 Answer to (b) is 675285 I need help with (c) and (d).
a. Colby Hepworth has just invested $400,000 in a book and video store. She expects to recieve a cash income of $120,000 per year from the investment. b. Kylie Sorensen has just invested $1,400,000 in a new biomedical technology. She expects to receive the following cash flows over the next five years: $350,000, $490,000, $700,000, $420,000, and $280,000. c. Carsen Nabors invested in a project that has a payback period of four years, The project brings in $960,000 per year. d. Rahn Booth invested $1,300,000 in a project that pays him an even amount per year for five yaers. the payback period is 2.5 years. 1. What is the Payback period for Colby? 2. What is the payback period for Kylie? 3. How much did Carsen invest in the project? 4. How much cash does Rahn receive each year?
a. Cuenca Company is considering the purchase of new equipment that will speed up the process for producing flash drives. The equipment will cost $7,200,000 and have a life of five years with no excepted salvage value. The expected cash flows associated with the project follow:
Year Cash revenue Cash Expenses
1 $8,000,000 $6,000,000
28,000,000 6,000,000
38,000,000 6,000,000
4 8,000,0006,000,000
5 8,000,000 6,000,000
b. Kathy Shorts is evaluting an investment in an information system that will save $240,000 per year. She estmates that the system will last 10 years. The system will cost $1,248,000. Her company’s cost of capital is 10 percent.
c. Elmo Enterprises just announced that a new plant would be built in Helper, Utah. Elmo told its shareholders that the plant has an expected life of 15 years and an expected IRR equal to 25 percent. The cost of building the plant is expected to be $2,880,00.
1. Calculate the IRR for Cuenca Company. The company’s cost of capital is 16 percent. Sould the new equipment be purchased?
2.Calculate Kathy Short’s IRR. Should she acquire the new system?
3. What should be Elmo Enterprises’ expected annual cash flow from the plant?
1. Apply to actual companies the basic knowledge and analytical techniques learned from our course.
2. Prepare vertical common size financial statements, horizontal common size financial statements, and various profitability and risk ratios.
3. Detect the time trend of the firm’s profitability and riskiness, and compare the calculated results with competitors.
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The specific purposes of this project are: 1. Apply to actual companies the basic knowledge and analytical techniques learned from our course. 2. Prepare vertical common size financial statements, horizontal common size financial statements, and various profitability and risk ratios. 3. Detect the time trend of the firm’s profitability and riskiness, and compare the calculated results with competitors. 4. Summarize/ present the analyses and make investment recommendations. You will be analyzing the following firms: a. Costco Wholesale Corp (ticker: COST). b. Wal Mart Stores, Inc (ticker: WMT). For these firms, download the most recent annual report to begin your work, including financial statements, footnotes to the financials, and the management discussions and analyses. Alternatively, you may use the 10 K report. You can download the 10 K from the company’s website or the SEC’s website (i.e., EDGAR online http://www.sec.gov/edgar/searchedgar/companysearchl). Tips: 1. Public companies usually publish annual reports at investor relation web pages. 2. You may search EDGAR by company name or by trading ticker symbol. An advantage of using EDGAR 10 K report is that you may quickly copy those tables into Excel. Use the filter (filing type) to show 10 K filings only. Click the “document” button and the first htm file will be the 10 K report. 3. Free reference is available at Yahoo finance (http://finance.yahoo.com) or Google finance (http://finance.google.com). Hoover’s is also available (http://www.hoovers.com) for you to browse the company information (other content is for paid users). The required tasks are detailed below: (1) Prepare vertical common size balance sheets and income statements for both companies. Note: Compute for the most recent THREE years, i.e., 2010, 2011, and 2012. 2 (2) Prepare horizontal common size income statement and balance sheet (in percentage) for both companies. You should compute for the most recent THREE…
1. (25 points) Lloyd Christmas, Ltd.’s accounting records reflect the following account balances atJanuary 1, 2005 (beginning of the year):
Account
Debit
Credit
Equipment
$160,000
Inventory
$ 95,000
Accounts Receivable
$ 20,000
Building
$100,000
Cash
$ 150,000
Supplies
$ 12,000
Prepaid Rent
$ 15,000
Land
$100,000
Unearned Revenues
$50,000
Accounts Payable
$60,000
Accumulated Depreciation Equipment
$30,000
Accumulated Depreciation Bldg
$50,000
Note Payable
$140,000
Owners’ Capital
$322,000
This company uses the perpetual inventory system (therefore, the company records a decrease to inventory and COGS expense for every sale). There were no owner investments or owner withdrawals for the year. Make the following adjustments for the year ended December 31, 2005:
Example: The company made a sale of services on credit. (see table below for entry)
1) The Prepaid Rent for Lloyd Christmas Ltd. was paid on December 31, 2004 (the journal entry for the initial prepayment has already been made). The lease was for three years. Make the adjustment for the expired rent at December 31, 2005 (for the whole year).
2) The note payable was taken out last year. The note carries an annual interest rate of 10%. Interest needs to be accrued for theentire year. The interest will be paid February 8th, 2006 (next year). Record the adjustment necessary at December 31, 2005.
3) Employee salaries in the amount of $60,000 were incurred for the year. Of that amount, $50,000 had been paid in cash, the remainder was still owed to employees at the end of the year. Record the journal entry necessary at December 31, 2005 to account for both the paid and unpaid portion of salaries.
4) At the end of the year, $3,000 of the supplies remained on hand. Record the adjustment necessary at December 31, 2005.
5) The company paid $20,000 on their accounts payable during the year. Record the entry.
6) The company made sales of merchandise (inventory) to customers for a total $250,000. The sales were made half on credit, and half in cash. The inventory sold had originally cost the company $90,000 (hint: this is your cost of goods sold expense).
7) The company provided the services associated with the Unearned Revenues balance at the beginning of the year. Record the adjustment necessary for the year 2005.
8) At December 31, the company had earned $30,000 in tax consulting revenue, but had not yet received payment from their customer. Record the adjustment necessary at December 31, 2005.
9) On December 31, received $22,000 in cash representing advance payment for services to be provided in February of 2006. Record the adjustment necessary at December 31, 2005.
10) The building has a useful life of 25 years and no salvage value. The equipment has a useful of 10 years and has a $20,000 salvage value. Record the adjustments necessary at December 31, 2005 (record the entire year’s depreciation for both the building and equipment).
11) Taxes for the year totaled $30,000. The taxes will be paid next year. Record the adjustment necessary at December 31, 2005.
Required:
A. Record the preceding transactions in the journal below. Make sure to indicate each account affected by the transactions.
B. Record the transactions from step A. in the ledger (use the T accounts provided below.)
C. Prepare an ending trial balance at December 31, 2005.
D. Prepare an income statement for Lloyd Christmas for 2005.
E. Prepare a statement of owners’ equity for the year ended December 31, 2005.
F.Prepare a balance sheet for Lloyd Christmas at December 31, 2005.
1. (30 points) Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store’s operations follow:
A?· Sales are budgeted at $_____ for November, $______ for December, and $______ for January.
A?·Collections are expected to be __% in the month of sale, __% in the month following the sale, and __% uncollectible.
A?· The cost of goods sold is 65% of sales.
A?· The company desires ending merchandise inventory to equal __% of the following month’s cost of goods sold. Payment for merchandise is made in the month following the purchase.
A?· Other monthly expenses to be paid in cash are $_____.
A?· Monthly depreciation is $____.
A?· Ignore taxes.
STUDY AID NOTE ‘ The Statement of Financial Position at October 31 is given
Required:
Headings are NOT required for the following statements
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
FILL IN BLANK SPACES WITH YOUR OWN NUMBERS TO SOLVE THE PROBLEM
Cost estimation, cumulative average time learning curve The Nautilus Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Nautilus submit a proposal on the cost of producing another six PT109s. Nautilus reports the following cost information for the first PT109 assembled and uses a 90% cumulative average time learning model as a basis for forecasting direct manufacturing labor hours for the next six PT109s. (A 90% learning curve means b = –0.152004.)
Required
1. Calculate predicted total costs of producing the six PT109s for the Navy. (Nautilus will keep the first deployment boat assembled, costed at $1,575,000, as a demonstration model for potential customers.)
2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109s in requirement 1, and (b) the predicted total costs for producing the six PT109s, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturinglabor hours.
Cost plus target return on investment pricing. John Beck is the managing partner of a business that has just finished building a 60 room motel. Beck anticipates that he will rent these rooms for 16,000 nights next year (or 16,000 room nights). All rooms are similar and will rent for the same price. Beck estimates the following operating costs for next year:
The capital invested in the motel is $1,000,000. The partnership’s target return on investment is 25%. Beck expects demand for rooms to be uniform throughout the year. He plans to price the rooms at full cost plus a markup on full cost to earn the target return on investment.
1. What price should Beck charge for a room night? What is the markup as a percentage of the full cost of a room night?
2. Beck’s market research indicates that if the price of a room night determined in requirement 1 is reduced by 10%, the expected number of room nights Beck could rent would increase by 10%. Should Beck reduce prices by 10%? Show yourcalculations.
Cost plus, target pricing, working backward (S. Sridhar, adapted) Waterbury, Inc., manufactures and sells RF17, a specialty raft used for whitewater rafting. In 2009, it reported the following:
1. What was the selling price in 2009? What was the percentage markup on full cost? What was the variable cost per unit?
2. Waterbury is considering raising its selling price to $348. However, at this price, its sales volume is predicted to fall by 10%. If Waterbury’s cost structure (variable cost per unit and total fixed costs) remains unchanged and if its demand forecast is accurate, should it raise the selling price to $348?
3. In 2010, due to increased competition, Waterbury must reduce its selling price to $315 in order to sell 20,000 units. The manager of the rafts division reduces annual investment to $2,100,000 but still demands a 20% target rate of return on investment. If fixed costs cannot be changed in this time frame, what is the target variable cost perunit?
Cost plus, time and materials. Mazzoli Brothers is an auto repair shop. Mazzoli’s cost accounting system tracks two cost categories: direct labor (working on the cars) and direct materials (parts). Mazzoli uses a time and materials pricing system, with direct labor marked up 100% and direct materials marked up 50% to recover indirect costs of support staff, support materials, and shared machines and tools, and to earn a profit.
Johanna White brings her car to the shop. The head mechanic, Luke Bariess, concludes her car’s problem is with the clutch plate. He considers two options: replace the clutch plate or repair it. The cost information available to Bariess follows:
1. Why might Mazzoli use different markup rates for direct materials and for direct labor?
2. If Bariess presents White with the replace or repair options, what price would he quote for each?
3. If the two options were equally safe and effective for the three years that White intends to use the car before junking it, which option would she choose?
4. If Bariess’s objective is to maximize profits, which option would Bariess recommend to White? Is this the option chosen by White in requirement 3? Comment on your answers in requirements 3 and4.
Cost volume profit and regression analysis Goldstein Corporation manufactures a children’s bicycle, model CT8. Goldstein currently manufactures the bicycle frame. During 2012, Goldstein made 32,000 frames at a total cost of $1,056,000. Ryan Corporation has offered to supply as many frames as Goldstein wants at a cost of $32.50 per frame. Goldstein anticipates needing 35,000 frames each year for the next few years.
Required
1. a. What is the average cost of manufacturing a bicycle frame in 2012? How does it compare to Ryan’s offer?
b. Can Goldstein use the answer in requirement 1a to determine the cost of manufacturing 35,000 bicycle frames? Explain.
2. Goldstein’s cost analyst uses annual data from past years to estimate the following regression equation with total manufacturing costs of the bicycle frame as the dependent variable and bicycle frames produced as the independent variable:
y = $435,000 + $19X
During the years used to estimate the regression equation, the production of bicycle frames varied from 31,000 to 35,000. Using this equation, estimate how much it would cost Goldstein to manufacture 35,000 bicycle frames. How much more or less costly is it to manufacture the frames rather than to acquire them from Ryan?
3. What other information would you need to be confident that the equation in requirement 2 accurately predicts the cost of manufacturing bicycle frames?
Listed below are several information characteristics,accountingprinciples, constraints, and assumptions. Match the letter of each with the appropriate phrase that states its application. (Items a through L may be used more than once or not at all.) a. Economic entity assumption g. Matching principle b. Going concern assumption h. Full disclosure principle c. Monetary unit assumption i. Relevance characteristic d. Periodicity assumption j. Reliability characteristic e. Historical cost principle k. Consistency characteristic f. Revenue recognition principle L. Conservatism ____ 1. Stable dollar assumption (do not use historical cost principle). ____ 2. Earning process completed and realized or realizable. ____ 3. Presentation of error free information with representational faithfulness. ____ 4. Yearly financial reports. ____ 5. Accruals and deferrals in adjusting and closing process. (Do not use going concern.) ____ 6. Useful standard measuring unit forbusinesstransactions. ____ 7. Notes as part of necessary information to a fair presentation. ____ 8. Affairs of thebusinessdistinguished from those of its owners. ____ 9.Businessenterprise assumed to have a long life. ____ 10. Valuing assets at amounts originally paid for them. ____ 11. Application of the sameaccountingprinciples as in the preceding year. ____ 12. Summarizing significantaccountingpolicies. ____ 13. Presentation of timely information with predictive and feedback value. ___ 14. Using the lower of cost or market approach in valuing inventories. ___ 15. Recording a transaction when goods or services are exchanged for cash or claims to cash.
Explain how organizations in the not for profit sector differ from organi zations in the public sector or for profit business sector. Provide an exam ple of an entity in each sector. 13 2. Discuss some of the differences in the preparation and presentation of the operating statements of nongovernmental not for profit entities and govern mental not for profit entities reporting as business type entities. 13 3. What financial statements does FASB require NFPs to present? 13 4. What are the three categories into which NFPs must classify their net assets? Describe which net assets are included in each category. Would board designated net assets be reported as temporarily restricted net assets? Explain your answer. 13 5. Why is a statement of functional expenses considered an important financial statement for a voluntary health and welfare organization? How does a state ment of functional expenses differ from the expense section of a statement of activities? 13 6. What is the difference between an unconditional and a conditional pledge? How are the two pledges reported? 13 7. Distinguish between program services expenses and supporting services expenses. Why is it important that NFPs report expenses for program ser vices separately from those for supporting services?
The company I have chosen to do is Kellogg Company (K) on the NYSE
Write a 7 – 8 page double spaced paper answering and demonstrating with calculations and financial data the following questions:
What is the name of the company? What is the industry sector?
What are the operating risks of the company?
What is the financial risk of the company (the debt to total capitalization ratio)?
Does the company have any preferred stock?
What is the capital structure of the company?: Short term portion of Long Term Debt, Long Term Debt, Preferred Stock (if any), and market value of Common Stock issued and outstanding?
What is the company’s current actual Beta?
What would the Beta of this company be if it had no Long Term Debt in its capital structure? (Apply the Hamada Formula.)
What is the company’s current Marginal Tax Rate?
What is the Cost of Debt, before and after taxes?
What is the Cost of Preferred Stock (if any)?
What is the Cost of Equity?
What is the cash dividend yield on the Common Stock?
What is the Weighted Average Cost of Capital of the company?
What is the Price Earnings Multiple of the company?
How has the company’s stock been performing in the last 5 years?
How would you assess the overall risk structure of the company in terms of its Operating Risks and Financial Risk (Debt to Capitalization Ratio)?
Would you invest in this company? Why? Or Why not?
The last page of your paper should be a Bibliography of the sources you used to prepare this paper.
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FIN 516 – WEEK 2 – MINI – CASE ASSIGNMENT The company I have chosen to do is Kellogg Company (K) on the NYSE Write a 7 – 8 page double spaced paper answering and demonstrating with calculations and financial data the following questions: What is the name of the company? What is the industry sector? What are the operating risks of the company? What is the financial risk of the company (the debt to total capitalization ratio)? Does the company have any preferred stock? What is the capital structure of the company?: Short term portion of Long Term Debt, Long Term Debt, Preferred Stock (if any), and market value of Common Stock issued and outstanding? What is the company’s current actual Beta? What would the Beta of this company be if it had no Long Term Debt in its capital structure? (Apply the Hamada Formula.) What is the company’s current Marginal Tax Rate? What is the Cost of Debt, before and after taxes? What is the Cost of Preferred Stock (if any)? What is the Cost of Equity? What is the cash dividend yield on the Common Stock? What is the Weighted Average Cost of Capital of the company? What is the Price Earnings Multiple of the company? How has the company’s stock been performing in the last 5 years? How would you assess the overall risk structure of the company in terms of its Operating Risks and Financial Risk (Debt to Capitalization Ratio)? Would you invest in this company? Why? Or Why not? The last page of your paper should be a Bibliography of the sources you used to prepare this paper.
Economic Principles (BBAC202) Group Assignment (Group of Three) CAMBRIDGE INTERNATIONAL COLLEGE Economic Principles BBAC202 October 2013 Economic Principles Assignment Topic Objectives: The Assignment aims to develop your knowledge and skills in the following areas: Comprehension and understanding Critical thinking and analysis Understanding of Market Economies Researching articles, books, online materials, and journals Due Date: Session 6.1 Hard Copies only – No Electronic Submissions Students are again reminded to use appropriate referencing, to acknowledge use of other’s ideas and statements, to avoid plagiarism and any copyright breaches, and to follow the instructions below. Students are to work in Groups of Three The length of the assignment is to be approximately 2000 Words. The word count does not include references or bibliography. Reference using Harvard/APA The word count must be specified on the front head sheet of the assignment. Your task is to read the following scenario and provide answers to the following questions. You need to answer each question as well as each part of the question. The Assignment is made up of questions worth a total of 25% of your final marks. Different countries have different types of economies as outlined in Chapter 2 of your textbook. For Example: `Australia, France, The USA and South Korea have market economies North Korea, Chin, Cuba and Laos have Command Economies Sweden, Norway, Iceland and Finland have Welfare Economies Your assignment is to research the Australian Economy and compare it to an Economy that is a Command Economy AND a Welfare Economy. You may choose from countries in the lists above, or chose countries of your own. Please state which countries you are using. PART 1 (7 marks) For each country complete the following table: ?Australia?Country 1?Country 2??Total population? ? ? ??GDP/capita? ? ? ??Labour force? ? ? ??% of population working in…
Module: Business Finance/ Understanding Business Finance
BAM1001/BAM1103
Tutors: G. Clarke
Assignment Number: One (Weighting 50%) Trimester 1, 2013 14
REFER/DEFER
Assignment Title: Doyle
Assignment Length: 2,500 words, adjusted for equivalent calculations
Issue Date: Week 4
Submission Deadline: Monday 25th November 2013, 4pm
The assignment MUST be submitted into Turnitin before 4pm, on the due date. Please contact Ged Clarke (gc2) for access to the Moodle/Turnitin class.
NO HARD COPY SUBMISSIONS WILL BE ACCEPTED. Learning Outcomes
This assessment satisfies the following learning outcomes as specified in your module guide.
No.
Learning Outcomes
Assessment Criteria
1
Understand the sources and uses of finance and information.
Demonstrate in both numerical and written analysis a clear understanding of the sources and uses of finance and information in the business organisation
2
Define and apply financial terms adequately
Use basic financial terms in context with reasonable accuracy.
Please refer to the University Handbook for penalties for late submission and grading descriptors. It is the candidate’s responsibility to familiarise themselves with the University’s policies on plagiarism and use of unfair means contained within the online University Handbook
Module: Business Finance – BAM 1001
Assignment Number: One
Assignment Title: Doyle
This assignment is designed to assess your ability to use and apply terminology and/or techniques in the area of financial accounting.
Task 1: Report (30 Marks 750 Words)
Required:
In a report for the attention of Doyle discuss the significance of alternative forms of finance available and how they might be applied in the applied in the business. Your report should relate to aspects considered in the module and core text book.
30 marks
Your report should be 750 words and adopt the format available from BISSTO (use essential sections only):
Doyle runs a business as a plumber and supplier of spare parts to contractors. The trial balance, and additional information, of the business as on 30 September 2013 is provided n Appendix 1.
Refer to Appendix 1
Required:
Using ONLY the data provided in the initial Trial Balance, prepare an income statement for the year ended 30 September and a balance sheet as at that date for Doyle.
10 marks
In a second set of accounts, update the income statement and balance sheet showing the effect of the further information. Workings must be clearly noted in the revised accounts and using supporting notes/calculations.
25 marks
Discuss, with reasons, which accounting concepts and conventions you have used in the preparation of the financial statements. Your discussion should be 600 words. Each item requires a clear reference.
25 marks
The spreadsheets must be ‘inserted’ into a single word document, and all sections of the accounts/workings must be visible on the screen.
Task 3: (10 marks)
Presentation, style language and accurate referencing
10 marks
Appendix 1
UNIVERSITY OF BOLTON
BUSINESS SCHOOL
Business Management
Module: Business Finance – BAM 1001/BAM1103
“I have” Assignment Control Sheet
General
Completed all tasks
Submitted my work, in a single file, toTurnitin
Put the following in the Turnitin submission/title:
When you upload your work you will also be asked to enter a ‘name’ for the assignment. You should enter your user student number, username and class tutor’s name e.g.:
1012xxxx_WSS2GHx_A Tutor
Shown my student number on the front sheet and, where appropriate, in the main body of the assignment (not used my name)
Kept a copy of the assignment for my own records
Assignment
Written no more than 1500 words.
Put my student number as a footer on each page
Provided accurate short references in the main body and using the Harvard system. See BISSTO via: http://www.bolton.ac.uk/bissto/
Presented text in my own words, any quotations/extracts are fully referenced
Made reference to at least three published sources, of which two are text books.
Turnitin
Turnitin will be used to receive your assignment. You are NOT required to submit a hard copy.
The software will allow you to maintain the academic integrity of your work. It will check your work against other material on the internet and against other students work.
All elements need to be submitted in a single file
Key dates are shown on the Turnitin screen in the Moodle area for this class.
You can only submit a single MS Word file.
Percentages greater than 15% should be avoided
You will be able to upload drafts of your written work into the revision area.
The revision area will close approximately one week before you are required to submit your final assignment.
All work submitted becomes part of the Turnitin database and cannot be deleted.
Do NOT use this Turnitin class to upload work for any other module or upload Bus Finance work into any other Turnitin class.
You will NOT be able to overwrite the final assignment submission after the due date.
Any late submission must be e mailed in a SINGLE file to your class tutor.
Advice:
Try not to cut and paste phrases or paragraphs from published sources. You should seek to use your own words to explain concepts and theory.
However, if you wish to refer to specific quotes from published sources then you must use full Harvard presentation. See BISSTO for clear guidance.
Do not share work with other students.
Do not create financial data/values, however you can use original data from other sources (with references)
Emergency Contact your class tutor
FACULTY OF WELLBEING & SOCIAL SCIENCES
ASSIGNMENT FEEDBACK FORM
Student Number: Academic Year 2013/14 Semester: 21 Level: LH4 Centre (off campus): Cohort/Intake number (off campus): Assignment Number/Title: Coyle Module Code/Occ./Title: BAM1001/BAM1103 Marking Tutor: Deadline: 9 November Date Handed In: Weight:
Relevant Learning Outcomes (Please see Module Guide):
Achieved? Y/N
1 Sources and Uses of Finance
2 Business Terms
Feedback:
Excellent
Good
Satisfactory
Poor
Very poor
Structure (layout, planning, flow)
Relevance (to brief/learning outcomes)
Evidence (research sources employed)
Understanding (cognitive awareness of subject area)
Reflection (description/analysis/critique appropriate to level)
Presentation (use of English and tables/figures/ appendices)
Referencing (in text, in Bibliography/Reference List)
Comments
Areas for Further Development
1st Marker’s Grade
Moderated Grade
Turnitin %
Please note that the mark advised to you on this feedback form is subject to ratification by the Assessment Board Signed (Module Tutor): ……………………………………… Date: ………………………
General Assessment Guidelines Level HE4
Relevance
Knowledge
Argument/Analysis
Structure
Presentation
Written English
Research/Referencing
Class I (Exceptional Quality)
80%+
As for Class 1(70 79%) but exceptional work
70 79%
Directly relevant to title. Addresses most or all of the implications and assumptions of the title.
Demonstrates a thorough knowledge/understanding of theory and practice for this level through the identification and summary of the most important issues.
Makes creative use of appropriate arguments and/or theoretical models. Contains some distinctive or independent thinking. A comprehensive discussion of the material resulting in clear, logical conclusions.
Coherently articulated and logically structured. An appropriate format is used.
The presentational style & layout is correct for the type of assignment. Effective inclusion of figures, tables, plates (FTP).
A very well written answer with standard spelling and grammar. Style is clear, resourceful and academic.
Sources accurately cited in the text. A range of appropriate references cited in the reference list correct style.
Class II/i (Very Good Quality)
60 69%
Directly relevant to title. Addresses some of the implications of the issues addressed by the title.
Demonstrates a good knowledge/understanding of theory and practice for this level through the identification and summary of key issues.
Uses appropriate arguments or theoretical models. Clear and valid discussion of the material. Clear, logical conclusions.
For the most part coherently articulated and logically constructed. An appropriate format is used.
The presentational style & layout is correct for the type of assignment. Effective inclusion of FTP.
Well written with standard spelling and grammar. Style is clear and academic.
Sources accurately cited in the text and an appropriate reference list in the correct style is provided.
Class II/ii (Good Quality)
50 59%
Generally addresses the title and its implications, but sometimes addresses irrelevant issues.
Demonstrates an adequate knowledge/understanding of theory and practice for this level through the identification and summary of some key issues.
Provides a partly coherent argument, but lacking clear focus and consistency in places. Some issues lack clarity, or theoretical models expressed in simplistic terms. Conclusions are fairly clear and logical.
Adequate attempt at articulation and logical structure. An acceptable format is used.
The presentational style & layout is correct for the type of assignment. Inclusion of FTP but lacks selectivity.
Competently written with minor lapses in spelling and grammar. Style is readable and mainly academic.
Most sources accurately cited in the text and an appropriate reference list in the correct style is provided.
Class III (Satisfactory Quality)
40 49%
Some degree of irrelevance to the title. Superficial consideration of the issues.
Demonstrates limited knowledge/understanding of theory and practice for this. An attempt is made to identify key issues.
A basic argument is evident but lacks clarity and coherence. Issues are only vaguely stated. Conclusions are not always clear or logical.
Some attempt at articulation and logical structure. An acceptable format is used.
The presentational style & layout is largely correct for the type of assignment. Inappropriate use of FTP or not used where clearly needed to aid understanding.
Generally competent writing although intermittent lapses in grammar and spelling pose obstacles for the reader. Style limits communication and tends not to be academic.
Some relevant sources cited. Some weaknesses in referencing technique.
Borderline Fail
35 39%
Some significant degree of irrelevance to the title is common. Only the most obvious issues are addressed at a superficial level and in unchallenging terms.
Demonstrates weaknesses in knowledge of theory and practice for this level, with poor understanding of key issues.
Limited argument, which lacks clarity in places. Conclusions are neither clear nor logical.
Poorly structured. Lack of articulation. Format deficient.
For the type of assignment the presentational style &/or layout is lacking. FTP ignored in text or not used where clearly needed.
Deficiencies in spelling and grammar makes reading difficult. Simplistic or repetitious style impairs clarity.
Limited sources and weak referencing.
Fail
Relevance to the title is intermittent or missing. The topic is reduced to its vaguest and least challenging terms.
Demonstrates a lack of basic knowledge of either theory or practice for this level, with little evidence of understanding.
Severely limited arguments. Lacks clarity. Conclusions are sparse.
Unstructured. Lack of articulation. Format deficient
For the type of assignment the presentational style &/or layout is lacking. FTP as above.
Poorly written with numerous deficiencies in grammar, spelling, expression and style.
An absence of academic sources and poor referencing technique.
Baced on a survey of 401 senior financial executives of V.S. companiesand in depth interviews with an additional 22 execu tives, wedocument a willingnm of corpo rate executives to routinely sacrifice shareholder value to inert earnings expectations or to smooth reported earnings. Whereas much previous research has focused on the use of accounting, such as accrual decision., to manage earnings. we pro vide new evidenced the widespread use of rear carom)? management. Real earnings management. which might include defening a valuable project or slashing research and development expenditures, is almost always value decreasing. The survey. administered in the fall of 2003, contained 10 questiorn, most with subsections•and explored in some depth both earnings management and voluntary disclosures. In addition, from theta]]
Mn R. Graham is the U. Richard Maid. Jr., Family Palmer of Fimance in Ore Fuqua School of Buyers at Date University, Durham, North Carolina. Campbell R. Harvey is the Paul Stiehl Professor of international Business in the Fuqua School of Business at Duty Uni mrsily,Ourham, North Carolina. Shim Raigopal is the Herbert Whitten Profestorof Accounting at the linker s/Welt IYashingtors, Seattle.
Author Note:Thisankle Is an augmented version oi ‘The Economic Implications of Corporate Financial Report ing. published in the Journal ifAmnouin g and reemar. tr. 120061. We have added additional interview* with cruel financial offers and presto] results thil are rot con tained in our earlier work.
of 2003 to early 2005. we interviewed 22 thief financial offkers (CFOs). which added depth to our understanding of corporate decision making. We explore which metrics CEOs believe are important lo investors and other outsiders and how thinebeliefs afftct their decisions. Finding a myopic emphasis on quarterly earnings measures, we also explore how the malaise of theexcessive shed term focus (“shorth rmi.n.’1 char we found con be fn•d
Survey Techniques and Sample Characteristics Believing that the most important aspect of survey research Is designing a survey Instrument that asks clear and relevant questions, we took several steps to achieve this design goal. We developed an initial survey Instrument andsolicited feedback from aca demic researchers, CFOs. and marketing research experts to minimize biases induced by the quo. tiortnaire and to maximize the response rate. After extensive beta testing of the survey, we made stw oral changes to the wording of some quesakets The final survey contained 12 questions. and the paper version was five pages long.t We e•mailed the survey to 3,174 members of an organization of financial executives. We also con tacted executives attendingCF0 forums at two uni versifies and administered a paper version of the survey at a conference of financial executives con ducted on 17 and 18 November 2003 in New York City. Our overall response rated 10.4 percent falls close to the rates reported by several recent surveys of financial executives.’ The companies from which we received responses range from small (15.1
Please read the article that I have attached and thenmake one page summary and discussion for your opinions on the current practice after reading the article
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Value Destruction and Financial Reporting Decisions John R Graham; Campbell R Harvey; Shiva Rajgopal Financial Analysts Journal; Nov/Dec 2006; 62, ABI/INFORM Global6; pg. 27 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
Kevin Clavin works at the drive through window of Big Bad Burgers. Occasionally, when a drive through customer orders, Kevin fills the order and pockets the customer’s money. He does not ring up the order on the cash register.
Identify the internal control weaknesses that exist at Big Bad Burgers, and discuss what can be done to prevent this theft.
E5 11
Internal control of cash receipts
Obj|2, 3
The mailroom employees send all remittances and remittance advices to the cashier. The cashier deposits the cash in the bank and forwards the remittance advices and duplicate deposit slips to the Accounting Department.
a.
Indicate the weak link in internal control in the handling of cash receipts.
b.
How can the weakness be corrected?
E5 12
Entry for cash sales; cash short
Obj|2, 3
The actual cash received from cash sales was $27,199, and the amount indicated by the cash register total was $27,228.
a.
What is the amount deposited in the bank for the day’s sales?
b.
What is the amount recorded for the day’s sales?
c.
How should the difference be recorded?
d.
If a cashier is consistently over or short, what action should be taken?
E5 13 due on 11/10
Recording cash sales; cash over
The actual cash received from cash sales was $14,356, and the amount indicated by the cash register total was $14,290.
a.
What is the amount deposited in the bank for the day’s sales?
b.
What is amount recorded for the day’s sales?
c.
How should the difference be recorded?
d.
If a cashier is consistently over or short, what action should
5 15
Torpedo Digital Company, a communications equipment manufacturer, recently fell victim to a fraud scheme developed by one of its employees. To understand the scheme, it is necessary to review Torpedo’s procedures for the purchase of services.
The purchasing agent is responsible for ordering services (such as repairs to a photocopy machine or office cleaning) after receiving a service requisition from an authorized manager. However, since no tangible goods are delivered, a receiving report is not prepared. When the Accounting Department receives an invoice billing Torpedo for a service call, the accounts payable clerk calls the manager who requested the service in order to verify that it was performed.
The fraud scheme involves Ross Dunbar, the manager of plant and facilities. Ross arranged for his uncle’s company, Capo Industrial Supplies and Service, to be placed on Torpedo’s approved vendor list. Ross did not disclose the family relationship.
On several occasions, Ross would submit a requisition for services to be provided by Capo Industrial Supplies and Service. However, the service requested was really not needed, and it was never performed. Capo Industrial Supplies and Service would bill Torpedo for the service and then split the cash payment with Ross.
Explain what changes should be made to Torpedo’s procedures for ordering and paying for services in order to prevent such occurrences in the future.
1.
Bank service charges, $40
2.
Check drawn by company for $480 but incorrectly recorded by company as $840.
3.
Check for $100 incorrectly charged by bank as $1,000.
4.
Check of a customer returned by bank to company because of insufficient funds, $975.
5.
Deposit in transit, $18,800.
6.
Outstanding checks, $12,200.
7.
Note collected by bank, $20,500.
E5 17
Entries based on bank reconciliation
Obj|5
Which of the reconciling items listed in Exercise 5 16 are required to be recorded in the company’s accounts?
E5 16
Bank reconciliation
Obj|5
Identify each of the following reconciling items as: (a) an addition to the cash balance according to the bank statement, (b) a deduction from the cash balance according to the bank statement, (c) an addition to the cash balance according to the company’s records, or (d) a deduction from the cash balance according to the company’s records. (None of the transactions reported by bank debit and credit memos have been recorded by the company.)
1.
Bank service charges, $40.
2.
Check drawn by company for $480 but incorrectly recorded by company as $840.
3.
Check for $100 incorrectly charged by bank as $1,000.
4.
Check of a customer returned by bank to company because of insufficient funds, $975.
2. At the end of 2013, the first year of operations, the company reported a net operating loss of $80,000 and a tax credit of $5,000. At that time, the company did not recognize any of the tax benefit associated with the operating loss or tax credit. However, the company was hope ful that these benefits could be recognized in the future due to the ability to carry forward both items against future taxable income and taxes. 3. Originally, at the end of the first quarter, the company estimated pretax income for the bal ance of the year of $60,000. 4. During the second quarter, the company decided to discontinue an operation. Originally, in quarter 1, the operation had reported losses of $30,000 and projected losses for the balance. of 2014 in the amount of $40,000. During quarter 2, the discontinued operation reported operating losses of $60,000 and realized losses on the disposal of assets of $25,000. AlthOugh not yet realized, the operation anticipated that assets to be sold in the future would net $30,000 less than their book value (carrying value) as reported at the end of quarter 2, 2014. 5. During the second quarter, the company reported pretax income from continuing opera . tions of $50,000 and projected pretax income from continuing operations of $60,000 for the balance of the year. During the second quarter, the company also experienced an extraor dinary pretax gain of $20,000. Provide the value for the items A through F. Problem 12 5 (LO 3, 4) Interim income statement, expense recognition, nonor dinary income items. Treetop Corporation is a manufacturer of specialty equipment used in the film editing industry. The company needs an income statement for the second quarter of its fiscal year and has requested that you prepare such a statement. Management of the company has provided you with the following information that may be relevant to your engagement: 1. Revenues for the quarter were $510,000. The revenues are traceable to the sale of 2,100 units. 2. The company employs the LIFO inventory method for the following items: beginning inventory of 900 units at a cost of $100 per unit and purchases of 1,500 units at a cost of $120 per unit. It is anticipated that ending inventory for the fiscal year will exceed the begin ning levels of inventory. Furthermore, management anticipates that inventory acquired in the next quarter will cost approximately $124 per unit. 3. Selling, general, and administrative expenses, excluding the items in (4) through (5) belov., totaled $110,000 for the quarter. 4. During the quarter, management expended $75,000 for research and development cosr,i, which are expected to provide for new technologies in the coming fiscal year. 5. Management bonuses for the current fiscal year will be approximately $160,000 6. Based on prior experiences, it is estimated that a year end physical inventory will reveal thg the perpetual inventory is overstated. The adjustment is estimated to be in the range M $30,000. 7. During the second quarter, the company experienced two unrelated extraordinary gams and B) in the amount of $20,000 and $15,000, respectively. The company’s income tax rates are as follows: 15% on the first $50,000 of taxable incornc 25% on the next $25,000, 34% on the next $25,000, 39% on the next $230,000, and .” thereafter. In the first quarter of the fiscal year, the company reported income before taNes $20,000 and tax expense of $1,000. The company expects that for the last six months of the ft cal year there will be a pretax loss of $40,000 traceable to continuing operations. Annwl I’ credits will likely amount to $7,000.
Required ? Prepare an income statement for the second quarter of the current fiscal year. All schedules should be presented in good form.
1.Using the FASB Codification login information provided, research the following. For each, identify the topic, subtopic, and section number (as applicable) that provide guidance for each and write the appropriate citation. For example, the topic, subtopic, and section number for the subsequent measurement of asset retirement obligations are 410, 20, and 35 respectively. Therefore, the citation is:
a.Fair value measurements and disclosures overall disclosures.
b.Business combinations.
c.Related party disclosures.
d.Internal use software.
e.Recognition of stock compensation.
2.Martin & Mark operate the law office of M&M, PC. Transactions that took place in 2012 and 2013 are below:
2012 2013
Amounts billed to customers for law services $380,000 $440,000 Cash collected from customers 330,000 450,000 Cash disbursements for two years rent 60,000 0 Cash disbursements for salaries paid to employees 200,000 210,000 Cash disbursements for travel 50,000 60,000 Cash disbursements for travel utilities 30,000 50,000
Utility costs incurred in 2012 were $40,000. There were no liabilities at the end of 2013 and there were no anticipated bad debts on receivables.
Answer the following:
a.Calculate the net operating cash flow for 2012 and 2013. Hint: This is cash basis accounting.
b.Prepare income statement for years 2012 and 2013 using accrual basisaccounting .
c.Determine the receivables from customers that the company would show on its 2012 and 2013 balance sheets prepared using accrual basis accounting.
Contact me for questions. See you Tuesday.
Dr. O
Assignment 4
1. The information below depicts 2013 summary for Match Company. The company has two operations, that is, manufacturing and wholesale. The amounts are in thousands.
Sales revenue $25,000 Cost of goods sold 16,000 Interest revenue 70,000 Selling and administrative expenses 4,700 Goodwill write off 820 2014 Income taxes 1,244 Gain on sale of investments (This is normal and recurring) 110 Loss due to flood damage, net of tax (This is extraordinary item) 390 Loss on disposition of wholesale division, net of tax 440 Loss on operations of wholesale division, net of tax 90
Match Company has 500,000 shares of common stock outstanding throughout the year. The company decided to discontinue its entire wholesale operations. On August 31, 2013, Match Company sold the wholesale operations to Reed Company.
Required
Prepare a multi step income statementand earnings per share for the Match Company.
2. Lancaster Inc.’s December 31, 2013 balance sheet accounts are copied below:
Cash $20,000
Accounts receivable 21,200
Accounts payable 30,000 Long term notes payable 41,000
Long term Investments 32,000
Common stock 100,000 Property, plant, and equipment assets (net of depreciation) 81,000
Retained earnings 23,200
Land 40,000
During 2014, the following transactions occurred. Lancaster Inc.
1.Purchased a tract of land for $18,000 cash.
2.Sold part of its $32,000 investment for $15,000. This transaction resulted in a gain of $3,400. The investment was classified as available for sale.
3.Issued additional $20,000 in common stock. The issue was at par.
4.Declared and paid dividends of $8,200 to stockholders.
5.Purchased land through the issuance of $30,000 in bonds.
6.Retired Long term notes payable with the face value of $16,000. The company paid $16,000 cash.
7.Recorded depreciation expense of $11,000.
Lancaster’s Net income for 2014 was $32,000.
Balances on December 31, 2014 are below:
Cash $32,000
Accounts Receivable$41,600
Accounts Payable $30,000
Required:
a.Prepare a statement of cash flows for year ended December 31, 2014. Use the indirect method for cash flows from operating activities.
b.How can users of financial statements utilize statement of cash flows in making informed decisions?
In 2012, Gurney Construction Company agreed to construct an apartment building at a price of $1,200,000. The information relating to the costs and billings for this contract is shown below.
2012
2013
2014
Costs incurred to date
$280,000
$600,000
$ ?785,000
Estimated costs yet to be incurred
520,000
200,000
–0–
Customer billings to date
150,000
500,000
1,200,000
Collection of billings to date
120,000
320,000
940,000
Instructions
(a)
Assuming that the percentage of completion method is used, (1) compute the amount of gross profit to be recognized in 2012 and 2013, and (2) prepare journal entries for 2013.
(b)
For 2013, show how the details related to this construction contract would be disclosed on the balance sheet and on the i
Tabby Pet Foods recently acquired Smartee Pet Toys. In auditing Smartee’s accounting records, Richard Conti, internal audit manager for Tabby, discovered that the new subsidiary had not been accounting for the pension assets and liabilities as required underFASB Statement No. 87.
The net present value of Smartee’s pension assets is $15.5 million, the vested benefit obligation is $12.9 million and the projected benefit obligation is $17.4 million. Richard reported this finding to Bob Winkler, CEO of Tabby Pet Foods.
A few days later, Bob called Richard and asked him for some advice on the pension fund of Smartee. Bob asked Richard if the negative income effect of the pension dilemma could be eliminated by terminating all the nonvested employees before the end of the fiscal year.
From this information, answer the following:
1.What should Richard’s answer be to the accounting question of terminating the nonvested employees before the end of the year?
2.What, if any, ethical issues do you see with the approach of terminating nonvested employees prior to the end of the year?
Please post your response to the following questions in the Forum byThursday EOD of Week 3 and post responses to your classmates by Monday EOD of Week 4.
The objective of this exercise is to develop flowcharts of a business process using traditional flowcharting techniques as well as data flow diagram.
Requirements
Pick a business process of your choice prepare a;
Context data flow diagram
A physical data flow diagram
A logical flow diagram
A traditional flowchart
The business process must result in at least six process (nodes) on the physical data flow diagram or the logical data flow diagram.
This exercise can be done in excel or word
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Accounting Information System Flowchart Project Objective The objective of this exercise is to develop flowcharts of a business process using traditional flowcharting techniques as well as data flow diagram. Requirements Pick a business process of your choice prepare a; Context data flow diagram A physical data flow diagram A logical flow diagram A traditional flowchart The business process must result in at least six process (nodes) on the physical data flow diagram or the logical data flow diagram. This exercise can be done in excel or word ???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Accounting Information System Flowchart Project Objective The objective of this exercise is to develop flowcharts of a business process using traditional flowcharting techniques as well as data flow diagram. Requirements Pick a business process of your choice prepare a; Context data flow diagram A physical data flow diagram A logical flow diagram A traditional flowchart The business process must result in at least six process (nodes) on the physical data flow diagram or the logical data flow diagram. This exercise can be done in excel or word
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Accounting Information System Flowchart Project Objective The objective of this exercise is to develop flowcharts of a business process using traditional flowcharting techniques as well as data flow diagram. Requirements Pick a business process of your choice prepare a; Context data flow diagram A physical data flow diagram A logical flow diagram A traditional flowchart The business process must result in at least six process (nodes) on the physical data flow diagram or the logical data flow diagram. This exercise can be done in excel or word
As a new staff accountant joining McEquity Corporation, an Irish company using IFRS, you have been asked by the senior accountant of financial reporting to assemble the statement of changes in equity for 2012that will be used in the annual report.
After getting various amounts and figures from the prior year financial statements, general ledger and subsidiary ledger, you are able to ascertain the following:
Ending balances as of December 31, 2011, were as follows:
Share capital
$ 25,000,000
Retained earnings
10,000,000
Translation of foreign operations
(2,000,000)
Available for sale financial assets
(5,000,000)
Revaluation surplus
4,000,000
Treasury stock
(1,000,000)
Minority interests
1,000,000
Total equity
$ 32,000,000
The summarized transactions for 2012 are as follows:
Sold capital shares
$2,000,000
Net income
$6,000,000
Minority interest portion
$500,000
Net foreign currency translation losses, net of taxes
$(1,000,000)
Decrease in value of available for sale financial assets, net of taxes
$(1,000,000)
Net decrease in revaluation surplus, net of taxes
$(1,000,000)
Purchase of treasury shares
$500,000
Dividends
$1,000,000
Based on the above information, prepare a statement of changes in equity for 2012. Additionally, describe what presentation differences there might be in the statement of stockholders’ equity if McEquityCorporation reported using US GAAP.
FASTPACK Manufacturing produces filament packaging tape. In 2009, FASTPACK produced and sold 15 million rolls of tape. The company has recently expanded its capacity, so it now can produce up to 30 million rolls per year. FASTPACKS accounting records show the following results from 2009: Sale price per roll……………………………………………………………………… $ 3.00 Variable manufacturing costs per roll………………………………………… $ 2.00 Variable marketing and administrative costs per roll……………….. $ 0.50 Total fixed manufacturing overhead costs……………………………….. $ 8,400,000 Total fixed marketing and administrative costs…………… $ 1,100,000 Sales……………………………………………………………… 15 million rolls Production…………………………………………. 15 million rolls There were no beginning or ending inventories in 2009. In January 2010, FASTPACK hired a new president, Kevin McDaniel. McDaniel has a one year contract that specifies he will be paid 10% of FASTPACK’s 2010 absorption costing operating income, instead of a salary. In 2010, McDaniel must make two major decisions: • Should FASTPACK undertake a major advertising campaign? This campaign would raise sales to 24 million rolls. This is the maximum level of sales FASTPACK can expect to make in the near future. The ad campaign would add an additional $2.3 million in fixed marketing and administrative costs. Without the campaign, sales will be 15 million rolls. • How many rolls of tape will FASTPACK produce? At the end of the year, FASTPACK Manufacturing’s Board of Directors will evaluate McDaniel’s performance and decide whether to offer him a contract for the following year. Questions: 1. compute FASTPACK’s 2009 operating income. 2. determine whether FASTPACK should adopt the advertising campaign. 3. determine how many rolls of tape FASTPACK should produce in 2010.
The ledger of Custer Company has the following work in process account.
Work in Process—Painting
5/1
Balance
4,180
5/31
Transferred out
?
5/31
Materials
6,930
5/31
Labor
2,870
5/31
Overhead
2,080
5/31
Balance
?
Production records show that there were440units in the beginning inventory, 30% complete,1,560units started, and1,510units transferred out. The beginning work in process had materials cost of $2,500and conversion costs of $1,680. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process.
(a) How many units are in process at May 31?
Work in process, May
31
(b) What is the unit materials cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
The unit materials cost for May $___________________
(c) What is the unit conversion cost for May? (Round unit costs to 2 decimal places, e.g. 2.25.)
The Pattia Winery is one of the finest wineries in the country. One of its famous produces is a red wine called Old Vines. Recently, management has become concerned about the increasing cost of making Old Vines and needs to determine if the current selling price of $10 per bottle is adequate. The winery wants to achieve a 25 percent gross profit on the sale of each bottle. The following information is given to you for analysis:
Batch size …………………………….. 10,550 bottles
Costs
Direct materials
Olen Millot grapes ………………………… $ 22,155
Chancellor grapes …………………………….. 9,495
Bottles ………………………………………… 5,275
Total direct materials cost ………………….. $36,925
Direct labor
Pickers/loaders ……………………………… $ 2,110
Crusher ………………………………………….. 422
Processors …………………………………….. 8,440
Bottler ……………………………………….. 13,293
Total direct labor costs …………………….. $24,265
Overhead
Depreciation, equipment ……………………. $ 2,743
Depreciation, building ………………………… 5,275
Utilities ……………………………………….. 1,055
Indirect labor ………………………………….. 6,330
Supervision ……………………………………. 7,385
Supplies ……………………………………….. 9,917
Repairs ………………………………………… 1,477
Miscellaneous …………………………………… 633
Total overhead costs ……………………….. $.34,815
Total production costs ………………………$ 96,005
1. Compute the unit cost per bottle for materials, labor, and overhead.
2. How would you advice management regarding the price per bottle of wine?
3. Compute the prime costs per unit and the conversion costs per unit.
Throughout your college career, you have been employed on a part time basis by the Center for Entrepreneurship of your business college. The Center for Entrepreneurship provides executive training and consulting for a fee to individuals and organizations located throughout the state. For 2010, the condensed income statement that follows summarizes the operating results of the center.
Fees …………………………………………..$ 2,625,000
Faculty and staff salaries ……………………. (1,050,000)
Facilities cost ………………………………… (550,000)
Training materials …………………………… (375,000)
Marketing and promotions …………………… (400,000)
Other costs of operations …………………….. (500,000)
Net operating loss ………………………………. $ (250,000)
Given that the center operated at a loss in 2010, the dean of the business college has asked the director to provide a justification for not closing the center. As the dean stated, “We’re charged with a fundamental obligation of being good stewards of the state’s resources. We cannot justify spending net resources to subsidize educational programs to corporations and other profit oriented organizations.” The center director has made the dean’s comments known to all employees and faculty of the center and all are concerned about losing their employment should the center be closed.
Having just completed a chapter in your accounting course addressing joint products, you become curious as to whether the preceding income statement fairly reflects the value of all outputs of the center. Particularly, you believe that the center plays a crucial role in the generation of contributions made to the college by alumni and friends of the Business College and university.
a. Discuss how the existence of joint products of the Center for Entrepreneurship would potentially modify the preceding income statement.
b. Discuss how you could use the concepts of joint products and joint cost allocation to demonstrate to the dean that the Center for Entrepreneurship is not consuming “net resources” of the state or college and that the center should continue its operations.
Adria Lopez created Success Systems on October 1, 2013. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2013. Adria Lopez decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.
No.
Account Title
Debit
Credit
101
Cash
$
48,502
106.1
Alex’s Engineering Co.
0
106.2
Wildcat Services
0
106.3
Easy Leasing
0
106.4
IFM Co.
3,080
106.5
Liu Corp.
0
106.6
Gomez Co.
2,748
106.7
Delta Co.
0
106.8
KC, Inc.
0
106.9
Dream, Inc.
0
119
Merchandise inventory
0
126
Computer supplies
620
128
Prepaid insurance
1,935
131
Prepaid rent
915
163
Office equipment
8,090
164
Accumulated depreciation—Office equipment
$
280
167
Computer equipment
20,100
168
Accumulated depreciation—Computer equipment
1,220
201
Accounts payable
1,210
210
Wages payable
$
700
236
Unearned computer services revenue
1,380
307
Common stock
68,000
318
Retained earnings
13,200
319
Dividends
$
0
403
Computer services revenue
0
413
Sales
0
414
Sales returns and allowances
0
415
Sales discounts
0
502
Cost of goods sold
0
612
Depreciation expense—Office equipment
0
613
Depreciation expense—Computer equipment
0
623
Wages expense
0
637
Insurance expense
0
640
Rent expense
0
652
Computer supplies expense
0
655
Advertising expense
0
676
Mileage expense
0
677
Miscellaneous expenses
0
684
Repairs expense—Computer
0
In response to requests from customers, A. Lopez will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company’s new merchandising activities. Also, Success Systems does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2014. Its transactions for January through March follow:
Jan.
4
The company paid cash to Lyn Addie for five days’ work at the rate of $175 per day. Four of the five days relate to wages payable that were accrued in the prior year.
5
Adria Lopez invested an additional $23,100 cash in the company in exchange for more common stock.
7
The company purchased $7,200 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
9
The company received $2,748 cash from Gomez Co. as full payment on its account.
11
The company completed a five day project for Alex’s Engineering Co. and billed it $5,470, which is the total price of $6,850 less the advance payment of $1,380.
13
The company sold merchandise with a retail value of $4,000 and a cost of $3,480 to Liu Corp., invoice dated January 13.
15
The company paid $640 cash for freight charges on the merchandise purchased on January 7.
16
The company received $4,060 cash from Delta Co. for computer services provided.
17
The company paid Kansas Corp. for the invoice dated January 7, net of the discount.
20
Liu Corp. returned $700 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $270 cost, is discarded. (The policy of Success Systems is to leave the cost of defective products in cost of goods sold.)
22
The company received the balance due from Liu Corp., net of both the discount and the credit for the returned merchandise.
24
The company returned defective merchandise to Kansas Corp. and accepted a credit against future purchases. The defective merchandise invoice cost, net of the discount, was $486.
26
The company purchased $9,900 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
26
The company sold merchandise with a $4,550 cost for $5,900 on credit to KC, Inc., invoice dated January 26.
29
The company received a $486 credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
31
The company paid cash to Lyn Addie for 10 days’ work at $175 per day.
Feb.
1
The company paid $2,745 cash to Hillside Mall for another three months’ rent in advance.
3
The company paid Kansas Corp. for the balance due, net of the cash discount, less the $486 amount in the credit memorandum.
5
The company paid $580 cash to the local newspaper for an advertising insert in today’s paper.
11
The company received the balance due from Alex’s Engineering Co. for fees billed on January 11.
15
The company paid $4,630 cash for dividends.
23
The company sold merchandise with a $2,480 cost for $3,340 on credit to Delta Co., invoice dated February 23.
26
The company paid cash to Lyn Addie for eight days’ work at $175 per day.
27
The company reimbursed Adria Lopez for business automobile mileage (800 miles at $0.21 per mile).
Mar.
8
The company purchased $2,880 of computer supplies from Harris Office Products on credit, invoice dated March 8.
9
The company received the balance due from Delta Co. for merchandise sold on February 23.
11
The company paid $910 cash for minor repairs to the company’s computer.
16
The company received $5,370 cash from Dream, Inc., for computing services provided.
19
The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,210) and March 8.
24
The company billed Easy Leasing for $9,227 of computing services provided.
25
The company sold merchandise with a $2,102 cost for $2,830 on credit to Wildcat Services, invoice dated March 25.
30
The company sold merchandise with a $1,158 cost for $2,400 on credit to IFM Company, invoice dated March 30.
31
The company reimbursed Adria Lopez for business automobile mileage (300 miles at $0.21 per mile).
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:
a.
The March 31 amount of computer supplies still available totals $2,015.
b.
Three more months have expired since the company purchased its annual insurance policy at a $2,580 cost for 12 months of coverage.
c.
Lyn Addie has not been paid for seven days of work at the rate of $175 per day.
d.
Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $915.
e.
Depreciation on the computer equipment for January 1 through March 31 is $1,220.
f.
Depreciation on the office equipment for January 1 through March 31 is $280.
g.
The March 31 amount of merchandise inventory still available totals $624.
Week Three Exercise Assignment Inventory 1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows. Painting Cost 1/2 Beginning inventory Woods $11,000 4/19 Purchase Sunset 21,800 6/7 Purchase Earth 31,200 12/16 Purchase Moon 4,000 Woods and Moon were sold during the year for a total of $35,000. Determine the firm’s a. cost of goods sold. b. gross profit. c. ending inventory. 2.
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Week Three Exercise Assignment Inventory 1. Specific identification method. Boston Galleries uses the specific identification method for inventory valuation. Inventory information for several oil paintings follows. Painting? Cost??1/2 Beginning inventory ?Woods ?$11,000 ??4/19 Purchase ?Sunset ?21,800 ??6/7 Purchase ?Earth ?31,200 ??12/16 Purchase ?Moon ?4,000 ?? Woods and Moon were sold during the year for a total of $35,000. Determine the firm’s a. cost of goods sold. b. gross profit. c. ending inventory. 2. Inventory valuation methods: basic computations. The January beginning inventory of the White Company consisted of 300 units costing $40 each. During the first quarter, the company purchased two batches of goods: 700 Units at $44 on February 21 and 800 units at $50 on March 28. Sales during the first quarter were 1,400 units at $75 per unit. The White Company uses a periodic inventory system. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted average inventory methods. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted average inventory methods. Using the White Company data, fill in the following chart to compare the results obtained under the FIFO, LIFO, and weighted average inventory methods. FIFO? LIFO ?Weighted Average?????? Goods available for sale ? $ ?$ ?$ ??Ending inventory, March 31 ??Cost of goods sold ?? 3. 3. Perpetual inventory system: journal entries. At the beginning of 20X3, Beehler Company implemented a computerized perpetual inventory system. The first transactions that occurred during 20X3 following. Purchases on account: 500 units @ $4 = $2,000 Sales on account: 300 of the above units = $2,550 Returns on account: 75 of the above unsold units The company president examined the computer generated…
Variance analysis, sales mix and sales quantity variances. Chicago Infonautics, Inc., produces handheld Windows CE?c compatible organizers. Chicago Infonautics markets three different handheld models: PalmPro is a souped up version for the executive on the go, PalmCE is a consumeroriented version, and PalmKid is a stripped down version for the young adult market. You are Chicago
Infonautics’ senior vice president of marketing. The CEO has discovered that the total contribution margin came in lower than budgeted, and it is your responsibility to explain to him why actual results are different from the budget. Budgeted and actual operating data for the company’s third quarter of 2012 are as follows:
Budgeted Operating Data, Third Quarter 2012
?
Actual Operating Data, Third Quarter 2012
?
Required
1. Compute the actual and budgeted contribution margins in dollars for each product and in total for the third quarter of 2012.
2. Calculate the actual and budgeted sales mixes for the three products for the third quarter of 2012.
3. Calculate total sales volume, sales mix, and sales quantity variances for the third quarter of 2012.
(Calculate all variances in terms of contribution margins.)
4. Given that your CEO is known to have temper tantrums, you want to be well prepared for this meeting.
In order to prepare, write a paragraph or two comparing actual results to budgetedamounts.
Variance analysis, working backward. The Jinwa Corporation sells two brands of wine glasses: Plain and Chic. Jinwa provides the following information for sales in the month of June 2011:
Static budget total contribution margin……………………………$11,000
Budgeted units to be sold of all glasses………………………………2,000 units
Budgeted contribution margin per unit of Plain……………………$4 per unit
Budgeted contribution margin per unit of Chic……………………$10 per unit
Total sales quantity variance……………………………………….$2,200 U
Actual sales mix percentage of Plain……………………………………60%
All variances are to be computed in contribution margin terms.
Required
1. Calculate the sales quantity variances for each product for June 2011.
2. Calculate the individual product and total sales mix variances for June 2011. Calculate the individual product and total sales volume variances for June 2011.
3. Briefly describe the conclusions you can draw from the variances.
Volt Gear, Inc., manufactures power equipment. Volt Gear has two primary products generators and air compressors. The following report was prepared by the controller for Volt Gear senior marketing management:
?
The marketing management team was concerned that the selling that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense that did other products. To verify this, the controller was asked to prepare a complete product profit ability report, using activity based costing.
The controller determine that selling and administrative expenses consisted of two activities: sales order processing and past sale customer service. The controller was able to determine the activity base and activity rate for each activity, as shown below.
?
The controller determined the following activity base usage information about each product:
?
(a) Determine the activity cost of each product for sales order processing and post sale customer service activities.
(b) Use the information in (a) to prepare a complete product profitability report dated for the year ended December 31, 2012. Calculate the gross profit to sales and the income from operation to sales percentages for each product.
(c) Interpret the profitability report. How should management respond to thereport?
Assignment Type:Individual Project Deliverable Length:20+ slides with at least 100 words per slide including speaker’s notes
Points Possible:200 Due Date: 3/3/2013 11:59:59 PM CT I need all the References that you have used. APA formatted References
Library Research Assignment
Assuming that you are the controller for a publicly traded company, your CFO has asked you to prepare a presentation for the accounting department personnel and the public auditors about the importance of the SOX Act and the requirements and responsibilities that the Act establishes for the auditors in charge of an annual audit. After the presentation, the CFO wants all accounting personnel and public accounting auditors to understand the regulations and guidelines established by the SOX Act and also for you to provide recommendations as to how the Act’s principles can be improved to make American corporations more ethically responsible.
Prepare a Power Point presentation of at least 20 slides that includes the following:
Assess the provision of the Sox Act that requires the establishment of the Public Company Accounting Oversight Board (PCAOB) and the measures that public accounting firms are taking to ensure that they maintain their independence in all audit assignments, including the mechanisms they are establishing to ensure that the necessary independence and integrity are prevalent in all aspects of their relationship with their clients.
Analyze how executives of corporate America have embraced the new regulations and requirements of the Sox Act while maintaining their purpose to produce a profit for investors and staying in compliance of the new rules in the industry. Explain what those new requirements are for the CEO and CFO of publicly traded companies.
Describe your assessment of the responsibilities established for accounting personnel—including protection for whistle blowers—and for the public accounting auditors.
Determine how the responsibilities of the board of directors audit committee have changed due to the Sox Act in overseeing the financial reporting process and to hire and be in charge of the independent auditors.
Provide recommended sanctions to be imposed on those who do not comply with the SOX Act provisions, and whether or not the sanctions should be stiffened or should include other personnel in the organization.
Researched sources should follow these guidelines:
At least half of the researched sources should be from authoritative electronic sources related to the accounting field.
The findings presented in the paper should be accurate renditions of the Sox Act, including citations and references.
Points Possible:100 Due Date:3/10/2013 11:59:59 PM CT
I need at least 5 Academic References
Select a publicly traded company for which an Accounting and Auditing Enforcement Release (AAER) was published on the U.S. Securities and Exchange Commission (SEC) website at http://sec.gov/divisions/enforce/friactions.shtml in the past two years. Submit the company name to the instructor for approval. Please note that each student must research a different company.
After obtaining instructor approval, review all AAERs published during the five year period and SEC Complaintrelating to this company during the past five years, as well as information available on the company’s Investor Relations website to evaluate the following items.
Prepare a 10 12 slide PowerPoint presentation (excluding title page, abstract, references page, and appendices containing financial analysis) containing detailed speaker’s notes for each of these slides presenting the findings of your analysis of the AAERs and SEC Complaint. Your presentation should discuss the following:
Explain the history of corporate accounting responsibility.
Discuss how you think that CSR has influenced social accounting.
Ethics, accounting, and legal issues involved in the AAERs and SEC Complaint.
Role of accountants in recognizing and assessing ethical issues when performing audits of financial statements, management accounting, internal auditing, and not for profit accounting.
Ethics standards contained in the AICPA Code of Professional Conduct.
Ethics requirements of the Board of Accountancy for the State in which you intent to pursue CPA licensure.
Current trends and events illustrating the importance of ethics in the accounting profession.
In addition to the SEC Forms, a minimum of five (5) peer reviewed academic or professional references must be incorporated in the slides with corresponding citations present.
Whirlpool Corporation conducted an activity based costing study of its Evansville, Indiana, plant in Order to identity its most profitable products. Assume that we select three representative refrigerators (out of 333): One low , one medium , and one high volume refrigerator. Additionally, we assume the following activity base information for each of the three refrigerators:
?
Prior to conducting the study, the factory over head allocation was based on single machine hour rate. The machine hour rate was $180 per hour. After conducting the activity based costing study, assume that three activities were used to allocate the factory overhead. The new activity rate information is assumed to be as follows:
?
(a) Complete the following table, using the single machine hour rate to determine the per unit factory overhead for each refrigerator ( Column A) and the three activity based rates to determine the activity based factory overhead per unit (Column B). Finally, compute the percent change in per unit overhead to nearest cent and whole percents to one decimal place.
?
(b) Why is the traditional overhead rate per machine hour greater under the single rate method than under the activity based method?
(c) Interpret Column C in your table from part (a)
Perfect Pies (PP)ltd makes pies, pastries and pizzas, which it sells to retailers under its own brand name and also supplies a major super market chain. It has two sites: the bakery and its head office at Darlington, and a distribution depot in Wolverhampton.
PP’s year end is 31 March 2012 and its accounts are required to be ready for publication by 31 May 2012.It is now 8th May and the final audit work is due to be completed by 16th May.The manager in charge of the audit is reviewing the audit file with a view to identifying any unresolved problems.
(You may assume an interim audit has been performed and that its results were satisfactory except for any deficiencies specifically mentioned in the case study.)
1.0Summary of results
20122011
£000£000
Turnover37683477
Gross Profit12401199
GP% 32.9%34.5%
Net Profit308289
Corporation Tax6257
Dividend138120
Fixed Assets19401745
Stock140195
Debtors712597
Bank balances4351
Current Liabilities (433) (494)
Net Assets24022094
£000£000
Share Capital18401840
Reserves562254
Shareholders’ funds24022094
1.1Stock summary
20122011
£000£000
At Darlington
Finished products4361
Raw materials4148
Packing materials3847
At Wolverhampton:
Finished products1839
Total140195
Notes:
The following audit work has been carried out on the stock at Darlington:
attended physical stocktake held on 31 March and performed test counts;
ensured that material items of stock had been valued at the lower of cost and net realisable value;
ensured that none of the stock on hand at 31 March was damaged or out of condition
The results of all tests were satisfactory.
Because of staff shortages, a physical count was not performed at Wolverhampton.The stock figure was extracted from stock records maintained at the depot.The audit team paid a one day visit to the Wolverhampton depot, in the course of which it performed the following audit work.:
agreed the stock balance in the accounts to the stock records.
discussed the year end stock figure with the depot manager and ascertained that he considered the figure to be reasonable and that his opinion year end stock did not require any provision for obsolete/damaged items.
1.2Summary of debtors
20122011
£000£000
Trade debtors535498
Loan to related company12020
Prepayments5779
Total 712 597
1.3Summary of results of debtors’ circularisation
Work done
A sample of 48 debtors was circularised.This represented all balances over £10,000 at 31 March and a representative sample of 25 others.A reminder letter was sent to all who had not replied by 23rd April.
Results
Results were as follows on the basis of replies received up to 8th May.
% of value
Notes£000No.of a/c’s circularised
Agreed1091830
Reconciled11401437
Disagreed23118
No reply95 1525
Total circularised 37548100
Notes:
1.Reconciling items were due to differences between the dates at which invoices and payments were entered in customers’ and in PP’s records.
2.The disagreement relates to an invoice for £3,000 sent to this customer in December 2011.The customer is refusing to pay on the grounds that the goods were damaged in transit. Note only the £3,000 is disputed the rest of the balance is accepted as valid.
1.4Loan to associated company
Included in debtors is an unsecured loan made to Bartleby ltd, a private company that is a supplier of PP and in which PP is considering acquiring 20% of the share capital.PP loaned Bartleby £20K in 2011 to provide working capital, and this amount has now been increased to £120K.No repayments have been received.The Finance director of PP was unwilling for the auditors to include this balance in the circularisation of debtors.Accordingly audit work has been confined to the following:
agreed balance outstanding to the nominal ledger;
traced payment to cash book, bank statement and returned cheque and ensured the cheque payee is Bartleby;
discussed the balance with Mrs Bateman, the finance director, who stated that in her opinion it is fully recoverable.
1.5Fixed Assets
All figures £000
COST1.4.07AddnsDisposals31.3.08
Freehold land & buildings 700400100 1000
Plant 2200 10009002300
Motor vehicles740700640800
Fixtures & fittings1052005300
Total37452300 16454400
DEPRECIATION1.4.07AddnsDisposals31.3.08
Freehold land & buildings 12520 145
Plant 1575850 6001825
Motor vehicles250250135365
Fixtures & fittings50805125
Total200012007402460
NET BOOK VALUE17451940
Notes
1.Of the additions to land and buildings half (£200,000) is in fact the surplus arising on revaluation.This revaluation was carried out by one of the directors of PP who is a surveyor.
2.The figure for additions to plant has been overstated.A number of orders for items of plant not confirmed before the yearend have been accrued instead of being treated as capital commitments.As a result fixed assets and current liabilities have both been overstated by £75,000.
Assuming the results of the audit were satisfactory in all other areas:
You are required to act as the audit manager reviewing the working papers and
1. Identify the unresolved problems which need to be addressed and discuss why each is a problem for the auditor and the potential impact of each on the financial statements.
2.Suggest how each of the problems might be resolved by the audit team and/or PP’s management in the time available.The alternatives might include:
altering the accounts;
qualifying the audit report;
obtaining management assurances in the letter of representation;
performing additional audit work, etc
In each case you should be specific about the steps to be taken e.g. what further tests should be performed (if any), what audit qualification is needed (if any) etc. You may make assumptions as necessary or suggest alternative actions depending on the outcome of further work or management reaction.There is no definitive answer to question 2.
Annual report preparation and printing ……..Marketing research
Building flood insurance ……………………Preventive maintenance
Charitable contributions …………………….Property taxes
Corporate advertising ……………………….Quality control inspection
Employee continuing education …………….Research and development salaries
Equipment depreciation ……………………..Research and development supplies
Interest on bonds payable …………………….Secretarial pool salaries
a. Classify each of these costs as normally being either committed (C) or discretionary (D).
b. Which of these costs can be either committed or discretionary based on management philosophy?
c. For the expenses marked discretionary in (a), provide a monetary or nonmonetary surrogate output measure. For each output measure, briefly discuss any objections that could be raised to it.
A portion of the costs incurred by business organizations is designated as direct labor cost. As used in practice, the term direct labor cost has a wide variety of meanings. Unless the meaning intended in a given context is clear, misunderstanding and confusion are likely to ensue. If a user does not understand the elements included in direct labor cost, erroneous interpretations of the numbers can occur and can result in poor management decisions. In addition to understanding the conceptual definition of direct labor cost, management accountants must understand how direct labor cost should be measured. Discuss the following issues:
a. Distinguish between direct labor and indirect labor.
b. Discuss why some nonproductive labor time (such as coffee breaks and personal time) can be and often is treated as direct labor whereas other nonproductive time (such as downtime and training) is treated as indirect labor.
c. Following are labor cost elements that a company has classified as direct labor, manufacturing overhead, or either category depending on the situation.
?c Direct labor: Included in the company’s direct labor are cost production efficiency bonuses and certain benefits for direct labor workers such as FICA (employer’s portion), group life insurance, vacation pay, and workers’ compensation insurance.
?c Manufacturing overhead: Included in the company’s overhead are costs for wage continuation plans in the event of illness, the company sponsored cafeteria, the personnel department, and recreational facilities.
?c Direct labor or manufacturing overhead: Included in this category are maintenance expenses, overtime premiums, and shift premiums. Explain the rationale used by the company in classifying the cost elements in each of the three categories.
d. The two aspects of measuring direct labor costs are (1) the quantity of labor effort that is to be included, and (2) the unit price by which the labor quantity is multiplied to arrive at labor cost. Why are these considered separate and distinct aspects of measuring labor cost?
Lincoln Company , a merchandiser, recently completed its calendar year 2013 operations.
LINCOLN COMAPNY
Income Statement For Year Ended December 31, 2013
Sales Cost of goods sold Gross profit Operating expenses
$750,000 360,000
$390,000
Depreciation expense
$ 16,000
Other operating expenses
190,000
206,000
Income from operations
$184,000
Other revenues (expenses)
Gain on sale of equipment
10,000
Interest expense*
(2,000)
8,0200
Income before taxes
$192,000
Income tax expense
23,000
Net income
$169,000
Additional Information on Year 2013 Transactions
1. Sold equipment costing $20,000, with accumulated depreciation of $14,000, for $16,000 cash. 2. Purchased equipment costing $30,000 by making a cash down payment of $14,000 and issuing a $16,000 long term note payable for the balance. 3. Borrowed $5,000 cash by signing a 90 day note payable. 4. Paid cash to reduce one $40,000 long term notes payable. 5. Issued 1,000 new shares of common stock for cash at $11 per share. 6. Declared and paid cash dividends of $84,000. 7. Interest expense paid in cash, $4,000 8. Income taxes paid in cash, $22,000.
Required:
1. Prepare a complete statement of cash flows using the indirect method. 2. Disclose any noncash investing and financing activities and supplemental cash flow information in the manner discussed in the textbook and the powerpoint. If you don’t know what I mean, look it up. 3. Answer the following questions based on your completed Statement of Cash Flows: a. Looking at the investing activities only what was the single largest sources of cash during and the single largest use of cash during 2013? b. Looking at financing activities only what was the single largest sources of cash during and the single largest use of cash during 2013? c. What caused the biggest difference between net income on the income statement and cash flows from operating activities on the cash flow statement. The answer is found on the cash flow statement itself.
Account analysis method. Gower, Inc., a manufacturer of plastic products, reports the following manufacturing costs and account analysis classification for the year ended December 31, 2009.
Gower, Inc., produced 75,000 units of product in 2009. Gower’s management is estimating costs for 2010 on the basis of 2009 numbers. The following additional information is available for 2010.
a. Direct materials prices in 2010 are expected to increase by 5% compared with 2009.
b. Under the terms of the labor contract direct manufacturing labor wage rates are expected to increase by 10% in 2010 compared with 2009.
c.Power rates amt wage rates for supervision, materials handling and maintenance are not expected to change from 2009 to 2010.
d. Depreciation costs are expected to increase by 5% and rent, property taxes, and administration costs are expected to increase by 7%.
1.Prepare a schedule of variable, fixed, and total manufacturing costs for each account category in 2010. Estimate total manufacturing costs for 2010.
2. Calculate Gower’s total manufacturing cost per unit in 2009, and estimate total manufacturing cost per unit in 2010.
3. How can you obtain better estimates of fixed and variable costs? Why would these better estimates be useful toGower?
Account analysis. Raymondo’s Restaurant wants to find an equation to estimate monthly utility costs. Raymondo’s has only been in business for one month, January 2008, and has the following information for utilities:
a. Electricity is billed by kilowatt hour. According to its first bill, Raymondo’s paid $573 for 3,000 kilowatt hours in January.
b. Raymondo’s contract with Waste Management for garbage pickup has Raymondo’s paying $270 once a quarter.
c. Raymondo’s phone contract includes a flat monthly fee of $20 and an additional charge of $0.03 per call. Raymondo’s made 1,200 calls in January.
1. Which of the above costs is variable? Fixed? Mixed? Explain.
2. Combine the information above to get a utility cost function for January.
3. If Raymondo’s expects to use 4,000 kilowatt hours of electricity in February, and makes the same number of calls as in January, estimate total utilities costs for February.
In recent years, Sonya Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is summarized below.
Bus
Acquired
Cost
Salvage Value
Useful Life in Years
Depreciation Method
1
1/1/10
$ 102,200
$ 6,600
4
Straight line
2
1/1/10
194,000
12,100
5
Declining balance
3
1/1/11
71,018
8,900
5
Units of activity
For the declining balance method, the company uses the double declining rate. For the units ofactivity method, total miles are expected to be 121,800 . Actual miles of use in the first 3 years were: 2011, 26,900 ; 2012, 32,600 ; and 2013, 31,800 .
(a) Compute the amount of accumulated depreciation on each bus at December 31, 2012. (Round answers to 0 decimal places, e.g. $2,125. Enter amounts in relevant fields only. Leave other fields blank, do not enter 0.)
Topper Toys has developed a new toy called the Brainbuster. The company has a standard cost system to help control costs and has established the following standards for the Brainbuster toy:
Direct materials: 7 diodes per toy at $0.32 per diode
Direct labor: 1.3 hours per toy at $6.70 per hour
During August, the company produced 4,800 Brainbuster toys. Production data on the toy for August follow:
Direct materials: 72,000 diodes were purchased at a cost of $0.30 per diode. 30,000 of these diodes were still in inventory at the end of the month.
Direct labor: 6,640 direct labor hours were worked at a cost of $48,472. Labor efficiency variance
Student life does not generally afford a great deal of free time to pursue your personal interests; however, at one point, you may have considered turning a personal interest or hobby into an official enterprise. Today, you have finally decided to turn that hobby into a business but have realized that you need start up capital from a lender or investor.
To obtain funding, you need to convince a lender / investor that your business is more than a hobby. You need to demonstrate that you have a firm grasp of your business, the accounting practices that impact your business, the controls needed to safeguard assets, and which accounting system will produce accurate and relevant financial information. Write a six to eight (6 8) page business plan in which you:
Describe the type of business you have created including: a.The product or service, and general staffing plan. Provide a rationale for your plan. b.The form of your business and the benefits it offers your particular business, c.A chart of accounts specific to your business, including a rationale as to the selection of each account. (Note: The chart of accounts is a blueprint of your business for the lender/investor. It should report the expected resources that you will consume in your business (assets), the sources of those resources (liabilities and equity), the sources of revenue, and expenditures that you expect to incur to earn those revenues. You may build a detailed chart that includes business units, divisions, product lines, etc.)
Based on the form of your business, analyze whether or not you will be required to use Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) accounting methods and how the IFRS / GAAP convergence will impact your business. Suggest how you will incorporate any changes into your books and records. (Note: You need to demonstrate to the lender/investor that you have recognized possible changes to GAAP that may impact the accounting and reporting of your accounting events.)
Prepare a pro forma balance sheet and income statement providing the assumptions made and support the valuations assigned.
Considering the value of assets (assigned per your balance sheet) used within your business, recommend two (2) specific internal controls that you will implement to protect your company’s assets and resources, justifying how each will provide assurances to management. (NOTE: Safeguarding assets and protecting personal data are paramount to ensuring the viability of a business. Demonstrate to the lender/investor that your assets will be safeguarded and customer information (if applicable) will be protected.)
Based on the internal control recommendations that you made, suggest how you will implement each within your business environment, indicating how challenges or resistances will be overcome.
Evaluate the impact of the regulatory environment, including the Sarbanes Oxley Act and other regulatory requirements, on your business venture, giving considering to how you intend to comply with the requirements and the general impact to decision making within your business.
Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic 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.
The specific course learning outcomes associated with this assignment are:
Examine accounting principles and concepts used in businesses.
Assess appropriate internal controls, regulatory requirements according to the Sarbanes Oxley Act, and fraud prevention and detection.
Use technology and information resources to research issues in financial accounting.
Write clearly and concisely about financial accounting using proper writing mechanics.
In Year 1, Better Sleep Company began to receive complaints from physicians that patients were experiencing unexpected side effects from the companys sleep apnea drug. The company took the drug off the market near the end of Year 1. During Year 2, the company was sued by 1,000 customers who had had a severe allergic reaction to the companys drug and required hospitalization. At the end of Year 2, the companys attorneys estimated a 60 percent chance the company would need to make payments in the range of $ 1,000 to $5,000 to settle each claim, with all amounts in that range being equally likely. At the end of Year 3, while none of the cases had been resolved, the companys attorneys now estimated an 80 percent probability the company would be required to make payments in the range of $2,000 to $7,000 to settle each claim. In Year 4 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30 percent of the remaining cases will be settled for $3,000 each, 50 percent will be settled for $50,000, and 20 percent will be settled for $10,000. Required: Prepare journal entries for Years 1 4 related to this litigation
Zigs Industries had the following operating results for 2011: sales = $27,960; cost of goods sold = $19,360; depreciation expense = $4,940; interest expense = $2,190; dividends paid = $1,050. At the beginning of the year, net fixed assets were $16,680, current assets were $5,780, and current liabilities were $3,300. At the end of the year, net fixed assets were $20,260, current assets were $7,116, and current liabilities were $3,840. The tax rate for 2011 was 30 percent. What is the cash flow from assets for 2011? (Negative amount should be indicated by a minus sign.) If no new debt was issued during the year, what is the cash flow to creditors? If no new debt was issued during the year, what is the cash flow to stockholders? (Negative amount should be indicated by a minus sign.)
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. It started only two jobs during March—Job P and Job Q. Job P was completed and sold by the end of the March and Job Q was incomplete at the end of the March. The company uses a plantwide predetermined overhead rate based on direct labor hours. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Estimated total fixed manufacturing overhead
$
10,000
Estimated variable manufacturing overhead per direct labor hour
$
1.00
Estimated total direct labor hours to be worked
2,000
Total actual manufacturing overhead costs incurred
$
12,500
Job P
Job Q
Direct materials
$
13,000
$
8,000
Direct labor cost
$
21,000
$
7,500
Actual direct labor hours worked
1,400
500
Required:
Assume the ending raw materials inventory is $1,000 and the company does not use any indirect materials. Prepare the journal entries to record raw materials purchases and the issuance of direct materials for use in production.
Calculate the annual cash flows available for dividend payments and the dividend per share if the residual dividend policy was strictly adhered to. (5)
If the directors chose to have a smooth dividend policy based on the maintainable regular dividend what would you suggest the dividends in each year should be? Include in your consideration the possibility of a special dividend or share re purchase. (6)
Explain why companies tend to follow the policy in 1.2 rather than 1.1. (4)
Bundy owns Bundiful World, a sole proprietorship. He incorporates as Bundiful, Inc. transferring all of the proprietorship’s assets (FMV: $350,000, basis: $ 275,000) for all of the stock. Bundiful, Inc. also assumes $15,000 of liabilities, $14,500 were business related, the remaining $500 was for a DVR so his wife, Peg, could record Oprah. Based on the above: Answer a. Bundiful, Inc. has an asset basis of $275,000; Al has a stock basis of $260,000. b. Bundiful, Inc. has an asset basis of $290,000; Al has a stock basis of $260,000. c. Bundiful, Inc.
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Al Bundy owns Bundiful World, a sole proprietorship. He incorporates as Bundiful, Inc. transferring all of the proprietorship’s assets (FMV: $350,000, basis: $ 275,000) for all of the stock. Bundiful, Inc. also assumes $15,000 of liabilities, $14,500 were business related, the remaining $500 was for a DVR so his wife, Peg, could record Oprah. Based on the above: Answer ?a.?Bundiful, Inc. has an asset basis of $275,000; Al has a stock basis of $260,000.???b.?Bundiful, Inc. has an asset basis of $290,000; Al has a stock basis of $260,000.???c.?Bundiful, Inc. has an asset basis of $290,000; Al has a stock basis of $290,000.???d.?Bundiful, Inc. has an asset basis of $275,000; Al has a stock basis of $275,000.???e.?Bundiful, Inc. has an asset basis of $290,000; Al has a stock basis of $275,000.??3 points Question 2 Archibald Leach incorporates his sole proprietorship as Cary On, Inc.. He transfers Cash of $12,000 and real estate (FMV: $200,000. basis: $135,000). Cary On assumes a mortgage on the real estate of $155,000 and accounts payable of $5,000 (all business use). Archie is on the cash basis. With respect to this transaction: Answer ?a.?Cary On has a basis in the real estate of $135,000.???b.?Cary On has a basis in the real estate of $135,000.???c.?Archie recognizes gain of $8,000.???d.?Archie recognizes gain of $13,000.???e.?Archie recognizes gain of $20,000.??3 points Question 3 Lucy and Desi form Babaloo, Inc. Lucy contributes business property (FMV: $200,000, basis $100,000) and provides managerial services in organizing Babaloo (FMV: $50,000). Desi contributes business property (FMV:$250,000, basis $75,000). Each receives one half of the stock. With respect to the transfers: Answer ?a.?Lucy and Desi will recognize gain.???b.?Lucy will recognize gain of $100,000 and income of $50,000.???c.?Babaloo will have a basis of $150,000 in Lucy’s property.???d.?Babaloo can take a business deduction of $50,000.???e.?None of the above.??3 points Question…
Translations and Reporting Issues (50 Points) Complete the following assignment. Submit your responses in MSWord as one document. Label each section clearly. If you choose to use an Excel spreadsheet for question 2, please copy and paste your spreadsheet into your Word document. For written answers, please make sure your responses are well written, conforming to APA formatting, and have proper citations, if needed.
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Translations and Reporting Issues (50 Points) Complete the following assignment. Submit your responses in MSWord as one document. Label each section clearly. If you choose to use an Excel spreadsheet for question 2, please copy and paste your spreadsheet into your Word document. For written answers, please make sure your responses are well written, conforming to APA formatting, and have proper citations, if needed. 1) What is the concept of current rate method of translation and temporal method of translation? How does balance sheet exposure differ under these two methods? 2) The 2010 financial statement of Child Co. Inc (Mexico), a subsidiary of Parent Co. Inc (United States), reveals the following information: Beginning Inventory ?Peso 100,000??Purchases ?Peso 500,000??Ending Inventory ?Peso 150,000??COGS ?Peso 450,000??US dollar exchange rate for 1 Peso:? ??January 1, 2010?$0.45??Average, 2010 ?$0.42??December 31, 2010 ?$0.38??The beginning inventory was acquired when the exchange rate was $0.50 last quarter of 2009; ending inventory was acquired when the exchange rate was $0.40 last quarter of 2010. Report amounts of ending inventory and cost of goods sold to be included in the consolidated financial statements under (1) Current rate method and (2) Temporal method.
Sarbanes Oxley and the push toward continuous auditing have expanded the responsibilities of auditors and accountants to monitor internal controls and maintain the integrity of the data contained in company information systems. Internal and external auditors, as well as corporate CFOs and controllers are using software to perform data analytics in order to check whether a company’s financial information is being handled correctly and if internal controls are functioning to prevent errors and fraud. IDEA is a powerful and user friendly tool that is used by many major accounting firms and corporations. It is designed to help accounting and financial professionals extend their auditing and analytical capabilities, detect fraud and meet documentation standards.
During this course, you will practice using IDEA to gain a deeper understanding of accounting databases and internal controls. The steps in the assignment are:
Read Sections 1, 2, 3 (only pages 79 117) & 5.
Walk through and complete the entire process described in Section 2, related to the analysis of an accounts receivable database.
Walk through the process described in Section 3 completing only steps 3.1 3.10.4, related to the analysis of an accounts payable database.Note you are only responsible for completing section 3 through and including section 3.10.4 (page 117).
Eleven IDEA documents will be automatically generated within your accounts receivable folder upon completing section 2.Seven IDEA documents will be automatically generated within your accounts payable folder upon completing the assigned steps in section 3.In addition to submitting these 18 IDEA documents, follow the remaining instructions for uploading the completed assignment.
Section 2.17 of the workbook details three audit findings that will be discovered when the processes in section 2 are completed.Section 3.18 of the workbook details thirteen audit findings that would be discovered in total when the processes in section 3 are completed.However, as you are only responsible for steps 3.1 3.10.4, you will only have discovered the first six of the thirteen audit findings (through and including the finding of payments made on a Sunday).Therefore, after completing the assigned sections you will have discovered a total of nine audit findings.
Create a document in MS Word that briefly documents the audit and/or data analysis processes that you employed using IDEA to arrive at each of the nine audit findings.In your document, each audit finding should have a brief narrative section as well as a corresponding screenshot(s) to support the finding and/or your comments.All required screenshots must be inserted into your report for credit.
To create a screenshot, go to the IDEA screen that you want to capture and press Ctrl PrtScn.Go to MS Word (or to another program where you want to insert your screen shot).Hit Ctrl v.Resize the image for the page.(A nice third party free software is JING free software, which you may also use for screenshots).
Compress and zip your 18 IDEA documents and your narrative document (that includes screenshots) into one file with the naming format: last name first IDEA.zip. Upload the .zip file to your Assignment Folder in WebTycho.
To compress and zip files in Windows 7, locate the desired files on your computer (use either Windows Explorer or My Computer), select each file that you want to include in the .zip by holding CTRL and clicking on the file. Right click and on the Menu that appears select Send To, Compressed zipped) File. The compressed file will generate in the folder from which you are working. Rename the file according to the format above. Note: you may select files with different extensions (i.e. .doc, .xls) to include in your .zip file.
The assignment addresses Course Objectives 1 7 above.
Sarbanes Oxley and the push toward continuous auditing have expanded the responsibilities of auditors and accountants to monitor internal controls and maintain the integrity of the data contained in company information systems. Internal and external auditors, as well as corporate CFOs and controllers are using software to perform data analytics in order to check whether a company’s financial information is being handled correctly and if internal controls are functioning to prevent errors and fraud. IDEA is a powerful and user friendly tool that is used by many major accounting firms and corporations. It is designed to help accounting and financial professionals extend their auditing and analytical capabilities, detect fraud and meet documentation standards.
During this course, you will practice using IDEA to gain a deeper understanding of accounting databases and internal controls. The steps in the assignment are:
Read Sections 1, 2, 3 (only pages 79 117) & 5.
Walk through and complete the entire process described in Section 2, related to the analysis of an accounts receivable database.
Walk through the process described in Section 3 completing only steps 3.1 3.10.4, related to the analysis of an accounts payable database.Note you are only responsible for completing section 3 through and including section 3.10.4 (page 117).
Eleven IDEA documents will be automatically generated within your accounts receivable folder upon completing section 2.Seven IDEA documents will be automatically generated within your accounts payable folder upon completing the assigned steps in section 3.In addition to submitting these 18 IDEA documents, follow the remaining instructions for uploading the completed assignment.
Section 2.17 of the workbook details three audit findings that will be discovered when the processes in section 2 are completed.Section 3.18 of the workbook details thirteen audit findings that would be discovered in total when the processes in section 3 are completed.However, as you are only responsible for steps 3.1 3.10.4, you will only have discovered the first six of the thirteen audit findings (through and including the finding of payments made on a Sunday).Therefore, after completing the assigned sections you will have discovered a total of nine audit findings.
Create a document in MS Word that briefly documents the audit and/or data analysis processes that you employed using IDEA to arrive at each of the nine audit findings.In your document, each audit finding should have a brief narrative section as well as a corresponding screenshot(s) to support the finding and/or your comments.All required screenshots must be inserted into your report for credit.
To create a screenshot, go to the IDEA screen that you want to capture and press Ctrl PrtScn.Go to MS Word (or to another program where you want to insert your screen shot).Hit Ctrl v.Resize the image for the page.(A nice third party free software is JING free software, which you may also use for screenshots).
Compress and zip your 18 IDEA documents and your narrative document (that includes screenshots) into one file with the naming format: last name first IDEA.zip. Upload the .zip file to your Assignment Folder in WebTycho.
To compress and zip files in Windows 7, locate the desired files on your computer (use either Windows Explorer or My Computer), select each file that you want to include in the .zip by holding CTRL and clicking on the file. Right click and on the Menu that appears select Send To, Compressed zipped) File. The compressed file will generate in the folder from which you are working. Rename the file according to the format above. Note: you may select files with different extensions (i.e. .doc, .xls) to include in your .zip file.
The assignment addresses Course Objectives 1 7 above.
The Social Security Administration increased the taxable wage base from $106,800 to $110,100. The 6.2% tax rate is unchanged. Joe Burns earned over $120,000 each of the past two years.
a.
What is the percent increase in the base?(Round your answer to the nearest hundredth percent.)
Percent increase
%
b.
What is Joe’s increase in Social Security tax for the new year?(Round your answerto the nearest cent.)
Prepare a salary budget for the total year 7/I /X I b 6/30/X2. Staffing levels are based on the need be six hours of hands on work per patient day. Volume in the budget year is m be 3,600 patient days. Productive time is 80 percent of total paid time. For purposes of this solution, staff can be hired only in half FIE in crements; thus if there is a need for 7.4 Fits, 7.5 must be budgeted. The 6300W lag are the current staff with FIE values and hourly rata of pay as of 4/11X1:
A pay raise will be given to all staff on May 1 of each year at a rate of 6 per cent. The starting rate of pay for new hires is $13.00 regardless of hire date.
Problem 3 Using the information provided. prepare a salary budget for FYX3 (7(1/X2 in 6130(X3). Volume in the budget year will be 3.000 units of service, and staff needs are for five hours of hands on work per unit of service. Productive time is 85 percent of tall paid time. For purposes of this solution, the assumption is that staff can be hired only in half FIT. increments. A pay raise will be given to all staff (and to the staring rate of pay) on June 1 and December 1 of each year at a rate of 6 percent. The following are the current staff with FIE values and hourly rates of pay as of March 8, 19%7:
Your pharmacy is able to produce up to 30,000 unit doses each month. The trend in unit doses over the years has been as shown below. What amount of unit doses will you budget for in 19X4?
Problem 12
You manage a Therapeutic Radiation Department with five machines. These machines have a maximum total capacity of 600 treatments per month, cach val ued at 50 RUNS. What number of RVUs will you budget in 19X8, given the fol lowing RVU trend over time?
Set up the Chart of Accounts 2. Revise the bank reconciliation for September 30th, 2013 3. Prepare the General Journal for the month of September 2013 4. Post all transactions to the T accounts 5. Prepare a trial balance for the month of September 2013 6. Prepare the Financial Statements in good form for the month of September 2013 including footnotes for a Summary of Significant Accounting Policies and for contingency disclosures. 7. Special instructions: ? Each General Journal entry should have an explanation under it in parenthesis. ? Every place where the word “Steven” or “Susan” appears in items 1, 2, 3 and 4 of the required substitute your own first name.
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Quattro Paperless Office Ltd. (Version A) Introduction to Accounting in the 21st Century Gaber, Hayes & Porporato McGraw Hill ? 2013 Note: the project document files that accompany this project contain the information needed to complete the project Quattro Paperless Office (Version A) While technology has long promised a ‘paperless society’, the promise has been slow to materialize. Small businesses in particular, can rarely afford to own the high speed scanners and shredders needed to efficiently eliminate the mountains of paper generated and processed by many businesses. Duplex scanners are available that scan both sides of a document at the rate of 100+ documents per minute, over 10 times faster than most home scanners. However, they cost $20,000 $50,000 and would sit idle in a small business much of the time.While it is expensive to image, index, and save documents online, well implemented digital solutions do reduce business operating costs. Online files take up less storage space than paper files. They may be quickly accessed and easily shared – locally or across the country. Digital records are simple to back up and take offsite: the risk of loss or damage if disaster strikes can be minimized. Authentication software can protect confidential or sensitive digital information. In short, document imaging can satisfy regulatory and security requirements while maximizing information accessibility, records security and end user productivity and protection. Imaging paper records creates a problem: the originating paper documents need to be eliminated. To comply with government privacy regulations and company policies concerning handling of confidential and sensitive information, this often requires shredding. Over the past twenty years in North America the market for mobile information destruction contractors (operators with high speed shredder equipped trucks) has been rapidly expanding. It…
Assignment Labor costs of an auto repair mechanic are seldom based on actual hours worked. Instead, the amount paid a mechanic is based on an industry average of time estimated to complete a repair job. The repair shop bills the customer for the industry average amount of time at the repair center’s billable cost per hour. This means a customer can pay, for example, $120 for two hours of work on a car when the actual time worked was only one hour. Many experienced mechanics can complete repair jobs faster than the industry average.
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Assignment Labor costs of an auto repair mechanic are seldom based on actual hours worked. Instead, the amount paid a mechanic is based on an industry average of time estimated to complete a repair job. The repair shop bills the customer for the industry average amount of time at the repair center’s billable cost per hour. This means a customer can pay, for example, $120 for two hours of work on a car when the actual time worked was only one hour. Many experienced mechanics can complete repair jobs faster than the industry average. The average data are compiled by engineering studies and surveys conducted in the auto repair business. Assume that you are asked to complete such a survey for a repair center. The survey calls for objective input, and many questions require detailed cost data and analysis. The mechanics and owners know you have the survey and encourage you to complete it in a way that increases the average billable hours for repair work. Required: Who are the stakeholders in this situation? What are the ethical consideration? How will you complete this assignment and why? PS: responses must be 3 4 sentences long each and represent “active communication.”
For each item below, indicate whether a debit (DR)or credit (CR) applies.????
1. Decrease in Prepaid Rent ?
2. ?. Increase in Unearned Revenue ??
3. ?. Increase in Accounts Payable ??
4. . Increase in Dividends ??
5. . Increase in Dividend Receivable ??
6.Increase in Wages expense ?
6. ?Increase in Accounts Receivable ?
7. ? Decrease in Supplies ??
8. Increase in Accumulated Depreciation???
9. Increase in Copyrights
Prepare, in good form, journal entries for the following transactions from Buster Brown Corporation.??? May 1 Stockholders invest $40,000 cash to start the business.?? May 2 Purchased equipment for $100,000, paying $20,000 and signing a five year, 6% note for the remainder.? ?May 3 Purchased $2,000 of paper supplies on account.?? May 4 Cash received for services amounted to $5,500.? ?5. Paid $800 for radio advertising.?? 6. Paid $500 on account for paper supplies purchased on May 3rd.
?7. Dividends of $200 were paid to stockholders.? ?8. Paid $600 for the current month’s rent.? ?9. Received $2,000 cash advance from a customer. ?? 10. Billed a customer for $900 for services completed.??
?The company’s chart of accounts includes: Cash, Accounts Receivable, Paper Supplies, Equipment, Accounts Payable, Notes Payable, Unearned Revenue, Common Stock, Retained Earnings, Dividends, Service Revenue, Advertising Expense, Paper Supplies Expense, and Rent Expense.
Are you familiar with government/not for profit accounting and would be able to complete a CAFR analysis by 11 10 13?
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Project Descriptions Deliverables Both the CAFR Analysis and the Not for Profit analysis paper will demonstrate your comprehension of the course subject matter and your ability to communicate effectively in writing. You are to analyze and evaluate the effectiveness of (1) a governmental entity and (2) a not for profit organization of your choosing. Not for Profit Organization Analysis For the Not for Profit analysis, you will need to identify that organization’s mission statement and then describe the extent to which the mission was accomplished. You will need to identify criteria for evaluation of the mission statement, measure achievement, and offer a conclusion on the evidence presented. The paper should be about three pages long, single spaced, in 12 point font. References must be included, but will not be counted as part of minimum page count. The paper should be submitted in the Assignments section of WebTycho. Your paper will be graded as a deliverable designed to show your mastery of the presentation of ideas, references (APA in text citation and properly presented “Works Cited”), and appropriate style and grammar. CAFR Analysis During the semester, we will be working on a continuing project focusing on the comprehensive annual financial report (CAFR) of a local government. You will need to obtain a CAFR from a local government and use it in answering questions pertaining to the various chapters. The purpose of this project is to make you familiar with a government’s financial statements and see how the information in the text is translated into and presented in the financial statements.
I. the following information is available for the Avisa Company for the month of November:
a. On November 30, alter all transactions have been recorded, the balance in the company’s Cash account has a balance of 527.202. b. The company’s bank statement shows a balance on November 30 of $29,279. c. Outstanding checks at November 30 include check 43030 in the amount of $1,525 and check 43556 in the amount of $1,459. d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest bearing note receivable for Avisa. The bank deducted a S 10 collection fee, and credited the remainder of $770 to Avisa’s account. e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown. f. A deposit placed in the bank’s night depository on November 30 totaled $1,675, and did not appear on the bank statement. g. Examination of the checks on the bank statement with the entries in the accounting records reveals that check 43445 for the payment of an account payable was correctly written for 52,450, but was recorded in the accounting records as 52.540. h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company’s books.
Based on the above information, prepare the November Bank Reconciliation for the .visa Company.
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ACC 211/ACC 211 Assignment/Homework 3 part B page 3031.jpg? ACC 211/ACC 211 Assignment/Homework 3 part B page 3032.jpg? ACC 211/Acc 211 Cheat Sheet/Homework 3 part B page 3033.jpg? ACC 211/Acc 211 Cheat Sheet/Homework 3 part B page 3034.jpg???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
1. The following information is available for the Avisa Company for the month of November:
a. On November 30, after all transactions have been recorded, the balance in the company’s Cash account has a balance of $27,202. b. The company’s bank statement shows a balance on November 30 of $29,279, c. Outstanding checks at November 30 include check #3030 in the amount of $1,525 and check #3556 in the amount of $1,459. d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest bearing note receivable for Avisa. The bank deducted a $10 collection fee, and credited the remainder of $770 to Avisa’s account. e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown. f. A deposit placed in the bank’s night depository on November 30 totaled $1,675, and did not appear on the bank statement. g. Examination of the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540. h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company’s books.
Based on the above information, prepare the November Bank Reconciliation for the Avisa Company.
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ACC 211/ACC 211 Assignment/Homework 3 part B page 3031.jpg? ACC 211/ACC 211 Assignment/Homework 3 part B page 3032.jpg? ACC 211/Acc 211 Cheat Sheet/Homework 3 part B page 3033.jpg? ACC 211/Acc 211 Cheat Sheet/Homework 3 part B page 3034.jpg???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
The controller for Mumbai Fertilizers Limited has established the following activity cost pools and cost drivcrs.
•
Activity Cost Pool Machine setups Material handling Hazardous waste control Quality control Other overhead costs …….
Total
Budgeted Overhead Cost $250,000 75,000
25,000 75,000 200,000
$625,000
Cost Driver Number of setups Weight of raw material Weight of hazardous chemicals used Number of inspections Machine hours
An order for 1,000 bags of Nitrogen Plus fertilizer has
Machine setups 5 setups Raw material 5,000 kg. Hazardous materials 1,000 kg. Inspections 10 inspections Machine hours 500 machine hours
Required: 1. Compute the total overhead that should be ill15: I 0 2. What is the overhead cost per bag of fertilizer • 3. Suppose Mumbai Fertilizers Limited were to use a siarat+ckicz,… machine hours. Compute the rate per hour. Under the approach in requirement (3). how much overhead emirs fertilizer order! a. In total. h Per bag of fertilizer. Explain why these two prod cupcosting systems result in such wide 6. Build a spreadtheet: Construct an Excel spreadsheet to solve requirelnents ( )ft ( 3), and tern do you recommend’? Why’?
Budgeted Level for Cost Driver 125 18.750 kg
1. 4s I I t+ 1
2,500 kg. 11000 20,000
t, In
Pool Rate $2,000 per setup $4 per kg
$10 per kg. $75 per inspection $10 per machine hour
•
, sJuiretnents.
Pr Activit Driver (10 1
3. Pr( rate:
tOci% Pius
differing costs. Which
A
. a se ritrinve if the folloking data change. The oethead ….,, ha I el apt et
In recent years, Sonya Transportation purchased three used buses. Because of frequent turnover in the accounting department, a different accountant selected the depreciation method for each bus, and various methods were selected. Information concerning the buses is summarized below.
Bus
Acquired
Cost
Salvage Value
Useful Life in Years
Depreciation Method
1
1/1/10
$ 102,200
$ 6,600
4
Straight line
2
1/1/10
194,000
12,100
5
Declining balance
3
1/1/11
71,018
8,900
5
Units of activity
For the declining balance method, the company uses the double declining rate. For the units of activity method, total miles are expected to be121,800. Actual miles of use in the first 3 years were: 2011,26,900; 2012, 32,600 ; and 2013, 31,800 .
(a1)
Calculate depreciation expense per mile under units of activity method. (Round answer to 2 decimal places, e.g. $0.50.)
Depreciation expense per mile
$
per mile
Alexia Corporation was organized on January 1, 2012. It is authorized to issue10,600shares of 8%, $101par value preferred stock, and493,100shares of no par common stock with a stated value of $2per share. The following stock transactions were completed during the first year.
Jan. 10
Issued81,600shares of common stock for cash at $4per share.
Mar. 1
Issued4,000shares of preferred stock for cash at $108per share.
Apr. 1
Issued22,500shares of common stock for land. The asking price of the land was $90,500. The fair value of the land was $84,600.
May 1
Issued82,700shares of common stock for cash at $6.97per share.
Aug. 1
Issued11,600shares of common stock to attorneys in payment of their bill of $44,400for services provided in helping the company organize.
Sept. 1
Issued10,700shares of common stock for cash at $8per share.
Nov. 1
Issued2,520shares of preferred stock for cash at $110per share.
(a)
Journalize the transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Jan. 10
Mar. 1
Apr. 1
May 1
Aug. 1
Sept. 1
Nov. 1
Brandon Corporation had the following stockholders’ equity accounts on January 1, 2012: Common Stock ($5par) $512,850, Paid in Capital in Excess of Par Common Stock $202,320, and Retained Earnings $105,060. In 2012, the company had the following treasury stock transactions.
Mar. 1
Purchased5,570shares at $9per share.
June 1
Sold1,480shares at $13per share.
Sept. 1
Sold1,380shares at $10per share.
Dec. 1
Sold1,270shares at $6per share.
Brandon Corporation uses the cost method of accounting for treasury stock. In 2012, the company reported net income of $30,840.
(a)
Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2012, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
Mar. 1
June 1
Sept. 1
Dec. 1
Dec. 31
The following stockholders’ equity accounts arranged alphabetically are in the ledger of Desiree Corporation at December 31, 2012.
Common Stock ($7stated value)
$2,818,900
Paid in Capital from Treasury Stock
11,000
Paid in Capital in Excess of Stated Value—Common Stock
1,619,900
Paid in Capital in Excess of Par—Preferred Stock
661,100
Preferred Stock (8%, $50par, noncumulative)
790,000
Retained Earnings
1,748,400
Treasury Stock (10,800common shares)
140,400
Prepare a stockholders’ equity section at December 31, 2012. (For preferred stock, common stock and treasury stock enter the account name only and do not provide the descriptive information provided in the question.)
DESIREE CORPORATION Balance Sheet (Partial) December 31, 2012
$
$
:
$
The following account balances relate to the stockholders’ equity accounts of Chipo Corp. at year end.
2012
2011
Common stock, 10,500 and 10,000 shares,
respectively, for 2012 and 2011
$161,440
$136,600
Preferred stock, 5,000 shares
104,400
104,400
Retained earnings
304,900
263,980
A small stock dividend was declared and issued in 2012. The market value of the shares was $10,920. Cash dividends were $14,380in both 2012 and 2011. The common stock has no par or stated value.
(a) What was the amount of net income reported by Chipo Corp. in 2012?
Net income
$
(b) Determine the amounts of any cash inflows or outflows related to the common stock and dividend accounts in 2012. Indicate where each of the cash inflows or outflows identified in would be classified on the statement of cash flows.
. Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company’s fiscal year ends on June 30. Consider the following items and classify each as either (1) prepaid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing.
a. Amounts paid on June 30 for a 1 year insurance policy
b. Professional fees earned but not billed as of June 30
c. Repairs to the firm’s copy machine, incurred and paid in June
d. An advance payment from a client for a performance next month at a convention
e. The payment in part (d) from the client’s point of view
f. Interest owed on the company’s bank loan, to be paid in early July
g. The bank loan payable in part (f)
h. Office supplies on hand at year end
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Revenue and Expenses 1. Recognition of concepts. Ron Carroll operates a small company that books entertainers for theaters, parties, conventions, and so forth. The company’s fiscal year ends on June 30. Consider the following items and classify each as either (1) prepaid expense, (2) unearned revenue, (3) accrued expense, (4) accrued revenue, or (5) none of the foregoing. a. Amounts paid on June 30 for a 1 year insurance policy b. Professional fees earned but not billed as of June 30 c. Repairs to the firm’s copy machine, incurred and paid in June d. An advance payment from a client for a performance next month at a convention e. The payment in part (d) from the client’s point of view f. Interest owed on the company’s bank loan, to be paid in early July g. The bank loan payable in part (f) h. Office supplies on hand at year end 2. Analysis of prepaid account balance. The following information relates to Action Sign Company for 20X2: Insurance expense $4,350 Prepaid insurance, December 31, 20X2 1,900 Cash outlays for insurance during 20X2 6,200 Compute the balance in the Prepaid Insurance account on January 1, 20X2. 3. Understanding the closing process. Examine the following list of accounts: Interest Payable Accumulated Depreciation: Equipment Alex Kenzy, Drawing Accounts Payable Service Revenue Cash Accounts Receivable Supplies Expense Interest Expense Which of the preceding accounts a. appear on a post closing trial balance? b. are commonly known as temporary, or nominal, accounts? c. generate a debit to Income Summary in the closing process? d. are closed to the capital account in the closing process? 4. Adjusting entries and financial statements. The following information pertains to Fixation Enterprises: The company previously collected $1,500 as an advance payment for services to be rendered in the future. By the end of December, one third of this amount had been earned. Fixation…
Lagatta Corporation’s overhead costs are usually $24,000 per month. However, the company pays $54,000 of real estate tax on the factory facility in March. Thus, the overhead costs for March increase to $78,000. The company normally uses 5,000 direct labor hours per month except for August, September, and October, in which the company requires 9,000 hours of direct labor per month to build inventories for high demand in the Christmas season. Last year, the company’s actual direct labor hours were the same as usual. The company made 5,000 units of product in each month except August, September, and October in which it produced 9,000 units per month. Direct labor costs were $8 per unit; direct materials costs were $7 per unit.
Required
a. Calculate a predetermined overhead rate based on direct labor hours.
b. Determine the total allocated overhead cost for the months of March, August, and December.
c. Determine the cost per unit of product for the months of March, August, and December.
d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $7 per unit.
Magnificent Modems has excess production capacity and is considering the possibility of making and selling paging equipment. The following estimates are based on a production and sales volume of 1,000 pagers.
Unit level manufacturing costs are expected to be $20. Sales commissions will be established at $1 per unit. The current facility level costs, including depreciation on manufacturing equipment ($60,000), rent on the manufacturing facility ($50,000), depreciation on the administrative equipment ($12,000), and other fixed administrative expenses ($71,950), will not be affected by the production of the pagers. The chief accountant has decided to allocate the facility level costs to the existing product (modems) and to the new product (pagers) on the basis of the number of units of product made (i.e., 5,000 modems and 1,000 pagers).
Required
a. Determine the per unit cost of making and selling 1,000 pagers.
b. Assuming the pagers could be sold at a price of $34 each, should Magnificent make the pagers?
c. Comment on the validity of using the number of units as an allocation base.
Market share and market size variances (continuation of 14 32). Aussie Intonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. The total handheld organizer market was estimated by Foolinstead Research to reach sales of 400,000 units worldwide in the third quarter. However, actual sales in the third quarter were 500,000 units.
1. Calculate the market share and market size variances for Aussie Infonautics in the third quarter o’ 2010 (calculate all variances in terms of contribution margins).
2. Explain what happened based on the market share and market size variances.
3. Calculate the actual market size, in units, that would have led to no market size variance (again using budgeted contribution margin per unit). Use this market size figure to calculate the actual market share that would have led to a zero market share variance.
Memphis Jazz Company is preparing a pamphlet that will provide information on the types of jazz, jazz terminology, and biographies of some of the better known jazz musicians. In addition, the pamphlet will include a request for funding to support the jazz company. The company has tax exempt status and operates on a not for profit basis.
The 10 page pamphlet cost $261,000 to design and print. Only 200,000 copies of the pamphlet were printed because the company director will be leaving and the pamphlet will soon be redesigned. One page of the pamphlet is devoted to fund solicitation; however, 98 percent of the design time was spent on developing and writing the jazz information.
a. If space is used as the allocation measure, how much of the pamphlet’s cost should be assigned to program activities? To fund raising activities?
b. If design time is used as the allocation measure, how much of the pamphlet’s cost should be assigned to program activities? To fund raising activities?
Mountain Tea Co. makes two products: a high grade tea branded Wulong and a low grade tea branded San Tea for the Asian market. Mountain purchases tea leaves from tea firms in mountainous villages of Taiwan and processes the tea leaves into a high quality product. The tea leaves are dried and baked in the manufacturing process. Mountain pays farmers $600 for 900 kilograms of tea leaves. For 900 kilograms of green leaves, the company can produce 100 kilograms of Wulong and 200 kilograms of tea fragments including dried leave stems and broken dried leaves. The cost of this process is $300 per batch. The tea fragments are packaged into San Tea. The market price for San Tea is $2.00 per kilogram. The market price is $20 per kilogram for Wulong. Mountain has an option of taking an additional process to refine the 100 kilograms of Wulong into 30 kilograms of Donding, a prestigious brand. The market price of Donding is $100 per kilogram. The cost of the additional process is $250 per batch.
Required
a. Allocate the joint cost to the joint products, Wulong and San Tea, using weight as the allocation base. Calculate the net income for each product. Since the San Tea is sold at a loss, should that product line be eliminated?
b. Allocate the joint cost to the joint products, Wulong and San Tea, using relative market value as the allocation base. Calculate the net income for each product. Compare the total net income (Wulong + San Tea) computed in Requirement b with that computed in Requirement a above. Explain why the total amount is the same. Comment on which allocation base (weight or relative market value) is more appropriate.
c. Should Mountain Tea further process Wulong into Donding?
Coursework assignment: write a 2,500 word essay on the following topic: “The budget has historically played center stage in most organizations’ systems of management control (Otley, 1994). However, recently it has been the subject of considerable criticism (Hansen et al., 2003). Budgeting has beendeemed‘broken’ (Jensen, 2001), ‘a thing of the past’ (Gurton, 1999), or an ‘unnecessary evil’ (Wallander, 1999)” (Libby & Lindsay, 2010: 56). Required: Critically assess the arguments and the evidence for the claim thatorganizationsno longer need budgets.
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Management Accounting and Control BS3517 Coursework assignment: write a 2,500 word essay on the following topic: “The budget has historically played center stage in most organizations’ systems of management control (Otley, 1994). However, recently it has been the subject of considerable criticism (Hansen et al., 2003). Budgeting has been deemed ‘broken’ (Jensen, 2001), ‘a thing of the past’ (Gurton, 1999), or an ‘unnecessary evil’ (Wallander, 1999)” (Libby & Lindsay, 2010: 56). Required: Critically assess the arguments and the evidence for the claim that organizations no longer need budgets. References You should consult academic journal articles for your coursework. Forget about the internet, other than to seek academic references. Plagiarism Plagiarism will be dealt with severely (see your Handbook for details, and see the University guidelines as to what constitutes plagiarism). Referencing Remember to reference your sources using an appropriate citation system, such as Harvard. Essays will lose marks for poor referencing style. Grammar You are strongly advised to proof read your essay in order to correct grammatical errors, incorrect spelling, and poor sentence structuring. Seek help if you are unsure. There are university resources to help students improve their grammatical skills. These resources are available to both home and overseas students. Essays will lose marks for poor grammatical style. Do not use bullet points in your essay. Unsubstantiated assertions Do not make unsubstantiated assertions. Essays will lose marks if littered with unsubstantiated assertions. If you are unsure about what an unsubstantiated assertion is, do some research to find out about the issue, and, importantly, how to avoid making unsubstantiated assertions. Criteria for assessment See your Module Outline for details. Please note the need to avoid being both prescriptive and descriptive in order to gain anything other than a third class/2.2 mark…
Not A Mega Bank has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows:
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.:.
The costs of the service departments are allocated on the following bases: Administration, employee hours; Communications, number of employees; and Facilities, square footage occupied.
Required
Round all final calculations to the nearest dollar.
a. Assume that Not A Mega Bank elects to distribute service department costs directly to production departments using the direct method. What amount of Communications Department costs is allocated to the Deposits Department?
b. Assume the same method of allocation as in requirement (a). What amount of Administration Department costs is allocated to the Loans Department?
c. Assuming that Not A Mega Bank elects to distribute service department costs to other departments using the step method (starting with Facilities and then Communications), what amount of Facilities Department costs is allocated to the Communications Department?
d. Assume the same method of allocation as in requirement (c). What amount of Communication Department costs is allocated to Facilities?
Potato skins are generated as a by product in making potato chips and frozen hash browns at Zeena Foods. The skins are sold to restaurants for use in appetizers. Processing and disposal costs associated with by product sales are $0.06 per pound of potato skins. During May 2010, Zeena Foods produced and sold 135,000 pounds of potato skins for $20,250. In addition, the joint cost for producing potato chips and hash browns was $82,000; separate costs of production were $48,000. In May, 90 percent of all joint production was sold for $319,000. Nonfactory operating expenses for May were $47,850.
a. Prepare an income statement for Zeena Foods assuming that by product sales are shown as Other Revenue and the processing and disposal costs for the by product are shown as additional cost of goods sold of the joint products.
b. Prepare an income statement for Zeena Foods assuming that the net realizable value of the by product is shown as Other Income.
c. Prepare an income statement for Zeena Foods assuming that the net realizable value of the by product is subtracted from the joint cost of the main products.
d. Would the presentation in (a), (b), or (c) be most helpful to managers? Why?
Qvat Division, a subsidiary of Imogene Ltd., manufactures a product with the following costs:
Direct material ………………..$15.00
Direct labor …………………… 26.25
Variable overhead …………….. 12.75
Fixed overhead ……………….. 18.00
Total ……………………………$72.00
Some of the chips are sold externally for $162; others are transferred internally to the Kwak Division. Qvat Division’s plant manager wants to establish a reasonable transfer price for chips transferred to Kwak. The purchasing manager of Kwak Division has informed the plant manager that comparable chips can be purchased externally in a price range from $112.50 to $172.50.
a. Determine the upper and lower limits for the transfer price between Qvat Division and Kwak Division.
b. If Qvat Division is presently selling all the chips it can produce to external buyers, what minimum price should be set for transfers to Kwak Division?
Revenue allocation, bundled products Heavenly Resorts operates a five star hotel with a world recognized championship golf course. Heavenly has a decentralized management structure, with three divisions:
Lodging (rooms, conference facilities)
Food (restaurants and in room service)
Recreation (golf course, tennis courts, and so on)
Starting next month, Heavenly Resorts will offer a two day, two person ?ogetaway package?? for $1,000. This deal includes:
Two nights’ stay for two in an ocean view room—separately priced at $800 ($400 per night for two).
Two rounds of golf—separately priced at $375 ($187.50 per round). One person can do two rounds, or two people can do one round each.
Candlelight dinner for two at the exclusive Heavenly Resorts Restaurant—separately priced at $200 ($100 per person).
Jenny Lee, president of the Recreation Division, recently asked the CEO of Heavenly Resorts how her division would share in the $1,000 revenue from the package. The golf course was operating at 100% capacity. Under the getaway package rules, participants who booked one week in advance were guaranteed access to the golf course. Lee noted that every ?ogetaway?? booking would displace $375 of golf bookings. She emphasized that the high demand reflected the devotion of her team to keeping the golf course rated one of the ?oBest 10 Courses in the World?? by Golf Monthly. As an aside, she also noted that the Lodging and Food divisions had to turn away customers during only ?opeak season events such as the New Year’s period.??
1. Using selling prices, allocate the $1,000 getaway package revenue to the three divisions using:
a. The stand alone revenue allocation method
b. The incremental revenue allocation method (with Recreation first, then Lodging, and then Food)
2. What are the pros and cons of the two methods in requirement 1?
Revenue allocation, bundled products. Yves Parfum Company blends and sells designer fragrances. It has a Men’s Fragrances Division and a Women’s Fragrances Division, each with different sales strategies, distribution channels, and product offerings. Yves is now considering the sale of a bundled product consisting of a men’s cologne and a women’s perfume. For the most recent year, Yves reported the following:
?
Required
1. Allocate revenue from the sale of each unit of L’Amour to Monaco and Innocence using the following:
a. The stand alone revenue allocation method based on selling price of each product
b. The incremental revenue allocation method, with Monaco ranked as the primary product
c. The incremental revenue allocation method, with Innocence ranked as the primary product
d. The Shapley value method, assuming equal unit sales of Monaco and Innocence
2. Of the four methods in requirement 1, which one would you recommend for allocating L’Amour’s revenues to Monaco and Innocence?Explain.
3 Paragraph Assignment Type: Discussion BoardDeliverable Length: 3 paragraphs Points Possible: 75Due Date: 2/13/2013 8AM CT The Discussion Board (DB) is part of the core of online learning.
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Assignment Type: Discussion Board Deliverable Length: 3 paragraphs ?Points Possible: 75 Due Date: 2/13/2013 8AM CT The Discussion Board (DB) is part of the core of online learning. Classroom discussion in an online environment requires the active participation of students and the instructor to create robust interaction and dialogue. Every student is expected to create an original response to the open ended DB question as well as engage in dialogue by responding to posts created by others throughout the week. At the end of each unit, DB participation will be assessed based on both level of engagement and the quality of the contribution to the discussion. At a minimum, each student will be expected to post an original and thoughtful response to the DB question and contribute to the weekly dialogue by responding to at least two other posts from students. The first contribution must be posted before midnight (Central Time) on Wednesday of each week. Two additional responses are required after Wednesday of each week. Students are highly encouraged to engage on the Discussion Board early and often, as that is the primary way the university tracks class attendance and participation. The purpose of the Discussion Board is to allow students to learn through sharing ideas and experiences as they relate to course content and the DB question. Because it is not possible to engage in two way dialogue after a conversation has ended, no posts to the DB will be accepted after the end of each unit. Your father runs a small auto body shop. He has decided to computerize his records and has asked you to explain the basics of accounting to him so that he can enter the data into his accounting software. Explain to him the rules of debits and credits for the balance sheet and income statement. Provide examples from the manufacturing industry of: a journal entry that would be recorded that impacts the balance sheet. a journal entry that would be recorded affecting the income…
Single rate, dual rate, and practical capacity allocation, beauty Department Store has a new promotional program that offers a free gift wrapping service for its customers. Beauty’s customer service department has practical capacity to wrap 7,500 gifts at a budgeted fixed cost of $6,750 each month. The budgeted variable cost to gift wrap an item is $0.50. Although the service is free to customers, a gift wrapping service cost allocation is made to the department where the item was purchased. The customer service department reported the following for the most recent month:
1. Using the single rate method, allocate gift wrapping costs to different departments in these three ways.
a. Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocation costs based on the budgeted use (of gift wrapping services).
b. Calculate the budgeted rate based on the budgeted number of gifts to be wrapped and allocate costs based on actual usage.
c. Calculate the budgeted rate based on the practical gift wrapping capacity available and allocate costs based on actual usage.
2. Using the dual rate method, compute the amount allocated to each department when (a) the fixed cost rate is calculated using budgeted costs and the practical gift wrapping capacity, (b) fixed costs a allocated based on budgeted usage of gift wrapping services, and (c) variable costs are allocate: using the budgeted variable cost rate and actual usage.
3. Comment on your results in requirements 1 and 2. Discuss the advantages of the dual rate method.
Support department cost allocation: direct and step down methods. Phoenix Partners provides management consulting services to government and corporate clients. Phoenix has two support departments—Administrative Services (AS) and Information Systems (IS)—and two operating departments— Government Consulting (GOVT) and Corporate Consulting (CORP). For the first quarter of 2009, Phoenix’s cost records indicate the following:
1. Allocate the two support departments’ costs to the two operating departments using the following methods:
a. Direct method
b. Step down method (allocate AS first)
c. Step down method (allocate IS first)
2. Compare and explain differences in the support department costs allocated to each operating department.
3. What approaches might be used to decide the sequence in which to allocate support departments when using the step downmethod?
Support department cost allocations; single department cost pools; direct, step down, and reciprocal methods. Spirit Training, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing facilities; however, both manufacturing facilities share the same support services for information technology and human resources. The following shows total costs for each manufacturing facility and for each support department.
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The total costs of the support departments (IT and HR) are allocated to the production departments (clothing and shoes) using a single rate based on the following:
Data on the bases, by department, are given as follows:
Information technology: Number of IT labor hours worked by department
Human resources: Number of employees supported by department
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Required
1. What are the total costs of the production departments (clothing and shoes) after the support department costs of information technology and human resources have been allocated using (a) the direct method, (b) the step down method (allocate information technology first), (c) the step down method (allocate human resources first), and (d) the reciprocal method?
2. Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour. If Spirit Training no longer operated its own IT department, 30% of the fixed costs of the
IT department could be eliminated. Should Spirit outsource its ITservices?
Support department cost allocations; single department cost pools; direct step down, and reciprocal methods. The Manes Company has two products. Product 1 is manufactured entirely in Department X. Product 2 is manufactured entirely in Department V. To produce these two products, the Manes Company has two support departments: A (a materials handling department) and B (a power generating department).
An analysis of the work done by departments A and B in a typical period follows:
The work done in Department A is measured by the direct labor hours of materials handling time. The work done in Department B is measured by the kilowatt hours of power. The budgeted costs of the support departments for the coming year are:
The budgeted costs of the operating departments for the coming year are $1,500,000 for Department X and $800,000 for Department Y.
Supervision costs are salary costs. Depreciation in Department B is the straight line depreciation of power generation equipment in its nineteenth year of an estimated 25 year useful life; it is old, but well maintained, equipment
1. What are the allocations of costs of support departments A and B to operating departments X and Y using )a) the direct method, )b) the step down method (allocate Department A first), )c) the step down method (allocate Department B first), and )d) the reciprocal method?
2. An outside company has offered to supply all the power needed by the Manes Company and to provide all the services of the present power department. The cost of this service will be $40 per kilowatt hour of power. Should Manes accept?Explain.
Swimmingly Corp. buys raw fish, cooks and processes it, and then cans it in single portion containers. The canned fish is sold to several wholesalers, who specialize in providing food to school lunch programs in the northwest United States and western Canada. All processing is conducted in the firm’s highly automated plant in Portland, Oregon. Amir Rigera, the production manager, is evaluated on the basis of a comparison of actual costs to standard costs. Only variable costs that Rigera controls are included in the comparison. Fish cost is noncontrollable. Standard costs per pound of fish for 2010 follow.
Direct labor …………………….$0.25
Repairs ………………………… 0.05
Maintenance …………………… 0.30
Indirect labor …………………… 0.05
Power …………………………… 0.10
For 2010, Swimmingly Corp. purchased 2.5 million pounds of fish and canned 1.5 million pounds. There were no beginning or ending inventories of raw, in process, or canned fish for the year. Actual 2010 costs were:
Direct labor ……………………$300,000
Repairs ……………………….. 80,000
Maintenance ………………….. 325,000
Indirect labor …………………. 77,500
Power ………………………… 157,500
a. Prepare a responsibility report for Rigera for 2010.
b. As his supervisor, evaluate Rigera’s performance based on the report in (a).
c. Rigera believes his 2010 performance is so good that he should be considered for immediate promotion to vice president of production operations. Do you agree? Discuss the rationale for your answer.
d. Do you believe that all of the costs shown on Rigera’s responsibility report are truly under his control? Discuss the rationale for your answer.
Use the partial year depreciation rule. 30. Schofield Inc., has a fiscal year ending April 30. On May 1 2002, Schofield, Inc. borrowed $10,000,000 at 15% 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, 2003, expenditures for the partially completed structure totaled $6,000,000. These expenditures were incurred evenly through out the year. Interest earned on the unexpended portion of the loan amounted to $400,000 for the year. How much should be shown as capitalized interest on Scofields financial statements at April 30, 2003? (Note: DO NOT OFFSET INTEREST EARNINGS OF $400,000 AGAINST CAPITALIZABLE INTEREST). a. $0. b. $50,000. c $450,000. d. $1,100,000.
As youve undoubtedly learned by now, you often have to focus on the details in tax law, and the rules surrounding corporate formation are no exception to this rule. We know that corporations are generally seen as a separate taxable entity from its shareholders. As a result, corporate formations, which involve transfers of property between the shareholders and the corporation, would generally be taxable to both the corporation and the shareholders. Its no surprise that this result would often discourage corporate formation. Congress remedied this particular problem by enacting Section 351, and your text details how this provision generally operates. Did Congress craft a provision that allows corporations and their shareholders to avoid taxation on these transactions permanently, or did it have something else in mind? Support your answer!
WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours. and the rate in the Fabrication Department is based on direct labor hours. At the beginning of the year, the company’s management made the following estimates for the year:
Department
Preparation
Fabrication
Machine hours
80,000
21,000
Direct labor hours a
35,000
50,000
Direct materials cost
$190,000
$400,000
Direct labor cost
$280,000
$530,000
Fixed manufacturing overhead cost
$256,000
$520,000
Variable manufacturing overhead per machine hour
$2.00
Variable manufacturing overhead per direct labor hour
$4.00
Job 127 was started on April 1 and completed on May 12. The company’s cost records show the following information concerning the job:
Department
Preparation
Fabrication
Machine hours
350
70
Direct labour hours
80
130
Direct materials cost
$940
$1,200
Direct labour cost
$710
$980
Required:
1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
2. Compute the total overhead cost applied to Job 127.
3. What would be the total cost recorded for Job 127? If the job contained 25 units, what would be the unit product cost?
4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year:
Department
Preparation
Fabrication
Machine hours
73,000
24,000
Direct labour hours
30,000
54,000
Direct materials cost
$165,000
$420,000
Manufacturing overhead cost
$390,000
$740,000
What was the amount of underapplied or overapplied overhead in each department at the end of the year?
Hsung Manufacturing Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department E, direct labor hours in Department G, and machine hours in Department I.
In establishing the predetermined overhead rates for 2012, the following estimates were made for the year.
Department
E
G
I
Manufacturing overhead
$1,050,000
$1,500,000
$840,000
Direct labor costs
$1,500,000
$1,250,000
$450,000
Direct labor hours
100,000
125,000
40,000
Machine hours
400,000
500,000
120,000
During January, the job cost sheets showed the following costs and production data.
Department
E
G
I
Direct materials used
$140,000
$126,000
$78,000
Direct labor costs
$120,000
$110,000
$37,500
Manufacturing overhead incurred
$89,000
$124,000
$74,000
Direct labor hours
8,000
11,000
3,500
Machine hours
34,000
45,000
10,400
Instructions
Compute the predetermined overhead rate for each department.
Compute the total manufacturing costs assigned to jobs in January in each department.
Compute the under or overapplied overhead for each department at January 31.
Hammatt Inc. provides a variety of services for commercial clients. Hammatt destroys any paper client records after seven years and the shredded paper is sold to a recycling company. The net realizable value of the recycled paper is treated as a reduction to operating overhead. The following data pertain to 2010 operations:
Budgeted operating overhead ………………………….$415,200
Actual operating overhead ……………………………..$410,500
Budgeted net realizable value of recycled paper ……… $9,200
Actual net realizable value of recycled paper …………. $9,700
Budgeted billable hours ……………………………….. 70,000
Actual billable hours …………………………………… 70,900
a. Assuming that number of billable hours is the allocation base, what was the company’s predetermined overhead rate?
b. Record the journal entry for the sale of the recycled paper.
c. What was the company’s underapplied or overapplied overhead for 2010? 34.
Joint Cost Allocation. Memory Manufacturing Company (MMC) produces memory modules in a two step process: chip fabrication and module assembly. In chip fabrication, each batch of raw silicon wafers yields 500 standard chips and 500 deluxe chips. Chips are classified as standard or deluxe on the basis of their density (the number of memory bits on each chip). Standard chips have 500 memory bits per chip, and deluxe chips have 1,000 memory bits per chip. Joint costs to process each batch are $24,000. In module assembly, each batch of standard chips is converted into standard memory modules at a separately identified cost of $1,000 and then sold for $8,500. Each batch of deluxe chips is converted into deluxe memory modules at a separately identified cost of $1,500 and then sold for $25,000.
1. Allocate joint costs of each batch to deluxe modules and standard modules using (a) the NRV method, (b) the constant gross margin percentage NRV method, and (c) the physical measure method, based on the number of memory bits. Which method should MMC use?
2. MMC can process each batch of 500 standard memory modules to yield 400 DRAM modules at an additional cost of $1,600. The selling price per DRAM module would be $26. Assume MMC uses the physical measure method. Should MMC sell the standard memory modules or the DRAM modules?
Joint costs and byproducts. (W. Crum) Royston, Inc. is a large food processing company. It processes 120,000 pounds of peanuts in the Peanuts Department at a cost of $1 60,000 to yield 10,000 pounds of product A, 60,000 pounds of product B, and 20,000 pounds of product C.
Product A is processed further in the Salting Department to yield 10,000 pounds of salted peanuts at a cost of $20,000 and sold for $10 per pound.
Product B (Raw Peanuts) is sold without further processing at$2 per pound.
Product C is considered a byproduct and is processed further in the Paste Department to yield 20,000 pounds of peanut butter at a cost of $10,000 and sold for $3 per pound.
The company wants to make a gross margin of 10% of revenues on product C and needs to allow 25% of revenues for marketing costs on product C. An overview of operations follows:
1. Compute unit costs per pound for products A, B, and C, treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
2. Compute unit costs per pound for products A, B, and C, treating all three as joint products and allocating joint costs by the NRVmethod.
Joint products and byproducts (continuation of 16 16). Quality Chicken is computing the ending inventory values for its July 31, 2009, balance sheet. Ending inventory amounts on July 31 are 15 pounds of breasts, 4 pounds of wings, 6 pounds of thighs, 5 pounds of bones, and 2 pounds of feathers. Quality Chicken’s management wants to use the sales value at splitoff method. However, they want you to explore the effect on ending inventory values of classifying one or more products as a byproduct rather than a joint product.
1. Assume Quality Chicken classifies all five products as joint products. What are the ending inventory values of each product on July 31, 2009?
2. Assume Quality Chicken uses the production method of accounting for byproducts. What are the ending inventory values for each joint product on July 31, 2009, assuming breasts and thighs are the joint products and wings, bones, and feathers are byproducts?
3. Comment on differences in the results in requirements 1 and 2.
Joint cost allocation with a byproduct. Mat Place purchases old tires and recycles them to produce rubber floor mats and car mats. The company washes, shreds, and molds the recycled tires into sheets. The floor and car mats are cut from these sheets. A small amount of rubber shred remains after the mats are cut. The rubber shreds can be sold to use as cover for paths and playgrounds. The company can produce 25 floor mats, 75 car mats, and 40 pounds of rubber shreds from 100 old tires.
In May, Mat Place, which had no beginning inventory, processed 125,000 tires and had joint production costs of $600,000. Mat Place sold 25,000 floor mats, 85,000 car mats, and 43,000 pounds of rubber shreds. The company sells each floor mat for $12 and each car mat for $6. The company treats the rubber shreds as a byproduct that can be sold for $0.70 per pound.
Required
1. Assume that Mat Place allocates the joint costs to floor mats and car mats using the sales value at splitoff method and accounts for the byproduct using the production method. What is the ending inventory cost for each product and gross margin for Mat Place?
2. Assume that Mat Place allocates the joint costs to floor mats and car mats using the sales value at splitoff method and accounts for the byproduct using the sales method. What is the ending inventory cost for each product and gross margin for Mat Place?
3. Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method.
Joint cost allocation with a byproduct. The Cumberland Mine is a small mine that extracts coal in West Virginia. Each ton of coal mined is 40% Grade A coal, 40% Grade B coal, and 20% coal tar. All output is sold immediately to a local utility. In May, Cumberland mined 1,000 tons of coal. It spent $10,000 on the mining process. Grade A coal sells for $100 per ton. Grade B coal sells for $60 per ton. Cumberland gets one quarter of a vat of coal tar from each ton of coal tar processed. The coal tar sells for$60 per vat Cumberland treats Grade A and Grade B coal as joint products, and treats coal tar as a byproduct
1. Assume that Cumberland allocates the joint costs to Grade A and Grade B coal using the sales value at splitoff method and accounts for the byproduct using the production method. What is the inventoriable cost for each product and Cumberland’s gross margin?
2. Assume that Cumberland allocates the joint costs to Grade A and Grade B coal using the sales value at splitoff method and accounts for the byproduct using the sales method. What is the inventoriable cost for each product and Cumberland’s gross margin?
3. Discuss the difference between the two methods of accounting for byproducts, focusing on what conditions are necessary to use each method.
Joint cost allocation, insurance settlement Quality Chicken grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2009 is:
Joint cost of production in July 2009 was $50.
A special shipment of 40 pounds of breasts and 15 pounds of wings has been destroyed in a fire. Quality Chicken’s insurance policy provides reimbursement for the cost of the items destroyed. The insurance company permits Quality Chicken to use a joint cost allocation method. The splitoff point is assumed to be at the end of the production process.
1. Compute the cost of the special shipment destroyed using
a. Sales value at splitoff method
b. Physical measure method (pounds of finished product)
2. What joint cost allocation method would you recommend Quality Chicken use?Explain.
Joint cost allocation, process further. Sinclair Oil & Gas, a large energy conglomerate, jointly processes purchased hydrocarbons to generate three non saleable intermediate products: ICR8, ING4, and XGE3. These intermediate products are further processed separately to produce Crude Oil, Natural Gas Liquids (NGL) and Natural Gas (measured in liquid equivalents). An overview of the process and results for August 2009 are shown here (Note: The numbers are small to keep the focus on key concepts):
A new federal law has recently been passed that taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquid or natural gas. Starting August 2009, Sinclair Oil & Gas must report a separate rate product line income statement for crude oil. One challenge facing Sinclair Oil & Gas is how to allocate the joint cost of producing the three separate saleable outputs. Assume no beginning or ending inventory.
1. Allocate the August 2009 joint cost among the three products using
a. Physical measure method
b. NRV method.
2. Show the operating income for each product using the methods in requirement 1.
3. Discuss the pros and cons of the two methods to Sinclair Oil & Gas for making decisions about product emphasis (pricing, sell or process further decisions, and so on).
4. Draft a letter to the taxation authorities on behalf of Sinclair Oil & Gas that justifies the joint cost allocation method you recommend Sinclairuse.
Joint cost allocation. Elsie Dairy Products Corp buys one input full cream milk, and refines it in a churning process. From each gallon of milk Elsie produces two cups (one pound) of butter and two quarts (8 cups) of buttermilk. During May 2008, Elsie bought 10,000 gallons of milk for $15,000. Elsie spent another $5,000 on the churning process to separate the milk into butter and buttermilk. Butter could be sold immediatelyfor$2 per pound and buttermilk could be sold immediately for $1.50 per quart.
Elsie chooses to process the butter further into spreadable butter by mixing it with canola oil, incurring an additional cost of $0.50 per pound. This process results in 2 tubs of spreadable buffer for each pound of butter processed. Each tub of spreadable buffer sells for $2.50.
1. Allocate the $20,000 joint cost to the spreadable butter and the buttermilk using the
a.Physical measure method (using cups) of joint cost allocation
b. Sales value at splitoff method of joint cost allocation
c. NRV method of joint cost allocation
d. Constant gross margin percentage NRV method of joint cost allocation
2. Each of these measures has advantages and disadvantages; what are they?
3. Some claim that the sales value at split off method is the best method to use. Discuss the logic behind this claim.
SY Telc has recently started the manufacture of RecRobo, a three wheeled robot that can scan a home for fires and gas leaks and then transmit this information to a mobile phone. The cost structure to manufacture 20,000 RecRobos is as follows. Cost Direct materials ($40 per robot) $ 800,000 Direct labor ($30 per robot) 600,000 Variable overhead ($6 per robot) 120,000 Allocated fixed overhead ($25 per robot) 500,000 Total $2,020,000 SY Telc is approached by Chen Inc. which offers to make RecRobo for $90 per unit or $1,800,000. Instructions (a) Using incremental analysis, determine whether SY Telc should accept this offer under each of the following independent assumptions. (1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided). (2) Assume that none of the fixed overhead can be reduced (avoided). However, if the robots are purchased from Chen Inc., SY Telc can use the released productive resources to generate additional income of $300,000. (b) Describe the qualitative factors that might affect the decision to purchase the robots from an outside supplier. __________________________________________________________________________________________________ EXERCISE 9 6 (a) (1) Decision Net Income Make Buy Increase (Decrease) Direct materials $0 Direct labor 0 Variable overhead 0 Fixed overhead 0 Purchase price 0 Total annual cost $0 $0 $0 Accept Offer ?? Yes or No Yes (2) Decision Net Income Make Buy Increase (Decrease) Direct materials $0 Direct labor 0 Variable overhead 0 Fixed overhead 0 Opportunity cost 0 Purchase price 0 Totals $0 $0 $0 Accept Offer ?? Yes or No (b) Qualitative Factors:
Thai Bay’s computer system generated the following trial balance on December 31, 2011. The companys manager knows something is wrong with the trial balance because it does not show any balance for Goods in Process Inventory but does show balances for the Factory Payroll and Factory Overhead accounts. Debit Credit Cash $ 48,000 Accounts receivable 42,000 Raw materials inventory 26,000 Goods in process inventory 0 Finished goods inventory 9,000 Prepaid rent 3,000 Accounts payable $ 10,500 Notes payable 13,500 Common stock 30,000 Retained earnings 87,000 Sales 180,000 Cost of goods sold 105,000 Factory payroll 16,000 Factory overhead 27,000 Operating expenses 45,000 Totals $ 321,000 $ 321,000 After examining various files, the manager identifies the following six source documents that need to be processed to bring the accounting records up to date. Materials requisition 21 3010: $ 4,600 direct materials to Job 402 Materials requisition 21 3011: $ 7,600 direct materials to Job 404 Materials requisition 21 3012: $ 2,100 indirect materials Labor time ticket 6052: $ 5,000 direct labor to Job 402 Labor time ticket 6053: $ 8,000 direct labor to Job 404 Labor time ticket 6054: $ 3,000 indirect labor Jobs 402 and 404 are the only units in process at year end. The predetermined overhead rate is 200% of direct labor cost. references 1.value: 2.00 points a. Direct materials costs to Goods in Process Inventory. b. Direct labor costs to Goods in Process Inventory. c. Overhead costs to Goods in Process Inventory. d. Indirect materials costs to the Factory Overhead account. e. Indirect labor costs to the Factory Overhead account. Required: 1. Prepare journal entries to assign the above costs. (Omit the “$” sign in your response.) Date General Journal Debit Credit a. b. c. d. e. check my workeBook Links (4)references 2.value: 1.00 points 2.1 Determine the revised balance of the Factory Overhead account after making the entries in part 1. Determine whether there is any under or overapplied overhead for the year. (Input the amount as positive value. Omit the “$” sign in your response.) $ 2.2 Prepare the adjusting entry to allocate any over or underapplied overhead to Cost of Goods Sold, assuming the amount is not material. (Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31 check my workeBook Links (4)references 3.value: 1.00 points 3. Prepare a revised trial balance. (The items in the Trial Balance should be grouped as follows: Assets, Liabilities (in order of their liquidity), Equity, Revenues, and Expenses. Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.) THAI BAY COMPANY Trial Balance December 31, 2011 Debit Credit $ $ Totals $ $ check my workeBook Links (4)references 4.value: 1.00 points 4.1 Prepare an income statement for year 2011. (Amounts to be deducted should be indicated by a minus sign. Omit the “$” sign in your response.) THAI BAY COMPANY Income Statement For Year Ended December 31, 2011 $ $ 4.2 Prepare a balance sheet as of December 31, 2011. (Be sure to list the assets and liabilities in order of their liquidity. Omit the “$” sign in your response.) THAI BAY COMPANY Balance Sheet December 31, 2011 Assets $ Inventories $ Total Assets $ Liabilities and Equity $ Total Liabilities Total Stockholders’ Equity Total Liabilities and Equity $
Tonys Electronics Corporation needs 12,000 units of a certain part to be used in the production of its karaoke machines. If Tonys Electronics buys the part from Scott Company instead of making it, Tonys could not use the present facilities for another manufacturing activity. Sixty percent of the fixed overhead applied will continue regardless of what decision is made. The following quantitative information is available regarding the situation presented: Cost to make the part: Direct materials $5 Direct labor 25 Variable overhead 12 Fixed overhead applied 15 $57 Cost to buy the part: $45 A. In deciding whether to make or buy the part, what are Tonys total relevant costs to make the part? B. Which alternative (make or buy) is more desirable for Tonys and by what amount? C. Suppose that Tonys Electronics Corporation is in an area of the country with high unemployment and that is unlikely that displaced employees will find other employment. How might that affect your decision?
Trailblazers produces two types of hiking boots: the mens boot and the womens boot. The two types of boots are similar, except that the womens boots are more stylish. Both types are made with the same machine. It takes 15 minutes of machine time to produce one pair of womens boots. The difference in production time results mainly from the different materials use in construction. The relevant data concerning the two types of boots are as follows: Mens Womens Sales price (per pair) $35 $40 Less: Direct materials 10 13 Direct labor 4 4 Variable overhead 8 10 Contribution margin $13 $13 Required machine time 1/4 hour 1/2 hour A. If the amount of machine time available to Trailblazers is limited, which boot should be produced first? B. If the total machine time available is 640 hours per month and the demand for each type of boot is 1,000 pairs per month, how many of each type should be produced to maximize profit? (Round your answer to the nearest pair.) C. What other factors should be considered in this decision, and how would they affect the decision?
True/False. If the answer is false replace the term(s) that makes it incorrect with the correct term(s). 1) Although Treasury securities have no risk of default or illiquidity, they do suffer from “maturity risk” the risk that interest rates will change in the future and thereby impact longer maturities more than shorter maturities. 2) The term structure of interest rates is the graphical presentation of the relation between the annual rate of interest earned on a security purchased on a given day and held to maturity and the remaining time of maturity. 3) Restrictive covenants, coupled with standard debt provisions, allow the lender to monitor and control the borrowers activities in order to protect itself against increase in borrower risk. 4) To carry out the sinking fun requirement, the corporation makes semiannual or annual payments to a trustee, who uses these funds to retire bonds by purchasing them in the marketplace. 5) A bond issued by an American company that is denominated in Swiss Francs and sold in Switzerland would be an example of a foreign bond. 6) Since a putable bond gives its holder the right to “put the bond” at specified times or actions by the firm, the bonds yield is lower than that of a nonputable bond. 7) A Eurobond is a bond issued by an international borrower and sold to investors in countries with currencies other than the country in which the bond is denominated. 8) Bondholders will convert their convertible bonds into shares of stock only when the conversion price is greater than the market price of the stock. 9) To sell a callable bond, the issuer must pay a higher interest rate than on a noncallable bond of equal risk. 10) The value of a bond with semiannual interest is greater than a bond with annual interest, everything else the same. 11) Increases in the basic cost of long term funds or in the risk will raise the required return on the bond. 12) A bond with short maturity has less “interest rate risk” than a bond with long maturity when all other features coupon interest rate, par value, and interest payment frequency are the same.
Trying to do some homework and I’m stuck on these 10 adjusting journal entries: 1. Wages earned by employees during December and to be paid in January are $33,875; associated payroll taxes on these wages are $2,710. 2. On July 1, a client paid CM2 $205,720 in advance for a year of consulting services. In addition, of the beginning balance in Unearned Revenue, 60% of the work has now been completed. 3. You discover that a product sale was made on account and recorded in December for $128,600; the product had not yet been shipped. The cost of the product was $68,742. 4. Bad debt expense is estimated to be 7% of ending Accounts Receivable. (Round to the nearest whole dollar.) 5. The Prepaid Expense account has a balance of $22,774. This balance includes $11,200 for a two year insurance policy purchased on January 1, 2011. Of the remaining prepaid balance, 30% of the benefit had now expired. (round to the nearest whole dollar.) 6. Annual depreciation rates are 7% for Buildings & Equipment/Furniture. No salvage. (Round to the nearest whole dollar.) 7. The long term liabilities were outstanding for all of 2011 and accrue interest at 6% APR. CM2 records accrued interest quarterly (interest was last updated on Sept. 30.) The company is required to pay the interest annually on January 1. 8. On December 15, CM2 declared a dividend of $110,000, to be paid on January 15, 2012. It had not yet been recorded. 9. At December 31, the Long Term Investments (Available for sale securities) had a fair value of $160,186. [CM2 uses a “Fair Value Adjustment” account (an adjunct account to the Investments) when marking the investment portfolio to fair value at year end.] 10. Income tax is based on a 35% tax rate. I am also looking for help with the closing entries too, but just giving me help with the adjusting entries would be amazing. Thank you all for the help, and I will be rating all answers!
Dual rate method, budgeted versus actual costs, and practical capacity versus actual quantities (continuation of 15 17). Chocolat, Inc. decides to examine the effect of using the dual rate method for allocating truck costs to each round trip. At the start of 2009, the budgeted costs were:
The actual results for the 45 round trips made in 2009 were:
Assume all other information to be the same as in Exercise 15 17.
1. Using the dual rate method, what are the costs allocated to the Dark Chocolate Division and the Milk Chocolate Division when (a) variable costs are allocated using the budgeted rate per round trip and actual round trips used by each division and when (b) fixed costs are allocated based on the budgeted rate per round trip and round trips budgeted for each division?
2. From the viewpoint of the Dark Chocolate Division, what are the effects of using the dual rate method rather than the single ratemethods?
Erin Tarver is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $12,000. The booth will be open 30 hours during the trade show. Ms. Tarver also plans to add a new product line, ProOffice, which will cost $180 per package. She will continue to sell the existing product, EZRecords, which costs $100 per package. Ms. Tarver believes that the salesperson will spend approximately 20 hours selling EZRecords and 10 hours marketing ProOffice.
Required
a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 80 units of EZRecords and 50 units of ProOffice.
b. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 200 units of EZRecords and 100 units of ProOffice.
c. Explain why the cost per unit figures calculated in Requirement a are different from the amounts calculated in Requirement b. Also explain how the differences in estimated cost per unit will affect pricing decisions.
FINS produces three products from its fish farm: fish, fish oil, and fishmeal. During July 2010, FINS produced the following average quantities of each product from each pound (16 ounces) of fish processed:
Product Obtained from Each Pound of Fish
Fish 8 ounces
Fish oil 4
Fish meal 2
Total 14 ounces
Of each pound of fish processed, 2 ounces are waste. In July, FINS processed 37.5 tons of fish (1 ton equals 2,000 pounds). Joint cost amounted to $142,800. On average, each pound of product has the following selling prices: fish, $4.50; fish oil, $6.50; and fish meal, $2.
a. Allocate the joint cost using weight as the basis. (Round to nearest whole percentage.)
b. Allocate the joint cost using sales value as the basis. (Round to nearest whole percentage.)
c. Discuss the advantages and disadvantages of the answers to parts (a) and (b).
For each of the following organizational units, indicate whether the unit would most likely be classified as a cost center (C), a revenue center (R), a profit center (P), or an investment center (I):
a. Laundry of a large bed and breakfast
b. Corporate owned local outlet of a fast food restaurant
c. Wildlife management department in a national or state park
d. Local public television station’s fund raising telethon staff ed by volunteers
e. City ticket office of an airline
f. Cafeteria of a for profit hospital
g. Fine jewelry counter in a local department store
h. University owned bookstore
i. Long term parking lot at a regional airport
j. Beijing office of an international public accounting firm
k. Sales representative for a college textbook publisher
Problem 1 Handy Man Services is a repair service company specializing in small household jobs. Each client pays a fixed monthly service fee based on the number of rooms in the house. Records are kept on the time and material costs used for each repair. The following profitability data apply to five customers. Customer Revenues Customer Costs Marveline Burnett $300 $225 J Jackson 200 305 Roger Jones 80 75 Paul Saas 75 110 Becky Stephan 350 220 Question 1: Compute the operating income for each of the five customers. (five points) Question 2: What options should Handy Man Services consider in light of the customer profitability results? (five points) Question 3: What problems might Handy Man Services encounter in accurately estimating the operating costs of each customer? (five points)
Problem 2 Gavin and Alex, baseball consultants, are in need of a microcomputer network for their staff. They have received three proposals, with related facts as follows: Proposal A Proposal B Proposal C Initial investment in equipment $90,000 $90,000 $90,000 Annual cash increase in operations: Year 1 80,000 45,000 90,000 Year 2 10,000 45,000 0 Year 3 45,000 45,000 0 Salvage value 0 0 0 Estimated life 3 yrs 3 yrs 1 yr The company uses straight line depreciation for all capital assets. Question 1: Compute the payback period, net present value, and accrual accounting rate of return with initial investment, for each proposal. Use a required rate of return of 14%. (10 points) Question 2: Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Why? (five points)
Problem # 5 The following information was used to prepare the March, bank reconciliation for Benson Machine Works. Identify the items that require adjustment to the cash balance per books and prepare the appropriate adjusting entries. 1. Included with the bank statement materials was a check from Jim Trent for $70 stamped “NSF.” 2. A personal deposit by Sam Benson to his personal account in the amount of $300 for dividends on his General Motors common stock was credited to the company account. 3. The bank statement included a debit memorandum for $30.00 for four books of blank checks for Benson Machine Works. 4. The bank statement contains a credit memorandum for $42.75 interest on the average checking account balance. 5. The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively, were not included in the bank statement postings. 6. Two checks totaling $316.86, which were outstanding at the end of February, cleared in March and were returned with the March statement. 7. The bank statement included a credit memorandum dated March 28, for $75.00 for the monthly interest on a 6 month $15,000 certificate of deposit that the company owns. 8. Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65, did not clear the bank during March. 9. On March 24, Benson Machine Works delivered to the bank for collection a $4,500 3 month note from Al Locke. A credit memorandum dated March 29, indicated the collection of the note and $135.00 of interest. 10. The bank statement included a debit memorandum for $25.00 for the collection service on the above note and interest.
Production data: Pounds in process, May 1: materials 100% complete; conversion 90% complete 70,000 Pounds started into production during May 350,000 Pounds completed and transferred to the next department ? Pounds in process, May 31: materials 75% complete; conversion 25% complete 40,000 Cost data: Work in process inventory, May 1: Materials cost $ 86,000 Conversion cost $ 36,000 Cost added during May: Materials cost $ 447,000 Conversion cost $ 198,000 1.) Compute the equivalent units of production. 2.) Compute the costs per equivalent unit for the month. (Round your answers to 2 decimal places.) 3.)Determine the cost of ending work in process inventory and of the units transferred out to the next department. (Round your intermediate calculation to 2 decimal places and final answers to the nearest whole dollar amount.) 4.) Prepare a cost reconciliation report for the month. (Round your intermediate calculation to 2 decimal places and final answers to the nearest whole dollar amount.)
The PVC Company manufactures a high quality plastic pipe that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Production data: Pounds in process, May 1: materials 100% complete; conversion 90% complete 70,000 Pounds started into production during May 350,000 Pounds completed and transferred to the next department ? Pounds in process, May 31: materials 75% complete; conversion 25% complete 40,000 Cost data: Work in process inventory, May 1: Materials cost $ 86,000 Conversion cost $ 36,000 Cost added during May: Materials cost $ 447,000 Conversion cost $ 198,000 3. Determine the cost of ending work in process inventory and of the units transferred out to the next department. Cost of ending work in process inventory? Cost of units completed and transferred out? 4. Prepare a cost reconciliation report for the month.
The PVC Company manufactures a high quality plastic pipe that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: Production data: Pounds in process, May 1: materials 100% complete; conversion 90% complete 67,000 Pounds started into production during May 320,000 Pounds completed and transferred to the next department ? Pounds in process, May 31: materials 75% complete; conversion 25% complete 27,000 Cost data: Work in process inventory, May 1: Materials cost $ 78,500 Conversion cost $ 20,300 Cost added during May: Materials cost $ 408,220 Conversion cost $ 111,730 The company uses the weighted average method. Required: 1. Compute the equivalent units of production. Materials Conversion Equivalent units of production 2. Compute the costs per equivalent unit for the month. (Round your answers to 2 decimal places. Omit the “$” sign in your response.) Materials Conversion Cost per equivalent unit $ $ 3. Determine the cost of ending work in process inventory and of the units transferred out to the next department. (Omit the “$” sign in your response.) Materials Conversion Total Cost of ending work in process inventory $ $ $ Cost of units completed and transferred out $ $ $ 4. Prepare a cost reconciliation report for the month. (Omit the “$” sign in your response.) Cost Reconciliation Costs to be accounted for: (Click to select)Cost of ending work in process inventoryCost of units completed and transferred outCost of beginning work in process inventory $ (Click to select)Costs added to production during the periodCost of ending work in process inventoryCost of units completed and transferred out Total cost to be accounted for $ Costs accounted for as follows: (Click to select)Cost of ending work in process inventoryCosts added to production during the periodCost of beginning work in process inventory $ (Click to select)Costs added to production during the periodCost of beginning work in process inventoryCost of units completed and transferred out Total cost accounted for $
QS 5 4 Recording sales perpetual system L.O. P2 Apr. 1 Sold merchandise for $2,000, granting the customer terms of 2/10, EOM; invoice dated April 1. The cost of the merchandise is $1,400. Apr. 4 The customer in the April 1 sale returned merchandise and received credit for $500. The merchandise, which had cost $350, is returned to inventory. Apr. 11 Received payment for the amount due from the April 1 sale less the return on April 4. Prepare journal entries to record each of the above sales transactions of a merchandising company. Assume a perpetual inventory system. (Omit the “$” sign in your response.) Date General Journal Debit Credit Apr. 1 To record credit sale To record cost of credit sale. Apr. 4 To record sales return Restore cost of returned goods to inventory Apr. 11
Question 1 A responsibility is based on an aspect of some relationship, and is empty of content until that relationship is nurtured. that relationship is described and specified. it is realized in financial terms. the subjects involved in the relationship are ethically sound. . 4 points Question 2 According to the text, Mectizan, a drug manufactured by Merck, is provided as an example to explain Answer that a firm’s social responsibility includes doing voluntary good. that a firm’s social responsibility includes not causing harm to others. that a firm’s social responsibility signifies obedience to the law. that a firm’s social responsibility entails the prevention of harm. . 4 points Question 3 _____ are those things that we ought, or should, do, even if we would rather not. Answer Responsibilities Decisions Socializations Theories . 4 points Question 4 Among which of the following would both law and ethics say that business should be held liable for violating its responsibilities? Answer The social responsibility of a firm to prevent harm when one is not the cause for it. The social responsibility of a firm to not cause harm to others. The social responsibility of a firm to obey the law. The social responsibility of a firm to do good. . 4 points Question 5 A firm builds a type of _____ when it creates a good image for itself. Answer knowledge curve trust bank ingenuity source safe loop . 4 points Question 6 Corporate philanthropy is an example of Answer a firm’s taking on the social responsibility of doing voluntary good. a firm’s adherence to the social responsibility of not causing harm to others. a firm complying with the social responsibility entailing from the law. a firm’s taking on the social responsibility of preventing harm. . 4 points Question 7 What according to Ambrose Bierce is “an ingenious device for obtaining individual profit without individual responsibility”? Answer Leadership Utilitarianism Equal opportunities Corporation . 4 points Question 8 Which among the following methods of constraining a business’s activities is beyond dispute? Answer The social responsibility of a firm to prevent harm when one is not the cause for it. The social responsibility of a firm to not cause harm to others. The social responsibility of a firm to obey the law. The social responsibility of a firm to do good. . 4 points Question 9 _____ can serve as proxies for success, to some extent, or at least would be unlikely to occur in a company known for ethical lapses. Answer Achievable objectives Quantifiable measurements Strong leadership Ethical codes of conduct . 4 points Question 10 The European Commission has defined CSR as “a concept whereby companies decide voluntarily to contribute to a better society and _____.” Answer better opportunities equality of treatment a cleaner environment a freer market system . 4 points Question 11 Conduct online research on pharmaceutical companies, and answer the following questions: 1. What social responsibilities do pharmaceutical companies have that differs from other types of companies? 2. Who are the primary stakeholders a pharmaceutical company has and how do you think they are prioritized? 3. Do you think pharmaceutical companies are justified in charging such high prices for certain medications or do you believe their high overhead costs (research, employing people, advertising) justifies what they charge? Please remember to cite your sources in APA format at the bottom of your essay. Answer NormalHeading 1Heading 2Heading 3Heading 4Heading 5AddressFormatted 1234567 ArialArial BlackBook AntiquaCentury GothicComic SansCourier NewGaramondGeorgiaTahomaTimes New RomanVerdana Path:body . 30 points Question 12 After the occurrence of Hurricane Katrina, insurance companies refused to pay claims to insurance holders who paid premiums on time and had binding legal contracts. What do you think the impact is to the “image management” that these insurance companies will have to deal with after all of the law suits? Answer NormalHeading 1Heading 2Heading 3Heading 4Heading 5AddressFormatted 1234567 ArialArial BlackBook AntiquaCentury GothicComic SansCourier NewGaramondGeorgiaTahomaTimes New RomanVerdana
QUESTION: WHICH OF THE FOLLOWING TAX FORMS DO YOU USE TO DO THE TAX RETURN FROM THE SITUATION THAT FOLLOWS: 1040, 4652, Schedule C, Schedule SE, 2106, 8582, 4684, Schedule E, Schedule A, Schedule B, Schedule D?? Robert (Bob) S. and Sally D. Grove are husband and wife and live at 4112 Larkspur Lane, Denton, TX 76201. Bob is a retired petroleum engineer, and Sally is a portrait artist. 1. When he retired at age 65 in 2008, Bob was chief of offshore operations at Pelican Exploration Corporation. While employed, Bob participated in Pelicans contributory qualified pension plan, to which he had contributed $250,000 (in after tax dollars). Under one of the plan options, he chose a life annuity payout of $60,000 per year over his life. Due to Bobs expertise in Gulf of Mexico offshore operations, Pelican continues to use his services on a consulting basis (see item 3). 2. Sally, an accomplished artist, is well known regionally for her oil portraits. She paints in the Photorealism style, providing her clients with portraits that are often mistaken for photographs. Painting in this style is very time consuming. Consequently, her output averages one portrait per month. Her fee of $3,200 per portrait, set several years ago, never varies. As this amount is quite reasonable for a Photorealistic oil portrait, she has a long waiting list of clients who have not yet been scheduled for sittings. She does all of her work in the studio the Groves maintain in their personal residence (see item 6). 3. During 2011, Bob made seven trips on behalf of Pelican. On a typical trip, Bob flies by commercial airline to New Orleans, Houston, or Corpus Christi and then takes a company helicopter to the offshore platform. If necessary, he rents a room at a local motel. Sometimes off site consultations can solve the problem, and a trip to the rig is not necessary. His expenses for these trips are as follows: Airfare $5,100 Lodging 3,100 Meals 2,200 Ground transportation (taxis, limos, and rental cars) 750 After each trip, Bob recovers his expenses when he is paid by Pelican for the services rendered. Pelican does not require an accounting for the expenses and reimburses Bob based on his verbal report of how much he spent. 4. During 2011, Sally completed 14 portraits, 11 of which were delivered when payment was received. Two portraits were delivered but were not paid for until 2012. One portrait was commissioned by the CEO of a company that has since entered bankruptcy. Because the CEO has been indicted for securities fraud, Sally feels certain that she will not be paid for the work. In December, she accepted $3,200 as payment for a portrait to be done in 2012. Although she did not like the arrangement, the customer said that the prepayment was motivated by anticipated cash flow considerations. In early January 2011, Sally was paid for three portraits she painted and delivered in 2010. 5. Sally keeps all of her receipts for expenses, but she does not classify them by category. Her total costs for painting supplies in 2011 were $3,010 (e.g., for canvases, brushes, oil paints, smocks, palettes, and other art supplies). The framing of the finished portrait is left to the customer because the most appropriate frame is a matter of personal taste, which depends on where the painting will be exhibited. 6. For convenience and security reasons, Sally prefers to work at home. The Groves had this in mind when they constructed their present residence. One fourth of the 4,000 square foot living area is devoted to Sallys studio. The home was built at a cost of $350,000 on a lot previously acquired for $100,000, and they moved in on June 15, 2008. As to business use, depreciation has been based on MACRS (using the midmonth convention) applicable to 39 year nonresidential realty. Besides home mortgage interest and property taxes (see item 19), residence expenses for 2011 are summarized below. Utilities $4,200 Molly Maid cleaning service 2,800 Service fee for home security system 1,600 Removal of stains from studio flooring 1,100 Homeowners insurance 970 Repairs to studio skylight 340 7. While on a business trip to South Texas in 1999 to acquire some oil leases, Bob attended a mortgage foreclosure auction. At the auction (held on February 4, 1999), he acquired an abandoned sugarcane farm near Pearland, known as Broussard Place. Bob financed most of the $30,000 purchase through a local farm credit union. In view of the expansion trend in nearby Houston, he regarded the purchase as a good investment. Early in 2011, Bob was contacted by a Houston real estate developer who offered $250,000 for Broussard Place. Horrified at the prospect of a $220,000 taxable gain, Bob ultimately arranged for an exchange transaction by written notice on May 10. In exchange for several vacant lots on Padre Island, Texas, worth $240,000 and cash of $10,000, Bob transferred Broussard Place to the developer. The exchange took place at an attorneys office in Houston on June 20, 2011. 8. On another business trip to South Texas, Bob purchased unimproved land near Nederland, Texas, for $18,200 at an estate sale held on April 17, 1986. Described as Block 46, the property was adjacent to a modest prison rice farm owned by the Texas Department of Corrections (TDC). Bob bought the property based on a hunch that the TDC might someday want to expand its Nederland prison facility. In late 2010, the TDC contacted Bob and offered him $140,000 for Block 46. After repeated threats of a condemnation proceeding, Bob transferred the property to the TDC on June 28, 2011, for $180,000. On December 17, 2011, Bob reinvested $175,000 in vacant land located near Texas State University in San Marcos. Bob does not plan to reinvest any more of the amount received from the TDC. 9. The Groves had always thought that taking extended road trips in an RV would be fun. Therefore, in June 2011, they bought a new Winnebago Deluxe Coach RVfor $106,250 [$100,000 (discounted list price) + $6,250 (state sales tax)]. Two weeks on the road was enough, however, and the road trip was over. In July 2011, they sold the RV to a neighbor for $90,000. The neighbor made a $20,000 cash down payment and paid the balance of $70,000 in early December 2011. No interest is provided for. 10. On May 9, 1997, Bobs father gave him 400 shares of Carmine Corporation common stock as a birthday present. The stock had cost his father $16,000 ($40 a share) and was worth $20,000 on the date of the gift. In 2007, when the stock was worth $140 per share, Carmine declared a 2 for 1 stock split. On July 27, 2011, Bob sold 400 shares for $20,000 ($50 a share). For sentimental reasons (they were a gift from his father), Bob wanted to keep 400 shares. 11. On December 21, 2011, the Groves sold 500 shares of Flamingo Power common stock for $40,000 ($80 a share); the stock was purchased on February 1, 2011, for $50,000 ($100 a share). They wanted to generate a loss to offset some of the capital gain recognized during the year. Because the Groves considered the stock to be a good investment, they repurchased 500 shares of Flamingo on February 19, 2012, for $45,000 ($90 a share). 12. On March 2, 2009, Sally was contacted by Laura Turner, a former college roommate. Over lunch, Laura asked Sally for a loan of $6,000 to help finance a new venture. Because the venture, a summer art camp in Santa Fe, New Mexico, sounded interesting, Sally made the loan. Laura signed a note due in two years at 10% interest. In late 2011, Sally learned that Laura had disappeared after being charged with grand theft by New Mexico authorities. Even worse, Laura is wanted in Arkansas for parole violation from a prior felony conviction. Laura has never paid any interest on the note she gave Sally. 13. The Groves have a long term capital loss carryover of $7,000 from 2010. 14. On May 9, 2007, Bobs favorite uncle, Cornelius Grove, gave him the family antique gun collection. Based on family records and educated estimates, the collection had an adjusted basis to Cornelius of $4,200 and was worth $13,000 on the date of the gift. Because Sally abhors guns, Bob has been under heavy pressure to get rid of the collection. After Cornelius died in early 2011, Bob donated the collection to the Alamo Siege Museum (a qualified charity). The transfer was made on December 5, 2011; at that time, several qualified appraisers valued the collection at $16,000. The museum plans to add the collection to the other firearms it exhibits to visitors. 15. While walking the dog in late December 2010, Sally was hit by an out of control delivery truck. The mishap sent Sally to the hospital for several days of observation and medical evaluation. Aside from severe bruises, she suffered no permanent injury. Once apprehended, the driver of the truck was ticketed for DUI. The owner of the truck, a local distributor for a national brewery, was concerned about the adverse publicity that would result if Sally filed a lawsuit. Consequently, it paid all of her medical expenses and offered her a settlement if she would sign a release. Under the settlement, Sally would receive $134,000″$8,000 for loss of income and $126,000 for personal injury. On January 31, 2011, Sally signed the release and was immediately paid $134,000. 16. In August 2010, Bob was rear ended while stopped for a red light. Because the driver who caused the accident left the scene, Bob was forced to use his insurance to repair the damage to his car. As a result, Bob was subject to the $1,000 deductible provision in the policy. In 2011, the insurance company (Falcon Casualty) located the driver at fault and recovered the amount paid for repairs. Consequently, in April 2011, Bob received a check from Falcon refunding the $1,000 deductible he had paid. The Groves did not claim any deduction as to the accident on their 2010 income tax return. 17. After an acrimonious divorce, the Grovess only daughter (Pamela Jansen) moved back home in January 2011. She brought her twins (Saley and Samantha) with her. Pamela has no income for the year except the $4,200 she received for two months of child support. Under the divorce decree, Pamela was given custody of the children and was awarded child support of $2,100 a month. The decree does not indicate who is entitled to the dependency exemptions for the children. Pamela plans to initiate legal proceedings against her ex husband for delinquent child support. 18. Besides the items already mentioned, the Groves have the following receipts for 2011: Social Security benefits (Bob, $12,000; Sally, $6,000) $18,000 Consulting income paid by Pelican (including expense reimbursement of $11,150″see item 3) 35,000 Life insurance proceeds (see below) 50,000 Qualified dividend income” Carmine Corporation 1,200 Flamingo Power 400 Interest income” IBM bonds 600 CD at First National Bank of Denton 400 Wells Fargo money market fund 300 City of Beaumont (TX) general purpose bonds 9,000 The life insurance proceeds concerned a policy owned by Cornelius Grove (see item 14), which named Bob as the beneficiary. The receipt of the proceeds came as a complete surprise to Bob as he never knew the policy existed. 19. Expenditures for 2011 not already mentioned are as follows: Payment of Pamelas legal fees and court costs incident to her divorce $9,000 Medical” Medicare B insurance premiums 2,244 Dental implants for Sally 8,000 Taxes on personal residence 3,600 Interest on home mortgage 2,200 Church pledge 1,200 Professional journals” Oil and gas related (Bob) 160 Art related (Sally) 120 Dues to professional organizations (Bob) 140 State professional license fee (Bob) 250 Tax return preparation fee (50%, equally divided between Bob and Sally relating to the tax reporting for each business and 50% relating to Bob and Sallys personal income tax return) 900 Texas does not impose an income tax, so the Groves choose the state and local sales tax option. In addition to the state general sales tax, the local sales tax rate is 2% (1.5% city; 0.5% county). The Groves do not keep track of sales tax expenditures for routine purchases (e.g., clothes and prepared foods), but they can verify the sales tax on exceptional items (i.e., big ticket purchases). 20. Relevant information for 2011 is provided below: 2010 tax refund applied toward 2011 income tax $ 800 Amount withheld by trustee of Bobs retirement plan 6,500 Quarterly payments made to the IRS ($2,500 each payment) 10,000 Name Social Security Number Birth Date Robert S. Grove 123’45’6785 09/15/1943 Sally K. Grove 123’45’6786 12/03/1944 Pamela Jansen 123’45’6784 10/19/1983 Saley Jansen 123’45’6787 06/25/2008 Samantha Jansen 123’45’6788 06/25/2008 The business activity code for Bob is 541330, and for Sally, it is 711510.
Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q Chip) and 70% (Q Chip Plus). Q Chip has variable costs per unit of $36 and a selling price of $60. Q Chip Plus has variable costs per unit of $42 and a selling price of $78. Ramirez’s fixed costs are $540,000. How many units of Q Chip would be sold at the break even point? a5,063 b5,869 c9,000 d11,813 2.MacCloud Industries has two divisions Standard and Premium. Each division has hundreds of different types of tennis racquets and tennis products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $270,000 What is the break even point in dollars? a$750,000 b$771,429 c$794,118 d$97,200
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $52,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 30% of revenues in the following year. The product requires an immediate investment of $54,000 in plant and equipment. a. What is the initial investment in the product? Remember working capital. Initial investment $ _________ b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight line depreciation, and the firms tax rate is 30%, what are the project cash flows in each year? (Enter your answers in thousands of dollars. Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Cash Flow 1 $ _________ 2 _________ 3 _________ 4 ________ c. If the opportunity cost of capital is 12%, what is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $ __________ d. What is project IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) IRR ______%
Rex, age 55, is an officer of Blue Company, which provides him with the following nondiscriminatory fringe benefits in 2012: ‘ Hospitalization insurance premiums for Rex and his dependents. The cost of the coverage for Rex is $2,900 per year, and the additional cost for his dependents is $3,800 per year. The plan has a $2,000 deductible, but his employer contributed $1,500 to Rex’s Health Savings Account (HSA). Rex withdrew only $800 from the HSA, and the account earned $50 of interest during the year. ‘ Long term care insurance premiums for Rex, at a cost of $12,600 per year. ‘ Insurance premiums of $840 for salary continuation payments. Under the plan, Rex will receive his regular salary in the event he is unable to work due to illness. Rex collected $4,500 on the policy to replace lost wages while he was ill during the year. ‘ Rex is a part time student working on his bachelor’s degree in engineering. His employer reimbursed his $5,200 tuition under a plan available to all full time employees. Indicate what amount of the following items are included in Rex’s gross income? If an amount is zero, enter “0”. Amount Included a. Hospitalization insurance premiums for Rex and his dependents: $ b. Long term care insurance premiums for Rex at a cost of $12,600 per year: $ c. Insurance premiums of $840 for salary continuation payments: $ d. The $4,500 Rex collected on the salary continuation policy to replace lost wages while he was ill during the year: $ e. Tuition reimbursement under a plan available to all full time employees: $
Safe ‘n Bright, Inc., produces outside doors for installation on homes. The following information was gathered to prepare budgets for the upcoming year beginning January : Sales forecast in units 5,500 doors Finished goods inventory, Jan 1 620 doors Target finished goods inventory, Dec 31 480 doors Raw materials inventory steel, Jan 1 40,000 pounds Target inventory steel, Dec 31. 80,000 pounds Raw materials inventory glass, Jan 1 6,000 square feet Target inventory glass, Dec 31. 4,000 square feet Budgeted purchase price steel $4 per pound |Budgeted purchase price glass $2 per square foot | The manufacture of each door requires 20 pounds of steel and 6 square feet of glass. a. Prepare the production schedule in units for Safe ‘n Bright. b. Using the production schedule, develop the direct materials purchase budgets for steel and glass.
Senkowski Ltd. cost information: Activity Purchasing, Allocation Base Purchase orders, Volume of Activity 30,000, Overhead costs $150,000. Activity Receiving, Allocation base Shipments received, Volume of Activity 15,000, Overhead Cost 60,000. Activity Machine setups, Allocation Base Setups, Volume of Activity 2,500, Overhead costs 200,000. Activity Quality control, Allocation base Inspections, Volume of Activity 18,000, Overhead costs 90,000. Direct materials are $15 per unit for luxury handbags and $11 per unit for deluxe handbags. There were 12, 500 direct labor hours, each of which was charged to inventory at $18 per hour. A. Management is trying to decide between using the traditional allocation method based on direct labor hours and using activity based costing. Calculate the overhead rates for each method. B. One particular batch of 40 luxury handbags had the following specifications: direct labor hours 8, purchase orders 4, shipments received 3, setups 2, inspections 12. Calculate the overhead to be allocated to the bags under the traditional and activity based costing techniques. C.Which costing method do you think is better for the company? Why?
The Shape Corporation’s projected sales for the first eight months of 2011 are as follows. Of Sharpe’s sales, 10 percent is for cash, another 60 percent is collected in the month following the sales, and 30 percent is collected in the second month following the sales. November and December sales for 2010 were $220,100 and $175,800, respectivly. Sharpe purchases its raw materials two months in advance of its sales equal to 60 percent of their final sales price. The supplier is paid one month after it makes delivery. For example, purchese for April sales are made Feburary and payment is made in March. In addition, Sharpy pays 9,600 per month for rent and 20,200 each month for other expenditures. Tax prepayments of 21,500 are made each quarter, beggining in March. The company’s cash balance at December 31, 2010, was 22,900; a minimum balance of 15,000 must be maintained at all times. Assume that any short term financing needed to maintain the cash balance is paid off in the month following the month of financing if sufficient funds are available. Interest on short term loans (10 percent) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the begining of the month. Thus, if in the month of April the firm expects to have a need for andditional 56,130, these funds would be borrowed at the begining of April with interest of 468 (i.e., 10% x 1/12 x 56,130) owed for April being paid at the begining of May. a. Prepare a cash budget for Sharpe covering the first seven months of 2011. b. Sharpe has 199,600 in notes payable due in July that must be repaid or renegotiated for an extention. Will the firm have sufficiant cash to repay the noptes?
Sold stock purchased ten months ago for $6,000 for $3,200. ‘Sold land that was a gift from James’s Uncle for $150,000. The property was received on June 15, 1995, when the property had a $125,000 FMV. The taxable gift was $115,000 because the annual exclusion was $10,000 in 1995. James’s Uncle purchased the land on July 27, 1980, for $85,000. At the time of the gift, gift tax of $5,000 was paid. A sales commission of $3,000 was paid at the closing on the sale of the land. ‘Sold stock purchased four years ago for $1,350 for $1,725. ‘Sold stock purchased 13 months ago for $10,000 for $9,200. ‘Purchased stock on July 8th for $11,000; the stock is currently held in an investment account. ‘The Brock’s have a $8,000 short term loss carryforward from the prior year. ‘On January 1, 2009 Pamela purchased an 8%, $100,000 corporate bond for $92,277. The bond was issued on January 1, 2008, and matures on January 1, 2014. Interest is paid semiannually, and the effective yield to maturity is 10% compounded semiannually. On July 1, of the current tax year, Pamela sold the bond for $95,949. Prepare a schedule that shows the: ‘Proceeds of sale for each transaction above; ‘Cost basis for each transaction above; ‘The gain or loss for each transaction above; and ‘Identify if the gain calculated above is short term of long term.
You stand in a flat meadow and observe two cows (see the figure below). Cow A is due north of you and 15.0 m from your position. Cow B is 25 m from your position. From your point of view, the angle between cow A and cow B is 20A?°, with cow B appearing to the right of cow A. (a) How far apart are cow A and cow B? m (b) Consider the view seen by cow A. According to this cow, what is the angle between you and cow B? A?° (c) Consider the view seen by cow B. According to this cow, what is the angle between you and cow A? Hint: What does the situation look like to a hummingbird hovering above the meadow? A?° (d) Two stars in the sky appear to be 20.A?° apart. Star A is 15.0 ly from the Earth, and star B, appearing to the right of star A, is 25 ly from the Earth. To an inhabitant of a planet orbiting star A, what is the angle in the sky between star B and our Sun?
statement of operations for Dogwood Community Hospital for the years ended 20X0 and 20X1 are shown in Exhibit 4 19a and 4 19b. Compute the following ratios for both years: Current, acid test, days in accounts receivable, average payment period, long term debt to net assets, net assets to total assets, total asset turnover, fixed asset turnover, operating per adjusted discharged, operating expense per adjusted discharge, salary and benefits as a percentage of total operating expense, return on total assets, and operating margin. After calculating the ratios, comment on Dogwoods liquidity, efficient use of assets or activity ratios, revenues, expense, and profitability, and capital structure relative to its industry benchmarks for its respective bed size listed in Exhibit 4 16a. Cite at least two meaningful ratios per category. Assume that Dogwood is a 250 bed facility for the analysis and its adjusted discharges were 6,300 for 20X0 and 6,400 for 20X1. Exhibit 4 18 Selected ratios for Buxton Hospital and the industry benchmarks Capital Ratios Industry Benchmarks Buxton Hosp(20X1) Buxton Hosp(20X0) Debt service coverage 2.50 3.90 2.90 Times interest earned 2.20 2.90 2.00 Net assets to Total assets 0.45 0.60 0.60 Long term debt to net asset 0.71 0.40 0.40 Exhibit 4 19a Statement of operations for Dogwood Community Hospital Dogwood Community Hospital Statement of Operations (in thousands) for the years Ended December 31, 20X1 and 20X0 Revenues 20X1 20X0 Net patient service revenue $52,000 $53,000 Other revenue 751+ 781+ Total operating revenues 52,751 53,781 Expenses Salaries and benefits 33,000 30,000 Supplies 10,200 10,550 Depreciation 2,900 3,100 Provision for bad debt 5,500+ 6,200+ Total operating expenses 51,600 49,850 Operating income 1,151 3,931 Excess of revenues over expense 1,151 3,931 Increase (decrease) in net assets 1,151 3,931
Here are stock market and Treasury bill percentage returns between 2006 and 2010: Year Stock Market Return T Bill Return 2006 17.37 6.40, 2007 7.91 6.16, 2008 ?39.13 2.00, 2009 29.80 0.60, 2010 19.66 0.62 a. What was the risk premium on common stock in each year? (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Year Risk Premium 2006 10.97% 2007 1.75% 2008 41.13% 2009 _____ % 2010 19.04 % b. What was the average risk premium? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Average risk premium % 3.97 is this correct c. What was the standard deviation of the risk premium? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Standard deviation of the risk premium %________ check my work.
suppose that back in the 1970’s, Steve was asked to build speakers for two friends. The first friend, Jan, needed a speaker for he rband. The second friend, Ed, needed a speaker built into the back of his hatchback automobile. Steve figured the following costs for each: Jan’s Job Ed’s job materials $50 $75 Labor hours 10 20 Steve knew that Jan’s job would be easier, since he had experience in building the type of speaker she needed. Her job would not require any special equipment or specialized fitting. Ed’s job, on the other hand, required specialized design and precise fitting. Steve thought he might need to build a mock up of the speaker first, to fit it into space. In addition, he might have to add to his tool collection to complete the job. Normally, Steve figured a wage rate of $6 per hour and charged 20 percent of labor and materials as an overhead rate. 1. prepare job order cost sheets for the two jobs, showing total cost. 2. conceptual connection: which cost do you think is more likely to be accurate? How might Steve build in some of the uncertainty of Ed’s job into a budgeted cost?
Lucia is a 69 year old single individual who receives a taxable pension of $10,000 per year and Social Security benefits of $7,000. Lucia is considering the possibility of selling stock she has owned for years and using the funds to purchase a summer home. She will realize a gain of $20,000 when she sells the stock, which has been paying $1,000 of dividends each year. Lucia says her brother recommended that she sell half of the stock this year and half next year because selling all of the stock at once would affect the tax treatment of her Social Securitiy benefits. a. Compute her AGI under the assumption she sells all of the stock now after receiving $1,000 dividends from the stock. b. Repeat the computation under the assumption she sells only half of the stock this year and also receives $1,000 dividends from the stock.
In March 2013, an explosion occurred at Kirk Co.’s plant, causing damage to area properties. By May 2013, no claims had yet been asserted against Kirk. However, Kirk’s management and legal counsel concluded that it was reasonably possible that Kirk would be held responsible for negligence, and that $4,000,000 would be a reasonable estimate of the damages. Kirk’s $5,000,000 comprehensive public liability policy contains a $400,000 deductible clause. In Kirk’s December 31, 2012 financial statements, for which the auditor’s fieldwork was completed in April 2013, how should this casualty be reported? A. As a note disclosing a possible liability of $4,000,000. B. As a note disclosing a possible liability of $400,000. C. No note disclosure of accrual is required for 2012 because the event occurred in 2013. D. As an accrued liability of $400,000.
The Miller Porter company sells powder coating equipment at a sales price of $50,000 per unit. The sales price includes delivery, installation, and initial testing of the equipment, as well as a monthly service call for one year in which a technician checks to make sure that the equipment is working properly and makes adjustments as needed. After the first year, customers are given the opportunity to enter into an extended service agreement; Miller Porter prices these extended service agreements to earn an expected gross profit of 50 percent. Given the wages paid to technicians and the time required to make a service call, the company estimates that the cost of providing each monthly service call is $200. Required: Develop a revenue recognition policy consistent with IAS 18 for The Miller Porter company for its sales of power coating equipment
Mr. Carter is the manager of Simmons Farm and Seed Company, a wholesaler of fertilizer, seed, and other farm supplies. The company has been successful in recent years primarily because of great customer service”flexible credit terms, customized orders (quantities, seed mix, etc), and on time delivery, among others. Global Agricultural Products, Inc., Simmons’ parent corporation, has informed Mr. Carter that his budgeted net income for the coming year will be $120,000. The budget was based on data for the prior year and Mr. Carter’s belief that there would be no significant changes in revenues and expenses for the coming period. After the determination of the budget, Carter received notice from Simmons’ principal shipping agent that it was about to increase its rates by 10%. This carrier handles 90% of Simmons’ total shipping volume. Paying the increased rate will result in failure to meet the budgeted income level, and Mr. Carter is understandably reluctant to allow that to happen. He is considering two alternatives. First, it is possible to use another carrier whose rates are 5% less than the old carrier’s original rate. The old carrier, however, is a subsidiary of a major customer; shifting to a new carrier will almost certainly result in loss of that customer and sales amounting to $70,000. Assume that prior to the recent rate increase, the shipping costs of the principal carrier and the other carriers were the same, and that costs of the other carriers are not expected to change. As a second alternative, Simmons can purchase its own trucks thereby reducing its shipping costs to 85% of the original rate. The new trucks would have an expected life of 10 years, no salvage value and would be depreciated on a straight line basis. Related fixed costs excluding depreciation would be $2,000. Assume that if Simmons purchases the trucks, Simmons will replace the principal shipper and the other shippers. Following are data from the prior year: Sales $1,500,000 Variable costs (excluding shipping) 1,095,000 Shipping costs 135,000 Fixed costs 150,000 REQUIRED: 1. Using cost volume profit analysis and the data provided, determine the maximum amount that Mr. Carter can pay for the trucks and still expect to attain budgeted net income. 2. At what price for the truck would Mr. Carter be indifferent between purchasing the new trucks and using a new carrier? 3. Mr. Carter has decided to use a new carrier, but now is worried its apparent lack of reliability may adversely affect sales volume. Determine the dollar amount of sales that Simmons can lose because of lack of reliability before any benefit from switching carriers is lost completely. 4. Describe what you think is the competitive strategy of Simmons Farm and Seed Company. What should be the strategy? How would the use of a new carrier affect the strategy? 5. Can Mr. Carter use value chain analysis to improve the profits of Simmons Farm and Seed Company? If so, explain how briefly.
What NCAA college basketball conferences have the higher probability of having a team play in college basketball’s national championship game? Over the last 20 years, the Atlantic Coast Conference (ACC) ranks first by having a team in the championship game 10 times. The Southeastern Conference (SEC) ranks second by having a team in the championship game 8 times. However, these two conferences have both had teams in the championship game only one time, when Arkansas (SEC) beat Duke (ACC) 76’70 in 1994 (NCAA website, April 2009). Use these data to estimate the following probabilities. a. What is the probability the ACC will have a team in the championship game (to 2 decimals)? b. What is the probability the SEC will have team in the championship game (to 2 decimals)? c. What is the probability the ACC and SEC will both have teams in the championship game (to 2 decimals)? d. What is the probability at least one team from these two conferences will be in the championship game? That is, what is the probability a team from the ACC or SEC will play in the championship game (to 2 decimals)? e. What is the probability that the championship game will not have a team from one of these two conferences (to 2 decimals)?
Need help with creating the Journal for the March transactions. I have a Journal written out but it doesn’t seem right even though the Cr. and Dr. balance out. The second 3/1 transaction dealing with Notes Payable are confusing, don’t know how to notate those in the journal; as well as the Additional Information section. I’ve copied chart of accounts for reference.
3/1 Owners of OPJ invested an additional $55,000 cash into the business. The cash is put into Big Bank.
3/1 Pay off the $40,000 Note Payable owed to Little Bank. The cash to pay off the note is taken out of Big Bank. Also pay to Little Bank $200 for interest owed on the Note Payable for February. The $200 cash is also taken out of Big Bank.
3/1 Take $4,000 cash out of Big Bank to pay for March’s rent.
3/2 The customer that purchased on credit on February 15 pays $78,000 cash to pay off the amount due. The cash is deposited into Big Bank.
3/10 Sale of inventory to a customer selling price is $65,000 cost of the inventory sold $12,000. The customer pays cash. The cash is deposited into Little Bank.
3/15 Take $26,000 cash out of Little Bank to pay employees for wages they have earned.
3/16 Purchase $70,000 of additional inventory. OPJ will pay the manufacturer 50% of the $70,000 in 10 days. OPJ will pay the remaining 50% in 30 days.
3/17 Sale of inventory to a customer selling price $120,000 cost of the inventory sold $27,000. The customer will pay for the purchase in 30 days.
3/20 Sale of inventoy to a customer selling price $70,000 cost of the inventory sold $14,000. The customer pays $15,000 cash that is deposited into Little Bank. The customer will pay the remaining amount in 30 days.
3/22 Purchase inventory for $30,000 cash. The cash is taken out of Big Bank.
3/26 Pay the manufacturer the 50% due on the March 16th purchase of inventory. The cash is taken out of Big Bank.
3/30 Take $25,000 cash out of Little Bank to pay employees for wages they have earned
**Additional Information** Note Payable Big Bank: Interest due to Big Bank on the Note Payable for the month of March is $600. As of March 31st, OPJ owes Big Bank a total of $1,125 for interest ($525 for Feb. + $600 for March). Interest will be paid to Big Bank in June.
Tweety Company manufactures one model of birdbath, which is very popular. Tweety sells all units it produces each month. The relevant range is 0’2,100 units, and monthly production costs for the production of 1,600 units follow. Tweetys utilities and maintenance costs are mixed with the fixed components shown in parentheses.
Production Costs
Amount
Direct materials
$
2,300
Direct labor
6,900
Utilities ($130 fixed)
590
Supervisors salary
2,800
Maintenance ($290 fixed)
490
Depreciation
850
Requirement 1:
Express each cost as a rate per month or per unit (or combination thereof). (Round per unitvalue to 2 decimal places. Omit the “$” sign in your response.)
Production Costs
Rate
Direct materials
$
per unit
Direct labor
$
per unit
Utilities
$
per month
$
per unit
Supervisor’s Salary
$
per month
Maintenance
$
per month
$
per unit
Depreciation
$
per month
Requirement 2:
Determine the total fixed cost per month and the variable cost per unit for Tweety. (Round your variable cost to 2 decimal places. Omit the “$” sign in your response.)
A new furnace for your small factory will cost $36,000 to install and will require ongoing maintenance expenditures of $1,000 a year. But it is far more fuel efficient than your old furnace and will reduce your consumption of heating oil by 3,300 gallons per year. Heating oil this year will cost $2 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years, at which point it will need to be replaced and will have no salvage value. The discount rate is 6%. a. What is the net present value of the investment in the furnace? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $ b. What is the IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) IRR % c. What is the payback period? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Payback period years d. What is the equivalent annual cost of the furnace? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual cost $ e. What is the equivalent annual savings derived from the furnace? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Equivalent annual savings $
Nike 10 K Problem 7 46 Budgeting Assumptions at Nike Examine Nikes 2008 10 K presented in Appendix C. find the section of the 10 K titled “Results of Operations” showing a condensed income statement for fiscal years 2006, 2007, and 2008. Appendix C: “Results Of Operations:” FY08 vs. FY07 FY07 vs. FY06 Fiscal 2008 Fiscal 2007 % Change Fiscal 2006 % Change Revenues $18,627.0 $16,325.9 14% $14,954.9 9% Cost of sales 10,239.6 9,165.4 12% 8,367.9 10% Gross margin 8,387.4 7,160.5 17% 6,587.0 9% Gross margin % 45.0% 45.9% 44.0% Selling and administrative expense 5,953.7 5028.7 18% 4,477.8 12% % revenues 32.0% 30.8% 9.9% Income before income taxes 2,502.9 2,199.9 14% 2,141.6 3% Net income 1,883.4 1,491.5 26% 1,392.0 7% Diluted earnings per share 3.74 2.93 28% 2.64 11% Use the condensed income statement to calculate budgeted net income for fiscal 2009 under the following alternative sets of assumption. 1. Note that Nikes revenues have increased by about 10% per year for each of the last 2 years. Assume cost of sales is 55% revenue, selling and administrative expense is 32% of revenue and income tax expense is 25% of income before income taxes. Assume that all costs are variable. a. Calculate budgeted net income if revenue increases by 10% b. Calculate budgeted net income if revenue decreases by 10% 2. Assume cost of sales is a variable cost and is 55% of revenue, selling and administrative expense is fixed, and income tax expense is a variable and is 25% of income before income taxes. a. Calculate budgeted net income if revenue increases by 10% b. Calculate budgeted net income if revenue decreases by 10% 3. Note that Nikes gross margin was 45% in fiscal 2008 but was slightly lower in 2006 and 2007, at 44% and 43.9%, respectively. Assume revenue for 2009 will be the same as in 2008, selling and administrative expense is a fixed cost of $5,954 million, and income tax expense is 25% of income before income taxes. a. Calculate budgeted net income if the gross margin increases to 46% b. Calculate budgeted net income if the gross margin decreases to 44%
Note: This is a continuation of the Waterways Problem from Chapter 1.) Waterways has two major public park projects to provide with comprehensive irrigation in one of its service locations this month. Job J57 and Job K52 involve 15 acres of landscaped terrain which will require special order sprinkler heads to meet the specifications of the project. Using a job cost system to produce these parts, the following events occurred during December 2010. Raw materials were requisitioned from the company’s inventory on December 2 for $5,061; on December 8 for $1,059; and on December 14 for $3,459. In each instance, two thirds (2/3) of these materials were for J57 and the rest for K52. Six time tickets were turned in for these two projects for a total amount of 18 hours of work. All the workers were paid $16.50 per hour. The time tickets were dated December 3, December 9, and December 15. On each of those days, 6 labor hours were spent on these jobs, two thirds (2/3) for J57 and the rest for K52. The predetermined overhead rate is based on machine hours. The expected machine hour use for the year is 2.112 hours, and the anticipated overhead costs are $840,576 for the year. The machine were used by workers on projects K52 and J57 on December 3, 9, and 15. Six machine hours were used for project K52 (2 each day), and 8.5 machine hours were used for project J57 (2.5 the first day and 3 each of the other days). Both of these special orders were completed on December 15, producing 237 sprinkler heads for J57 and 142 sprinkler heads for K52. Additional job order activities during this period of time included: Dec. 1 Purchased raw materials from Durbin Supply Company on account for $53,200. Dec. 2 Issued $40,000 of direct materials from the company’s inventory to jobs other than K52 and J57 and $3,000 of indirect materials. Dec. 12 Paid Waterways’ factory salaries and wages in the amount of $65,000. Dec. 13 Paid the factory’s water bill of $9,000. Dec. 18 Transferred $50,000 of costs from other completed jobs to finished goods. Dec. 21 Paid the factory’s electric bill of $12,000 for Waterways’ factory. Dec. 31 Made adjusting entries for the factory that included accrued property taxes of $12,000, prepaid insurance of $8,800, and accumulated depreciation of $16,000. Instructions (a) Set up the job cost sheets for Job No. J57 and Job No. K52. Determine the total cost for each manufacturing special order for these jobs. (Round unit cost to nearest cent.) (b) Journalize the activities from these job cost sheets in the general journal. Also journalize the other costs that occurred during this period of time . (c) Assuming that Manufacturing Overhead has a debit balance of $3,600, determine whether overhead has been under/over applied and make the adjusting entry. (d) Why would Waterways choose machine hours as the cost driver for the overhead rather than direct labor cost? What would Waterways be likely to choose as the cost driver for the overhead for the job of installing the irrigation system and why?
On October 31, 2012, the general ledger of The Dean Acting Academy shows a balance for cash of $6,920. Cash receipts yet to be deposited into the checking account total $5,540, while checks written by the academy but not yet processed by the bank total $4,205. The companys balance of cash does not reflect a bank service charge of $8 and interest earned on the checking account of $3. These amounts are included in the balance of cash of $5,580 reported by the bank as of the end of October. Answer the following based on the process of doing the bank reconciliation: Determine the total amount that is used to reconcile the Bank balance (include “‘” if needed)? Determine the total amount that is used to reconcile the Company cash balance (include “‘” if needed)? What is the balance in the companys cash account after the reconciliation?
The owner of a bicycle repair shop forecasts revenues of $240,000 a year. Variable costs will be $70,000, and rental costs for the shop are $50,000 a year. Depreciation on the repair tools will be $30,000. Prepare an income statement for the shop based on these estimates. The tax rate is 30%. (Input all amounts as positive values.) INCOME STATEMENT (Click to select)Depreciation Rental costs Variable costs Pretax profitRevenue $ _____ (Click to select )Pretax profit, Depreciation, Variable costs, Revenue, Rental costs $_____ (Click to select)Rental costs, Depreciation, Pretax profit, Revenue, Variable costs $______ (Click to select)Pretax profit, Revenue, Rental costs, Variable costs, Depreciation $______ (Click to select)Depreciation,Variable costs, Rental costs, Pretax profit, Revenue $_____ (Click to select)Revenue, Depreciation, Pretax profit, Taxes, Rental costs $_______ (Click to select)Net loss, or Net income $ _________
For the past several years, Emily Page has operated a part time consulting business from her home. As of June 1, 2010, Emily decided to move to rented quarters and to operate the business, which was to be known as Bottom Line Consulting, on a full time basis. Bottom Line Consulting entered into the following transactions during June: The following assets were received from Emily Page: cash, $20,000; accounts receivable, $4,500; supplies, $2,000; and office equipment, $11,500. There were no liabilities received. 1. Paid three months rent on a lease rental contract, $6,000. 2. Paid the premiums on property and casualty insurance policies, $2,400. 4. Received cash from clients as an advance payment for services to be provided and recorded it as unearned fees, $2,700. 5. Purchased additional office equipment on account from Office Depot Co., $3,500. 6. Received cash from clients on account, $3,000. 10. Paid cash for a newspaper advertisement, $200. 12. Paid Office Depot Co. for part of the debt incurred on June 5, $750. June 12. Recorded services provided on account for the period June 1’12, $5,100. 14. Paid part time receptionist for two weeks salary, $1,100. 17. Recorded cash from cash clients for fees earned during the period June 1’16, $6,500. 18. Paid cash for supplies, $750. 20. Recorded services provided on account for the period June 13’20, $3,100. 24. Recorded cash from cash clients for fees earned for the period June 17’24, $5,150. 26. Received cash from clients on account, $6,900. 27. Paid part time receptionist for two weeks salary, $1,100. 29. Paid telephone bill for June, $150. 30. Paid electricity bill for June, $400. 30. Recorded cash from cash clients for fees earned for the period June 25’30, $2,500. 30. Recorded services provided on account for the remainder of June, $1,000. 30. Emily withdrew $5,000 for personal use. 4. At the end of June, the following adjustment data were assembled. Analyze and use these data to complete parts (5) and (6). a. Insurance expired during June is $200. b. Supplies on hand on June 30 are $650. c. Depreciation of office equipment for June is $250. d. Accrued receptionist salary on June 30 is $220. e. Rent expired during June is $2,000. f. Unearned fees on June 30 are $1,875. I need to figure out the unearned fees
Pine valley furniture recently implemented a new internship program and has begun recruiting interns from nearby university campuses. As part of this program, interns have the opportunity to work alongside a systems analysis. This shadowing opportunity provides invaluable insights into the systems analysis and design process. recently you were selected for a six month internship at pine valley furniture, and Jim Woo has been assigned as your supervisor. At an initial meeting with Jim, he explains that pine valley furniture is currently involved with two important systems development projects, the customer tracking system and webstore. The purpose of the Customer tracking systems is to enable the PVF marketing group to track customer purchase activity and sales trends better. The webstore project will help move the company in to the twenty first century by facilitating online furniture purchases, with an initial focus on corporate furniture buying. During your meeting with Jim, he reviews the documentation assembled for both systems, Mr. Woo hands you a copy of the Customer Tracking System’s economic feasibility analysis. He mentions that he would like to modify the spreadsheet to reflect the information provided in the following table. Because you are familiar with spreadsheet products, you volunteer to make the modifications for him. Net economic benefit $0 $50,000 $50,000 $50,000 $50,000 $50,000 One time cost $47,500 Recurring Cost $0 $32,000 $32,000 $32,000 $32,000 $32,000 a How were pine valley furniture’s projects indicated? What is the focus for each of the new systems? b Modify the customer tracking system s economic feasibility analysis to reflect the modifications mentioned in this case problem. Use a discount rate of 10 percent. After the changes are made, what are the new overall NPV, ROI, and BEP? c Modify the worksheet created in part b using discount rates of 12 and 14 percent. What impact do these values have on the overall NPV, ROI, and BEP? d Jim Woo would like to investigate how other online stores are targeting the business furniture market, identify and evaluate two online stores that sell business furniture. Briefly summarize your findings
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a commission of 13% of selling price for all items sold. Barbara Cheney, Pittmans controller, has just prepared the companys budgeted income statement for next year. The statement follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $16,010,000 Manufacturing costs: Variable $7,180,000 Fixed overhead 2,190,000 9,370,000 Gross margin 6,640,000 Selling and administrative costs: Commissions to agents 2,081,300 Fixed marketing costs 101,000* Fixed administrative costs 1,670,000 3,852,300 Net operating income 2,787,700 Fixed interest cost 534,000 Income before income taxes 2,253,700 Income taxes (30%) 676,110 Net income $1,577,590 *Primarily depreciation on storage facilities. As Barbara handed the statement to Karl Vecci, Pittmans president, she commented, “I went ahead and used the agents 13% commission rate in completing these statements, but weve just learned that they refuse to handle our products next year unless we increase the commission rate to 18%.” “Thats the last straw,” Karl replied angrily. “Those agents have been demanding more and more, and this time theyve gone too far. How can they possibly defend a 18% commission rate?” “They claim that after paying for advertising, travel, and the other costs of promotion, theres nothing left over for profit,” replied Barbara. “I say its just plain robbery,” retorted Karl. “And I also say its time we dumped those guys and got our own sales force. Can you get your people to work up some cost figures for us to look at?” “Weve already worked them up,” said Barbara. “Several companies we know about pay a 6.5% commission to their own salespeople, along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed costs would increase by $2,081,300 per year, but that would be more than offset by the $2,881,800 (18% Af— $16,010,000) that we would avoid on agents commissions.” The breakdown of the $2,081,300 cost follows: Salaries: Sales manager $110,000 Salespersons 618,000 Travel and entertainment 408,000 Advertising 945,300 Total $2,081,300 “Super,” replied Karl. “And I noticed that the $2,081,300 is just what were paying the agents under the old 13% commission rate.” “Its even better than that,” explained Barbara. “We can actually save $79,000 a year because thats what were having to pay the auditing firm now to check out the agents reports. So our overall administrative costs would be less.” “Pull all of these numbers together and well show them to the executive committee tomorrow,” said Karl. “With the approval of the committee, we can move on the matter immediately.” Requirement 1: Compute Pittman Companys break even point in sales dollars for next year assuming: (a) The agents commission rate remains unchanged at 13%. (Round contribution ratio (%) to 3 decimal places, e.g., .1234 as .123 or 12.3%. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Break even point in sales dollars $ (b) The agents commission rate is increased to 18%. (Round contribution ratio (%) to 3 decimal places, e.g., .1234 as .123 or 12.3%. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Break even point in sales dollars $ (c) The company employs its own sales force. (Round contribution ratio (%) to 3 decimal places, e.g., .1234 as .123 or 12.3%. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Break even point in sales dollars $ Requirement 2: Assume that Pittman Company decides to continue selling through agents and pays the 18% commission rate. Determine the volume of sales that would be required to generate the same net income as contained in the budgeted income statement for next year. (Round contribution ratio (%) to 3 decimal places, e.g., .1234 as .123 or 12.3%. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Volume of sales $ Requirement 3: Determine the volume of sales at which net income would be equal regardless of whether Pittman Company sells through agents (at a 18% commission rate) or employs its own sales force. (Round contribution ratio (%) to 3 decimal places, e.g., .1234 as .123 or 12.3%. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Volume of sales $ Requirement 4: Compute the degree of operating leverage that the company would expect to have on December 31 at the end of next year assuming:(Round your answers to 2 decimal places.) (a) The agents commission rate remains unchanged at 13%. (b) The agents’ commission rate increased to 18%. (c) The company employs its own sales force. Requirement 5: Make a recommendation as to whether the company should continue to use sales agents (at a 18% commission rate) or employ its own sales force.
On Point, Inc., is interested in producing and selling a deluxe electric pencil sharpener. Market research indicates that customers are willing to pay $40 for such a sharpener and that 20,000 units could be sold each year at this price. The cost to produce the sharpener is currently estimated to be $34. a. If On Point requires a 23 percent return on sales to undertake production of a product, what is the target cost for the new pencil sharpener?(Round your answers to 2 decimal places. Omit the “$” sign in your response.) Target cost $ b. If a competitor sells basically the same sharpener for $36, what would On Point’s target cost be to maintain a 23 percent return on sales?(Round your answers to 2 decimal places. Omit the “$” sign in your response.) Target cost $
Power Brite Painting Company specializes in refurbishing exterior painted surfaces that have been hard hit by humidity and insect debris. It uses a special technique, called pressure cleaning, before priming and painting the surface. The refurbishing process involves the following steps: Unskilled laborers trim all trees and bushes within two feet of the structure. Skilled laborers clean the building with a high pressure cleaning machine, using about 6 gallons of chlorine per job. Unskilled laborers apply a coat of primer. Skilled laborers apply oil based exterior paint to the entire surface. On average, skilled laborers work 12 hours per job, and unskilled laborers work 8 hours. The refurbishing process generated the following operating results during the year on 628 jobs:
Luminous Publishing, Inc., is a book publisher. The following selected investment transactions occurred during 2013:
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, 2012, are as follows:
Note 2. The investment in Quest Co. stock is anequity method investment representing 32% of the outstanding shares of Quest Co.
The comparative unclassified balance sheets for December 31, 2013 and 2012 are provided below. Selected balances are missing. Determine the missing amounts. Enter all amounts as positive numbers. Do not round interim calculations. Round final answers to nearest dollar.
Luminous Publishing, Inc.
Balance Sheet
December 31, 2013 and 2012
Dec. 31, 2013
Dec. 31, 2012
Cash
$178,000
$157,000
Accounts receivable (net)
106,000
98,000
Available for sale investments (at cost) Note 1
$ Correct 13
$ 53,400
Less valuation allowance for available for sale investments
Correct 16
3,900
Available for sale investments (fair value)
$ Correct 19
49,500
Interest receivable
$ Correct 22
Investment in Quest Co. stock Note 2
Correct 24
$ 55,000
Office equipment (net)
90,000
95,000
Total assets
$ Correct 30
$454,500
Accounts payable
$ 56,900
$ 51,400
Common stock
50,000
50,000
Excess of issue price over par
160,000
160,000
Retained earnings
Correct 42
197,000
Unrealized gain (loss) on available for sale investments
Precision Manufacturing Inc. (PMI) makes two types of industrial component parts the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: EX300 TX500 Total Direct materials $366,325 $162,550 $528,875 Direct labor $120,000 $42,500 $162,500 The company is considering implementing an activity based costing system the distributes all of its manufacturing overhead to four activities as shown below: Activity Cost Pool(and activity measure) Manufacturing overhead Activity EX300 TX500 Total Machining(machine hour) $198,250 90,000 62,500 152,500 Setups(setup hours) 150,000 75 300 375 Product level(number of products) 100,250 1 1 2 General factory(direct labor dollars) 60,125 120,000 42,500 162,500 Total manufacturing overhead cost 508,625 REQUIRED: 1. Compute the plantwide overhead rate that would be used in the companys conventional cost system. Using the plantwide rate, compute the unit product cost for each product. 2. Compute the activity rate for each activity cost pool. Using the activity rates, compute the unit product cost for each product. 3. Why do the conventional and activity based cost assignments differ from one another?
In preparing for a meeting the controller accumulated the following data. Beginning inventory 25,000 Units produced 100,000 Units sold 105,000 Fixed manufacturing overhead $400,000 Direct materials per unit $25.00 Direct labor per unit $35.00 Variable manufacturing overhead per unit $15.00 A. Computer the cost per unit, using absorption costing. B. Computer the cost per unit, using variable costing. C. Computer the difference in net income between the two methods. Which costing method results in the higher net operating income? D. Assume that production was 100,000 units and sales were 70,000 units. What would be the difference in the methods? Which costing method shows the greater net operating income? E. Assume that production was 100,000 units and sales were 100,000 units. What would be the two methods? F. Which methods is required by generally accepted accounting principles?
Herbal Care Corp., a distributor of herb based sunscreens, is ready to begin its third quarter, in which peak sales occur. The company has requested a $52,900, 90 day loan from its bank to help meet cash requirements during the quarter. Because Herbal Care has experienced difficulty in paying off its loans in the past, the loan officer at the bank has asked the company to prepare a cash budget for the quarter. In response to this request, the following data have been assembled: a. On July 1, the beginning of the third quarter, the company will have a cash balance of $41,000. b. Actual sales for the last two months and budgeted sales for the third quarter follow (all sales are on account): May (actual) $230,000 June (actual) $260,000 July (budgeted) $580,000 August (budgeted) $620,000 September (budgeted) $520,000 Past experience shows that 25% of a months sales are collected in the month of sale, 69% in the month following sale, and 1% in the second month following sale. The remainder is uncollectible. c. Budgeted merchandise purchases and budgeted expenses for the third quarter are given below: July August September Merchandise purchases $236,000 $343,000 $158,000 Salaries and wages $50,000 $30,000 $32,000 Advertising $130,000 $131,000 $79,000 Rent payments $8,000 $7,600 $8,300 Depreciation $8,600 $8,400 $9,400 Merchandise purchases are paid in full during the month following purchase. Accounts payable for merchandise purchases on June 30, which will be paid during July, total $211,000. d. Equipment costing $8,600 will be purchased for cash during July. e. In preparing the cash budget, assume that the $52,900 loan will be made in July and repaid in September. Interest on the loan will total $1,010. Requirement 1: Prepare a schedule of expected cash collections for July, August, and September and for the quarter in total. (Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response) Month July August September Quarter From accounts receivable: May sales $ $ $ $ June sales From budgeted sales: July sales August sales September sales Total cash collections $ $ $ $ Requirement 2: Prepare a cash budget, by month and in total, for the third quarter. (Show deficiencies, and total financing preceded by a minus sign wherever appropriate. Enter all other amounts as positive values. Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.) Month July August September Quarter Total cash available $ $ $ $ Total disbursements Excess (deficiency) of receipts over disbursements Total financing Cash balance, ending $ $ $ $ Requirement 3: If the company needs a minimum cash balance of $19,000 to start each month, can the loan be repaid as planned?
Problem 4–14 Comprehensive Problem—Weighted Average Method [LO2, LO3, LO4, LO5]
Honeybutter, Inc., manufactures a product that goes through two departments prior to completion the Mixing Department followed by the Packaging Department. The following information is available about work in the first department, the Mixing Department, during June.
Physical
Percent Completed
Units to Account For:
Units
Materials
Conversion
BWIP
70,000
70%
40%
Units Started
460,000
Completed & T/O
450,000
EWIP
80,000
75%
25%
Costs to Account For:
Materials
Conversion
BWIP
$36,550
$13,500
Cost added during period
391,850
287,300
Required:
Assume that the company uses the weighted average method.
Determine the equivalent units for June for the Mixing Department.
Compute the costs per equivalent unit for June for the Mixing Department.
Determine the total cost of ending work in process inventory and the total cost of units transferred to the Packaging Department.
Prepare a cost reconciliation report for the Mixing Department for June.
Gray & Greene Company is a relatively small private company with annual sales of $25,000,000, on a total asset base of $18,000,000. The company manufactures specialized parts for larger corporations in the automobile, energy, and home products industries. For instance, the company produces the control switch for automobile power seats, a fuel gage monitor for gasoline pumps, and a thermostat switch for appliances such as refrigerators and air conditioners. The company employs about 80 people and generally runs two and sometimes three production shifts five days a week. A maintenance crew works on Saturdays to keep machines in working order.
Mike Gray the company CEO is a second generation owner of the company. He took over as head of the company after his father retired in 19×5. Mike is a firm believer in specialty work. Since his company specializes and has expertise in certain types of products, Mike feels they should contract out to specialists for other areas of need. The company does not have a finance officer or personnel officer. Mike hired a personnel agency for all hiring and pension programs, and an accounting firm to maintain accounting records. Mike and Bob Greene, the COO, still have final authority and decision making power over the major personnel and accounting related activities and have worked well in this relationship for a number of years. By leaving much of this administrative type work to specialized agencies, Mike and Bob have been able to concentrate their efforts into product development and production of their unique products.
Customers have been very pleased with the quality of the product produced by Gray & Greene as well as the reliability of delivery and performance. There products have always been very cost competitive, and the company never lacks for business.
Mike has an administrative assistant, Gloria Wong, who oversees the accounting activities and works as an intermediary between the accounting service and Gray & Greene. Gloria keeps track of regular activities such as employee hours, and supply usage and sends required information and forms to the accounting service. The accounting service regularly transfers the information into various accounting reports. At the end of the year, the accounting service does a detailed analysis of the company operation and performance and develops the annual financial statements.
Kevin Butler, a newly hired MBA for Bean Counters Accounting Service, will be assisting on his first annual review of the Gray & Greene annual financial statements. Specifically, he has been given the responsibility to reconstruct and develop the records for the company’s long term assets.
During the year, Mike Gray had performed several activities related to Gray & Greene in the area of long term assets. Recent technology had made some of the machines used in the manufacturing process obsolete. New machines were purchased. There was also some selling, disposing, and trading of older machines as products changed and new customers wanted new designs and processes. Mike had saved all the records related to fixed asset transactions and asked Gloria to relate this information to Kevin. Kevin was responsible for insuring that these activities were properly reported for accounting purposes and incorporated into the financial statements for the 20×7 calendar year.
(1) Kevin and Gloria got together with the documentation and began to review the long term asset activities. On January 15, 20×7, the company disposed of a stamping machine. The machine was originally purchased on January 15, 20×0 for $84,000. The machine was estimated to have a useful life of 10 years with a zero salvage value. (Note: Gray & Greene use a straight line method of depreciation for all long term assets unless otherwise noted.) No effort was made to sell or trade the machine because the machine was broken beyond repair. $100 was also paid to a salvage company to disassemble and remove the machine from the plant.
(2) The next activity occurred on February 1, 20×7. A molding machine was purchased for $247,000. The machine cost an additional $10,000 to have it shipped to the plant. Once on location, the company had $5,000 in installation and operating costs before the machine was ready to begin full operation. Two employees went to a one day training school to learn how to operate the new machine at a cost of $1,400. The molding machine has an 8 year useful life and a salvage value of $22,000. The company paid cash for the shipping, installation, and training charges plus $25,000 for the machine. The balance due on the machine was set up with a note payable.
(3) On March 1, 20×7, a cutting machine was traded in for a similar new computerized cutting machine. The old machine, which originally cost $130,000, had been at the company since January 1, 20×1 and had 1 year and 10 months of useful life remaining. The salvage value of the old machine was estimated at $10,000, but the company received $36,000 as a trade in value. The new machine cost $280,000, which included delivery and installation. The new machine has an expected life of 10 years at which time it could probably be sold for $40,000. The company made a down payment of $20,000 and signed a five year note payable for the balance due.
(4) April 1, 20×7 a pressing machine was sold for $71,000. It originally cost $185,000 and had a book value on December 31, 20×6 of $72,500. The annual depreciation for this machine was $18,000. The machine was expected to have a $5,000 salvage value in about four years.
(5) To celebrate April 15, 20×7, the company acquired a new utility van, which would be used to pick up and deliver parts to customers and suppliers in the immediate vicinity. The van has a sticker price of $37,595, but the company was able to secure the vehicle for $35,000. The van will probably have a useful life of 5 years with a book value of $5,000 at the end of that time. The company paid $7,000 and signed a 3 year note for the balance due.
(6) On May 1, 20×7 an old pressing machine was traded in for a new computerized processing machine. These machines were used on different production lines and considered as dissimilar equipment. The old pressing machine cost $157,000 when it was purchased on May 1, 20×3 and had a useful life of 8 years with a salvage value of $13,000. A $90,000 trade in allowance was given for the pressing machine. The new processing machine had a list price of $350,000, but only cost the company $260,000 after the trade in. The new machine had a nine year useful life with a $26,000 salvage value. The company paid $52,000 down and signed a note payable for the balance due.
(7) August 1, 20×7 the company had to complete a major overhaul on an assembly machine. The machine had been purchased for $430,000 on August 1, 20×2. The machine was expected to last for 12 years with a $70,000 salvage value. If the repairs had not been completed, the machine would not function efficiently in the company and would have to be disposed for its parts, which would have brought the company about $30,000. The cost of the repairs was $33,000, but the overhaul was expected to add 2 years onto the remaining life of the machine. The repairs were paid for in cash.
(8) On September 1, 20×7 the company traded in a sorting machine which had cost $135,000 when purchased on March 1, 20×0 for a similar new sorting machine with a purchase price of $210,000. The old machine had a ten year useful life with a $15,000 salvage value. Gray & Greene received $52,000 as a trade in value on the old machine. The new sorting machine is expected to have an eight year life with an $11,000 salvage value. The company paid $40,000 in cash and signed a 3 year note for the balance due.
(9) A spray machine was purchased on October 1, 20×7. The cost of the machine was $165,000. The terms of the agreement were fob destination and the shipping costs were $3,000. The area of the building in which this machine was located had to be specially ventilated and partitioned to control fumes and dust. The cost of the building refurbishing was $35,000. The company used their own maintenance employees to complete the job as part of their regular work schedule, and their cost of the refurbishing was an additional $12,000. The machine had an eight year life with a salvage value of $20,000. The company paid cash to have the building refurbished, signed a note for $125,000 and paid cash for the balance due on the machine.
(10) On November 1, 20×7 a molding machine needed a replacement part. The cost of the part was $8,400, which the company paid for in cash. The purchase price of the machine on November 1, 20×6 was $232,000 and it had an eight year useful life with a $40,000 salvage value. This part was not expected to increase the useful life of the machine. This part typically breaks down after four years, so the fact that it only lasted one year was a concern. The company can expect to replace this part again in four years or less.
Required:
Complete all required journal entries for each of the long term activities, which took place during 20×7. Remember to account for the appropriate depreciation expense for the year on any of the long term assets. (The activities are numbered in bold to make it easier to follow.)
An investor holds two stocks, each of which can rise (R), remain unchanged (U), or decline (D) on any particular day. Let x equal the number of stocks that rise on the particular day. Find A?µx and ?x for the following cases. (a) The probability distribution of x assuming that all outcomes are equally likely. (Round your answers to 3 decimal places. State your answer of A?µx and ? x as reduced fraction.) A?µx = / ? x = / (b) The probability distribution of x assuming that for each stock P(R) = .6, P(U) = .1, and P(D) = .3 and assuming that movements of the two stocks are independent. (Round your answers to 3 decimal places.) A?µx = ?x = c) The probability distribution of x assuming that for the first stock P(R) = .4, P(U) = .2, P(D) = .4 and that for the second stock P(R) = .8, P(U) = .1, P(D) = .1 and assuming that movements of the two stocks are independent. (Round your answers to 3 decimal places.) A?µx = ?x =
James Rowe, CPA, is the independent auditor of Raleigh Corporation. Rowe is considering the audit work to be performed in the accounts payable area for the current year’s engagement. The prior year’s working papers show the confirmation requests were mailed to 100 of Raleigh’s 1,000 supplies. The selected suppliers were based on Rowe’s sample that was designed to select accounts with large dollar balances. A substantial number of hours were spent by Raleigh employees and by Rowe resolving relatively minor differences between the confirmation replies and Raleigh’s accounting records. Alternative audit procedures were used for those supplies that did not respond to the confirmation requests. Required: a. Identify the accounts payable audit objectives the Rowe must consider in determining the audit procedures to be followed. b. Identity situations in which Rowe should use accounts payable confirmations and discuss whether Rowe is required to use them. c. Discussion why the use of large dollar balances as the basis for selecting accounts payable for confirmation might not be the most efficient approach, and indicate what more efficient procedures could be followed when selecting accounts payable for confirmation. Chapter sixteen Debt and Equity Capital Stan Jones, CPA, the continuing auditor of Sussex, Inc. is beginning the audit of the common stock and treasury stock accounts. Jones has decided to design substantive procedures with the risk of material misstatement specified at a high level. Sussex has no par, no stated value common stock and acts as its own registrar and transfer agent. During the past year Sussex both issued and reacquired shares of its own common stock, some of which the company still owned at year end. Additional common stock transactions occurred among the shareholders during the year. Common stock transactions can be traced to individual shareholders’ accounts in a subsidiary ledger and to a stock certificate book. The company has not paid cash or stock dividends. There are no other classes of stock, stock rights, warrants, or option plans Required: What substantive audit procedures should Jones apply in examining the common stock and treasury stock accounts? Work up homework and post in Drop box
On January 1, 2010, Hays Corporation arranged a $3,000 line of credit with the Barnett Bank. It agreed to accept the bank’s offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. Hays began its loan transactions with Barnett Bank by borrowing $1,000 on January 1, 2010. On January 1, 2011, Hays borrowed an additional $1,000 from Barnett Bank, bringing the total amount borrowed to $2,000. On January 1, 2012, Hays paid $500 on the principal of the loan. On December 31, 2012, Hays records the 2012 interest payment. The prime rate for 2012 was 5%. Which of the following answers shows the effect of the 2012 interest payment on the financial statements? Assets, 75 or 90? Liabilities NA, (75) or (90), Equity NA 90 or 70 Revenue NA, Expenses NA, 75 or 90?, Net Income NA, 75 or 90, and Cash 75 FA, 75 OA, 90 FA, 90 OA?
On January 1, 2012, Kristen Corporation had the following stockholders’ equity accounts. Common stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000, Paid in Capital in Excess of Par Common Stock 200,000 and Reatained Earnings 600,000. During the Year, the following transactions occured. Feb 1 Declared $1 cash dividend per share to stockholders of record on February 15, payable March 1 Mar 1 Paid the dividend declared in Feb Apr 1 Announced a 2 for 1 stock split. Prior to the split, the market price per share was $36 Jul 1 Declared a 10% stock dividend to stockholders of record on jul 15, distributable jul 31. On July 1, the market price of the stock was $13 Jul 31 Issued the shares for the stock dividend Dec 1 Declared $0.50 per share dividend to stockholders of record on December 15, payable Jan 5, 2015 Dec 31 Determined that net income for the year was $350,000 Instructions A. Journalize the transactions and the closing entry for net income B. Enter the beginning balances, and post these entries to the stockholders’ equity accounts C. Prepare a stockholders’ equtiyt section at Dec 31.
Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couples joint year 2 tax return and each spouses separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewellas separate year 3 tax return understated Crewellas self employment income causing the joint return year 2 tax liability to be understated by $3,600 and Crewellas year 3 separate return tax liability to be understated by $10,100. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. a. What amount of tax can the IRS require Jasper to pay for the Dahvills year 2 joint return? b. What amount of tax can the IRS require Jasper to pay for Crewellas year 3 separate tax return?
Javadi Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job order costing system and computes predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below: Quarter First Second Third Fourth Direct materials $ 160,000 $ 80,000 $ 40,000 $ 120,000 Direct labor 80,000 40,000 20,000 60,000 Manufacturing overhead 240,000 216,000 204,000 ? Total manufacturing costs (a) 480,000 $ 336,000 264,000 $ ? Number of units to be produced (b) 160,000 80,000 40,000 120,000 Estimated unit product cost (a Af· b) $ 3.00 $ 4.20 $ 6.60 $ ? Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product. Required: 1 a. Using the high low method, estimate the fixed manufacturing overhead cost per quarter and the variable manufacturing overhead cost per unit. Fixed manufacturing overhead cost $______ per quarter Variable manufacturing overhead $ ______ per unit 1 b. Compute the total manufacturing overhead cost, total manufacturing cost and unit product cost for the fourth quarter. Total manufacturing overhead cost $ _______ Total manufacturing cost $_______ Unit product cost $ _________
Julia Katchum is in charge of the Eastern Regional Counterterrorism Computer Forensics Unit. Her recent investigations led her to believe that an imminent threat of a terrorist act in the Chicago area exists. She did not know much about the attack except that at least four terrorists were involved, and one of them had just made a phone call from inside the main offices of Stevenson and Barnes International Accounting Firm. Her immediate task was to proceed directly to Stevens and Barnes with an eight person tactical team including a counterterrorism field officer to apprehend the suspect. Julias primary mission was to search the suspects office and home computers and find any information that could help thwart the attack. It was though the attack could take place before the day was over. When Julia and the CTU (counterterrorism unit) team arrived at the accounting firm, only the CTU officer went inside to avoid drawing undue attention. Inside, the CTU officer surreptitiously spoke to the security guard at the front desk and asked to be escorted to the office of the head of security. Once there, the CTU officer used the buildings surveillance cameras to locate the suspect who was in the center of a very large room full of staff accountants working in individual cubicles. The CTU officer decided against sending in the entire team and to make the arrest alone. There was too big a chance that the suspect could see the team coming at him because of his position in the center of the room. If he saw them coming, he could have time to delete valuable evidence or to notify other terrorists. The CTU officer worked his way through the cubicles in as casual a way as possible, but when he got half way to his destination the suspect seemed to identify him and began typing frantically on his computer. When the CTU officer realized what the suspect was doing, he ran the rest of the way and stopped the suspect by pressing his 10mm pistol into the side of the mans head. The CTU raided the suspects home at the same moment he was arrested. Just a few minutes later, the officer in charge of that raid delivered the notebook computer to John Dobson, CTUs forensic accountant, as he was just beginning to look over the suspects computer in the Stevens and Barnes offices. John noted the following facts: ‘ The suspects office computer had opened an instant messenger program. He could see a piece of a message written in Arabic. ‘ The battery in the home notebook computer was warm, even though it was turned off and not plugged in when it was seized. What approach should John take in examining the two computers? What are some specific things that he should include in his examination?
Julian Company is a job order costing firm that uses a plantwide overhead rate based on direct labor hours. Estimated information for the year is as follows: Overhead Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦$665,000 Direct labor hours Ac€¦Ac€¦Ac€¦.100,000 Julian worked on five jobs in July. Data are as follows: Job 210 Job 211 Job 212 Job 213 Job 214 Balance, July 1 $32,780 $51,770 $29,600 $ 0 $ 0 Direct materials $25,500 $39,800 $24,450 $13,600 $18,420 Direct labor cost $60,000 $28,500 $41,500 $23,000 $21,300 Direct labor hours 4,000 1,900 2,700 1,500 1,400 By July 31, Jobs 210 and 212 were completed and sold. The remaining jobs were in process. Required: 1. Calculate the plantwide overhead rate for Julian Company. 2. Prepare job order cost sheets for each job showing all costs through July 31. 3. Calculate the balance inWork in Process on July 31. 4. Calculate Cost of Goods Sold forJuly.
On June 30, the end of the first year of operations, Johnson Industries, Inc., manufactured 2,000 units and sold 1,700 units. The following income statement was prepared, based on the variable costing concept: Johnson Industries, Inc. Variable Costing Income Statement For the Year Ended June 30, 2013 Sales $782,000 Variable cost of goods sold: Variable cost of goods manufactured $442,000 Less inventory, July 31 66,300 Variable cost of goods sold 375,700 Manufacturing margin $406,300 Variable selling and administrative expenses 93,500 Contribution margin $312,800 Fixed costs: Fixed manufacturing costs $202,000 Fixed selling and administrative expenses 62,900 264,900 Income from operations $47,900 Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.
Kody Corporation uses a job order costing system with a plantwide overhead rate based on machine hours. At the beginning of the year, the company made the following estimates: Machine hours required to support estimated production 150,000 Fixed manufacturing overhead cost $750,000 Variable manufacturing overhead cost per machine hour $4.00 Required: 1. Compute the predetermined overhead rate. 2. During the year Job 500 was started and completed. The following information was available with respect to this job: Direct materials requisitioned $350 . Direct labor cost $230 Machine hours used 30 Compute the total manufacturing cost assigned to Job 500. 3 a During the year the company worked a total of 147,000 machine hours on all jobs and incurred actual manufacturing overhead costs of $1,325,000. What is the amount of underapplied or overapplied overhead for the year? 3 b If this amount were closed out entirely to cost of goods sold, would the journal entry increase or decrease net operating income? a) Increase b) Decrease
The Kroger Co. is one of the largest retailers in the United States and also manufactures and processes some of the food for sale in its supermarkets. Kroger reported the following January 31 balances in its stockholders equity accounts (dollars in millions): Current Year Prior Year Common stock $ 961 $ 938 Paid in capital 3,286 3,121 Retained earnings 7,449 6,360 During the current year, Kroger reported net income of $1,230. 1)How much did Kroger declare in dividends for the year? (Enter your answers in dollars not in millions. Omit the “$” sign in your response.) 2) Assume that the only other transaction that affected stockholders equity during the current year was a single stock issuance. Prepare the journal entry reflecting the stock issuance. (Enter your answers in dollars not in millions. Omit the “$” sign in your response.)
Kuvomi Corporation worked on four jobs during October: Job F346, Job F347, Job F348, and Job F349. At the end of October, the job cost sheets for these jobs contained the following data: Job F346 Job F347 Job F348 Job F349 Beginning balance $ 1,090 $ 590 $ 0 $ 0 Charged to the jobs during October: Direct materials $ 2,840 $ 4,070 $ 1,550 $ 3,720 Direct labor $ 1,170 $ 890 $ 590 $ 470 Manufacturing overhead applied $ 4,710 $ 1,840 $ 2,858 $ 500 Units completed 218 0 102 0 Units in process at the end of October 0 317 0 255 Units sold during October 151 0 64 0 Jobs F346 and F348 were completed during October. The other two jobs had not yet been completed at the end of October. There was no finished goods inventory on October 1. In October, overhead was underapplied by $1,340. The company adjusts its cost of goods sold every month for the amount of the underapplied or overapplied overhead. Requirement 1: Using the direct method, what is the cost of goods sold for October? (Omit the “$” sign in your response.) Cost of goods sold $ Requirement 2: What is the total value of the finished goods inventory at the end of October? (Omit the “$” sign in your response.) Total value of the finished goods $ Requirement 3: What is the total value of the work in process inventory at the end of October? (Omit the “$” sign in your response.) Total value of the work in process $
Lindsey Smith Inc. has the following cost structure for the upcoming year. Sales (20,000 units @ $25) $500,000 Manufacturing costs: Variable $10 per unit Fixed $180,000 Marketing and administrative costs: Variable $5 per unit Fixed $20,000 A. What is the expected level of profit? B. Should the company accept a special order for 1,000 units at a selling price of $20 if variable marketing expenses associated with the special order are $2 per unit? What will be the incremental profit if the order is accepted? C. Suppose that the company received a special order for 3,000 units at selling price of $19 with no variable marketing expenses. What would be the impact on profit? D. Assume that id the special order were accepted, all the regular customers would be aware of the price paid for the special order. Would that influence your decision? Why?
List and record each transaction for Claymont Outpatient Clinic under the accrual basis of accounting at Dec 31, 2011. Then develop a balance sheet as of Dec 31, 2012, and a statement of operations for the year ended Dec 31, 2012. 1 The clinic received an $8,000,000 unrestricted cash contribution from the community. (Hint: this transaction increases the unrestricted net assets account.) 2 The clinic purchased $5,600,000 of equipment. The clinic paid cash for the equipment. 3 The clinic borrowed $3,000,000 from the bank on a long term basis. 4 The clinic purchased $600,000 of supplies on credit. 5 The clinic provided $9,400,000 of services on credit. 6 In the provisions of these services, the clinic used $300,000 of supplies. 7 The clinic received $740,000 in advance to care for capitated patients. 8 The clinic incurred $4,000,000 in labor expenses and paid cash for them. 9 The clinic incurred $2,500,000 in general expenses and paid cash for them. 10 The clinic received $7,300,000 from patients and their third parties in payment of outstanding accounts. 11 The clinic met $540,000 of its obligation to capitated patients in transaction g. 12 The clinic made a $300,000 cash payment on the long term loan. 13 The clinic also made a cash interest payment of $35,000. 14 A donor made a temporarily restricted donation of $350,000, which is set aside in temporary investments. 15 The clinic recognized $380,000 in depreciation for the year. 16 The clinic estimated that $800,000 of patient accounts would not be received
Listed below are seven technical accounting terms introduced or emphasized in this chapter. Job Order costing Overhead application rate Overapplied overhead Activity based costing Cost driver Cost of finished goods manufactured Job cost sheet Each of the following statements may (or may not) describe thses techinial terms. For each statment, indicate the term described, or amswer “None” if the statement does not correctly describe any of the terms. a. An activity base that can b etraced directly to units produced and can be used as a denominator in computing an overhead application rate. b. The total of all direct lavor, direct materials and manufacturing overhead transferred from work in process to finished goods. c. A means of assigning indirect product costs to work in process during the period. d. A debit balance remaining in the Manufacturing Overhead account at teh end of the period. e. The type of cost accounting system likely to be used by a construction company. f. The type of cost accounting method likely to be used for overhead costs.
Listed below are the transactions of ari Kawabata, D.D.S., for the month of September. Sept. 1 Kawabata begins practice as a dentist and Invests $20,000 cash. 2 Purchases furniture and dental equipment on account from Green Jacket Co. for $17,280. 4 Pays rent for office space, $680 for the month. , ( .; . 1 ., ..’ _ 4 Employs a receptionist, Michael Bradley. nA?° V’ ,.,. ”. I ‘ ‘. ‘ 5 Purchases dental supplies for cash, $942. 8 . Receives cash of $1,690 from patients for services performed. 10 Pays miscellaneous office expenses, $430. 14 Bills patients $5,820 for services performed. 18 Pays Green Jacket Co. on account, $3,600. 19 Withdraws $3,000 cash from the business for personal use. 20 Receives $980 from patients on account. 25 Bills patients $2,110 for services performed. 30 Pays the following expenses In cash: office salaries $1,800; miscellaneous office expenses $85. 30 Dental supplies used during September, $330. Instructions (a) Enter the transactions shown above in appropriate general ledger accounts (use T accounts). Use the following .ledger accounts: Cash; Accounts Receivable; Supplies on Hand; Furniture and Eqwpment; Accumulated Depreciation; Accounts Payable; Yasunari Kawabata, Capital; Setvice Revenue; Rent Expense; Miscellaneous Office Expense; Office Salaries Expense; Supplies Expense; Depreciation Expense; and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 Jines for each of the other accounts needed. Record depreciation using a 5 year life on the furniA? ture and equipment, the straight line method, and no salvage value. Do not use a drawing account. (b) Prepare a trial balance. (c) Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet. (d) Close the ledger. (e) Prepare a post dosing trial balance. P3 2 (Adjusting Entries and Financial Statements) Mason Advertising Agency was founded in JanuA? ary 2006. Presented below are adjusted and unadjusted trial balances as of December 31, 2010.
A local department store hires you to write an automated checkout program to expedite customers in a hurry. The checkout line can only accept five items for any one purchase. Design a program that asks for the price of each item, and then displays the subtotal of the sale, the amount of the sales tax and the total. The sales tax is 6 percent. ‘Submit your RAPTOR source code file with comments added to each line or where necessary to explain program flow. Also submit the flowchart of your working program. ‘Make sure you run it to make sure it is error free and does what it is supposed to. You can use the generate dropdown to create example C++ code based on your working logical flow chart to see what the code would look like. Remember to follow the guidelines of good program design. Make sure to use meaningful variable names and include comments as needed.
Exhibits 4 27a and 4 27b show the statement of operations and balance sheet for 270 bed Lake Community Hospital for 20X0 and 20X1. Adjusted discharges for 20X1 are 19,000 and 20,000, respectively. a. Perform a horizontal analysis on both statements. . Using these financial performance measures, evaluate the financial state of Lake Community. The debt principal payments each year are $5.5 million, whereas adjusted discharges are 19,000 in 20X0 and 20,000 in 20X1. Exhibit 4 27a Statement of Operations for Lake Community Hospital Lake Community Hospital Statement Operations (in thousands) for the Years Ended December 31, 20X1 and 20X0 Revenues 20X1 20X0 Net Patient Service Revenue $197,000 $184,000 Other Operating Revenue 6,400+ 5,700+ Total Operating Revenues 203,400 189,700 Operating Expenses Salaries and Benefits 101,600 93,500 Supplies and other Expenses 70,100 61,000 Depreciation 12,000 11,300 Provision for bad Debts 9,173 9,167 Interest 1,413+ 1,433+ Total Operating Expenses 194,286 176,400 Income from Operations 9,114 13,300 Non Operating Income Investment Income/Contributions 9,500+ 8,500+ Excess of Revenues over Expenses 18,614 21,800 Net Income 18,614 21,800 Exhibit 4 27b Balance Sheet for Lake Community Hospital Lake Community Hospital Balance Sheet (in thousands) for the Years Ended December 31, 20X1 and 20X0 Current Assets 20X1 20X0 Cash and Cash Equivalents $40,500 $15,500 Net Patient Accounts Receivables 29,500 26,400 Inventories 3,800 4,000 Other Current Assets 10,500+ 5,200+ Total Current Assets 84,300 51,100 Plant, Property, and Equipment Gross Plant, Property, and Equipment 115,000 200,500 (Less Accumulated Depreciation) (65,000) (107,000) Net Property, Plant and Equipment 50,000 93,500 Funded Depreciation/Board Designated Funds Cash and Short Term Investments 185,000+ 110,000+ Total Assets 319,300 254,600 Current Liabilities Accounts Payable 9,500 8,500 Salaries Payable 4,500 3,500 Notes Payables 4,300+ 4,500+ Total Current Liabilities 18,300 16,500 Long Term Liabilities Bonds Payable 54,000 27,500 Total Long Term Liabilities 54,000 27,500 Net Assets 247,000+ 210,600+ Total Liabilities and Net Assets 319,300 254,600
Fact Pattern for Questions 21 and 22. EFG Inc. is a calendar year corporation. EFG had current earnings and profits of $100,000 and no accumulated earnings and profits when it distributed a total of $160,000 to its two equal shareholders, Jane and Joe. On the date of the cash distribution, Janes basis in her EFG Inc. stock was $10,000 and Joes basis in his EFG Inc. stock was $35,000. How much is includible by Jane in her gross income for the current taxable year with respect to the distribution to her? Answer A. $50,000 dividend income and 0 capital gain. B. $80,000 dividend income and 0 capital gain. C. 0 dividend income and $70,000 capital gain. D. $50,000 dividend income and $20,000 capital gain. Fact Pattern for Questions 21 and 22. EFG Inc. is a calendar year corporation. EFG had current earnings and profits of $100,000 and no accumulated earnings and profits when it distributed a total of $160,000 to its two equal shareholders, Jane and Joe. On the date of the cash distribution, Janes basis in her EFG Inc. stock was $10,000 and Joes basis in his EFG Inc. stock was $35,000. What is Joes adjusted basis in his EFG Inc. stock after the distribution? Answer A. $0. B. $5,000. C. $15,000. D. $35,000.
Field Company purchased a warehouse in a downtown district where land values are rapidly increasing. Adolph Phillips, controller, and Wilma Smith, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Phillips, noting that depreciation can be taken only on the building, favors placing a very high proportion of the cost on the warehouse itself, thus reducing taxable income and income taxes. Smith, his supervisor, argues that the allocation should recognize the increasing value of the land, regardless of the depreciation potential of the warehouse. Besides, she notes, net income is negatively impacted by additional depreciation and causes the companys stock price to go down. Discuss what stakeholder interests are in conflict because of the disagreement between the controller and financial vice president. Also, discuss which method you would choose for allocating the costs between the land and the building.
Financial management The balance sheet for the Bryan Corporation is shown below. Sales for the year were $3,040,000, with 75 percent of sales sold on credit. BRYAN CORPORATION Balance Sheet 201X Assets Liabilities and Stockholders Equity CashAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ $ 50,000 Accounts payableAc€¦Ac€¦Ac€¦Ac€¦Ac€¦.. $220,000 Accounts receivableAc€¦… 280,000 Accrued taxesAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 80,000 InventoryAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 240,000 Bonds payable (long term)Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 118,000 Plant and equipmentAc€¦… 380,000 Common stockAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 100,000 Paid in capitalAc€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 150,000 Retained earningsAc€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 282,000 Total assetsAc€¦Ac€¦Ac€¦… $950,000 Total liabilities and stockholders equityAc€¦ $950,000 Compute the following ratios: a. Current ratio. b. Quick ratio. c. Debt to total assets ratio. d. Asset turnover. e. Average collection period. Also I have to show for a 360 day year. please show the formulas im confused with these.
Dominick Lopez operates a consulting firm called Tech Today. On August 31, the companys records show the following accounts and amounts for the month of August. Use this information prepare an August statement of retained earnings for Tech Today. (The owner invested $84,000 cash in the company in exchange for common stock during the first week of August.)
Holly Company invests its excess cash in marketable securities. At the beginning of 2010 it had the following portfolio of investments in available for sale securities: 12/31/09 Security Cost Fair Value 400 shares of I Company common stock $ 8,400 $ 9,400 700 shares of O Company common stock 23,100 21,700 Totals $31,500 $31,100 During 2010, the following transactions occurred: Mar. 31 Purchased U Company 8% bonds with a face value of $10,000 for $10,000 plus accrued interest; interest is payable on the bonds each June 30 and December 31 May 17 Sold 200 shares of O Company common stock for $30 per share June 30 Received the semiannual interest on the U Company bonds Oct. 12 Sold 100 shares of I Company common stock for $24 per share Dec. 31 Received the semiannual interest on the U Company bonds and dividends of $1 per share and $1.50 per share on the I and O Company common stock, respectively The December 31 closing market prices were as follows: I Company common stock, $25 per share; O Company common stock, $31 per share; U Company 8% bonds, 101. Required 1. Prepare journal entries to record the preceding information. 2. Show what is reported on the Holly Companys 2010 income statement. 3. Assuming the investment in I Company stock is considered to be a current asset and the remaining investments are non current, show how all the items are reported on the December 31, 2010 balance sheet of the Holly Company. 4. If GAAP required that unrealized holding gains and losses on available for sale securities be included in income, how much would Holly recognize in 2010?
The firm of Harwood & Toole, CPAs, has been the auditor and tax return preparer for Tucker,Inc., a nonpublic company, for several years. In the current year, the management of Tucker discharged Harwood & Toole from the audit and tax engagement because of a disagreement over a tax matter. Management of Tucker has not paid Harwood & Toole any of the current years audit and tax fees. Another CPA firm has been hired and management of Tucker has requested that Harwood & Toole provide the following items: Indicate which of the following items must be provided to management of Tucker by Harwood & Toole. a. Accounting records of Tucker, Inc., in the possession of Harwood & Toole. Yes No b. Copies of adjusting entries prepared by the staff of Harwood & Toole. Yes No c. A copy of Tuckers partially completed tax return prepared by the staff of Harwood & Toole. Yes No d. Copies of Harwood & Tooles audit working papers from prior engagements. Yes No e. Several consolidating entries prepared by Tucker, Inc, and reviewed by Harwood & Toole. Yes No
COMPREHENSIVE PROBLEM – BUDGETING AND COSTING CONCEPTS (CHAPTERS 1, 2, 4, 6 & 9)
Mile High Inc. was formed in March 2011 to provide prepackaged snack boxes for a new low cost regional airline beginning April 1. The Company has just leased warehouse space central to the two airports to store materials.
To move packaged materials from the warehouses to the airports, where final assembly will take place, Mile High must choose whether to lease a delivery truck or pay a full time driver at a fixed cost of $5,000 per month or pay a delivery service a rate equivalent to $0.40 per box. This cost will be included in either fixed manufacturing overhead or variable manufacturing overhead, depending on which option is chosen. The company is hoping for rapid growth, as sales forecasts for the new airline are promising. However, it is essential that Mile High managers carefully control costs in order to be compliant with their sales product and remain profitable.
Ron Spencer, the company’s president, is trying to determine whether to use absorption or variable costing to evaluate performance of company managers. For absorption costing, he intends to use the practical capacity level of the facility, which is 20,000 boxes per month. Production volume variances will be written off to cost of goods sold.
Costs for the three months are expected to remain unchanged. The costs and revenues for April, May and June are expected to be as follows:
Sales revenue
$6.00 per box
Direct material cost
$1.20 per box
Direct manufacturing labor cost
$0.35 per box
Variable manufacturing overhead cost
$0.15 per box
Variable delivery cost (if this option is chosen)
$0.40 per box
Fixed delivery cost (if this option is chosen)
$5,000 per month
Fixed manufacturing overhead costs
$15,000 per month
Fixed administrative costs
$28,000 per month
Projected production and sales for each month follow. High production in May is the result of an anticipated surge in June employee vacations.
Sales (in units)
Production
March
0
12,200
April
12,000
18,000
May
12,500
9,000
June
13,000
12,000
Total
37,500
39,200
Since Mile High is a start up business, they were able to negotiate extended payment terms with direct materials vendor. Their standard payment terms of 30 days were extended to 60 days for the first three months. Payments for variable manufacturing, fixed manufacturing and administrative costs are payable in 30 days. Labor costs are payable in the month incurred. Regional airports are billed upon delivery and have 30 day payment terms with the opportunity to qualify for a 1% discount by December 31 based on timely payment experience. Mile High anticipates that 50% of their customers will pay within the first 30 days and 20% will pay within 60 days. The remaining 30% will take 90 days to remit payment. This experience data is based on benchmarking of industry trends. Ideally the 1% discount will serve as an incentive for customers to pay faster than the benchmarking data suggests.
Ron Spencer is the sole proprietor of Mile High and he contributed $82,000 of packaging equipment to the business in exchange for his ownership. He was able to secure a line of credit $75,000 from a business associate which will be drawn down March 2013 to fund the initial operating expenses of Mile High. He will be successful in attracting additional investors if Mile High reaches its sales targets and can effectively manage cash flows during this critical startup period.
In an effort to further manage costs, Ron Spencer has hired his nephew Arnold, an undergraduate accounting student, to assist with preparing the projected income statement, balance sheet and cash flows.
1.Prepare a budgeted income statement, under absorption costing for Mile High for the months of April, May and June assuming that Mile High opts to use the variable delivery service. Include supporting schedules to support the revenues and manufacturing costs.
2.Prepare a cash budget (budgeted statement of cash flows) for the months of April, May and June. Include supporting schedules for customer collections and vendor payments.
3.Prepare a forecasted balance sheet for the months of April, May and June using budgeted income statements and the budgeted statement of cash flows.
4.Will Ron Spencer achieve his goal of attracting additional investors based on the budgeted operating results and financial position for the months of April, May and June for Mile High? Why or Why Not?
5.Are there any operational trends that you would bring to the attention of Ron Spencer? What operational changes if any should he consider to address these trends?
Following are the financial statements for Starman Corporation for the year ended December 31, 2009. Assume that all balance sheet amounts represent both average and ending figures. Starman Corporation Balance Sheet December 31, 2009 Assets Cash $ 20,000 Marketable securities 30,000 Accounts receivable 50,000 Inventory 100,000 Long term receivables 35,000 Property, plant, and equipment 65,000 Total assets $300,000 Liabilities and Stockholders’ Equity Current liabilities $100,000 Long term liabilities 60,000 Stockholders’ equity 140,000 Total liabilities and stockholders’ equity $300,000 Starman Corporation Income Statement For the Year Ended December 31, 2009 Net sales $400,000 Cost of goods sold 240,000 Gross margin $160,000 Operating expenses 40,000 Income before income taxes $120,000 Income taxes expense 30,000 Net income $ 90,000 What is the receivable turnover for this corporation? Round your answer to one decimal place. Answer a. 4.8 times b. 1.8 times c. 6.0 times d. 8.0 times
Each of the following independent events requires a year end adjusting entry. Show how each event and its related adjusting entry affect the accounting equation. Assume a December 31 closing date. a. Paid $3,000 cash in advance on April 1 for a one year insurance policy. b. Purchased $1,600 of supplies on account. At years end, $100 of supplies remained on hand. c. Paid $6,000 cash in advance on March 1 for a one year lease on office space. d. Received a $15,000 cash advance for a contract to provide services in the future. The contract required a one year commitment starting September 1. e. Paid $12,000 cash in advance on October 1 for a one year lease on office space. (Leave no cells blank be certain to enter “0” wherever required. Amounts in parentheses do not require a minus sign in front of them. Omit the “$” sign in your response.) The Accounting Equation Total Assets Stockholders Equity Event/ Adjustment Cash + Other Assets = Liabilities + Common Stock + Retained Earnings a. () a. Adj.1 () () b. b. Adj.2 () () c. () c. Adj.3 () () d. d. Adj.4 () e. () e. Adj.5 () () 1 $ Af— / 12 = $ 2 $ ‘ = $ 3 $ Af— / 12 = $ 4 $ Af— / 12 = $ 5 $ Af— / 12 = $
The following information concerns the intangible assets of Epstein Corporation:
a. On June 30, 2013, Epstein completed the acquisition of the Johnstone Corporation for $2,120,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,800,000.
b. Included in the assets purchased from Johnstone was a patent that was valued at $72,800. The remaining legal life of the patent was 12 years, but Epstein believes that the patent will only be useful for another seven years.
c. Epstein acquired a franchise on October 1, 2013, by paying an initial franchise fee of $187,200. The contractual life of the franchise is 9 years.
1. Prepare year end adjusting journal entries to recordamortizationexpense on the intangibles at December 31, 2013
2. Prepare the intangible asset section of the December 31, 2013, balance sheet
The following transactions involving intangible assets of Minton Corporation occurred on or near December 31, 2010. Complete the chart below by writing the journal entry(ies) needed at that date to record the transaction and at December 31, 2011 to record any resultant amortization. If no entry is required at a particular date, write “none needed.” On Date On of Transaction December 31, 2011 1.Minton paid Grand Company $500,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Minton is in business. 2. Minton spent $600,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful. 3. In January, 2011, Minton’s application for a patent (#2 above) was granted. Legal and registration costs incurred were $120,000. The patent runs for 20 years. The manufacturing process will be useful to Minton for 10 years. 4. Minton incurred $192,000 in successfully defend ing one of its patents in an infringement suit. The patent expires during December, 2014. 5. Minton incurred $480,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $252,000, is deemed worthless. 6. Minton paid Sneed Laboratories $104,000 for research and development work performed by Sneed under contract for Minton. The benefits are expected to last six years.
The following trial balance was taken from the books of Fisk Corporation on December 31, 2012. Account Debit Credit Cash $ 9,000DR Accounts Receivable 40,000DR Notes Receivable 10,000DR Allowance for Doubtful Account 1,800DR Inventory 44,000DR Prepaid Insurance 4,800DR Equipment 110,000DR Accumulated Depreciation Equip 15,000DR Accounts Payable 10,800CR Common Stock 44,000CR Retained Earnings 75,000CR Sales Revenue 260,000CR Cost of Goods Sold 126,000DR Salaries and wages Expense 50,000DR Rent Expense 12,800 DR Totals $406,600DR $406,600CR At year end, the following items have not yet been recorded. a. Insurance expired during the year, $2,000. b. Estimated bad debts, 1% of gross sales. c. Depreciation on equipment, 10% per year. d. Interest at 6% is receivable on the note for one full year. *e. Rent paid in advance at December 31, $5,400 (originally charged to expense). f. Accrued salaries and wages at December 31, $5,800. Instructions (a) Prepare the necessary adjusting entries. (b) Prepare the necessary closing entries.
Frances Company uses ABC to account for its chrome wheel manufacturing process. Company managers have identified four manufacturing activities that incur manufacturing overhead costs: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are found on the data sheet. Frances Company expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 2,600 parts, require 15 setups, and consume 1,600 hours of finishing time. Job 420 used 100 parts, required 2 setups, and consumed 130 finishing hours. Job 510 used 400 parts, required 3 setups, and consumed 330 finishing hours. Requirements 1. Compute the cost allocation rate for each activity. Begin in A1. Enter the Activity in column A, the rate in column B, and the driver in column C. 2. Compute the manufacturing overhead cost that should be assigned to Job 420. Begin in A6 by identifying the job number. Be sure to list the Activity in column A and the allocated manufacturing overhead in column B. 3. Compute the manufacturing overhead cost that should be assigned to Job 510. Begin in A13 by identifying the job number. Be sure to list the Activity in column A and the allocated manufacturing overhead in column B.
Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost control report is given below:
“I just can’t understand all the red ink,” Weston complained to the supervisor of another department. “When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before. Instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.”
Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $74,000; the fixed component of the budgeted utilities cost is $11,000.
Required:
Prepare a performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the Machining Department.(Leave no cells blank be certain to enter “0” wherever required. Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)
Fraud Case Exeter, Inc., is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss at the end of the year approached. The CEO, Hank Snow, was under intense pressure from the major shareholders to report positive net income for the year. However, he new that the controller, Alice Li, Had, arranged a short term bank loan of $10,000 to cover a temporary shortfall crash. He told Alice to record the incoming cash as “construction revenue” instead of a loan. That would nudge the company’s income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid. 1. How would this action affect the year end income statement? How would it affect the year end balance sheet? 2. If you were a major shareholder who wanted to sell a block of shares to other investors, how would this fraudulent action affect you? Req. 1 The proposed action would increase net income by increasing revenues. It would distort the balance sheet by understating liabilities. Req. 2 By making the companys financial situation look better than it actually was, the stock prices would likely be higher, and a person selling stock would likely receive more for it.
Global Motors is a U.S. corporation that purchases automobiles from European manufacturers for distribution in the United States. A recent purchase involved the following events: Nov. 12 Purchased automobiles from Stockholm Motors in Swedish kronor for Sk20,000,000, payable in 60 days. Current exchange rate, $0.1286 per krona. (Global uses the perpetual inventory system.) Dec. 31 Made year end adjusting entry relating to the Sk20,000,000 account payable to Stockholm Motors. Current exchange rate, $0.1288 per krona. Jan. 11 Issued a check to World Bank for $2,566,800 in full payment of the account payable to Stockholm Motors. Instructions a. Prepare in general journal form the entries necessary to record the preceding events. b. Compute the exchange rate (price) of the krona in U.S. dollars on January 11. c. Explain a hedging technique that Global might have used to protect itself from the possibility of losses resulting from a significant increase in the exchange rate for the krona.
Again, if anyone can help me, that would be great. I have already labeled everything correctly in the income statement, just need some help with how to get a final figure for: Direct Materials Direct Labor Factory Overhead Sales Salaries Misc Selling Expense Supplies Misc Admin Expenses Also, questions 3 6 below. The book just doesn’t help me. I think I am missing a step or something and it’s driving me crazy Soldner Health Care Products Inc. expects to maintain the same inventories at the end of 2012 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during 2012. A summary report of these estimates is as follows: Estimated Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials $17 Direct labor 12 Factory overhead $136,400 9 Selling expenses: Sales salaries and commissions 28,300 4 Advertising 9,600 Travel 2,100 Miscellaneous selling expense 2,300 3 Administrative expenses: Office and officers’ salaries 27,700 Supplies 3,400 1 Miscellaneous administrative expense 3,320 2 Total $213,120 $48 It is expected that 8,140 units will be sold at a price of $96 a unit. Maximum sales within the relevant range are 10,000 units. 2. What is the expected contribution margin ratio? Round to the nearest whole percent. % 3. Determine the break even sales in units. units 4. Construct a cost volume profit chart on your own paper. What is the break even sales? $ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $ Percentage: (Round to the nearest whole percent.) % 6. Determine the operating leverage. Round to one decimal place.
If someone could help me with this, that would be great. I think I am on the right path, but there are no examples on the book or internet to walk me through it. I have to see how it’s done in order to get it. The book is a bit confusing to me. Thanks. Break Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $6,496,000 Cost of goods sold $1,624,000 Selling, general and administration $812,000 $2,436,000 Income from operations $ 4,060,000 In addition, assume that BeerBev sold 58,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $24,400. a. Compute the break even sales (barrels) for the current year. Round to the nearest whole barrel. barrels b. Compute the anticipated break even sales (barrels) for the following year. Round to the nearest whole barrel. barrels
HELP ME SOLVE PROBLEM USING APPROPRIATE FORMS PROBLEM 1 Karl F. and Jeanne S. Wheat are married and live at 13071 Forestview Drive, Columbia, MO 65201. Karl is a self employed insurance claims adjuster (business activity code 524290), and Jeanne is a dietitian for the local school district. ‘ 1. Karl represents several national casualty insurance companies on a contract basis. He is paid a retainer and receives additional compensation if the claims for the year exceed a specified number. As an independent contractor, he is responsible for whatever expenses he incurs. Karl works out of an office near his home. The office is located at 1202 Brentwood Avenue. He shares Suite 326 with a financial consultant, and operating expenses are divided equally between them. The suite has a common waiting room with a receptionist furnished and paid by the landlord. Karls one half share of the 2011 expenses he paid is listed below. Office rent $11,600 Utilities (includes telephone and fax) 4,300 Replacement of waiting room furniture on April 22 3,600 Renters insurance (covers personal liability, casualty, and theft) 1,400 Office expense (supplies and postage meter) 740 New Toshiba copier (less trade in on old machine) on February 7 300 Waiting room coffee service (catered) 280 Waiting room magazine subscriptions 90 ‘ For his own business use, Karl purchased a laptop computer for $2,100 on June 17 and a Nikon camera for $1,200 on February 5. Except for his vehicle (see item 2), Karl uses the A?§ 179 write offoption whenever possible. ‘ 2. On January 2, 2011, Karl paid $31,000 (including sales tax) to purchase a gently used Dodge Durango SUV that he uses 92% of the time for business. No trade in was involved, and he did not claim any A?§ 179 expensing. Karl uses the actual operating cost method to compute his tax deduction, using the 200% declining balance MACRS depreciation method with a half year convention. His expenses relating to the Durango for 2011 are as follows: Gasoline $3,100 Auto insurance 1,500 Interest on car loan 820 Auto club dues 225 Oil changes and lubrication 140 License and registration 90 In connection with his business use of the Durango, Karl paid $510 for parking and $350 in fines for traffic violations. In 2011, Karl drove the Durango 14,352 miles for business [8,612 miles between January 1 and June 30 and 5,740 miles between July 1 and December 31] and 1,248 miles for personal use (which includes his daily round trip commute to work). ‘ 3. Karl handles most claim applications locally, but on occasion, he must travel out of town. Expenses in connection with these business trips during 2011 were $930 for lodging and $1,140 for meals. He also paid $610 for business dinners with several visiting executives of insurance companies with whom he does business. Karls other business related expenses for 2011 are listed below. ‘ Contribution to H.R. 10 (Keogh) retirement plan $8,000 Premiums on medical insurance covering family (spouse and children) 4,600 Premiums on disability insurance policy (pays for loss of income in the event Karl is disabled and cannot work) 2,400 State and local occupation fee 450 Birthday gift for receptionist ($25 box of Godiva chocolates plus $3 for gift wrap) 28 ‘ 4. Jeanne earns $32,000 as a registered dietician for the Columbia School District. The job she holds, manager of the school lunch program, is not classified as full time. Consequently, she is not eligible to participate in the teacher retirement or health insurance programs. Jeannes expenses for 2011 are summarized as follows: ‘ Contribution to traditional IRA $4,000 Job hunting expense 720 Continuing education program 350 Membership dues to the National Association of Dietitians 120 Subscription to Nutrition Today 90 To work full time and earn a larger salary, Jeanne applied for a position as chief dietitian for a chain of nursing homes. According to the director of the recruiting service Jeanne hired, the position has not yet been filled and Jeanne is one of the leading candidates. The continuing education program was sponsored by the National Association of Dietitians and consisted of a one day seminar on special diets for seniors. Out of a total of 8,670 miles driven for the year, Jeanne drove the family Chevrolet Malibu 930 miles on job related use. She drove 410 miles between January 1 and June 30 and the remaining 520 miles between July 1 and December 31. The Wheats purchased the car on July 11, 2009, for $23,400. Jeanne uses the automatic mileage method for computing any available deduction for business use of the car. ‘ 5. The Wheats have supported Gene Isaacson, Jeannes widowed father, for several years, appropriately claiming him as a dependent for tax purposes. On December 27, 2010, Gene suffered a massive stroke. The doctors did everything they could for Gene, but he died in the intensive care unit of St. Marys Memorial Hospital on January 8, 2011. The Wheats paid the following expenses on behalf of Gene: $11,800 medical ($6,000 incurred in 2010 and $5,800 in 2011) and $5,300 funeral. [The Wheats medical insurance (see item 3) does not cover parents.] These expenses were paid in January and February 2011. Genes will named Jeanne as executor and sole heir of the estate. ‘ 6. Upon the advice of the financial consultant who shares office space with Karl, the Wheats decided to convert Genes home into a furnished rental house. After several minor repairs (e.g., touching up the paint on the interior walls, replacing various window screens, and pressure washing the brick exterior), the property was advertised for rent in the classified section of the local newspaper on March 1, 2011. The repairs cost $720, and the newspaper ad was $360. Based on reconstructed records and appraisal estimates, information about the property is as follows: Original Cost FMV 1/8/11 House $40,000 $220,000 Land 10,000 50,000 Furniture and appliances 21,000 14,000 ‘ 7. Genes former residence was rented almost immediately, with occupancy commencing April 1, 2011, under the following terms: one year lease; $2,400 per month; first and last months rent in advance; $2,000 damage deposit; and lawn care, but not utilities, included. The tenant complied with all terms except that the December rent payment was not made until January 1, 2012″the tenant took an extended Christmas holiday trip. Expenses in connection with the property were as follows: property taxes, $2,600; repairs, $320; lawn maintenance, $540; insurance, $1,800; and street paving assessment, $2,100. The property is located at 12120 Barrington Avenue, Columbia, MO 65201. (Note: If you are using H&R Block At Home, input 365in the “days owned” box and in the “days rented” box. Otherwise, the program will apportion the expenses inappropriately). ‘ 8. In early December 2010, a friend advised Karl to buy stock in Pioneer Aviation Inc. (PAI). At that time, PAI was in serious financial straits and was headed toward bankruptcy. Nevertheless, according to Karls friend, the value of the corporations underlying assets was such that the shareholders were bound to recover considerably more than the current market price of $0.50 per share. Excited at the chance for a “sure” profit, on December 15, 2010, Karl purchased 20,000 shares for $10,000. In September 2011, the trustee in bankruptcy announced that the stock was worthless and that even some of PAIs preferred creditors would not be paid. ‘ 9. On June 14, 2011, the Wheats sold 500 shares of Garnet Corporation for $17,500 ($35 per share). They owned 1,000 shares acquired as follows: 500 shares on November 5, 2007, for $25 a share and 500 shares on August 5, 2009, for $30 a share. The Wheats did not instruct their broker as to which 500 shares to sell. ‘ 10. One month before she died on April 14, 2002, Violet Isaacson (Jeannes mother) gave Jeanne a coin collection. Based on careful records that Violet kept, the collection had a cost basis of $9,000 and a fair market value of $18,000 at the time Violet passed away. On February 12, 2011, the Wheat residence was burglarized, and the coin collection was stolen. The Wheats filed a claim for $24,000 (the current value of the collection) with the carrier of their homeowners insurance policy. All they were able to collect, however, was $10,000, which was the maximum amount allowed for valuables (e.g., jewelry and antiques) without a special rider. ‘ 11. In her will, Violet Isaacson (see item 10) left Jeanne a vacant lot on Joplin Road. Violet had paid $15,000 for the property, and it had a value of $19,000 when she died. Violet had purchased the lot because it was adjacent to a school that she expected would expand. By 2011, it has become clear that the Joplin Road area of Columbia is not growing and that no school expansion will take place. Consequently, on July 1, 2011, Jeanne sold the lot for $19,000. Not included in this price are back property taxes (and interest on the underpaid taxes) of $700 on the lot, which the purchaser assumed and later paid. ‘ 12. Every year around Christmas, Karl receives cards from various car repair facilities (including dealerships), expressing thanks for the business referrals and enclosing cash. Karl has no arrangement, contractual or otherwise, that requires any compensation for the referrals he makes. Concerned about the legality of such “gifts,” Karl had previously consulted an attorney about the matter. Without passing judgment on the status of the payors, the attorney found that Karls acceptance of the payments does not violate state or local law. Karl sincerely believes that the payments he receives have no effect on the referrals he makes. During December 2011, Karl received cards containing $7,200. One card containing $900, however, was delayed in the mail and was not received by Karl until January 4, 2012. ‘ 13. In addition to those previously noted, the Wheats receipts during 2011 are summarized below. ‘ Payments to Karl for services rendered (as reported on Forms 1099 issued by several payor insurance companies) pursuant to contractual arrangement $82,000 Income tax refunds for tax year 2010 Federal 210 State 90 Interest income State of Missouri general purpose bonds 1,400 GE corporate bonds 1,100 Certificate of deposit at Columbia National Bank 900 Qualified dividends (Duke Energy) $ 600 Proceeds from garage sale (see item 14) 9,200 Cash gifts from Karls parents 24,000 Karls net state lottery gains (winnings, $1,000; losses, $900) 100 ‘ 14. On June 2 and 3, 2011, the Wheats held a garage sale to dispose of unwanted furniture, appliances, books, bicycles, clothes, and a boat (including trailer). The estimated basis of the items sold is $25,500. All were personal use property. ‘ 15. Expenditures during 2011, not mentioned elsewhere, are as follows: Medical” Copayment portion of medical expenses $1,300 Dental (orthodontist) 1,200 Taxes” State income tax (see item 17) 3,456 State sales taxes 1,120 Property taxes on personal residence 3,800 Interest on home mortgage reported on Form 1098 4,200 Charitable contributions 3,600 ‘ The Wheats medical insurance does not cover dental services. The Wheats pledge contributions of $1,200 per year to their church. In 2011, they paid the pledges for 2010’2012. During 2011, the Wheats drove the Malibu 270 miles for medical purposes”150 miles in the first half of the year and 120 miles in the second half (e.g., trips to the hospital and doctor and dentist offices)”and 320 miles for charitable purposes”140 miles in the first half of the year and 180 miles in the second half (delivering meals to the poor under a church sponsored program). ‘ 16. The Wheats have two sons who live with them: Trace and Trevor. Both are full time students. Trace is an accomplished singer and made $4,200 during the year performing at special events (e.g., weddings, anniversaries, and civic functions). Trace deposits his earnings in a savings account intended to help cover future college expenses. ‘ 17. The Form W’2 Jeanne receives from her employer reflects wages of $32,000. Appropriate amounts for Social Security and Medicare taxes were deducted. Income tax with holdings were $1,320 for Federal and $1,056 for state. The Wheats made quarterly tax payments of $2,200 for Federal and $600 for state on each of the following dates: April 15, 2011; June 15, 2011; September 15, 2011; and January 15, 2012. Relevant Social Security numbers are provided below. Name Social Security Number Birth Date Karl F. Wheat 111’11’1111 06/06/1969 Jeanne S. Wheat 123’45’6781 08/14/1970 Gene Isaacson 123’45’6784 03/12/1934 Trace Wheat 123’45’6788 09/13/1993 Trevor Wheat 123’45’6789 07/20/1991
Alternative methods of joint cost allocation, ending inventories. The Evrett Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and Z. All three end products are separated simultaneously at a single splitoff point.
Products X and Y are ready for sale immediately upon splitoff without further processing or any other additional costs. Product Z, however, is processed further before being sold. There is no available market price for Z at the splitoff point.
The selling prices quoted here are expected to remain the same in the coming year. During 2012, the selling prices of the items and the total amounts sold were as follows:
X—75 tons sold for $1,800 per ton
Y—225 tons sold for $1,300 per ton
Z—280 tons sold for $800 per ton
The total joint manufacturing costs for the year were $328,000. Evrett spent an additional $120,000 to finish product Z.
There were no beginning inventories of X, Y, or Z. At the end of the year, the following inventories of completed units were on hand: X, 175 tons; Y, 75 tons; Z, 70 tons. There was no beginning or ending work in process.
A new federal law has recently been passed that taxes crude oil at 30% of operating income. No new tax is to be paid on natural gas liquid or natural gas. Starting August 2012, Sinclair Oil & Gas must report a separate product line income statement for crude oil. One challenge facing Sinclair Oil & Gas is how to allocate the joint cost of producing the three separate saleable outputs. Assume no beginning or ending inventory.
Required
1. Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December 31, 2012, using the following joint cost allocation methods:
a. NRV method
b. Constant gross margin percentage NRV method
2. Compare the gross margin percentages for X, Y, and Z using the two methods given in requirement 1.
Needing help with these exercises. PE18 1A Management Process Three phases of the management process are controlling, planning, and decision making.
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PE18 1A Management Process Three phases of the management process are controlling, planning, and decision making. Match the following descriptions to the proper phase. Phase of management process Description Controlling a. Long range courses of action Decision Making b. Inherent in planning, directing, controlling, and improving Planning c. Monitoring the operating results of implemented plans and comparing the actual results with expected results. PE18 2A Direct Materials, direct labor, and factory overhead Identify the following costs as direct materials (DM), direct labor (DL), or factory overhead (FO) for an automobile manufacturer. a. Steel b. Wages of employees that operates painting equipment c. Oil used for assembly line machinery d. Wages of the plant supervisor PE18 3A Prime and conversion costs Identify the following costs as a prime cost (P), conversion cost (C), or both (B) for an automobile manufacturer. a. Steel b. Wages of employees that operate paining equipment c. Oil used for assembly line machinery d. Wages of the plant manager PE18 4A Product and period costs Identify the following costs as a product cost or a period cost for an automobile manufacturer a. Sales staff salaries b. Rent on office building c. Wages of employees that operate paining equipment d. Steel PE18 5A Cost of goods sold, cost of goods manufactured Swain Company has the following information for January: Cost of direct materials used in production………………………$12,000 Direct labor……………………………………………………………………….31,000 Factory overhead………………………………………………………………20,000 Work in process inventory, January…
Biotechtron, Inc., has two research laboratories in the Midwest, one in Tulsa, Oklahoma, and one in Ames, Iowa. The owner of Biotechtron centralized the legal services function in the Tulsa office, where both laboratories send any legal questions or issues. The legal services support center has budgeted fixed costs of $60,000 per year and a budgeted variable rate of $40 per hour of professional time. The normal usage of the legal services center is 1,625 hours per year for the Tulsa office and 875 hours per year for the Ames office. This corresponds to the expected usage for the coming year.
Required:
1. Determine the amount of legal services support center costs that should be assigned to each office.
2. Since the offices produce services, not tangible products, what purpose is served by allocating the budgeted costs?
3. Now, assume that during the year, the legal services center incurred actual fixed costs of $59,000 and actual variable costs of $91,500. It delivered 2,300 hours of professional time—1,200 hours to Tulsa and 1,100 hours to Ames. Determine the amount of the legal services center’s costs that should be allocated to each office. Explain the purposes of this allocation.
4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why?
On January 10, 2011, Delta Corporation acquired 12,000 shares of the outstanding common stock of Kennedy Company for $600,000. At the time of purchase, Kennedy Company had outstanding 48,000 shares with a book value of $2.4 million. On December 31, 2011, the following events took place:
(a) Kennedy reported net income of $160,000 for the calendar year 2011.
(b) Delta received from Kennedy a dividend of $0.55 per share of common stock.
(c) The fair value of Kennedy Company stock had temporarily declined to $44 per share.
Give the entries that would be required to reflect the purchase and subsequent events on the books of Delta Corporation, assuming that
(1) The security is classified as available for sale and
Common costs. Wright Inc. and Brown Inc. are two small clothing companies that are considering leasing a dyeing machine together. The companies estimated that in order to meet production, Wright needs the machine for 800 hours and Brown needs it for 200 hours. If each company rents the machine on its own, the fee will be $50 per hour of usage. If they rent the machine together, the fee will decrease to $42 per hour of usage.
Required
1. Calculate Wright’s and Brown’s respective share of fees under the stand alone cost allocation method.
2. Calculate Wright’s and Brown’s respective share of fees using the incremental cost allocation method.
Assume Wright to be the primary party.
3. Calculate Wright’s and Brown’s respective share of fees using the Shapley value method.
4. Which method would you recommend Wright and Brown use to share the fees?
Cost allocation to divisions. Lenzig Corporation has three divisions: Pulp, Paper, and Fibers. Lenzig’s new controller, Ari Bardem, is reviewing the allocation of fixed corporate overhead costs to the three divisions. He is presented with the following information for each division for 2009:
Until now, Lenzig Corporation has allocated fixed corporate overhead costs to the divisions on the basis of division margins. Bardem asks for a list of costs that comprise fixed corporate overhead and suggests the following new allocation bases:
1.Allocate 2009 fixed corporate overhead costs to the three divisions using division margin as the allocation base. What is each division’s operating margin percentage (division margin minus allocated fixed corporate overhead costs as a percentage of revenues)?
2. Allocate 2009 fixed costs using the allocation bases suggested by Bardem. What is each division’s operating margin percentage under the new allocation scheme?
3. Compare and discuss the results of requirements 1 and 2. If division performance is linked to operating margin percentage, which division would be most receptive to the new allocation scheme? Which division would be the least receptive? Why?
4. Which allocation scheme should Lenzig Corporation use? Why? How might Bardem overcome any objections that may arise from thedivisions?
Customer profitability and ethics. Blat Corporation manufactures a product called the glat, which it sells to merchandising firms such as International House of Glats (lHoG,) Blats R Us (GRU,) Glat Marcus (GM,) Blat City (GC,) Good Glats (GG,) and Blat mart (Gmart.( The list price of a glat is $40, and the full manufacturing costs are $30. Salespeople receive a commission on sales but the commission is based on number of orders taken, not on sales revenue generated or number of units sold. Salespeople receive a commission of $20 per order (in addition to regular salary.) Glat Corporation makes products based on anticipated demand. Blat Corporation carries an inventory of glats so rush orders do not result in any extra manufacturing costs over and above the $30 per glat. Blat Corporation ships finished product to the customer at no additional charge to the customer for either regular or expedited delivery. Blat incurs significantly higher costs for expedited deliveries than for regular deliveries. Expected and actual customer level cost driver rates are:
Because salespeople are paid $20 per order, they break up large orders into multiple smaller orders. This practice reduces the actual order taking cost by $16 per smaller order (from $28 per order to $12 per order) because the smaller orders are all written at the same time. This lower cost rate is not included in budgeted rates because salespeople create smaller orders without telling management or the accounting department Also, salespeople offer customers discounts to entice them to place more orders; GRU and Gmart each receive a 5% discount off the list price of $40.
Information about Glat’s clients follows:
*Because GRU places 12 separate orders, its order costs are $28 per order. All other orders are multiple smaller orders and so have actual order costs of $12 each.
1. Using the information above, calculate the expected customer level operating income for the six customers of Blat Corporation. Use the number of written orders at $28 each to calculate expected order costs.
2. Recalculate the customer level operating income using the number of written orders but at their actual $12 cost per order instead of $28 (except for GRU, whose actual cost is $28 per order.) How will Blat Corporation evaluate customer level operating cost performance this period?
3. Recalculate the customer level operating income if salespeople had not broken up actual orders into multiple smaller orders. Don’t forget to also adjust sales commissions.
4. How is the behavior of the salespeople affecting the profit of Blat Corporation? Is their behavior ethical? What could Blat Corporation do to change the behavior of thesalespeople?
Customer profitability, customer cost hierarchy. Orsack Electronics has only two retail and two wholesale customers. Information relating to each customer for 2012 follows (in thousands):
?
Orsack’s annual distribution channel costs are $34 million for wholesale customers and $5 million for retail customers. Its annual corporate sustaining costs, such as salary for top management and general administration costs, are $61 million. There is no cause and effect or benefits received relationship between any cost allocation base and corporate sustaining costs. That is, corporate sustaining costs could be saved only if Orsack Electronics were to completely shut down.
Required
1. Calculate customer level operating income using the format in Exhibit 14 5.
2. Prepare a customer cost hierarchy report, using the format in Exhibit 14 6.
3. Orsack’s management decides to allocate all corporate sustaining costs to distribution channels: $48 million to the wholesale channel and $13 million to the retail channel. As a result, distribution channel costs are now $82 million ($34 million + $48 million) for the wholesale channel and $18 million ($5 million + $13 million) for the retail channel. Calculate the distribution channel level operating income. On the basis of these calculations, what actions, if any, should Orsack’s managers take?Explain.
Customer profitability, distribution. Figure Four is a distributor of pharmaceutical products. Its ABC system has five activities:
Rick Flair, the controller of Figure Four, wants to use this ABC system to examine individual customer profitability within each distribution market. He focuses first on the Ma and Pa single store distribution market. Two customers are used to exemplify the insights available with the ABC approach. Data pertaining to these two customers in August 2009 are as follows:
1. Use the ABC information to compute the operating income of each customer in August 2009. Comment on the results and what, if anything, Flair should do.
2. Flair ranks the individual customers in the Ma and Pa single store distribution market on the basis of monthly operating income. The cumulative operating income of the top 20% of customers is $55,680. Figure Four reports operating losses of $21,247 for the bottom 40% of its customers. Make four recommendations that you think Figure Four should consider in light of this new customer profitabilityinformation.
Customer profitability, distribution. Spring Distribution has decided to analyze the profitability of five new customers. It buys bottled water at $12 per case and sells to retail customers at a list price of $14.40 per case. Data pertaining to the five customers are:
Its five activities and their cost drivers are:
1. Compute the customer level operating income of each of the five retail customers now being examined (P, Q, R, S, and T). Comment on the results.
2. What insights are gained by reporting both the list selling price and the actual selling price for each customer?
3. What factors should Spring Distribution consider in deciding whether to drop one or more of the fivecustomers?
Customer profitability, Service Company. Instant Service (IS) repairs printers and photocopiers for five multisite companies in a tristate area. IS’s costs consist of the cost of technicians and equipment that are directly traceable to the customer site and a pool of office overhead. Until recently, IS estimated customer profitability by allocating the office overhead to each customer based on share of revenues. For 2010, IS reported the following results:
Tina Sherman, IS’s new controller, notes that office overhead is more than 10% of total costs, so she spends a couple of weeks analyzing the consumption of office overhead resources by customers. She collects following information:
1. Compute customer level operating income using the new information that Sherman has gathered.
2. Prepare exhibits for IS similar to Exhibits 14 7 and 14 8. Comment on the results.
3. What options should IS consider, with regard to individual customers, in light of the new data and analysis of officeoverhead?
Customer cost hierarchy, customer profitability. Denise Nelson operates Interiors by Denise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Denise serves two architecture firms (Attractive Abodes and Better Buildings), and a commercial window treatment business in which Denise designs and constructs window treatments for three commercial clients (Cheery Curtains, Delightful Drapes, and Elegant Extras). Denise would like to evaluate the profitability of her two architecture firm clients and three commercial window treatment clients, as well as evaluate the profitability of each of the two divisions, and the business as a whole. Information about her most recent quarter follow:
Gross revenue from Attractive Abodes (AA)………………….$58,500
Gross revenue from Better Buildings (BB)……………………..47,200
Gross revenue from Cheery Curtains (CC)………………………89,345
Gross revenue from Delightful Drapes (DD)……………………36,960
Gross revenue from Elegant Extras (EE)……………………….18,300
Costs specific to AA…………………………………………….36,750
Costs specific to BB…………………………………………….29,300
Costs specific to CC…………………………………………….54,645
Costs specific to DD…………………………………………….28,930
Costs specific to EE…………………………………………….14,260
Overhead costsa…………………………………………………85,100
aDenise has determined that 25% of her overhead costs relate directly to her architectural business, 40% relate directly to her window treatment business, and the remainder is general in nature. Denise gave a 10% discount to Attractive Abodes in order to lure it away from a competitor, and gave a 5% discount to Elegant Extras for advance payment in cash.
Required
1. Prepare a customer cost hierarchy report for Interiors by Denise, using the format in Exhibit 14 6.
2. Prepare a customer profitability analysis for the five customers, using the format in Exhibit 14 7.
3. Comment on the results of the preceding reports. What recommendations would you give Denise?
Dillo Vineyards, a large winery in Texas, produces a full line of varietal wines. The company, whose fiscal year begins on November 1, has just completed a record breaking year. Its inventory account balances on October 31 of this year were Materials Inventory, $1,803,800; Work in Process Inventory, $2,764,500; and Finished Goods Inventory, $1,883,200. At the beginning of the year, the inventory account balances were Materials Inventory, $2,156,200; Work in Process Inventory, $3,371,000; and Finished Goods Inventory, $1,596,400.
During the fiscal year, the company’s purchases of direct materials totaled $6,750,000. Direct labor hours totaled 142,500, and the average labor rate was $8.20 per hour. The following overhead costs were incurred during the year: depreciation plant and equipment, $685,600; indirect labor, $207,300; property tax, plant and equipment, $94,200; plant maintenance, $83,700; small tools, $42,400; utilities, $96,500; and employee benefits, $76,100.
Required
Prepare a statement of cost goods manufactured for the fiscal year ended October 31.
Direct and step down allocation E books, an online book retailer, has two operating departments—Corporate Sales and Consumer Sales—and two support departments—Human Resources and Information Systems. Each sales department conducts merchandising and marketing operations independently. E books uses number of employees to allocate Human Resources costs and processing time to allocate Information Systems costs, the following data is available for September 2009:
1. Allocate the support departments’ costs to the operating departments using the direct method.
2. Rank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments’ costs to the operating departments based on the step down method.
3. How could you have ranked the support departmentsdifferently?
Direct labor variances: price, efficiency, mix, and yield. Trevor Joseph employs two workers in his guitar making business. The first worker, George, has been making guitars for 20 years and is paid $30 per hour. The second worker, Earl, is less experienced, and is paid $20 per hour. One guitar requires, on average, 10 hours of labor. The budgeted direct labor quantities and prices for one guitar are as follows:
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That is, each guitar is budgeted to require 10 hours of direct labor, comprised of 60% of George’s labor and 40% of Earl’s, although sometimes Earl works more hours on a particular guitar and George less, or vice versa, with no obvious change in the quality or function of the guitar.
During the month of August, Joseph manufactures 25 guitars. Actual direct labor costs are as follows:
George (145 hours)………………………..$4,350
Earl (108 hours)…………………………….2,160
Total actual direct labor cost………………$6,510
Required
1. What is the budgeted cost of direct labor for 25 guitars?
2. Calculate the total direct labor price and efficiency variances.
3. For the 25 guitars, what is the total actual amount of direct labor used? What is the actual direct labor input mix percentage? What is the budgeted amount of George’s and Earl’s labor that should have been used for the 25 guitars?
4. Calculate the total direct labor mix and yield variances. How do these numbers relate to the total direct labor efficiency variance? What do these variances tellyou?
Direct materials efficiency, mix, and yield variances. Nature’s Best Nuts produces specialty nut products for the gourmet and natural foods market. Its most popular product is Zesty Zingers, a mixture of roasted nuts that are seasoned with a secret spice mixture, and sold in one pound tins. The direct materials used in Zesty Zingers are almonds, cashews, pistachios, and seasoning. For each batch of 100 tins, the budgeted quantities and budgeted prices of direct materials are as follows:
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Changing the standard mix of direct material quantities slightly does not significantly affect the overall end product, particularly for the nuts. In addition, not all nuts added to production end up in the finished product, as some are rejected during inspection. In the current period, Nature’s Best made 2,500 tins of Zesty Zingers in 25 batches with the following actual quantity, cost and mix of inputs:
?
Required
1. What is the budgeted cost of direct materials for the 2,500 tins?
2. Calculate the total direct materials efficiency variance.
3. Why is the total direct materials price variance zero?
4. Calculate the total direct materials mix and yield variances. What are these variances telling you about the 2,500 tins produced this period? Are the variances large enough toinvestigate?
Eliminating Entries, Acquisition Expenses Pinnacle Corporation acquired all of Stengl Corporation’s common stock in an exchange of common shares with a current market value of $10,000,000. Related accountants’ and attorneys’ fees were $300,000. The total book value of Stengl’s stockholders’ equity consists of capital stock of $200,000 and retained earnings of $1,800,000. Book values and fair values of Stengl’s assets and liabilities are given below: book value fair value cash and receivables 800,000 800,000 inventories 1,100,000 900,000 plant assets, net 1,600,000 1,000,000 current liabilities (1,000,000) (1,000,000) long term debt (500,000) (475,000) In addition, Stengl has previously unrecorded identifiable intangible assets with a fair value of $1,200,000 that meet FASB ASC Topic 805 criteria for recognition. Required Prepare the working paper eliminating entries to consolidate the balance sheets of Pinnacle Corporation and Stengl Corporation at the date of acquisition.
Exercise 3 13 Record year end adjusting entries [LO3] Below are transactions for Hurricane Company during 2012. a. On October 1, 2012, Hurricane lends $8,000 to another company. The other company signs a note indicating principal and 8% interest will be paid to Hurricane on September 30, 2013. b. On November 1, 2012, Hurricane pays its landlord $3,000 representing rent for the months of November through January. The payment is debited to Prepaid Rent for the entire amount. c. On August 1, 2012, Hurricane collects $15,600 in advance from another company that is renting a portion of Hurricanes factory. The $15,600 represents one year’s rent and the entire amount is credited to Unearned Revenue. d. Depreciation on machinery is $4,900 for the year. e. Salaries for the year earned by employees but not paid to them or recorded are $3,600. f. Hurricane begins the year with $980 in supplies. During the year, the company purchases $3,900 in supplies and debits that amount to Supplies. At year end, supplies costing $2,500 remain on hand. Required: Record the necessary adjusting entries at December 31, 2012, for Hurricane Company for each of the situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Exercise 5 12A Inventory costing periodic system L.O. P3 Harold Co. reported the following current year purchases and sales data for its only product. Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 160 units @ $12.40 = $ 1,984 Jan. 10 Sales 150 units @$42.40 Mar. 14 Purchase 310 units @ $17.40 = 5,394 Mar. 15 Sales 200 units @$42.40 July 30 Purchase 460 units @ $22.40 = 10,304 Oct. 5 Sales 240 units @$42.40 Oct. 26 Purchase 660 units @ $27.40 = 18,084 Totals 1,590 units $ 35,766 590 units Harold uses a periodic inventory system. (a) Determine the costs assigned to ending inventory and to cost of goods sold using FIFO. (Omit the “$” sign in your response.) Ending inventory Cost of goods sold FIFO $ $ (b) Determine the costs assigned to ending inventory and to cost of goods sold using LIFO. (Omit the “$” sign in your response.) Ending inventory Cost of goods sold LIFO $ $
Exercise 5 4 Income effects of inventory methods L.O. A1
Park Company reported the following March purchases and sales data for its only product.
Date
Activities
Units Acquired at Cost
Units Sold at Retail
Mar.
1
Beginning inventory
180
units
@ $7.60
=
$
1,368
Mar.
10
Sales
105
units
@$15.60
Mar.
20
Purchase
250
units
@ $6.60
=
1,650
Mar.
25
Sales
175
units
@$15.60
Mar.
30
Purchase
120
units
@ $5.60
=
672
Totals
550
units
$
3,690
280
units
Park uses a perpetual inventory system. For specific identification, ending inventory consists of 270 units, where 120 are from the March 30 purchase, 80 are from the March 20 purchase, and 70 are frombeginning inventory.
1.
Complete comparative income statements for the month of March for Park Company for the four inventory methods. Assume expenses are $1,900, and that the applicable income tax rate is 30%.(Round per unit costs to three decimal places. Round your answers to the nearest dollar amounts. Input all amounts as positive values. Omit the “$” sign in your response.)
Dell Inc. is the worlds largest computer systems company selling directly to customers. Products include desktop computer systems, notebook computers, workstations, network server and storage products, and peripheral hardware and software. The following is a list of accounts and amounts reported in a recent year. The accounts have normal debit or credit balances and the dollars are rounded to the nearest million. Assume the companys year ended on January 31, 2012. Accounts Payable $ 8,409 Marketable Securities (investments) $ 690 Accounts Receivable 6,383 Other Assets 7,741 Accrued Expenses Payable 3,928 Other Income 143 Accumulated Depreciation 2,393 Other Liabilities 8,324 Cash 8,232 Property, Plant, and Equipment 4,400 Contributed Capital 11,339 Research and Development Expense 485 Cost of Sales 50,234 Retained Earnings ? Income Tax Expense 756 Sales Revenue 61,141 Inventories 767 Selling, General, and Administrative Expenses 7,072 Long Term Debt 1,908 Required: 1. Prepare an adjusted trial balance at January 31, 2012.
Design Flooring Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting Department, where carpet backing is added at the beginning of the process and the process is completed On July 1, Design Flooring Carpet Company had the following inventories: Finished Goods…………………………………….$5,600 Work in Process Spinning Department …..900 Work in Process Tufting Department ……1,400 Materials…………………………………………………..4,200 Departmental accounts are maintained for factory overhead, and both have zero balances on July 1. Manufacturing operations for July are summarized as follows: a. Materials purchased on account $$ 84,600 b. Materials requisitioned for use: Fiber”Spinning Department $ 42,800 Carpet backing”Tufting Department 34,400 Indirect materials”Spinning Department 3,200 Indirect materials”Tufting Department 2,800 c. Labor used: Direct labor”Spinning Department $ 24,200 Direct labor”Tufting Department 18,700 Indirect labor”Spinning Department 12,300 Indirect labor”Tufting Department 11,900 d. Depreciation charged on fixed assets: Spinning Department $ 5,300 Tufting Department 3,100 e. Expired prepaid factory insurance: Spinning Department $ 1,200 Tufting Department 900 f. Applied factory overhead: Spinning Department $ 21,600 Tufting Department 19,500 g. Production costs transferred from Spinning Department to Tufting Department $ 87,200 h. Production costs transferred from Tufting Department to Finished Goods $159,200 i. Cost of goods sold during the period $160,300 Instructions: Journalize the entries to record the operations, identifying each entry by letter. Compute the July 31 balances of the inventory accounts. Compute the July 31 balances of the factory overhead accounts.
Determine the basis of stock in the hands of the shareholder in each of the following instances. Assume 80% rule is met in all cases. a. Contribution of property with a basis of $1,000 and a FMV of $1400 b. Contribution of property with a basis of $3,000 and a FMV of $3,800. The stockholder also received $500 cash from the corporation as part of the stock transaction. c. Contribution of property with a basis of $8200 and a FMV of 12,500. The stockholder also received property with a FMV of $1700 from the corporation as part of the stock transaction. d. Contribution of a building with a FMV of $200000, a mortgage (assumed by the corporation) of $100,000 and a basis of $125,000. e. Contribution of a building with a FMV of $1,700,000, a mortgages (assumed by the corporation) of $1,000,000 and a basis of $635,000.
Diego Company manufactures one product that is sold for $80 per unit in two geographic regions”the East and West regions. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units. Variable costs per unit: Manufacturing: Direct materials $ 24 Direct labor $ 14 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 800,000 Fixed selling and administrative expenses $ 496,000 The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expenses is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 7. What is the amount of the difference between the variable costing and the absorption costing net operating incomes? What is the cause of the difference? 8. What is the companys break even point in unit sales? It is above or below the actual sales volume? Compare the break even sales volume to your answer for question 6 and comment? 9. If the sales volume in the East and West regions had been reversed, what would be the companys overall break even point in unit sales? 10. What would have been the companys variable costing net operating income if it had produced and sold 35,000 units? You do not need to perform any calculations to answer this question.
Diego Company manufactures one product that is sold for $80 per unit in two geographic regions”the East and West regions. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units. Variable costs per unit: Manufacturing: Direct materials $ 24 Direct labor $ 14 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 800,000 Fixed selling and administrative expenses $ 496,000 The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expenses is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 14. Diego is considering eliminating the West region because an internally generated report suggest the regions total gross margin in the first year of operations was $50,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East regions sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2? 15. Assume the West region invest $30,000 in a new advertising campaign in Year 2 that increases the unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?
after discontinuing the ordinary business operations and closing the accounts on may 7 , the ledger of the partnership of anna , brian, and cole indicated the following: cash 7.500 noncash assets 105,00 liabilities 27,500 anna capital 45,000 brian capital 15,000 cole capita 25,000 112,500 112,500 the partners share net income and losses in the ratio of 3:2:1. between may 7 30, the noncash assets were sold for 150,000, the liabilities were paid, and the remaining cash was distributed to the partners. (A)prepare a statement of partnership liquidation. (B) assume the same facts as in (A), except that the noncash were sold for 45,000 and any partner with a capital deficiency pays the amount of deficiency to the partnership. prepare a statement of partnership liquidation.
Dunnstreet produces two types of calculator, standard and deluxe. The company is currently using a traditional costing system with machine hours as the cost driver but is considering a move to activity based costing. In preparing for the possible switch, Dunnstreet has identified two cost pools: materials handling and setup. The collected data follow:
Standard Model
Deluxe Model
Number of machine hours
25,000
30,000
Number of material moves
550
850
Number of setups
80
500
Total estimated overhead costs are $225,000 of which $70,000 is assigned to the material handling cost pool and $155,000 is assigned to the setup cost pool.
references
6.
E4 14 Requirement 1
Requirement 1:
Calculate the overhead assigned to each product using the traditional cost system. Round the overhead rate to four decimal places if necessary.(Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.Omit the “$” sign in your response.)
Overhead assigned
Standard model
$
Deluxe model
$
eBook Links (5)references
7.
E4 14 Requirement 2
Requirement 2:
Calculate the overhead assigned to each product using ABC. Round activity rates to four decimal places if necessary.(Do not round intermediate calculations and round your final answers to 2 decimal places. Omit the “$” sign in your response.)
Early in 2006, Septa, Inc., was organized with authorization to issue 1,000 shares of $100 par value preferred stock and 200,000 shares of $1 par value common stock. Five hundred shares of the preferred stock were issued at par, and 80,000 shares of common stock were sold at $15 per share. The preferred stock pays a 10 percent cumulative dividend. During the first four years of operations (2006 through 2009), the corporation earned a total of $1,800,000 and paid dividends of 40 cents per share in each year on its outstanding common stock. INSTRUCTIONS: A. Prepare the stockholders equity section of the balance sheet at December 31, 2009. Include a supporting schedule showing your computation of the amount of retained earnings reported. (Hint: Income increases retained earnings, whereas dividends decrease retained earnings.)
Early in January 2010, Tellco, Inc., acquired a new machine and incurred $100,000 of interest, installation, and overhead costs that should have been capitalized but were expensed. The company earned net operating income of $1,000,000 on average total assets of $8,000,000 for 2011. Asume that the total cost of the new machine will be depreciated over 10yrs using the straight line method. a. Calculate the ROI for Tellco, Inc., for 2010 b Calculate ROI for Tellco, Inc for 2010, assuming that the $100,000 had been capitalized and depreciated over 10 years using the straight line method. c. Given your answers to a and be, why would the company want to account for this expenditure as an expense? d. Assuming that the $100,000 is capitalzed, what will be the effect on ROI for 2011 and subsequent yrs. compared to expensing theinterest, installation and overhead costs in 2010? Explain your answer?
You are provided with the following information taken from Washburne Inc.’s March 31, 2012, balance sheet.
Cash ……………………………….…………..…… $ 11,000
Accounts receivable ……………….…………………. 20,000
Inventory ………………………….………………….. 36,000
Property, plant, and equipment, net of depreciation … 120,000
Accounts payable ……………………………………… 22,400
Common stock ……………………………………….. 150,000
Retained earnings ……………………………………… 11,600
Additional information concerning Washburne Inc. is as follows.
1. Gross profit is 25% of sales.
2. Actual and budgeted sales data:
March (actual) …… $46,000
April (budgeted) …… 70,000
3. Sales are both cash and credit. Cash collections expected in April are:
March …………. $18,400 (40% of $46,000)
April ……………. 42,000 (60% of $70,000)
$60,400
4. Half of a month’s purchases are paid for in the month of purchase and half in the following month. Cash disbursements expected in April are:
Purchases March …… $22,400
Purchases April ……… 28,100
$50,500
5. Cash operating costs are anticipated to be $11,200 for the month of April.
6. Equipment costing $2,500 will be purchased for cash in April.
7. The company wishes to maintain a minimum cash balance of $9,000. An open line of credit is available at the bank. All borrowing is done at the beginning of the month, and all repayments are made at the end of the month. The interest rate is 12% per year, and interest expense is accrued at the end of the month and paid in the following month.
Instructions
Prepare a cash budget for the month of April. Determine how much cash Washburne Inc. must borrow, or can repay, in April.
Accounting for a byproduct. Sunny Day Juice Company produces oranges from various organic growers in Florida. The juice is extracted from the oranges and the pulp and peel remain. Sunny Day considers the pulp and peel byproducts of its juice production and can sell them to a local farmer for $2.00 per pound.
During the most recent month, Sunny Day purchased 4,000 pounds of oranges and produced 1,500 gallons of juice and 900 pounds of pulp and peel at a joint cost of $7,200. The selling price for a half gallon of orange juice is $2.50. Sunny Day sold 2,800 half gallons of juice and 860 pounds of pulp and peel during the most recent month. The company had no beginning inventories.
Required
1. Assuming Sunny Day accounts for the byproduct using the production method, what is the inventoriable cost for each product and Sunny Day’s gross margin?
2. Assuming Sunny Day accounts for the byproduct using the sales method, what is the inventoriable cost for each product and Sunny Day’s gross margin?
3. Discuss the difference between the two methods of accounting for byproducts.
Allocating Costs to Divisions Gether Corporation manufactures appliances. It has four divisions: Refrigerator, Stove, Dishwasher, and Microwave oven. Each division is located in a different city and the quarters is located in Oakland, California. Headquarters incurs a total of $14,255,000 in costs, none of which are direct costs of any of the divisions. Revenues, costs, and facility space for each division are as follows:
Gether wants to allocate the indirect costs of headquarters on the basis of either square feet or segment margin for each division.
1. Allocate the indirect headquarters costs to each division, first using square feet of space and then using segment margin as the allocation base. Calculate the division operating margins after each allocation in dollars and as a percentage of revenues.
2. Which allocation base do you prefer? Why?
3. Should any of the divisions be dropped based on your calculations? Why or whynot?
Allocation of common costs. Ben and Gary are students at Berkeley College. They share an apartment that is owned by Gary. Gary is considering subscribing to an Internet provider that has the following packages available:
Package Per Month
A. Internet access………………………………$60
B. Phone services………………………………..15
C. Internet access + phone services……………..65
Ben spends most of his time on the Internet (?oeverything can be found online now??). Gary prefers to spend his time talking on the phone rather than using the Internet (?ogoing online is a waste of time??). They agree that the purchase of the $65 total package is a ?owin–win?? situation.
Required
1. Allocate the $65 between Ben and Gary using (a) the stand alone cost allocation method, (b) the incremental cost allocation method, and (c) the Shapley value method.
2. Which method would you recommend they use and why?
Allocation of common costs. Jim Dandy Auto Sales uses all types of media to advertise its products (television, radio, newspaper, etc.). At the end of 2011, the company president, Jim Dandridge, decided that all advertising costs would be incurred by corporate headquarters and allocated to each of the company’s three sales locations based on number of vehicles sold. Jim was confident that his corporate purchasing manager could negotiate better advertising contracts on a corporate wide basis than each of the sales managers could on their own. Dandridge budgeted total advertising cost for 2012 to be $1.8 million. He introduced the new plan to his sales managers just before the New Year.
The manager of the east sales location, Tony Snider, was not happy. He complained that the new allocation method was unfair and would increase his advertising costs significantly over the prior year. The east location sold high volumes of low priced used cars and most of the corporate advertising budget was related to new car sales.
Following Tony’s complaint, Jim decided to take another hard look at what each of the divisions were paying for advertising before the new allocation plan. The results were as follows:
?
Required
1. Using 2011 data as the cost bases, show the amount of the 2012 advertising cost ($1,800,000) that would be allocated to each of the divisions under the following criteria:
a. Dandridge’s allocation method based on number of cars sold
b. The stand alone method
c. The incremental allocation method, with divisions ranked on the basis of dollars spent on advertising in 2011
2. Which method do you think is most equitable to the divisional sales managers? What other options might President Jim Dandridge have for allocating the advertising costs?
Allocation of Common Costs. The cities of Albany, Troy and Schenectady are considering the implementation of a new program to handle disposal of hazardous waste to comply with a new, more stringent state law. Because of the close proximity of the three cities, a joint program has been suggested. The annual cost of separate programs and a joint program are:
1. Allocate the $5,000,000 cost of the joint program to each of the three cities using:
a. The stand alone method
b. The incremental allocation method (in the order of the most waste to the least waste).
2. How do you think the citizens of each community would feel about each of the two methods ofallocation?
Allocation of corporate costs to divisions. Dusty Rhodes, controller of Richfield Oil Company, is preparing a presentation to senior executives about the performance of its four divisions. Summary data (dollar amounts in millions) related to the four divisions for the most recent year are:
Under the existing accounting system, costs incurred at corporate headquarters are collected in a single cost pool ($3228 million in the most recent year) and allocated to each division on the basis of its actual revenues. The top managers in each division share in a division income bonus pool. Division income is defined as operating income less allocated corporate costs.
Rhodes has analyzed the components of corporate costs and proposes that corporate costs be collected in four cost pools. The components of corporate costs for the most recent year (dollar amounts in millions) and Rhodes’ suggested cost pools and allocation bases are:
1. Discuss two reasons why Richfield Oil should allocate corporate costs to each division.
2. Calculate the operating income of each division when all corporate costs are allocated based on revenues of each division.
3. Calculate the operating income of each division when all corporate costs are allocated using the four cost pools.
4. How do you think the new proposal will be received by the division managers? What are the strengths and weaknesses of Rhodes’ proposal relative to the existing single cost poolmethod?
Allocation to accomplish smoothing O’Hara Corporation estimated its overhead costs would be $24,000 per month except for January when it pays the $72,000 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $96,000 ($72,000 + $24,000). The company expected to use 7,000 direct labor hours per month except during July, August, and September when the company expected 9,000 hours of direct labor each month to build inventories for high demand that normally occurs during the Christmas season. The company’s actual direct labor hours were the same as the estimated hours. The company made 3,500 units of product in each month except July, August, and September in which it produced 4,500 units each month. Direct labor costs were $24 per unit, and direct materials costs were $10 per unit.
Required
a. Calculate a predetermined overhead rate based on direct labor hours.
b. Determine the total allocated overhead cost for January, March, and August.
c. Determine the cost per unit of product for January, March, and August.
d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $20 per unit.
Alternative joint cost allocation methods, further process decision. The Wood Spirits Company produces two products—turpentine and methanol (wood alcohol)—by a joint process. Joint costs amount to $120,000 per batch of output. Each batch totals 10,000 gallons: 25% methanol and 75% turpentine. Both products are processed further without gain or loss in volume. Separable processing costs are methanol $3 per gallon; turpentine, $2 per gallon. Methanol sells for $21 per gallon. Turpentine sells for $14 per gallon.
1. How much of the joint costs per batch will be allocated to turpentine and to methanol, assuming joint costs are allocated based on the number of gallons at splitoff point?
2. If joint costs are allocated on an NRV basis, how much of the joint costs will be allocated to turpentine and to methanol?
3. Prepare product line income statements per batch for requirements 1 and 2. Assume no beginning or inventories.
4. The company has discovered an additional process by which the methanol (wood alcohol) can be made into a pleasant tasting alcoholic beverage. The selling price of this beverage would be $60 a gallon. Additional processing would increase separable costs $9 per gallon (in addition to the $3 per gallon separable cost required to yield methanol). The company would have to pay excise taxes of 20% on the selling price of the beverage. Assuming no other changes in cost what is the joint cost applicable to the wood alcohol (using the NRV method)? Should the company produce the alcoholic beverage? Show your computations.
Alternative methods of joint cost allocation, product mix decisions. The Southern Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A, Super B, and Super D. In the most recent month (December), the output at the splitoff point was as follows:
Product A, 322,400 gallons
Product B, 119,600 gallons
Product C, 52,000 gallons
Product D, 26,000 gallons
The joint costs of purchasing and processing the crude vegetable oil were $96,000. Southern had no beginning or ending inventories. Sales of product C in December were $24,000. Products A, B, and D were further refined and then sold. Data related to December are as follows:
?
Southern had the option of selling products A, B, and D at the splitoff point. This alternative would have yielded the following revenues for the December production:
Product A, $84,000
Product B, $72,000
Product D, $60,000
Required
1. Compute the gross margin percentage for each product sold in December, using the following methods for allocating the $96,000 joint costs:
a. Sales value at splitoff
b. Physical measure
c. NRV
2. Could Southern have increased its December operating income by making different decisions about the further processing of products A, B, or D? Show the effect on operating income of any changes yourecommend.
Alternative methods of joint cost allocation, ending inventories. The Darl Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, 4 and Z. All three end products are separated simultaneously at a single splitoff point. Products X and y are ready for sale immediately upon splitoff without further processing or any other additional costs. Product Z, however, is processed further before being sold. There is no available market price for Z at the splitoff point.
The selling prices quoted here are expected to remain the same in the coming year. During 2009, the selling prices of the items and the total amounts sold were:
X—120 tons sold for $1,500 per ton
Y—340 tons sold for $1,000 per ton
Z—475 tons sold for $700 per ton
The total joint manufacturing costs for the year were $400,000. Darl spent an additional $200,000 to finish product Z. There were no beginning inventories of X, Y, or Z. At the end of the year, the following inventories of completed units were on hand: X, 180 tons; Y 60 tons; Z, 25 tons. There was no beginning or ending work in process.
1. Compute the cost of inventories of X, Y, and Z for balance sheet purposes and the cost of goods sold for income statement purposes as of December31, 2009, using the following joint cost allocation methods:
a. NRV method
b.Constant gross margin percentage NRV method.
2. Compare the gross margin percentages for X, Y, and Z using the two methods given in requirement 1.
The following situations suggest a strength or a weakness in internal control.
a. Top managers delegate all internal control procedures to the accounting department.
b. The accounting department orders merchandise and approves invoices for payment.
c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each day’s cash sales.
d. The officer who signs checks need not examine the payment packet because he is confident the amounts are correct.
Requirements
1. Define internal control.
2. The system of internal control must be tested by external auditors. What law or rule requires this testing?
3. Identify each item as either a strength or a weakness in internal control and give the reason for your answer.
The October 31 bank statement of White’s Healthcare has just arrived from State Bank. To prepare the bank reconciliation, you gather the following data:
a. The October 31 bank balance is $5,170.
b. The bank statement includes two charges for NSF checks from customers. One is for $420 (#1), and the other is for $120 (#2).
c. The following White checks are outstanding at October 31:
Check No. Amount
237$ 90
288 150
291 580
294 590
295 10
296 150
d. White collects from a few customers by EFT. The October bank statement lists a $1,400 EFT deposit for a collection on account.
e. The bank statement includes two special deposits that White hasn’t recorded yet: $1,050, for dividend revenue, and $50, the interest revenue White earned on its bank balance during October.
f. The bank statement lists a $70 subtraction for the bank service charge.
g. On October 31, the White treasurer deposited $290, but this deposit does not appear on the bank statement.
h. The bank statement includes a $700 deduction for a check drawn by Multi State Freight Company. White notified the bank of this bank error.
i. White’s Cash account shows a balance of $2,700 on October 31.
Requirements
1. Prepare the bank reconciliation for White’s Healthcare at October 31, 2012.
2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.
The records of Anacker Company indicate a July 31 cash balance of $9,400, which includes undeposited receipts for July 30 and 31. The cash balance on the bank statement as of July 31 is $6,575. This balance includes a note of $4,000 plus $160 interest collected by the bank but not recorded in the journal. Checks outstanding on July 31 were as follows: No. 370, $580; No. 379, $615; No. 390, $900; No. 1148, $225; No. 1149, $300; and No. 1151, $750. On July 3, the cashier resigned, effective at the end of the month. Before leaving on July 31, the cashier prepared the following bank reconciliation:
Subsequently, the owner of Anacker Company discovered that the cashier had stolen an unknown amount of undeposited receipts, leaving only $1,000 to be deposited on July 31. The owner, a close family friend, has asked your help in determining the amount that the former cashier has stolen.
1. Determine the amount the cashier stole from Anacker Company. Show your computations in good form.
2. How did the cashier attempt to conceal the theft?
3. a. Identify two major weaknesses in internal controls that allowed the cashier to steal the undeposited cash receipts.
b. Recommend improvements in internal controls, so that similar types of thefts of undeposited cash receipts can beprevented.
During the week ended March 28, the following activity took place: 16,000 lbs. of raw materials were purchased for inventory at a cost of $4.95 per pound.
2,500 cases of finished product were produced.
15,600 lbs. of raw materials were used.
12,200 direct labor hours were worked at a total cost of $152,500.
$76,860 of actual variable overhead costs were incurred.
Required:
Calculate each of the following variances and provide plausible explanations for the results:
This case is based on an actual situation. Centennial Construction Company, headquartered in Dallas, Texas, built a Rodeway Motel 35 miles north of Dallas. The construction foreman, whose name was Slim Chance, hired the 40 workers needed to complete the project. Slim had the construction workers fill out the necessary tax forms, and he sent their documents to the home office. Work on the motel began on April 1 and ended September 1. Each week, Slim filled out a time card of hours worked by each employee during the week. Slim faxed the time sheets to the home office, which prepared the payroll checks on Friday morning. Slim drove to the home office on Friday, picked up the payroll checks, and returned to the construction site. At 5 PM on Friday, Slim distributed payroll checks to the workers.
Requirements
1. Describe in detail the main internal control weakness in this situation. Specify what negative result(s) could occur because of the internal control weakness.
2. Describe what you would do to correct the internal control weakness.
Trong Company’s bank statement from Nguyen National Bank at August 31, 2012, shows the information below.
Balance, August 1 $11,284 Bank credit memoranda:
August deposits 47,521 Collection of note
Checks cleared in August 46,475 receivable plus $105
Balance, August 31 16,856 interest $4,505
Interest earned 41
Bank debit memorandum:
Safety deposit box rent 20
A summary of the Cash account in the ledger for August shows: Balance, August 1, $10,959; receipts $50,050; disbursements $47,794; and balance, August 31, $13,215. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $2,600 and outstanding checks of $2,925. The deposit in transit was the first deposit recorded by the bank in August. In addition, you determine that there were two errors involving company checks drawn in August: (1) A check for $340 to a creditor on account that cleared the bank in August was journalized and posted for $430. (2) A salary check to an employee for $275 was recorded by the bank for $277.
Instructions
(a) Prepare a bank reconciliation at August 31.
(b) Journalize the adjusting entries to be made by Trong Company at August 31. Assume that interest on the note has not been accrued by the company.
Two Brother Productions makes all sales on credit. Cash receipts arrive by mail. Justin Broaddus in the mailroom opens envelopes and separates the checks from the accompanying remittance advices. Broaddus forwards the checks to another employee, who makes the daily bank deposit but has no access to the accounting records. Broaddus sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Broaddus’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the amount receivable.) When Broaddus receives a customer check for $375 less a $60 allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
1. Identify the internal control weakness in this situation.
2. Who should record sales allowances?
3. What is the amount that should be shown in the ledger for cash receipts?
Tyler Kirsch has recently been hired as the manager of Dark Canyon Coffee. Dark Canyon Coffee is a national chain of franchised coffee shops. During his first month as store manager, Tyler encountered the following internal control situations:
a. Dark Canyon Coffee has one cash register. Prior to Tyler’s joining the coffee shop, each employee working on a shift would take a customer order, accept payment, and then prepare the order. Tyler made one employee on each shift responsible for taking orders and accepting the customer’s payment. Other employees prepare the orders.
b. Since only one employee uses the cash register, that employee is responsible for counting the cash at the end of the shift and verifying that the cash in the drawer matches the amount of cash sales recorded by the cash register. Tyler expects each cashier to balance the drawer to the penny every time no exceptions.
c. Tyler caught an employee putting a box of 100 single serving tea bags in his car. Not wanting to create a scene, Tyler smiled and said, “I don’t think you’re putting those tea bags on the right shelf. Don’t they belong inside the coffee shop?” The employee returned the tea bags to the stockroom.
State whether you agree or disagree with Tyler’s method of handling each situation and explain your answer.
Using the Web site http://edgarscan.pwcglobal.com/servlets/edgarscan, enter ?oHershey Foods.?? Click on Hershey Foods Corp. and then click on 10 K 2004–12–31. Fetch the entire 10 K filing by clicking on text rich (724K). Once the 10 K filing appears, find the ?oManagement Report on Internal Control over Financial Reporting?? by searching the document for the key words ?ointernal control?? using the Word ?oFind?? command, and answer the following questions:
1. How many times is ?ointernal control?? mentioned in Hershey’s 10 K?
2. Are there any recent changes in internal control over financial reporting?
3. What criteria were used by management to analyze and assess internal control as a basis for the ?oManagement Report on Internal Control over Financial Reporting???
4. Who signed the ?oManagement Report on Internal Control over Financial Reporting?? on behalf of Hershey’s management?
5. Do Hershey’s internal controls guarantee its financial reporting is complete and accurate?
6. Who is Hershey’s independent public accounting firm?
7. What do 10 K Exhibits 31.1 and 31.2 say about the possible existence of fraud?
Comprehensive Problem 18 68 Thriller Corporation has one class of voting common stock, of which 1,000 shares are issued and outstanding. The shares are owned as follows: Joe Jackson 400 Mike Jackson (Joes son) 200 Jane Jackson (Joes daughter) 200 Vinnie Price (unrelated) 200 Total 1,000 Thriller Corporation has current E&P of $300,000 for this year and accumulated E&P at January 1 of this year of $500,000. During this year, the corporation made the following distributions to its shareholders: 03/31: Paid a dividend of $10/share to each shareholder ($10,000 in total). 06/30: Redeemed 200 shares of Joes stock for $200,000. Joes basis in the 200 shares redeemed was $100,000. 09/30: Redeemed 60 shares of Vinnies stock for $60,000. His basis in the 60 shares was $36,000. 12/31: Paid a dividend of $10/share to each shareholder ($7,400 in total). b.Compute the corporations accumulated E&P at January 1 of next year. (Round all intermediate calculations to 2 decimal places except the shares redeemed ratio which should not be rounded. Round final answers to the nearest dollar amount. Omit the “$” sign in your response.) Accumulated E&P at 01/01/12 $
CONCLUDING CASE MA EARTH SKIN CARE TRIES TO STAY NATUR AL Heather Franklin is a marketing manager for Ma Earth Skin Care. Four years ago, when she was hired to help with the paperwork for promotional campaigns, she was thrilled to become a part of this company because she loved Ma Earth s lotions, soaps, and cosmetics. Besides smelling heavenly and offering exquisite colors for eye shadow and lipstick, the products spoke to Heather s values: Ma Earth promised to use all natural ingredients, sustainably grown or mined, and to operate with minimal adverse impact on the planet. So for Heather, going to work was almost like carrying out a mission, promoting both beauty and concern for the planet s well being. No doubt, her commitment and enthusiasm helped to pave the way when the position of marketing manager opened up. Currently Heather and her team are preparing a promotional campaign for a new product line, Or Essentials, which includes lipsticks, foundation, and eye shadows tinted with a plant extract called orellana. The exciting feature of Or Essentials is that orellana is harvested deep in the Amazon rain forest, and because of its sustainable practices, Ma Earth will obtain this special ingredient in a socially responsible manner. The company set up a contract with a tribe living in a remote village. The people of the tribe are supposed to grow and harvest the orellana, which is naturally part of the area s ecosystem, and Ma Earth has promised to pay a fair price to the whole tribe so the people can use the money to maintain their village and their way of life. Consumers will get a beautiful product and the pleasure of knowing that they are helping to preserve an endangered ecology and an endangered way of life for the rain forest people. But when Heather sat down for a meeting with the photography crew that traveled to the village, some concerns began to surface. She was looking at stunning photos of tribe members arrayed in grass skirts as they stood behind a pile of fruit from the orellana tree. As she was selecting her favorite shots, one of the photographers commented that the translator had made some surprising remarks on the return trip from the village. Apparently the pile of orellana fruit had been gathered just for the photo shoot. The tribe doesn t really bother with growing and harvesting orellana; the people of this area aren t primarily farmers, and there aren t actually many orellana trees within a day s walk of the village. The first year they had tried selling orellana to Ma Earth, they grew only enough to earn a few hundred dollars, not really worth the effort. Heather felt confused by these statements and planned to take a closer look at spending on her product later that day. Hours later, when the other employees had gone home, Heather finally had a chance to spend some time researching her product on the company s employee website. She found purchasing transactions for orellana/annatto, and after a little research learned that under either name, the product is just an inexpensive dye. Under the latter name, it is used as a common food coloring. It turns out that Ma Earth made most of its purchases from a mainstream supplier, which is cheaper than persuading remote villagers to provide orellana. That evening Heather went home feeling betrayed and upset. The next day she asked her boss, the divisional vice president, why the company pretended to care about a remote village if it was just a front for a brand. Heather s boss, Megan McDonough, said, But we do care! We send them tens of thousands of dollars every year. Sure, they don t actually grow that stuff for us, but they could, and we ll buy it if they do. Anyway, our aid has provided a school and a health clinic, not to mention food and clothing. We ve helped the tribe members stay healthy and preserve their language and culture. Heather considered what Megan said. So, she asked, does this mean we re using their culture to build an image for our brand, and in exchange, they get money from us to keep that culture alive? She thought about the traditional designs the marketing department had copied from the tribe as decorations for the Or Essentials packaging. Megan nodded encouragingly. That s exactly what I m saying. It s a win win situation. Heather felt relieved but not quite sure that her original idealism would withstand her deeper knowledge of how Ma Earth defined its mission. QUESTIONS 1. What ethical issues is Heather facing in this situation? What possible marketing claims about the company s relationship with the Amazonian tribe would cross a line into unethical territory? What claims could it make ethically? 2. How could Ma Earth create an ethical climate that would help managers such as Heather ensure that they are behaving ethically? 3. How effectively do you think Ma Earth is practicing corporate social responsibility in this situation?Explain the reasoning behind your evaluation.
Daniel Merrill is the manager of an airport gift shop, Merrill News and Gifts. From the following data, Mr. Merrill wants a cash budget showing expected cash receipts and disbursements for the month of April, and the cash balance expected as of April 30, 20X7. Planned cash balance, March 31, 20X7: $100,000 Customer receivables as of March 31: $530,000 total, $80,000 from February sales, $450,000 from March sales Accounts payable, March 31: $460,000 Merchandise purchases for April: $450,000, 40% paid in month of purchase, 60% paid in next month Payrolls due in April: $90,000 Other expenses for April, payable in April: $45,000 Accrued taxes for April, payable in June: $7,500 Bank note due April 10: $90,000 plus $7,200 interest Depreciation for April: $2,100 Two year insurance policy due April 14 for renewal: $1,500, to be paid in cash Sales for April: $1,000,000, half collected in month of sale, 40% in next month, 10% in third month Prepare the cash budget for the month ending April 30, 20X7.
Danner Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2009. Prepare budgeted income statement and supporting budgets. (SO 3, 4) 1. Sales: Quarter 1, 28,000 bags; quarter 2, 42,000 bags. Selling price is $60 per bag. 2. Direct materials: Each bag of Snare requires 4 pounds of Gumm at a cost of $4 per pound and 6 pounds of Tarr at $1.50 per pound. 3. Desired inventory levels: Type of Inventory January 1 April 1 July 1 Snare (bags) 8,000 12,000 18,000 Gumm (pounds) 9,000 10,000 13,000 Tarr (pounds) 14,000 20,000 25,000 4. Direct labor: Direct labor time is 15 minutes per bag at an hourly rate of $14 per hour. 5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter. 6. Income taxes are expected to be 30% of income from operations. Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 150% of direct labor cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $439,500 in quarter 2. Instructions Prepare the budgeted income statement for the first 6 months and all required operating budgets by quarters. (Note: Use variable and fixed in the selling and administrative expense budget). Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr. part I need help on DANNER FARM SUPPLY COMPANY Budgeted Income Statement Sales 1,680,000 Cost of goods sold (70,000 X $33.75)* 448,000 Gross profit 1,232,000 Selling and administrative expenses 147,000 Income from operations 1,085,000 Income tax expense (30%) 215,600 Net income 869,400 *Cost Per Bag Cost Element Quantity Unit Cost Total Direct materials 2 Gumm?? 4 pounds Tarr?? 6 pounds Direct labor 1/4 hour Manufacturing Overhead (150% of Direct Labor) Total $0.00
DeAnne Company produces a single product. The company’s variable costing income statement for August appears below: DeAnne Company Income Staement For the month ended August 31 Sales ($23 per unit) $ 933,800 Variable expenses: Variable cost of goods sold 609,000 Variable selling expense 121,800 Total variable expenses 730,800 Contribution margin 203,000 Fixed expenses: Fixed manufacturing 142,000 Fixed selling and administrative 35,500 Total fixed expenses 177,500 Net operating income $ 25,500 The company produced 35,500 units in August and the beginning inventory consisted of 8,670 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. Under absorption costing, the ending inventory for the month ended August 31 would be reported at: $53,550 $78,540 $67,830 $83,540
At December 31, 2010, Cord Company’s plant asset and accumulated depreciation and amortization accounts had balances as follows: Category Plant Asset Accumulated Depreciation & Amortization automobiles and truck 172,000 100,325 leasehold 216,000 108,000 Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2011 and other information: leasehold improvement: straight line ; automobile & truck 150% declining balance; 5 years, all acquired after 2007 c.The leasehold improvements were completed on December 31, 2007, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2013, was renewable for an additional four year term. On April 29, 2011, Cord exercised the renewal option. e.On August 30, 2011, Cord purchased a new automobile for $12,500. f.On September 30, 2011, a truck with a cost of $24,000 and a carrying amount of $9,100 on date of sale was sold for $11,500. Depreciation for the nine months ended September 30, 2011, was $2,650. g.On December 20, 2011, a machine with a cost of $17,000 and a book value of $2,975 at date of disposition was scrapped without cash recovery. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2011. Round computations to the nearest whole dollar. I just need how to do the automobile and truck and leasehold improvement! I don’t have any clue.
On December 31, 2012, Pacifica, Inc., acquired 100 percent of voting stoc of Seguros Company. Pacifica will maintainSeguros as a wholly owned subisidiary with its own legal and accounting identity. The consideration transferred to the owner subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included 50,000 newly issued pacifica common shares ($20 market value, 5 par value) and an agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by Dec. 31 2013. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money. Immediately prior to the acquisition, the following data for both firms were available: Revenues (1,200,000) Exp 875,000 net income (325,000) R.E 1/1/12… (950,000) Net income (325,000) Dividends paid 90,000 Retained earnings 12/31/12 (1,185,000)
The August 31 bank statement of Winchester’s Healthcare has just arrived from United Bank. To prepare the bank reconciliation, you gather the following data:
a. The August 31 bank balance is $4,870.
b. The bank statement includes two charges for NSF checks from customers. One is for $400 (#1), and the other for $110 (#2).
c. The following Winchester checks are outstanding at August 31:
Check No. Amount
237$ 50
288170
271520
294580
29550
296140
d. Winchester collects from a few customers by EFT. The August bank statement lists a $1,300 EFT deposit for a collection on account.
e. The bank statement includes two special deposits that Winchester hasn’t recorded yet: $970, for dividend revenue, and $80, the interest revenue Winchester earned on its bank balance during August.
f. The bank statement lists a $30 subtraction for the bank service charge.
g. On August 31, the Winchester treasurer deposited $350, but this deposit does not appear on the bank statement.
h. The bank statement includes a $1,000 deduction for a check drawn by Multi State Freight Company. Winchester notified the bank of this bank error.
i. Winchester’s Cash account shows a balance of $2,900 on August 31.
Requirements
1. Prepare the bank reconciliation for Winchester’s Healthcare at August 31, 2012.
2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.
Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.
Chapter 2 Exercise 1
1. Issuance of stock
Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases:
a. Jackson Corporation has common stock with a par value of $1 per share.
b. Royal Corporation has no par common with a stated value of $5 D share.
c. French Corporation has no par common; no stated value has been as signed
Chapter 2 Exercise 3
3. Analysis of stockholders’ equity
Star Corporation issued both common and preferred stock during 19X6. The stockholders’ equity sections of the company’s balance sheets at the end of 19X6 and 19X5 follow.
19X6 19X5
Preferred stock, $100 par value, 10% $580,000 $500,000
Common stock, $10 par value 2,350,000 1,750,000
Paid in capital in excess of par value
Preferred 24,000 —
Common 4,620,000 3,600,000
Retained earnings 8,470,000 6,920,000
Total stockholders’ equity $16,044,000 $12,770,000
a. Compute the number of preferred shares that were issued during 19X6.
b. Calculate the average issue price of the common stock sold in 19X6.
c. By what amount did the company’s paid in capital increase during 19X6?
d. Did Star’s total legal capital increase or decrease during 19X6? By what amount?
Chapter 2 Problem 1
1. Bond computations: Straight line amortization
Southlake Corporation issued $900,000 of 8% bonds on March 1, 19X1. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.
• Case A—The bonds are issued at 100.
• Case B—The bonds are issued at 96.
• Case C—The bonds are issued at 105.
Southlake uses the straight line method of amortization.
Instructions:
Complete the following table:
Case A Case B Case C
a. Cash inflow on the issuance date _______ _______ _______
b. Total cash outflow through maturity _______ _______ _______
c. Total borrowing cost over the life of the bond issue _______ _______ _______
d. Interest expense for the year ended December 31, 19X1 _______ _______ _______
e. Amortization for the year ended December 31, 19X1 _______ _______ _______
f. Unamortized premium as of December 31, 19X1 _______ _______ _______
g. Unamortized discount as of December 31, 19X1 _______ _______ _______
h. Bond carrying value as of December 31, 19X1 _______ _______ _______
Chapter 3 Exercise 1
1. Product costs and period costs
The costs that follow were extracted from the accounting records of several different manufacturers:
1. Weekly wages of an equipment maintenance worker
2. Marketing costs of a soft drink bottler
3. Cost of sheet metal in a Honda automobile
4. Cost of president’s subscription to Fortune magazine
5. Monthly operating costs of pollution control equipment used in a steel mill
6. Weekly wages of a seamstress employed by a jeans maker
7. Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan Adams
a. Determine which of these costs are product costs and which are period costs.
b. For the product costs only, determine those that are easily traced to the finished product and those that are not.
Chapter 3 Exercise 2
2. Definitions of manufacturing concepts
Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:
Materials and supplies used
Brass $75,000
Repair parts 16,000
Machine lubricants 9,000
Wages and salaries Machine operators 128,000
Production supervisors 64,000
Maintenance personnel 41,000
Other factory overhead Variable 35,000
Fixed 46,000
Sales commissions 20,000
Compute:
a. Total direct materials consumed
b. Total direct labor
c. Total prime cost
d. Total conversion cost
Chapter 3 Exercise 5
5. Schedule of cost of goods manufactured, income statement
The following information was taken from the ledger of Jefferson Industries, Inc.:
Direct labor $85,000 Administrative expenses $59,000
Selling expenses 34,000 Work in. process
Sales 300,000 Jan. 1 29,000
Finished goods Dec. 31 21,000
Jan. 1 115,000 Direct material purchases 88,000
Dec. 31 131,000 Depreciation: factory 18,000
Raw (direct) materials on hand Indirect materials used 10,000
Jan. 1 31,000 Indirect labor 24,000
Dec. 31 40,000 Factory taxes 8,000
Factory utilities 11,000
Prepare the following:
a. A schedule of cost of goods manufactured for the year ended December 31.
b. An income statement for the year ended December 31.
Chapter 3 Problem 3
3. Manufacturing statements and cost behavior
Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows.
Per Unit Variable Cost Fixed Cost
Direct materials $4.50 $ —
Direct labor 6.5 —
Factory overhead 9 50,000
Selling — 70,000
Administrative — 135,000
Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no work in process. Tampa carries its finished goods inventory at the average unit cost of production.
Instructions:
a. Determine the cost of the finished goods inventory of light gauge aluminum.
b. Prepare an income statement for the current year ended December 31
c. On the basis of the information presented:
1. Does it appear that the company pays commissions to its sales staff? Explain.
2. What is the likely effect on the $4.50 unit cost of direct materials if next year’s production increases? Why?
The bank portion of the bank reconciliation for Carlin Company at November 30, 2012, is shown here and on the next page.
?
The adjusted cash balance per bank agreed with the cash balance per books at November 30. The December bank statement showed the following checks and deposits.
?
The cash records per books for December showed the following.
?
The bank statement contained two memoranda.
1. A credit of $2,645 for the collection of a $2,500 note for Carlin Company plus interest of $160 and less a collection fee of $15. Carlin Company has not accrued any interest on the note.
2. A debit of $819.10 for an NSF check written by K. Webster, a customer. At December 31, the check had not been re deposited in the bank At December 31, the cash balance per books was $12,513.30, and the cash balance per bank statement was $18,988.40. The bank did not make any errors, but Carlin Company made two errors.
Instructions
(a) Using the four steps in the reconciliation procedure described on pages 354–355, prepare a bank reconciliation at December 31, 2012.
(b) Prepare the adjusting entries based on the reconciliation.
The bank portion of the bank reconciliation for Chapin Company at October 31, 2010, was as follows.
The adjusted cash balance per bank agreed with the cash balance per books at October 31. The November bank statement showed the following checks and deposits:
The cash records per books for November showed the following.
The bank statement contained two bank memoranda:
1. A credit of $1,375 for the collection of a $1,300 note for Chapin Company plus interest of $91 and less a collection fee of $16. Chapin Company has not accrued any interest on the note.
2. A debit for the printing of additional company checks $34.
At November 30, the cash balance per books was $5,958, and the cash balance per the bank statement was $9,100. The bank did not make any errors, but two errors were made by Chapin Company.
Instructions
(a) Using the four steps in the reconciliation procedure described on page 368, prepare a bank reconciliation at November 30.
(b) Prepare the adjusting entries based on thereconciliation.
The bank portion of the bank reconciliation for Horsman Company at October 31, 2012, is shown here and on the next page.
?
The adjusted cash balance per bank agreed with the cash balance per books at October 31. The November bank statement showed the following checks and deposits.<>
>?
The cash records per books for November showed the following.
?
The bank statement contained two bank memoranda:
1. A credit of $2,242 for the collection of a $2,100 note for Horsman Company plus interest of $157 and less a collection fee of $15. Horsman Company has not accruedany interest on the note.
2. A debit for the printing of additional company checks $85. At November 30, the cash balance per books was $11,073.80 and the cash balance per bank statement was $17,712.50. The bank did not make any errors, but Horsman Company made two errors.
Instructions
(a) Using the four steps in the reconciliation procedure described on pages 354–355, prepare a bank reconciliation at November 30, 2012.
(b) Prepare the adjusting entries based on the reconciliation. (Note: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The correction of any errors relating to recording cash receipts should be made to AccountsReceivable.)
The bank portion of the bank reconciliation for Rintala Company at November 30, 2014, was as follows.
Rintala Company Bank Reconciliation November 30, 2014
Cash balance per bank
$14,724.84
Add: Deposits in transit
2,530.20
Less: Outstanding checks
17,255.04
Check Number
Check Amount
3451
$ 2,260.40
3470
720.10
3471
844.50
3472
1,426.80
3474
1,052.94
6,304.74
Adjusted cash balance per bank
$10,950.30
The adjusted cash balance per bank agreed with the cash balance per books at November 30.
The December bank statement showed the following checks and deposits.
Bank Statement
Checks
Deposits
Date
Number
Amount
Date
Amount
12 1
3451
$2,260.40
12 1
$ 2,530.20
12 2
3471
844.50
12 4
1,211.60
12 7
3472
1,426.80
12 8
2,365.10
12 4
3475
1,640.70
12 16
2,672.70
12 8
3476
1,300.00
12 21
2,945.00
12 10
3477
2,130.00
12 26
2,567.30
12 15
3479
3,080.00
12 29
2,836.00
12 27
3480
600.00
12 30
1,025.00
12 30
3482
475.50
Total
18,152.90
12 29
3483
1,140.00
12 31
3485
540.80
Total
$15,438.70
The cash records per books for December showed the following.
Cash Payments Journal
Cash Receipts Journal
Date
Number
Amount
Date
Number
Amount
Date
Amount
12 1
3475
$1,640.70
12 20
3482
$475.50
12 3
$ 1,211.60
12 2
3476
1,300.00
12 22
3483
1,140.00
12 7
2,365.10
12 2
3477
2,130.00
12 23
3484
795.06
12 15
2,672.70
12 4
3478
621.30
12 24
3485
450.80
12 20
2,954.00
12 8
3479
3,080.00
12 30
3486
1,889.50
12 25
2,567.30
12 10
3480
600.00
Total
$14,930.26
12 28
2,836.00
12 17
3481
807.40
12 30
1,025.00
12 31
1,190.40
Total
$16,822.10
The bank statement contained two memoranda:
1.
A credit of $3,765.07 for the collection of a $3,620.07 note for Rintala Company plus interest of $160.00 and less a collection fee of $15.00. Rintala Company has not accrued any interest on the note.
2.
A debit of $575.74 for an NSF check written by D. Chagnon, a customer. At December 31, the check had not been redeposited in the bank.
At December 31, the cash balance per books was $12,842.14, and the cash balance per the bank statement was $20,628.37. The bank did not make any errors, but two errors were made by Rintala Company.
(a) Using the four steps in the reconciliation procedure, prepare a bank reconciliation at December 31. (Reconcile the bank balance first and then the book balance.)
RINTALA COMPANY Bank Reconciliation December 31, 2014
Cash balance per bank statementNSF checkDeposits in transitCash balance per booksAdjusted cash balance per bankError in depositError in recording checkOutstanding checksAdjusted cash balance per booksNote collected by bank
$
Add:
Adjusted cash balance per booksCash balance per bank statementNote collected by bankOutstanding checksDeposits in transitNSF checkError in recording checkAdjusted cash balance per bankCash balance per booksError in deposit
Less:
Adjusted cash balance per booksCash balance per booksOutstanding checksAdjusted cash balance per bankNSF checkError in depositError in recording checkDeposits in transitCash balance per bank statementNote collected by bank
Cash balance per booksOutstanding checksDeposits in transitError in depositAdjusted cash balance per bankNote collected by bankNSF checkAdjusted cash balance per booksError in recording checkCash balance per bank statement
$
Note collected by bankError in recording checkOutstanding checksCash balance per bank statementNSF checkAdjusted cash balance per bankError in depositCash balance per booksAdjusted cash balance per booksDeposits in transit
$
Add:
Error in recording checkCash balance per bank statementAdjusted cash balance per booksOutstanding checksNSF checkError in depositAdjusted cash balance per bankDeposits in transitCash balance per booksNote collected by bank
Less:
Adjusted cash balance per booksCash balance per booksOutstanding checksAdjusted cash balance per bankDeposits in transitNote collected by bankNSF checkError in recording checkError in depositCash balance per bank statement
$
Adjusted cash balance per bankCash balance per booksNote collected by bankAdjusted cash balance per booksOutstanding checksNSF checkError in recording checkCash balance per bank statementDeposits in transitError in deposit
Adjusted cash balance per bankAdjusted cash balance per booksNote collected by bankCash balance per booksDeposits in transitError in recording checkNSF checkOutstanding checksError in depositCash balance per bank statement
Deposits in transitOutstanding checksError in recording checkAdjusted cash balance per bankError in depositNote collected by bankCash balance per bank statementNSF checkCash balance per booksAdjusted cash balance per books
$
(b) Prepare the adjusting entries based on the reconciliation. (Hint: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The correction of any errors relating to recording cash receipts should be made to Accounts Receivable.)(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
The cash account for Alpine Sports Co. on April 1, 2006, indicated a balance of $16,911.95. During April, the total cash deposited was $65,500.40, and checks written totaled $68,127.47. The bank statement indicated a balance of $18,880.45 on April 30, 2006. Comparing the bank statement, the canceled checks, and the accompanying memorandums with the records revealed the following reconciling items:
a. Checks outstanding totaled $5,180.27.
b. A deposit of $3,481.70, representing receipts of April 30, had been made too late to appear on the bank statement.
c. A check for $620 had been incorrectly charged by the bank as $260.
d. A check for $479.30 returned with the statement had been recorded by Alpine Sports Co. as $497.30. The check was for the payment of an obligation to Bray & Son on account.
e. The bank had collected for Alpine Sports Co. $3,424 on a note left for collection. The face of the note was $3,200.
f. Bank service charges for April amounted to $25.
g. A check for $880 from Shuler Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of April 30.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Ambulance Systems at February 29, 2012, indicated a balance of $20,580. The bank statement indicated a balance of $24,750 on February 29, 2012. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:
a. Checks outstanding totaled $9,300.
b. A deposit of $12,000, representing receipts of February 29, had been made too late to appear on the bank statement.
c. The bank had collected $6,240 on a note left for collection. The face of the note was $6,000.
d. A check for $140 returned with the statement had been incorrectly recorded by Ambulance Systems as $410. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.
e. A check drawn for $725 had been incorrectly charged by the bank as $275.
f. Bank service charges for February amounted to $90.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Ambulance Systems on February 29, 2012, what amount should be reported as cash?
The cash account for Black Diamond Sports Co. on November 1, 2008, indicated a balance of $23,326.69. During November, the total cash deposited was $118,125.41, and checks written totaled $115,650.10. The bank statement indicated a balance of $24,226.75 on November 30, 2008. Comparing the bank statement, the canceled checks, and the accompanying memoranda with the records revealed the following reconciling items:
a. Checks outstanding totaled $12,673.40.
b. A deposit of $18,332.15, representing receipts of November 30, had been made too late to appear on the bank statement.
c. A check for $850 had been incorrectly charged by the bank as $580.
d. A check for $39.30 returned with the statement had been recorded by Black Diamond Sports Co. as $393.00. The check was for the payment of an obligation to Locke & Son on account.
e. The bank had collected for Black Diamond Sports Co. $4,590 on a note left for collection.
The face of the note was $4,500.
f. Bank service charges for November amounted to $50.
g. A check for $1,080.20 from Kalina Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of November 30.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Bonita Medical Co. at September 30, 2008, indicated a balance of $5,335.30. The bank statement indicated a balance of $5,604.60 on September 30, 2008. Comparing the bank statement and the accompanying canceled checks and memoranda with the records revealed the following reconciling items:
a. Checks outstanding totaled $4,790.45.
b. A deposit of $9,226.15, representing receipts of September 30, had been made too late to appear on the bank statement.
c. The bank had collected $7,725 on a note left for collection. The face of the note was $7,500.
d. A check for $4,315 returned with the statement had been incorrectly recorded by Bonita Medical Co. as $3,415. The check was for the payment of an obligation to Rowe Co. for the purchase of office equipment on account.
e. A check drawn for $230 had been erroneously charged by the bank as $2,300.
f. Bank service charges for September amounted to $50.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Bravo Bike Co. at May 1, 2012, indicated a balance of $15,085. During May, the total cash deposited was $75,100 and checks written totaled $69,750. The bank statement indicated a balance of $25,460 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $11,360.
b. A deposit of $9,200, representing receipts of May 31, had been made too late to appear on the bank statement.
c. The bank had collected for Bravo Bike Co. $4,725 on a note left for collection. The face of the note was $4,500.
d. A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
e. A check for $410 returned with the statement had been recorded by Bravo Bike Co. as $140. The check was for the payment of an obligation to Portage Co. on account.
f. Bank service charges for July amounted to $40.
g. A check for $1,100 from Elkhart Co. was returned by the bank because of insufficient funds.
1. Prepare a bank reconciliation as of May 31.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Bravo Bike Co. on May 31, 2012, what amount should be reported as cash?
The cash account for Cabrillo Co. at March 1, 2008, indicated a balance of $10,676.67. During March, the total cash deposited was $39,146.38, and checks written totaled $42,918.40.
The bank statement indicated a balance of $10,960.06 on March 31. Comparing the bank statement, the canceled checks, and the accompanying memoranda with the records revealed the following reconciling items:
a. Checks outstanding totaled $11,008.25.
b. A deposit of $8,773.34, representing receipts of March 31, had been made too late to appear on the bank statement.
c. The bank had collected for Cabrillo Co. $3,710 on a note left for collection. The face of the note was $3,500.
d. A check for $380 returned with the statement had been incorrectly charged by the bank as $830.
e. A check for $419 returned with the statement had been recorded by Cabrillo Co. as $149.
The check was for the payment of an obligation to Graven Co. on account.
f. Bank service charges for March amounted to $40.
g. A check for $1,129.50 from Kane Miller Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of March 31.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Fred’s Sports Co. on June 1, 2010, indicated a balance of $16,515. During June, the total cash deposited was $40,150, and checks written totaled $43,600. The bank statement indicated a balance of $18,175 on June 30, 2010. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $6,840.
b. A deposit of $4,275, representing receipts of June 30, had been made too late to appear on the bank statement.
c. A check for $640 had been incorrectly charged by the bank as $460.
d. A check for $80 returned with the statement had been recorded by Fred’s Sports Co. as $800. The check was for the payment of an obligation to Miliski Co. on account.
e. The bank had collected for Fred’s Sports Co. $3,240 on a note left for collection. The face of the note was $3,000.
f. Bank service charges for June amounted to $35.
g. A check for $1,560 from ChimTech Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of June 30.
2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.
The cash account for Inky’s Bike Co. at July 1, 2010, indicated a balance of $12,470. During July, the total cash deposited was $26,680, and checks written totaled $31,500. The bank statement indicated a balance of $16,750 on July 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $12,850.
b. A deposit of $5,100, representing receipts of July 31, had been made too late to appear on the bank statement.
c. The bank had collected for Inky’s Bike Co. $2,675 on a note left for collection. The face of the note was $2,500.
d. A check for $370 returned with the statement had been incorrectly charged by the bank as $730.
e. A check for $320 returned with the statement had been recorded by Inky’s Bike Co. as $230. The check was for the payment of an obligation to Ranchwood Co. on account.
f. Bank service charges for July amounted to $25.
g. A check for $850 from Hallock Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of July 31.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Pickron Co. at April 30, 2006, indicated a balance of $13,290.95. The bank statement indicated a balance of $18,016.30 on April 30, 2006. Comparing the bank statement and the accompanying canceled checks and memorandums with the records revealed the following reconciling items:
a. Checks outstanding totaled $7,169.75.
b. A deposit of $5,189.40, representing receipts of April 30, had been made too late to appear on the bank statement.
c. The bank had collected $3,240 on a note left for collection. The face of the note was $3,000.
d. A check for $1,960 returned with the statement had been incorrectly recorded by Pickron Co. as $1,690. The check was for the payment of an obligation to Jones Co. for the purchase of office equipment on account.
e. A check drawn for $1,680 had been erroneously charged by the bank as $1,860.
f. Bank service charges for April amounted to $45.00.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for Seal Tek Co. at December 1, 2006, indicated a balance of $3,945.90. During December, the total cash deposited was $31,077.75, and checks written totaled $30,395.78. The bank statement indicated a balance of $5,465.50 on December 31. Comparing the bank statement, the canceled checks, and the accompanying memorandums with the records revealed the following reconciling items:
a. Checks outstanding totaled $3,003.84.
b. A deposit of $2,148.21, representing receipts of December 31, had been made too late to appear on the bank statement.
c. The bank had collected for Seal Tek Co. $1,908 on a note left for collection. The face of the note was $1,800.
d. A check for $120 returned with the statement had been incorrectly charged by the bank as $1,200.
e. A check for $318 returned with the statement had been recorded by Seal Tek Co. as $138. The check was for the payment of an obligation to Kenyon Co. on account.
f. Bank service charges for December amounted to $30.
g. A check for $636 from Fontana Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of December 31.
2. Journalize the necessary entries. The accounts have been closed.
The cash account for Showtime Systems at February 28, 2006, indicated a balance of $19,144.15. The bank statement indicated a balance of $31,391.40 on February 28, 2006. Comparing the bank statement and the accompanying canceled checks and memorandums with the records reveal the following reconciling items:
a. Checks outstanding totaled $11,021.50.
b. A deposit of $6,215.50, representing receipts of February 28, had been made too late to appear on the bank statement.
c. The bank had collected $6,300 on a note left for collection. The face of the note was $6,000.
d. A check for $1,275 returned with the statement had been incorrectly recorded by Showtime Systems as $2,175. The check was for the payment of an obligation to Wilson Co. for the purchase of office supplies on account.
e. A check drawn for $855 had been incorrectly charged by the bank as $585.
f. Bank service charges for February amounted to $28.75.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
The cash account for South Bay Sports Co. on April 1, 2012, indicated a balance of $35,025. During April, the total cash deposited was $83,150, and checks written totaled $90,000. The bank statement indicated a balance of $34,345 on April 30, 2012. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $7,700.
b. A deposit of $3,800, representing receipts of April 30, had been made too late to appear on the bank statement.
c. A check for $960 had been incorrectly charged by the bank as $690.
d. A check for $150 returned with the statement had been recorded by South Bay Sports Co. as $1,500. The check was for the payment of an obligation to Jones Co. on account.
e. The bank had collected for South Bay Sports Co. $2,600 on a note left for collections. The face of the note was $2,500.
f. Bank service charges for June amounted to $50.
g. A check for $1,900 from Valley Schools Academy was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of April 30.
2. Journalize the necessary entries. The accounts have not beet closed.
3. If a balance sheet were prepared for South Bay Sports Co. on April 30, 2012, what amount should be reported as cash?
The financial statements of Tootsie Roll are presented in Appendix A of this book, together with an auditor’s report—Report of Independent Auditors.
Instructions
Using the financial statements and reports, answer these questions about Tootsie Roll’s internal controls and cash.
(a) What comments, if any, are made about cash in the ?oReport of Independent Registered Public Accounting Firm???
(b) What data about cash and cash equivalents are shown in the consolidated balance sheet (statement of financial position)?
(c) What activities are identified in the consolidated statement of cash flows as being responsible for the changes in cash during 2009?
(d) How are cash equivalents defined in the Notes to Consolidated Financial Statements?
(e) Read the section of the report titled ?oManagement’s Report on Internal Control Over Financial Reporting.?? Summarize the statements made in that section of the report.
The following procedures were recently installed by C&G Hydraulics Company:
a. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.
b. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts.
c. At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers.
d. At the end of each day, all cash receipts are placed in the bank’s night depository.
e. At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank.
f. The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer’s office for approval.
g. After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing.
h. Along with petty cash expense receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund.
Instructions
Indicate whether each of the procedures of internal control over cash represents
(1) A strength or
(2) A weakness. For each weakness, indicate why it exists.
BizKid Companys adjusted trial balance on August 31, 2011, its fiscal year end, follows. Debit Credit Merchandise inventory $ 42,000 Other (noninventory) assets 168,000 Total liabilities $ 48,510 Common stock 81,013 Retained earnings 56,537 Dividends 8,000 Sales 287,280 Sales discounts 4,395 Sales returns and allowances 18,960 Cost of goods sold 110,754 Sales salaries expense 39,357 Rent expense”Selling space 13,502 Store supplies expense 3,447 Advertising expense 24,419 Office salaries expense 35,910 Rent expense”Office space 3,447 Office supplies expense 1,149 Totals $ 473,340 $ 473,340 On August 31, 2010, merchandise inventory was $33,894. Supplementary records of merchandising activities for the year ended August 31, 2011, reveal the following itemized costs. Invoice cost of merchandise purchases $ 123,480 Purchase discounts received 2,593 Purchase returns and allowances 5,927 Costs of transportation in 3,900 1.value: 10.00 points Required: 1. Compute the companys net sales for the year. (Omit the “$” sign in your response.) Net sales $ check my workeBook Links (2)references 2.value: 10.00 points 2. Compute the companys total cost of merchandise purchased for the year. (Omit the “$” sign in your response.) Total cost of merchandise purchased $ check my workeBook Links (2)references 3.value: 10.00 points 3. Prepare a multiple step income statement that includes separate categories for selling expenses and for general and administrative expenses. (Input all amounts as positive values. Omit the “$” sign in your response.) BIZKID COMPANY Income Statement For Year Ended August 31, 2011 $ $ Expenses Selling expenses Total selling expenses General and administrative expenses Total general and administrative expenses Total expenses $ check my workeBook Links (2)references 4.value: 10.00 points 4. Prepare a single step income statement that includes these expense categories: cost of goods sold, selling expenses, and general and administrative expenses. (Input all amounts as positive values. Omit the “$” sign in your response.) BIZKID COMPANY Income Statement For Year Ended August 31, 2011 $ Expenses $ Total expenses $
Bob is a twenty eight year old unmarried man and the assistant manager of a grocery store. For the past five years he’s been a volunteer firefighter, which he trained for when he was in the Navy. He is really proud of his condo, and is happy he’ll have his big screen TV paid off in a couple months because he wants to buy a new laptop computer. He jokes about working at the grocery store just to get his employee discount because his Great Dane eats about $50 worth of dog food a week! Bob has the following monthly income and expenses: Gross monthly income: $5,300 Monthly principal and interest (including any PMI) $1,270 Monthly homeowners association fee $100 Annual property taxes $3,278 Annual homeowners insurance $650 Monthly auto payment $295 Semi annual auto insurance $700 Average monthly gasoline expense $200 Monthly installment payment on the TV $97 Average monthly utilities $250 Monthly Internet/phone/cable TV $200 Bruno’s dog food and tennis balls $250 Assignment Questions: 1. What is Bob’s housing (front end) ratio? Show how you calculated this. 2. What is his debt to income (back end) ratio? Show how you calculated this. Without considering any compensating factors… 3. What is the maximum allowable housing ratio for a conforming loan? 4. What is the maximum allowable debt to income ratio for a conforming loan? 5. What is the maximum allowable housing ratio for an FHA loan? 6. What is the maximum allowable debt to income ratio for an FHA loan? 7. What is the maximum allowable debt to income ratio for a VA loan? 8. Which of these three types of loans does Bob qualify for?
Brady Products manufactures a silicone paste wax that goes through three processing departments”Cracking, Blending, and Packing. All raw materials are introduced at the start of work in the Cracking Department. The Work in Process T account for the Cracking Department for a recent month is given below: Work in Process”Cracking Department Inventory, May 1 171,740 Completed and transferred to the Blending Department ? Materials 555,920 Conversion 282,000 Inventory, May 31 ? The May 1 work in process inventory consisted of 62,000 pounds with $110,980 in materials cost and $60,760 in conversion cost. The May 1 work in process inventory was 100% complete with respect to materials and 80% complete with respect to conversion. During May, 280,000 pounds were started into production. The May 31 inventory consisted of 76,000 pounds that were 100% complete with respect to materials and 60% complete with respect to conversion. The company uses the weighted average method to account for units and costs. Required: 1. Determine the equivalent units of production for May. Materials Conversion Equivalent units of production 2. Determine the costs per equivalent unit for May. (Round your answers to 2 decimal places.) Materials Conversion Cost per equivalent unit $ $ 3. Determine the cost of the units completed and transferred to the Blending Department during May. (Round your intermediate calculation to 2 decimal places. Round your final answers to nearest whole dollar amount.) Materials Conversion Total Cost of units completed and transferred out $ $ $
Break Even Sales BeerBev Inc., reported the following operation information for a recent year: Net Sales $5,760,000 Cost of Goods Sold $1,440,000 Selling, general and administration 720,000 $2,160,000 Income from operations $3,600,000 In addition, assume that BeerBev sold 40,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $21,600. a. Compute the break even sales (barrels) for the current year. Round to the nearest whole barrel. ____barrels b. Compute the anticipated break even sales (barrels) for the following year. Round to the nearest whole barrel. ____barrels
Brianna Webb, a connoisseur of fine chocolate, opened Bris Sweets in Collegetown on February 1, 2011. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the stores financial records. The following transactions occurred in February 2011, the first month of operations. a. Received four shareholders’ contributions totaling $28,900 cash to form the corporation; issued stock. b. Paid three months’ rent for the store at $1,750 per month (recorded as prepaid expenses). c. Purchased and received candy for $6,200 on account, due in 60 days. d. Purchased supplies for $1,430 cash. e. Negotiated and signed a two year $14,000 loan at the bank. f. Used the money from (e) to purchase a computer for $3,150 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store. g. Placed a grand opening advertisement in the local paper for $490 cash. h. Made sales on Valentine’s Day totaling $3,800; $2,675 was in cash and the rest on accounts receivable. The cost of the candy sold was $2,000. i. Made a $620 payment on accounts payable. j. Incurred and paid employee wages of $1,000. k. Collected accounts receivable of $150 from customers. l. Made a repair to one of the display cases for $125 cash. m. Made cash sales of $2,700 during the rest of the month. The cost of the candy sold was $1,510. 1&2. Record in the T accounts the effects of each transaction for Bris Sweets in February, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T accounts. 3.1 Prepare an income statement at the end of the month ended February 28, 2011. 3.2 Prepare statement of stockholders equity at the end of the month ended February 28, 2011. 3.3 Prepare balance sheet at the end of the month ended February 28, 2011. (Be sure to list the assets and liabilities in order of their liquidity. Omit the “$” sign in your response.) 5. After three years in business, you are being evaluated for a promotion. One measure is how efficiently you managed the assets of the business. The following data are available: 2013* 2012 2011 Total assets $ 85,000 $ 50,500 $ 35,500 Total liabilities 49,000 17,500 18,500 Total stockholders equity 36,000 33,000 17,000 Total sales 94,500 78,000 56,000 Net income 22,300 11,000 4,200 * At the end of 2013, Brianna decided to open a second store, requiring loans and inventory purchases prior to the stores opening in early 2014. Compute the total asset turnover ratio for 2012 and 2013.
Choose an item that you would like to manufacture. You do not actually need to manufacture something, but will proceed through the assignment as if you were planning on manufacturing the item you have selected. The product should require materials and labor and be something that you are familiar with in process from start to finish. The product must be useful and marketable. You can choose something as simple as making chocolate chip cookies, a type of craft, or something more complicated.
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Choose an item that you would like to manufacture. You do not actually need to manufacture something, but will proceed through the assignment as if you were planning on manufacturing the item you have selected. The product should require materials and labor and be something that you are familiar with in process from start to finish. The product must be useful and marketable. You can choose something as simple as making chocolate chip cookies, a type of craft, or something more complicated. Consider production as if you were making the product from beginning to end, and not as if using a kit. Perform the following steps: 1. Choose a product to manufacture and describe the manufacturing process. 2. Prepare the following budgets for 1 quarter broken down monthly regarding your chosen item: • estimated sales budget • estimated direct materials budget • estimated direct labors budget • estimated manufacturing overhead budget • estimated selling and administrative expenses • estimated income statement. 3. Classify all manufacturing costs and selling and administrative expenses as either variable or fixed. 4….
Castle Company produces throw blankets that are popular holiday gifts. Standard variable costs relating to a single blanket are given below Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 2.62 yards $5 per yard $? Direct labor 1.35 DLH $6.80 per DLH $? Variable manufacturing overhead 1.35 DLH $2 per direct labor hour $? Total standard cost $? Overhead is applied to production on the basis of direct labor hours. During March, 924 blankets were manufactured and sold.
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Castle Company produces throw blankets that are popular holiday gifts. Standard variable costs relating to a single blanket are given below ?Standard Quantity or Hours?Standard Price or Rate?Standard Cost??Direct materials?2.62 yards?$5 per yard?$???Direct labor?1.35 DLH?$6.80 per DLH?$???Variable manufacturing overhead?1.35 DLH?$2 per direct labor hour?$???Total standard cost? ? ?$???Overhead is applied to production on the basis of direct labor hours. During March, 924 blankets were manufactured and sold. Selected information related to the month’s production is given below: ?Materials Used?Direct Labor?Variable Manufacturing Overhead??Actual costs incurred?$11,500 ?$8,408?$3,100 ??Direct materials price variance??? ? ??Actual?2,620 yards? 1400 hours? ??Direct materials quantity variance?$1,000 U ? ? ??Direct labor rate variance? ??? ??Direct labor efficiency variance? ??? ??Variable overhead rate variance? ? ????Variable overhead efficiency variance? ? ????*For this month’s production of 924 blankets??Submit an Excel document with each tab labeled by item number in good form that demonstrates the following through your calculations: 1. What is the standard cost of a single blanket? 2. What was the actual cost per blanket produced during March? 3. What was the direct materials price variance for March? 4. What was the direct labor rate variance for March? The direct labor efficiency variance? 5. What was the variable overhead rate variance for March? The variable overhead efficiency variance?
Carolina Clinic is considering investing in new heart monitoring equipment. It has two options: Option A would have an initial lower cost but would require a significant expenditure for rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance costs would be higher. Since the option B machine is of initial higher quality, it is expected to have a salvage value at the end of its useful life. The following estimates were made of the cash flows. The companys cost of capital is 12%. Option A Option B Initial cost $160,000 $227,000 Annual cash inflows $75,000 $80,000 Annual cash outflows $35,000 $30,000 Cost to rebuild (end of year 4) $60,000 $0 Salvage value $0 $12,000 Estimated useful life 8 years 8 years Instructions (a) Compute the (1) net present value, (2) profitability index, and (3) internal rate of return for each option. (b) Which option should be accepted? I don’t want the full answer, if you can just tell me HOW to get the 12% discount factor that would be great and I can figure out the rest
Casagrande Company is currently operating at 80 percent capacity. Worried about the companys performance, Mike, the general manager, reviewed the companys operating performance. Following are sales and related cost information about Casagrande, in millions of dollars: Segment North South East West Sales $30 $40 $20 $10 Less variable costs 12 8 21 8 Contribution margin $18 $32 $(1) $ 2 Less fixed costs 9 12 6 3 Operating profit (loss) $ 9 $20 $(7) $(1) A. What is the current operating profit for the company as a whole? B. Assume that all fixed costs are unavoidable. If Mike eliminated the unprofitable segments, what would be the new operating profit for the company as a whole? C. What options does management have to maximize profits? D. What qualitative factors do you think management should consider before making this decision? What impact could these qualitative factors have on the decision?
Case 3 5: International versus U.S. Standards in Ch. 3 of Financial Accounting Theory and Analysis Case 3 5 International versus U.S. Standards Under U.S. GAAP, property, plant, and equipment are reported at historical cost net of accumulated depreciation. These assets are written down to fair value when it is determined that they have been impaired. A number of other countries, including Australia, Brazil, England, Mexico, and Singapore, permit the revaluation of property, plant, and equipment to their current cost as of the balance sheet date. The primary argument favoring revaluation is that the historical cost of assets purchased ten, twenty, or more years ago is not meaningful. A primary argument against revaluation is the lack of objectivity in arriving at current cost estimates, particularly for old assets that either will or cannot be replaced with similar assets or for which no comparable or similar assets are currently available for purchase. Required: a. Discuss the qualitative concept of comparability. In your opinion, would the financial statements of companies operating in one of the foreign countries listed above be comparable to a U.S. companys financial statements? Explain. b. Discuss the concept of reliability. In your opinion, would the amounts reported by U.S. companies for property, plant, and equipment be more or less reliable than the current cost amounts reported by companies in England, Mexico, or elsewhere? c. Discuss the concept of relevance. In your opinion, would the amounts reported by U.S. companies for property, plant, and equipment be more or less relevant than the current cost amounts reported by companies in England, Mexico, or elsewhere?
Chapter 21 Salaur Company is evaluating a lease arrangement being offered by TSP Company for use of a computer system. The lease is noncancelable, and in no case does Salaur receive title to the computers during or at the end of the lease term. The lease starts on January 1, 2011, with the first rental due at the beginning of the year. Additional information related to the lease is as follows: Yearly rental $3,557.25 Lease term 3 years Estimated economic life 5 years Purchase option $3,000 at end of 3 years, which approximates fair value Renewal option 1 year at $1,500; no penalty for nonrenewal; standard renewal clause Fair value at inception of lease $10,000 Cost of asset to lessor $10,000 Residual value Guaranteed ‘0’ Unguaranteed $3,000 Incremental borrowing rate of lessee 12% Lessors implicit rate Executory costs paid by: Lessor; estimated to be $500 per year Estimated fair value at end of lesse $3,000 Accounting Analyze the lease capitalization criteria for this lease for Salaur Company. Prepare the journal entry for Salaur on January 1, 2011. Analysis Briefly discuss the impact of the accounting for this lease for two common ratios: return on assets and debt to total assets. Principles What element of the reliability (representational faithfulness, verifiability, neutrality) is being addressed when a company like Salaur evaluates lease capitalization criteria?
Purchased 57 watches for $8,151 ($143 per watch) on account.
Jul.
31
Sold 42 watches for $12,642 cash.
Aug.
12
Purchased 43 watches for $6,622 ($154 per watch) cash.
Aug.
22
Sold 21 watches for $6,321 on account.
Sep.
19
Paid for watches ordered on July 17.
Sep
27
Received full payment for watches sold on account on August 22.
Oct.
27
Purchased 88 watches for $14,784 ($168 per watch) cash.
Nov.
20
Sold 115 watches for $34,615 cash.
Dec.
4
Purchased 105 watches for $18,270 ($174 per watch) cash.
Dec.
8
Sold 36 watches for $10,836 on account.
Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equipped with a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatly reduced. As of December 31, the estimated market value of MU watches is only $114 per watch
Record any necessary entry on December 31, 2013, related to this information
Classify the following as population or sample: (a) All the senators of the United States presently in office (b) 1500 people selected to find out the soft drink preference in Chicago For the following questions, would you collect information using a sample or a population? (a) A survey to rank the famous television shows in United States (b) A research project to find how many heart attack patients are admitted on January 1 to a famous hospital (c) A study to find the quality of matchsticks in a bundle of 100 matchboxes (d) An evaluation of the creativity of the director of three films From the data in the Statistical Abstract of United States represented below with details, choose the kind of scale that can be used to measure them. NCAA IA Team Total Offense Team name Plays Louisville 345 Hawaii 329 New Mexico St. 401 Oregon 357 Ordinal Nominal Ratio Interval AVX Stereo Equipment, Inc., recently began a “no hassles” return policy. A sample of 515 customers who had recently returned items showed 300 thought the policy was fair, 180 thought it took too long to complete the transaction, and the rest had no opinion. On the basis of this information, make an inference about customer reaction to the new policy. (Round your answers to 2 decimal places. Omit the “%” sign in your response.) Customer reaction Percent Fair % Too long % No opinion % The above data that majority of the customers believe the policy is fair. What is the level of measurement for each of the following variables? ( Ordinal, Nominal, Ratio or Interval) a. Student IQ ratings. b. Distance students travel to class. c. The jersey numbers of a sorority soccer team. d. A classification of students by state of birth. e. A ranking of students as freshman, sophomore, junior, and senior. f. Number of hours students study per week. What is the level of measurement for these items related to the newspaper business? ( Ratio or Nominal ) a. The number of papers sold each Sunday during 2009. b. The departments, such as editorial, advertising, sports, etc. c. A summary of the number of papers sold by county. d. The number of years employed by the newspaper for each employee.
Classifying Activities According to Level, Determining Value Added or Nonvalue Added [LO2]
Summer Company manufactures flowerpots in several different sizes and has identified the following activities in its manufacturing process.
Required:
Classify each activity listed as facility, product, customer, batch, or unit level, identify a cost driver for each activity listed and indicate whether each activity is value added or nonvalue added.
Activity
Level
Cost driver
Value added
Storing inventory
(Click to select) Facility, batch, product Unit, batch Batch, customer Facility Unit, product, batch Batch Unit Batch, product
(Click to select) Units, labor hours Inspections Molds used Batches Units Batches fired Deliveries Sq. footage Orders
(Click to select) Value added Non value added
Creating molds
(Click to select) Batch Batch, product Facility, batch, product Unit Facility Unit, batch Unit, product, batch Batch, customer
(Click to select) Inspections Batches Deliveries Molds used Units, labor hours Units Orders Sq. footage Batches fired
(Click to select) Value added Non value added
Pouring plaster
(Click to select) Unit, product, batch Batch, product Facility Facility, batch, product Unit Unit, batch Batch Batch, customer
(Click to select) Inspections Batches Batches fired Units Sq. footage Orders Units, labor hours Deliveries Molds used
(Click to select) Non value added Value added
Firing pots in kiln
(Click to select) Batch, customer Unit Unit, batch Unit, product, batch Facility, batch, product Batch Batch, product Facility
(Click to select) Units Orders Inspections Sq. footage Molds used Deliveries Units, labor hours Batches fired Batches
(Click to select) Value added Non value added
Sanding and finishing
(Click to select) Facility Batch, product Batch, customer Facility, batch, product Unit, product, batch Batch Unit, batch Unit
(Click to select) Units, labor hours Orders Molds used Deliveries Batches fired Batches Units Sq. footage Inspections
(Click to select) Value added Non value added
Painting
(Click to select) Facility, batch, product Unit Batch Facility Unit, batch Batch, customer Unit, product, batch Batch, product
(Click to select) Batches fired Molds used Inspections Units, labor hours Units Batches Orders Sq. footage Deliveries
(Click to select) Non value added Value added
Performing quality control
(Click to select) Batch Unit, batch Batch, product Unit, product, batch Unit Batch, customer Facility Facility, batch, product
(Click to select) Units Units, labor hours Inspections Orders Deliveries Molds used Sq. footage Batches fired Batches
(Click to select) Value added Non value added
Ordering materials
(Click to select) Batch Batch, product Unit, product, batch Facility Unit, batch Facility, batch, product Batch, customer Unit
(Click to select) Molds used Batches Batches fired Units, labor hours Units Sq. footage Deliveries Orders Inspections
(Click to select) Non value added Value added
Delivering orders to customers
(Click to select) Batch, customer Unit, product, batch Facility Batch Facility, batch, product Batch, product Unit Unit, batch
(Click to select) Orders Units Inspections Sq. footage Batches fired Units, labor hours Deliveries Batches Molds used
(Click to select) Non value added Value added
Insuring the manufacturing facility
(Click to select) Unit, batch Unit Facility, batch, product Batch, customer Unit, product, batch Batch, product Facility Batch
(Click to select) Batches fired Units Inspections Batches Units, labor hours Molds used Deliveries Sq. footage Orders
(Click to select) Value added Non value added
Reconfiguring machinery between batches
(Click to select) Unit, product, batch Facility Facility, batch, product Batch Batch, product Batch, customer Unit Unit, batch
(Click to select) Sq. footage Inspections Orders Batches Batches fired Deliveries Units Molds used Units, labor hours
Colerain Corporation is a merchandising company that is preparing a profit plan for the third quarter of the calendar year. The companys balance sheet as of June 30 is shown below: Colerain Corporation Balance Sheet June 30 Assets Cash $ 94,000 Accounts receivable 154,000 Inventory 54,600 Plant and equipment, net of depreciation 340,000 Total assets $ 642,600 Liabilities and Stockholders Equity Accounts payable $ 73,500 Common stock 440,000 Retained earnings 129,100 Total liabilities and stockholders equity $ 642,600 Colerains managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $260,000, $280,000, $270,000, and $290,000, respectively. 2. All sales are on credit and all credit sales are collected. Each months credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each months ending inventory must equal 35% of the cost of next months sales. The cost of goods sold is 60% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $86,000. Each month $7,000 of this total amount is depreciation expense and the remaining $79,000 relates to expenses that are paid in the month they are incurred. 5. The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30. 2a. Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30th. (Input all amounts as positive values. Do not round intermediate calculations.) Merchandise Purchases Budget July August September Total Budgeted cost of goods sold $ $ $ $ Total needs Required purchases $ $ $ $ 2b. Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30th. (Do not round intermediate calculations. Leave no cells blank be certain to enter “0” wherever required.) Schedule of Expected Cash Disbursements”Merchandise Purchases July August September Total From accounts payable $ $ $ $ For July purchases For August purchases For September purchases Total cash disbursements $ $ $ $ 3. Prepare an income statement for the quarter ended September 30th. (Input all amounts as positive values except losses which should be indicated by a minus sign. Do not round intermediate calculations. Leave no cells blank be certain to enter “0” wherever required.) Colerain Corporation Income Statement For the Quarter Ended September 30 $ $ 4. Prepare a balance sheet as of September 30th. (Be sure to list the assets and liabilities in order of their liquidity. Do not round intermediate calculations.) Colerain Corporation Balance Sheet September 30 Assets $ Total assets $ Liabilities and Stockholders’ Equity $ Total liabilities and stockholders’ equity $
Collier Bicycles has been manufacturing its own wheels for its bikes. The company is operating at 100% capacity, and variable manufacturing overhead is charged to its production at the rate of 30$ of direct labor costs. The direct materials and direct labor cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $4 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $42,000 of fixed manufacturing overhead being charged to the wheels will have to be absorbed by other products. a. Prepare an incremental analysis for the decision to make or buy wheels. b. Should Collier Bicycles buy the wheels from the outside supplier? Justify answer.
Colt Football Co. had a player contract with Watts that is recorded in its books at $3,600,000 on July 1, 2010. Day Football Co. had a player contract with Kurtz that is recorded in its books at $4,500,000 on July 1, 2010. On this date, Colt traded Watts to Day for Kurtz and paid a cash difference of $450,000. The fair value of the Kurtz contract was $5,400,000 on the exchange date. The exchange had no commercial substance. After the exchange, the Kurtz contract should be recorded in Colt’s books at a. $4,050,000. b. $4,500,000. c. $4,950,000. d. $5,400,000. Use the following information for questions 2 through 4. On March 1, 2010, Newton Company purchased land for an office site by paying $540,000 cash. Newton began construction on the office building on March 1. The following expenditures were incurred for construction: Date Expenditures March 1, 2010 $ 360,000 April 1, 2010 504,000 May 1, 2010 900,000 June 1, 2010 1,440,000 The office was completed and ready for occupancy on July 1. To help pay for construction, $720,000 was borrowed on March 1, 2010 on a 9%, 3 year note payable. Other than the construction note, the only debt outstanding during 2010 was a $300,000, 12%, 6 year note payable dated January 1, 2010.
Systematic Enterprises invested its excess cash in the following instruments during December 2010:
Certificate of deposit, due January 31, 2013 …………………..$ 75,000
Certificate of deposit, due March 30, 2011 ……………………. 150,000
Commercial paper, original maturity date February 28, 2011 …. 125,000
Deposit into a money market fund ……………………………… 25,000
Investment in stock ……………………………………………… 65,000
90 day Treasury bills ……………………………………………. 100,000
Treasury note, due December 1, 2040 ………………………….. 500,000
Required
Determine the amount of cash equivalents that should be combined with cash on the company’s balance sheet at December 31, 2010, and for purposes of preparing a statement of cash flows for the year ended December 31, 2010.
Levon Helm was a kind of one man mortgage broker. He would drive around Tennessee looking for homes that had second mortgages, and if the criteria were favorable, he would offer to buy the second mortgage for ?ocash on the barrelhead.?? Helm bought low and sold high, making sizable profits. Being a small operation, he employed one person, Cindy Patterson, who did all his bookkeeping. Patterson was an old family friend, and he trusted her so implicitly that he never checked up on the ledgers or the bank reconciliations. At some point, Patterson started ?oborrowing?? from the business and concealing her transactions by booking phony expenses. She intended to pay it back someday, but she got used to the extra cash and couldn’t stop. By the time the scam was discovered, she had drained the company of funds that it owed to many of its investors. The company went bankrupt, Patterson did some jail time, and Helm lost everything.
Requirements
1. What was the key control weakness in this case?
2. Many small businesses cannot afford to hire enough people for adequate separation of duties. What can they do to compensate for this?
Lipkus Company has recorded the following items in its financial records.
Cash in bank……………………..$ 47,000
Cash in plant expansion fund…… 100,000
Cash on hand…………………… 12,000
Highly liquid investments………. 34,000
Petty cash……………………….. 500
Receivables from customers…….. 89,000
Stock investments………………. 61,000
The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments had maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6 to 12 months. The plant expansion project will begin in 3 years.
Instructions
(a) What amount should Lipkus report as ?oCash and cash equivalents?? on its balance sheet?
(b) Where should the items not included in part (a) be reported on the balance sheet?
(c) What disclosures should Lipkus make in its financial statements concerning ?ocash and cash equivalents???
Loganberry Company maintains a petty cash fund for small expenditures. The following transactions occurred over a 2 month period.
July 1 Established petty cash fund by writing a check on Rock Point Bank for $100.
15 Replenished the petty cash fund by writing a check for $96.90. On this date the fund consisted of $3.10 in cash and the following petty cash receipts: freight out $51.00, postage expense $20.50, entertainment expense $23.10, and miscellaneous expense $4.10.
31 Replenished the petty cash fund by writing a check for $95.90. At this date, the fund consisted of $4.10 in cash and the following petty cash receipts: freight out $43.50, charitable contributions expense $20.00, postage expense $20.10, and miscellaneous expense $12.30.
Aug. 15 Replenished the petty cash fund by writing a check for $98.00. On this date, the fund consisted of $2.00 in cash and the following petty cash receipts: freight out $40.20, entertainment expense $21.00, postage expense $14.00, and miscellaneous expense $19.80.
16 Increased the amount of the petty cash fund to $150 by writing a check for $50.
31 Replenished petty cash fund by writing a check for $137.00. On this date, the fund consisted of $13 in cash and the following petty cash receipts: freight out $74.00, entertainment expense $43.20, and postage expense $17.70.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account.
(c) What internal control features exist in a petty cash fund?
Meridian Clothing is a retail store specializing in women’s clothing. The store has established a liberal return policy for the holiday season in order to encourage gift purchases. Any item purchased during November and December may be returned through January 31, with a receipt, for cash of exchange. If the customer does not have a receipt, cash will still be refunded for any item under $50. If the item is more than $50, a check is mailed to the customer. Whenever an item is returned, a store clerk completes a return slip, which the customer approximately once every two hours to authorize the return slips. Clerks are instructed to place the returned merchandise on the proper rack on the selling floor as soon as possible. This year, returns at Meridian Clothing have reached an all time high. There are a large number of returns under $50 without receipts.
a. How can sales clerks employed at Meridian Clothing use the store’s return policy to steal money from the cash register?
b. What internet control weaknesses do you see in the return policy that make cash thefts easier?
c. Would issuing a store credit in place of a cash refund for all merchandise returned without a receipt reduce the possibility of theft? List some advantages and disadvantages of issuing a store credit in place of a cash refund.
d. Assume that Meridian Clothing is committed to the current policy of issuing cash refunds without a receipt. What changes could be made in the store’s procedures regarding customer refunds in order to improve internal control?
Nature Hill Middle School wants to raise money for a new sound system for its auditorium. The primary fund raising event is a dance at which the famous disc jockey Jay Dee will play classic and not so classic dance tunes. Barry Cameron, the music and theater instructor, has been given the responsibility for coordinating the fund raising efforts.
This is Barry’s first experience with fund raising. He decides to put the eighth grade choir in charge of the event; he will be a relatively passive observer.
Barry had 500 unnumbered tickets printed for the dance. He left the tickets in a box on his desk and told the choir students to take as many tickets as they thought they could sell for $5 each. In order to ensure that no extra tickets would be floating around, he told them to dispose of any unsold tickets. When the students received payment for the tickets, They were to bring the cash back to Barry, and he would put it in a locked box in his desk drawer.
Some of the students were responsible for decorating the gymnasium for the dance. Barry gave each of them a key to the money box and told them that if they took money out to purchase materials, they should put a note in the box saying how much they took and what it was used for. After two weeks, the money box appeared to be getting full, so Barry asked Robin Herbert to count the money, prepare a deposit slip, and deposit the money in a bank account Barry had opened.
The day of the dance, Barry wrote a check from the account to pay Jay Dee. The DJ said, however, that he accepted only cash and did not give receipts. So Barry took $200 out of the cash box and gave it to Jay. At the dance, Barry had Amy Kuether working at the entrance to the gymnasium, collecting tickets from students and selling tickets to those who had not pre purchased them. Barry estimated that 400 students attended the dance.
The following day, Barry closed out the bank account, which had $250 in it, and gave that amount plus the $180 in the cash box to Principal Skinner. Principal Skinner seemed surprised that, after generating roughly $2,000 in sales, the dance netted only $430 in cash. Barry did not know how to respond.
Instructions
Identify as many internal control weaknesses as you can in this scenario, and suggest how each could be addressed.
North Bank has a loan receivable from Westminster Dance Company. Westminster is late making payments to the bank, and Kevin McHale, a North Bank vice president, is helping Westminster restructure its debt. McHale learns that Westminster is depending on landing a $1,500,000 contract from Envy Theater, another North Bank client. McHale also serves as Envy’s loan officer at the bank. In this capacity, he is aware that Envy is considering declaring bankruptcy. McHale has been a great help to Westminster, and Westminster’s owner is counting on him to carry the company through this difficult restructuring. To help the bank collect on this large loan, McHale has a strong motivation to help Westminster survive.
Requirements
1. Identify the ethical issue that McHale is facing. Specify the two main alternatives available to McHale.
2. Identify the possible consequences of McHale identifying Envy’s financial position to Westminster Dance Company.
3. Identify the correct ethical decision McHale must make based on the two alternatives identified in Requirement 2.
On July 1, 2011, Acton Company established an Imprest (petty cash) fund in the amount of $400.00 in cash from a check drawn for the purpose establishing the fund. On July 31, the petty cash fund has cash of $31.42 and the following receipts on hand: for merchandise received, $204.30; freight in, $65.74; laundry, service, $84.00; and miscellaneous expense, $14.54. A check was drawn to replenish the fund. On Aug. 31, the petty cash fund has cash of $55.00 and the following receipts on hand: merchandise, $196.84; freight in, $76.30; laundry service, $84.00; and miscellaneous expense, $7.86. The petty cash custodian is not able to account fix the excess cash in the fund. A check is drawn to replenish the fund.
Required
1. In journal form, prepare the entries necessary to record each of these transactions. The company uses the periodic inventory system.
2. What are two examples of why a local semiprofessional baseball team might have need for an imprest {petty cash} system?
On May 31, 2010, Lombard Company had a cash balance per books of $5,681.50. The bank statement from Community Bank on that date showed a balance of $7,964.60. A comparison of the statement with the cash account revealed the following facts.
1. The statement included a debit memo of $70 for the printing of additional company checks.
2. Cash sales of $786.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $796.15. The bank credited Lombard Company for the correct amount.
3. Outstanding checks at May 31 totaled $1,106.25, and deposits in transit were $836.15.
4. On May 18 the company issued check No. 1181 for $685 to N. Habben, on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Lombard Company for $658.
5. A $2,500 note receivable was collected by the bank for Lombard Company on May 31 plus $80 interest. The bank charged a collection fee of $30. No interest has been accrued on the note.
6. Included with the cancelled checks was a check issued by Lonshek Company to C. Young for $290 that was incorrectly charged to Lombard Company by the bank.
7. On May 31 the bank statement showed an NSF charge of $140 for a check issued by K. Uzong, a customer, to Lombard Company on account.
Instructions
(a) Prepare the bank reconciliation as of May 31, 2010.
(b) Prepare the necessary adjusting entries at May 31, 2010.
On St. Patrick’s Day in 1992, Chambers Development Company, one of the largest landfill and waste management firms in the United States, announced that it had been engaging in improper accounting for years. Wall Street fear over what this announcement implied about the company’s track record of steady earnings growth sent Chambers’ stock price plunging by 62% in one day. The improper accounting by Chambers had been discovered in the course of the external audit. The auditors found that $362 million in expenses had not been reported since Chambers first became a public company in 1985. If this amount of additional expense had been reported, it would have completely wiped out all the profit reported by Chambers since it first went public. The difficult part of this situation was that a large number of the financial staff working for Chambers were former partners in the audit firm performing the audit. These accountants had first worked as independent external auditors at Chambers, then were hired by Chambers, and subsequently were audited by their old partners. What ethical and economic issues did the auditors of Chambers Development Company face as they considered whether to blow the whistle on their former partners?
Otto Company maintains a petty cash fund for small expenditures. These transactions occurred during the month of August.
Aug. 1 Established the petty cash fund by writing a check on Central Bank for $200.
15 Replenished the petty cash fund by writing a check for $175. On this date, the fund consisted of $25 in cash and these petty cash receipts: freight out $74.40, entertainment expense $41, postage expense $33.70 and miscellaneous expense $27.50.
16 Increased the amount of the petty cash fund to $400 by writing a check for $200.
31 Replenished the petty cash fund by writing a check for $283. On this date, the fund consisted of $117 in cash and these petty cash receipts: postage expense $145, entertainment expense $90.60, and freight out $46.40.
Instructions
(a) Journalize the petty cash transactions.
(b) Post to the Petty Cash account.
(c) What internal control features exist in a petty cash fund?
Pete Harsh and Sara Alper are both cash register clerks for Farmers’ Markets. Gina Majed is the store manager for Farmers’ Markets. The following is an excerpt of a conversation between Pete and Sara:
Pete: Sara, how long have you been working for Farmers’ Markets?
Sara: Almost five years this July. You just started two weeks ago . . . right?
Pete: Yes. Do you mind if I ask you a question?
Sara: No, go ahead.
Pete: What I want to know is, have they always had this rule that if your cash register is short at the end of the day, you have to make up the shortage out of your own pocket?
Sara: Yes, as long as I’ve been working here.
Pete: Well, it’s the pits. Last week I had to pay in almost $50.
Sara: It’s not that big a deal. I just make sure that I’m not short at the end of the day.
Pete: How do you do that?
Sara: I just short change a few customers early in the day. There are a few jerks that deserve it anyway. Most of the time, their attention is elsewhere and they don’t think to check their change.
Pete: What happens if you’re over at the end of the day?
Sara: Majed lets me keep it as long as it doesn’t get to be too large. I’ve not been short in over a year. I usually clear about $50 to $80 extra per day.
Discuss this case from the viewpoint of proper controls and professional behavior.
Prometheus Co. records all cash receipts on the basis of its cash register receipts. Prometheus Co. discovered during April 2006 that one of its sales clerks had stolen an undetermined amount of cash receipts when she took the daily deposits to the bank. The following data have been gathered for April:
Cash in bank according to the general ledger ………………. $12,573.22
Cash according to the April 30, 2006, bank statement ……….. 13,271.14
Outstanding checks as of April 30, 2006 ………………………. 1,750.20
Bank service charge for April ……………………………………… 45.10
Note receivable, including interest collected by bank in April … 5,200.00
No deposits were in transit on April 30, which fell on a Sunday.
a. Determine the amount of cash receipts stolen by the sales clerk.
b. What accounting controls would have prevented or detected this theft?
Rocking Chair Productions makes all sales on credit. Cash receipts arrive by mail. Larry Padgitt in the mailroom opens envelopes and separates the checks from the accompanying remittance advices. Padgitt forwards the checks to another employee, who makes the daily bank deposit, but has no access to the accounting records. Padgitt sends the remittance advices, which show cash received, to the accounting department for entry in the accounts. Padgitt’s only other duty is to grant sales allowances to customers. (A sales allowance decreases the amount receivable.) When Padgitt receives a customer check for $300 less a $40 sales allowance, he records the sales allowance and forwards the document to the accounting department.
Requirements
1. Identify the internal control weakness in this situation.
2. Who should record sales allowances?
3. What is the amount that should be shown in the ledger for cash receipts?
Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
Instructions
1. Prepare a bank reconciliation as of July 31. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.
3. What is the amount of Cash that should appear on the balance sheet as of July 31?
4. Assume that a canceled check for $125 has been incorrectly recorded by the bank as $1,250. Briefly explain how the error would be included in a bank reconciliation and how it should becorrected.
Ryan Egan and Jack Moody are both cash register clerks for Organic Markets.
Lee Sorrell is the store manager for Organic Markets. The following is an excerpt of a conversation between Ryan and Jack:
Ryan: Jack, how long have you been working for Organic Markets?
Jack: Almost five years this November. You just started two weeks ago . . . right?
Ryan: Yes. Do you mind if I ask you a question?
Jack: No, go ahead.
Ryan: What I want to know is, have they always had this rule that if your cash register is short at the end of the day, you have to make up the shortage out of your own pocket?
Jack: Yes, as long as I’ve been working here.
Ryan: Well, it’s the pits. Last week I had to pay in almost $40.
Jack: It’s not that big a deal. I just make sure that I’m not short at the end of the day.
Ryan: How do you do that?
Jack: I just shortchange a few customers early in the day. There are a few jerks that deserve it anyway. Most of the time, their attention is elsewhere and they don’t think to check their change.
Ryan: What happens if you’re over at the end of the day?
Jack: Lee lets me keep it as long as it doesn’t get to be too large. I’ve not been short in over a year. I usually clear about $20 to $30 extra per day.
Discuss this case from the viewpoint of proper controls and professional behavior.
San Diego Harbor Tours has poor internal control over cash. Ben Johnson, the owner, suspects the cashier of stealing. Here are some details of company cash at September 30:
a. The Cash account in the ledger shows a balance of $6,450.
b. The September 30 bank statement shows a balance of $4,300. The bank statement lists a $200 bank collection, a $10 service charge, and a $40 NSF check.
c. At September 30, the following checks are outstanding:
Amount
$100
300
600
200
d. There is a $3,000 deposit in transit at September 30.
e. The cashier handles all incoming cash and makes bank deposits. He also writes checks and reconciles the monthly bank statement. Johnson asks you to determine whether the cashier has stolen cash from the business and, if so, how much.
Requirements
1. Perform your own bank reconciliation using the format illustrated in the chapter. There are no bank or book errors.
2. Explain how Johnson can improve his internal controls.
BACKGROUND: Audit standards require that auditors use analytical procedures at two stages in the audit: at the planning, or risk assessment, level and at the final, or concluding, stages of the audit. In addition, the auditor may decide to use analytical procedures during the substantive testing phase, to obtain evidence about specific accounts to be audited. While analytical procedures may involve similar types of procedures in both the planning and final review phases of the audit, they meet different objectives and require different conclusions and actions on the part of the auditor based on the results. In the planning phase, they are used to help the auditors identify unusual transactions or amounts to highlight the risk of material misstatement. In the final phases of the audit, they are used to assist the auditor in forming the ending conclusions and to ensure all necessary conclusions have been reached. Woo Industries was being audited by BK&D CPAs. Analytical procedures were performed as part of the risk assessment procedures and helped to identify increased accounts receivable balances as the result of loosened credit policies prompted by heightened competition. As a result, BK&D decided to increase their assessment of inherent risk relative to accounts receivable and sent an increased number of confirmations. Analytical procedures were also used during the substantive testing phase to audit the increases in property, plant, and equipment. After the testing, BK&D determined that they had met the audit standard requirements as they had performed two sets of analytical procedures. 1.) What step did BK&D CPAs fail to perform? 2.) Why do audit standards require the second (final) set of analytical procedures? 3.) Does it make a difference that analytical procedures were performed in testing property, plant, and eqipment, as indicated by BK&D CPAs?
Beckett Co. received its bank statement for the month ending June 30, 2010, and reconciled the statement balance to the June 30, 2010, balance in the Cash account. The reconciled balance was determined to be $6,148. The reconciliation recognized the following items: 1. Deposits in transit were $3,471. 2. Outstanding checks totaled $2,657. 3. Bank service charges shown as a deduction on the bank statement were $61. 4. An NSF check from a customer for $663 was included with the bank statement. The firm had not been previously notified that the check had been returned NSF. 5. Included in the canceled checks was a check actually written for $890. However, it had been recorded as a disbursement of $980. Required: (a) What was the balance in Beckett Co.’s Cash account before recognizing any of the preceding reconciling items? (Omit the “$” sign in your response.) Balance per Cash account before reconciliation $ (b) What was the balance shown on the bank statement before recognizing any of the preceding reconciling items? (Omit the “$” sign in your response.) Balance per bank before reconciliation $
At the beginning of 2009, Metatec inc. acquired Ellsion Technology Corp for $600 million. In addition to cash, receivables, and inventory , the following asssets and their fair values were also inquired. plant and Equipment(Depreciable Assets) 150 million Patent 40 million goodwill 100 million The plant and equipment are depreciated over a 10 year useful life on a straight line basis. There is no estiamted residual value. The patent is estimated to have a 5 year useful life, no residual value, and is amortized using straightline method. At the end of 2011 a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined. Plant & equip. Undiscovered Sum of future cash flows 80 Million Fair Value 60 Million Patent: Undiscovered sum of future cash flows 20 Million Fair value 13 Million Goodwill: Fair value of Ellison Tech 450 Million Fair Value of Ellisons net Assets (excluding goodwill) 390 Million Book Value of Ellison net assets ( including goodwill) 470 Million this is after first recording any impairment losses on plant and equipment and the patent. Required 1.Compute the book value of the plant and equipment and patent at the end of 2011. 2. When should the plant and equipment and the patent be tested for impairment 3. When should goodwill be tested for impairment 4. Determine the amount of any impairment loss to be recorded if any for the three assets.
9. Horton Enterprises performed services on July 30, billed the customer on August 3, and received payment on September 7. The revenue should be recognized in A)August
B)September
C)December
D)July
7. Southeastern Louisiana University sold season tickets for the 2006 football season for $160,000. A total of 8 games will be played during September, October and November. In September, two games were played. In October, three games were played. The balance in Unearned Revenue at October 31 is A)$40,000
B)$100,000
C)$0
D)$60,000
3. Southeastern Louisiana University sold season tickets for the 2006 football season for $160,000. A total of 8 games will be played during September, October and November. Assuming all the games are played, the Unearned Revenue balance that will be reported on the December 31 balance sheet will be A)$160,000
B)$60,000
C)$0
D)$100,000
i hope u can show me the steps or explain of the right answer. Thank you
Sarah’s Computer City sells 5,000 boxes of CD RW compact discs per year. She determined that she pays $50 to process an order for discs. Her purchase price is $6 for each box of discs and she has determined that storage costs for one year are 25 percent of the purchase price. Sarah’s vendor said that if she purchased 1,000 boxes at a time, she would receive a 10 percent discount. The total cost formula is
What is Sarah’s annual carrying cost if she does not take advantage of the discount? Answer
The accounts receivable clerk for Quigley Industries prepared the following partially completed aging of receivables schedule as of the end of business on November 30: A B C D E F G 1 Not Days Past Due 2 Past Over 3 Customer Balance Due 1 30 31 60 61 90 90 4 Able Brothers Inc. 3,000 3,000 5 Accent Company 4,500 4,500 21 Zumpano Company 5,000 5,000 22 Subtotals 830,000 500,000 180,000 80,000 45,000 25,900 The following accounts were unintentionally omitted from the aging schedule and not included in the subtotals above: Customer Balance Due date Beltran Indistries $ 12,000 July 10 Doodle Company 8,000 September 20 La Corp Inc. 17,000 October 17 VIP Sales Company 10,000 November 4 We Go Company 23,000 December 21 a. Determine the number of days past due for each of the preceding accounts. b. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals.
Adjusting entries and account classification. Selected amounts from Trent Company’s trial balance of 12/31/10 appear below: 1. Accounts Payable $160,000 2. Accounts Receivable 150,000 3. Accumulated Depreciation”Equipment 200,000 4. Allowance for Doubtful Accounts 20,000 5. Bonds Payable 500,000 6. Cash 150,000 7. Common Stock 60,000 8. Equipment 840,000 9. Insurance Expense 30,000 10. Interest Expense 10,000 11. Merchandise Inventory 300,000 12. Notes Payable (due 6/1/11) 200,000 13. Prepaid Rent 150,000 14. Retained Earnings 818,000 15. Salaries and Wages Expense 328,000 (All of the above accounts have their standard or normal debit or credit balance.) Part A. Prepare adjusting journal entries at year end, December 31, 2010, based on the following supplemental information. a. The equipment has a useful life of 15 years with no salvage value. (Straight line method being used.) b. Interest accrued on the bonds payable is $15,000 as of 12/31/10. c. Expired insurance at 12/31/10 is $20,000. d. The rent payment of $150,000 covered the six months from November 30, 2010 through May 31, 2011. e. Salaries and wages earned but unpaid at 12/31/10, $22,000. Part B. Indicate the proper balance sheet classification of each of the 15 numbered accounts in the 12/31/10 trial balance before adjustments by placing appropriate numbers after each of the following classifications. If the account title would appear on the income statement, do not put the number in any of the classifications. a. Current assets b. Property, plant, and equipment c. Current liabilities d. Long term liabilities e. Stockholders’ equity
Allessandro Scarlatti Company / Balance Sheet / December 31, 2008 Cash 40,000 Accounts Payable 61,000 Acc Receivables 89,000 Notes Payable 67,000 Less: Allowance for Doubtful Accounts 7000 = 82000 Inventories 171,000 / Prepaid Expenses 9000 = 128,000 = 302,000 The following errors in the corporation’s accounting have been discovered: 1 Jan 2009 cash distribursements entered as of Dec 2008 included payments of accounts payable in the amount of $39,000, on which a cash discount of 2% was taken. 2 The inventory included of 27,000 of merchandise that had been received at Dec 31 but for which so purchase invoices had been received or entered. Of this amount, 12,000 had been received on consignment; the remainder was purchased f.o.b. destination terms 2/10, n/30. 3 Sales for the first four days in Jan 2009 in the amount of 30,000 were entered in the sales book as of Dec 31 2008. Of these, $21500 were sales on account and the remainder were cash sales 4 Cash not including cash sales, collected in Jan 2009 and entered as of Dec 31 2008 totaled 35,324. Of this amount 23,324 was received on account after cash discounts of 2% had been declared the remainder represented the proceeds of a bank loan. Directions: A Restate the current assets and liabilities sections of balance sheet in accordance with good accounting practice. (Assume that both accounts receivable & accounts payable are recorded gross.) B Determine the net effect of your adjustments on Allessandaro Scarlatti Company’s retained earnings balance.
Alpine, Inc., has been experiencing losses for some time, as shown by its most recent income statement: ALPINE, INC. Income Statement For the year ended June 30, 2012 Sales (40,000 Units at $12) $480,000 Less: Cost of Goods Sold Direct Materials $120,000 Direct Labor 65,600 Manufacturing Overhead 90,000 275,600 Gross Margin 204,400 Less: Operating expenses: Selling expenses: Variable: Sales Commissions $38,400 Shipping 14,000 52,400 Fixed (Advertising, salaries) 110,000 Administrative expenses: Variable (billing, other) 3,200 Fixed (salaries, other) 85,000 250,600 Net Loss $(46,200) All variable expenses in the company vary in terms of units sold, except for sales commissions, which are based on sales dollars. Variable manufacturing overhead is 50 cents per unit. The companys plant has a capacity of 70,000 units. Management is particularly disappointed with 2012s operating results. Several possible courses of action are being studied to determine what should be done to make 2013 profitable. 1. Redo Alpine, Inc.s 2012 Income Statement in the contribution format. Show both a total column and a per unit column on your statement 2. Refer to the data. Micah Patdu, the president thinks it would be unwise to change the selling price. Instead, she wants to use less costly materials in manufacturing units of product, thereby reducing costs by $1.73 per unit. How many units would have to be sold during 2013 to earn a target profit of $59,000 for the year?
Anna Feinberg began working for the Pfeiffer Company in 1965 at age seventeen. By 2002 she had attained the position of bookkeeper, office manager, and assistant treasurer. In appreciation for her skill, dedication, and long years of service, the Pfeiffer Board of Directors resolved to increase Feinbergs monthly salary to $1,400 and to create for her a retirement plan. The plan allowed that Feinberg would be given the privilege of retiring from active duty at any time she chose and that she would receive retirement pay of $700 per month, although the Board expressed the hope that Feinberg would continue to serve the company for many years. Feinberg, however, chose to retire two years later, in 2004. The Pfeiffer Company paid Feinberg her retirement pay until 2011. The company discontinued payments, alleging that no contract had been made by the Board of Directors as there had been no consideration paid by Feinberg, and that the resolution was merely a promise to make a gift. Feinberg sued. Is the promise supported by consideration? Is the promise enforceable? Explain.
Answer these question on an Excel spreadsheet. Question1. When Oprah gave away Pontiac G6 sedans to her TV audience, was the value of the cars taxable? On Labor Day weekend in 2006, World Furniture Mall in Plano,Illinois, gave away $275,000 of furniture because the Chicago Bears shut out the Green Bay Packers in their football season opener at Lambeau Field in Green Bay (26 0).Was the free furniture in the form of a discount or rebate taxable, or should the furniture company hand the customers a Form 1099 MISC? Question 2 You are interviewing a client before preparing his tax return. He indicates that he did not list as income $96,000 received as recovery for false imprisonment. What should you do with respect to this significant recovery? And explain. Partial list of research aids: CCA 2008099001 Daniel and Brenda Stadnyk, T.C.Memo. 2008 289 Rev.Rul. 2007 14, 2007 1 C.B. 747. 104A?§
Manatee Company closes its books monthly. On September 30, selected ledger account balances are:
Notes Receivable
$96,000
Interest Receivable
438
Notes Receivable include the following.
Date
Maker
Face
Term
Interest
Aug. 16
M. Bear Inc.
$18,000
60 days
12%
Aug. 25
Pope Co.
12,000
60 days
14%
Sept. 30
Quackers Corp.
66,000
6 months
13%
Interest is computed using a 360 day year. During October, the following transactions were completed.
Oct. 7
Made sales of $7,580on Manatee credit cards.
12
Made sales of $1,400on MasterCard credit cards. The credit card service charge is2%.
15
Added $540to Manatee customer balance for finance charges on unpaid balances.
15
Received payment in full from M. Bear Inc. on the amount due.
24
Received notice that the Pope note has been dishonored. (Assume that Pope is expected to pay in the future.)
(a)
Journalize the October transactions and the October 31 adjusting entry for accrued interest receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Use 360 days for calculation.)
1. Garrett Wolfe Company borrowed $10,000 by signing a 12%, one year note on September 1, 2012. 2. A count of supplies on December 31, 2012, indicates that supplies of $900 are on hand. 3. Depreciation on the equipment for 2012 is $1,000. 4. Garrett Wolfe Company paid $2,100 for 12 months of insurance coverage on June 1, 2012. 5. On December 1, 2012, Garrett Wolfe collected $30,000 for consulting services to be performed from December 1, 2012, through March 31, 2013. 6. Garrett Wolfe performed consulting services for a client in December 2012. The client will be billed $4,200. 7. Garrett Wolfe Company pays its employees total salaries of $9,000 every Monday for the preceding 5 day week (Monday through Friday). On Monday, December 29, employees were paid for the week ending December 26. All employees worked the last 3 days of 2012.
Instructions Prepare adjusting entries for the seven items described above.
CMA Accelerated Program – Winter 2013 Week 3 Quiz 1. Marvin Corp, a publicly accountable entity sold new production equipment to Terrell Inc. Marvin Corp. has agreed to provide financing to Terrell Inc. in the form of a $450,000, 2% interest bearing note to be repaid in five years. At the time of the sale, prevailing market interest rates were 5%. What would be the carrying value of the note on the books of Marvin Corp. at the time of the transaction and one year after the sale? (round your answer to the nearest dollar). a) $450,000 and $450,000 b) $391,552 and $411,130 c) $391,552 and $402,130 d) $391,552 and $380,974 2. Short Stack Manufacturing Corp. (SS) acquired a piece of equipment on January 1 costing $600,000. SS has adopted the diminishing balance method of depreciation using a rate of 25%. It is estimated that the asset will have a residual value of $100,000. What is the maximum depreciation to be claimed in the final year of claiming depreciation on this asset? Assume that the company has a December 31 year end. a) $6,787 b) $26,697 c) $25,000 d) $100,000 CMA Accelerated Program – Winter 2013 Week 3 Quiz 3. The Grass Roots Company Limited (GRC) has identified the following cash generating units (CGUs). With a downturn in the economy, GRC has determined that the CGUs should be tested for impairment. Management has determined the following: CGU Value in Use Fair Value X $ 450,000 $ 600,000 Y 800,000 580,000 Z 1,450,000 1,600,000 The carrying value of each of these CGU’s is as follows: CGU Net Assets Goodwill Carrying Value (x Goodwill) X $ 800,000 $300,000 $1,100,000 Y 750,000 250,000 1,000,000 Z 1,000,000 500,000 1,500,000 What would be the amount GRC would report if any for impairment? a) $ 600,000 b) $1,020,000 c) $ 900,000 d) $ 700,000 4. Strait Corp. is preparing an insurance claim for a recent fire that destroyed their inventory. Existing accounting records indicated that in the current year, the company had sales of $6,000,000 and purchases of $4,800,000. The financial statements from the prior year reported an ending inventory of $1,600,000. Historically the company has realized a 32% mark up on cost. Based on this information, the estimated value of the physical inventory would be a) $1,854,546 b) $1,600,000 c) $2,320,000 d) Can not be determined from the information provided CMA Accelerated Program – Winter 2013 Week 3 Quiz 5. Ashton Limited is currently reviewing its inventory at year end to determine whether a writedown is required for net realizable value. The major components of inventory are as follows: Cost Net Realizable Fair Value Value S 1 $ 38,000 $ 42,000 $ 46,150 S 2 62,000 49,700 50,850 S 3 47,500 52,500 44,600 S 4 79,600 82,300 90,005 S 5 22,300 13,280 13,885 Total $249,400 $239,780 $245,490 How much of a write down should W Company record if any to reflect the valuation of inventory in accordance with the Accounting Standards for Private Enterprise? a) No write down is required, cost is less than fair value b) $22,465 c) $ 9,620 d) $21,320 CMA Accelerated Program – Winter 2013 Week 3 Quiz 6. The Cramer Company Inc. had the following transactions during the month of January: Units Unit Cost Unit Sales Total 1st Opening balance 6,000 $8.50 $51,000 3rd Purchase 9,500 $9.00 $85,500 5th Sale 4,000 7th Sale 2,500 15th Purchase 6,000 $9.10 $54,600 17th Purchase 10,000 $9.40 $94,000 28th Sale 6,500 31st Purchase 3,500 $9.90 $34,650 A count of the inventory on January 31st showed that 22,000 units were on hand. Cramer uses a periodic inventory system and measures the inventory value using the first in first out method. Unit selling price is $20.00 What amount will Cramer Company Inc. report as Cost of Sales for the month of January (round unit costs to four decimals)? a) $319,750 b) $205,750 c) $183,250 d) $114,000 7. Stanley Inc., a publicly accountable entity, acquired a new building on January 1, 20×10. The following major components have been identified: Roof $2,000,000 10 year useful life Walls 6,000,000 20 year useful life Fixtures 4,000,000 10 year useful life Furnace 1,000,000 8 year useful life Other 600,000 10 year useful life The company has adopted the straight line method of depreciation with all assets having a zero residual value. On December 31, 20×16 the roof is replaced at a cost of $3,000,000. What loss if any would the company report due to the roof replacement? a) $800,000 b) $600,000 c) $ 0 d) $400,000 CMA Accelerated Program – Winter 2013 Week 3 Quiz 8. Simon Limited has arranged to exchange an under utilized truck for some land currently not being used by Garfunkel Corp. Simon has agreed to pay $56,000 in addition to providing the truck in the exchange. The land had recently been appraised at a fair value of $120,000 and the fair value of the truck is $80,000. The truck’s original cost was $110,000 and had been depreciated $20,000. Since Simon has determined that the transaction has commercial substance, which of the following entries best reflects the entry Simon should be making to account for the exchange? a) Land 146,000 Cash 56,000 Truck Old 90,000 b) Land 136,000 Accum. Depr Old 20,000 Loss on Exchange 10,000 Cash 56,000 Truck Old 110,000 c) Land 146,000 Accum. Depr. Old 20,000 Cash 56,000 Truck Old 110,000 d) Land 176,000 Accum. Depr. Old 20,000 Gain on Exchange 30,000 Cash 56,000 Truck Old 110,000 9. At the beginning of the year, Lynn Corp. (a publicly accountable entity) purchased equipment for a price of $3,400,000 to be repaid in 6 years. As an incentive, the vendor offered low interest financing at a rate of 1.5% per year when prevailing market interest rates were 4%. Matthews uses the diminishing balance method of depreciation with a rate of 30% for this type of equipment with an estimated residual value of $400,000. Based on this information what would be the total charge to the Matthews Corp. Statement of Income in the fourth year from the date the equipment was acquired. a) $427,668 b) $389,414 c) $433,596 d) $430,575 CMA Accelerated Program – Winter 2013 Week 3 Quiz 10. Pillow Corp. a publicly accountable entity is planning on building an extension to their existing factory. As a qualifying asset, activity on the project commenced in January 2011 and was completed in December of the same year Expenditures were incurred as follows (assume expenditures occurred at the beginning of the month) Expenditures: January $ 800,000 April 600,000 July 1,100,000 September 1,400,000 October 900,000 December 500,000 To finance the project, the company borrowed $2,200,000 at a rate of 5.5% at the beginning of the year. Any other financing was to come from existing debt lines that included: 7.00% bank line of credit of $6,000,000 5.50% bank line of credit of $8,000,000 To account for this project the company a) will capitalize interest on the asset specific borrowing. b) will make an accounting policy choice to either capitalize the interest or expense the interest on the asset specific borrowing. c) will capitalize $141,477. d) will capitalize $170,922 a publicly accountable entity sold new production equipment to Terrell Inc. Marvin Corp. has agreed to provide financing to Terrell Inc. in the form of a $450,000, 2% interest bearing note to be repaid in five years. At the time of the sale, prevailing market interest rates were 5%. What would be the carrying value of the note on the books of Marvin Corp. at the time of the transaction and one year after the sale? (round your answer to the nearest dollar). a) $450,000 and $450,000 b) $391,552 and $411,130 c) $391,552 and $402,130 d) $391,552 and $380,974 2. Short Stack Manufacturing Corp. (SS) acquired a piece of equipment on January 1 costing $600,000. SS has adopted the diminishing balance method of depreciation using a rate of 25%. It is estimated that the asset will have a residual value of $100,000. What is the maximum depreciation to be claimed in the final year of claiming depreciation on this asset? Assume that the company has a December 31 year end. a) $6,787 b) $26,697 c) $25,000 d) $100,000 CMA Accelerated Program – Winter 2013 Week 3 Quiz 3. The Grass Roots Company Limited (GRC) has identified the following cash generating units (CGUs). With a downturn in the economy, GRC has determined that the CGUs should be tested for impairment. Management has determined the following: CGU Value in Use Fair Value X $ 450,000 $ 600,000 Y 800,000 580,000 Z 1,450,000 1,600,000 The carrying value of each of these CGU’s is as follows: CGU Net Assets Goodwill Carrying Value (x Goodwill) X $ 800,000 $300,000 $1,100,000 Y 750,000 250,000 1,000,000 Z 1,000,000 500,000 1,500,000 What would be the amount GRC would report if any for impairment? a) $ 600,000 b) $1,020,000 c) $ 900,000 d) $ 700,000 4. Strait Corp. is preparing an insurance claim for a recent fire that destroyed their inventory. Existing accounting records indicated that in the current year, the company had sales of $6,000,000 and purchases of $4,800,000. The financial statements from the prior year reported an ending inventory of $1,600,000. Historically the company has realized a 32% mark up on cost. Based on this information, the estimated value of the physical inventory would be a) $1,854,546 b) $1,600,000 c) $2,320,000 d) Can not be determined from the information provided CMA Accelerated Program – Winter 2013 Week 3 Quiz 5. Ashton Limited is currently reviewing its inventory at year end to determine whether a writedown is required for net realizable value. The major components of inventory are as follows: Cost Net Realizable Fair Value Value S 1 $ 38,000 $ 42,000 $ 46,150 S 2 62,000 49,700 50,850 S 3 47,500 52,500 44,600 S 4 79,600 82,300 90,005 S 5 22,300 13,280 13,885 Total $249,400 $239,780 $245,490 How much of a write down should W Company record if any to reflect the valuation of inventory in accordance with the Accounting Standards for Private Enterprise? a) No write down is required, cost is less than fair value b) $22,465 c) $ 9,620 d) $21,320 CMA Accelerated Program – Winter 2013 Week 3 Quiz 6. The Cramer Company Inc. had the following transactions during the month of January: Units Unit Cost Unit Sales Total 1st Opening balance 6,000 $8.50 $51,000 3rd Purchase 9,500 $9.00 $85,500 5th Sale 4,000 7th Sale 2,500 15th Purchase 6,000 $9.10 $54,600 17th Purchase 10,000 $9.40 $94,000 28th Sale 6,500 31st Purchase 3,500 $9.90 $34,650 A count of the inventory on January 31st showed that 22,000 units were on hand. Cramer uses a periodic inventory system and measures the inventory value using the first in first out method. Unit selling price is $20.00 What amount will Cramer Company Inc. report as Cost of Sales for the month of January (round unit costs to four decimals)? a) $319,750 b) $205,750 c) $183,250 d) $114,000 7. Stanley Inc., a publicly accountable entity, acquired a new building on January 1, 20×10. The following major components have been identified: Roof $2,000,000 10 year useful life Walls 6,000,000 20 year useful life Fixtures 4,000,000 10 year useful life Furnace 1,000,000 8 year useful life Other 600,000 10 year useful life The company has adopted the straight line method of depreciation with all assets having a zero residual value. On December 31, 20×16 the roof is replaced at a cost of $3,000,000. What loss if any would the company report due to the roof replacement? a) $800,000 b) $600,000 c) $ 0 d) $400,000 CMA Accelerated Program – Winter 2013 Week 3 Quiz 8. Simon Limited has arranged to exchange an under utilized truck for some land currently not being used by Garfunkel Corp. Simon has agreed to pay $56,000 in addition to providing the truck in the exchange. The land had recently been appraised at a fair value of $120,000 and the fair value of the truck is $80,000. The truck’s original cost was $110,000 and had been depreciated $20,000. Since Simon has determined that the transaction has commercial substance, which of the following entries best reflects the entry Simon should be making to account for the exchange? a) Land 146,000 Cash 56,000 Truck Old 90,000 b) Land 136,000 Accum. Depr Old 20,000 Loss on Exchange 10,000 Cash 56,000 Truck Old 110,000 c) Land 146,000 Accum. Depr. Old 20,000 Cash 56,000 Truck Old 110,000 d) Land 176,000 Accum. Depr. Old 20,000 Gain on Exchange 30,000 Cash 56,000 Truck Old 110,000 9. At the beginning of the year, Lynn Corp. (a publicly accountable entity) purchased equipment for a price of $3,400,000 to be repaid in 6 years. As an incentive, the vendor offered low interest financing at a rate of 1.5% per year when prevailing market interest rates were 4%. Matthews uses the diminishing balance method of depreciation with a rate of 30% for this type of equipment with an estimated residual value of $400,000. Based on this information what would be the total charge to the Matthews Corp. Statement of Income in the fourth year from the date the equipment was acquired. a) $427,668 b) $389,414 c) $433,596 d) $430,575 CMA Accelerated Program – Winter 2013 Week 3 Quiz 10. Pillow Corp. a publicly accountable entity is planning on building an extension to their existing factory. As a qualifying asset, activity on the project commenced in January 2011 and was completed in December of the same year Expenditures were incurred as follows (assume expenditures occurred at the beginning of the month) Expenditures: January $ 800,000 April 600,000 July 1,100,000 September 1,400,000 October 900,000 December 500,000 To finance the project, the company borrowed $2,200,000 at a rate of 5.5% at the beginning of the year. Any other financing was to come from existing debt lines that included: 7.00% bank line of credit of $6,000,000 5.50% bank line of credit of $8,000,000 To account for this project the company a) will capitalize interest on the asset specific borrowing. b) will make an accounting policy choice to either capitalize the interest or expense the interest on the asset specific borrowing. c) will capitalize $141,477. d) will capitalize $170,922
I am looking for a brief, overall analysis of Statement of Comprehensive Income (Balance Sheet), Statement of Financial Position and Statement of Cash Flow data for a company for a 2 year period. Only a brief discussion of the results are needed e.g. Has the company profit increased or decreased over the two years? Is more money held in assets now? Has debt increased over the two years? Is there anything particularly positive or worrying in the data?
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Statement of Comprehensive Income ?Year Ended March 2012?Year Ended March 2011???£000?£000??Operating Income from Operations?285,312?260,231??Operating Expenses of Operations?(273,406)?(249,430)??Operating Surplus / (Deficit)?11,906?10,801??Finance Costs??Finance Income?433?347??Finance Expense – Financial Liabilities?(9,769)?(9,206)??Net Finance Costs?(11,279)?(10,644)??Corporation Tax Expense?0?0??Surplus / Deficit from Operations?627?157??Surplus / Deficit for the Year?627?157??Other Comprehensive Income??Impairments?(2)?(193)??Revaluations?16,937?29??Asset Disposals?0?0??Other Recognised Gains and Losses?0?0??Other Reserve Movements?0?0??Total Comprehensive Income / Expense?17,562?(7)?? Statement of Financial Position as of March 31st 2012 ?31st March 2012?31st March 2011???£000?£000??Non Current Assets??Intangible Assets?576?838??Property, Plant and Equipment?219,000?203,193??Investment Property?0?0??Other Investments?0?0??Trade and Other Receivables?8,733?7,826??Other Financial Assets?0?0??Other Assets?0?0??Total Non Current Assets?228,309?211,857??Current Assets??Inventories?2,837?3,183??Trade and Other Receivables?6,247?6,131??Other Financial Assets?0?0??Non Current Assets for Sale and Assets in Disposal Groups?0?1,078??Cash and Cash Equivalents?36,346?33,441??Total Current Assets?45,430?43,833??Current Liabilities??Trade and Other Payables?(15,093)?(13,717)??Borrowings?(4,897)?(4,231)??Other Financial Liabilities?0?0??Provisions?(706)?(613)??Other Liabilities?(2,048)?(1,040)??Liabilities in Disposal Groups?0?0??Total Current Liabilities?(22,744)?(19,601)??Total Assets Less Current Liabilities?250,995?236,089??Non Current Liabilities??Trade and Other Payables?0?0??Borrowings?(151,365)?(154,020)??Other Financial Liabilities?0?0??Provisions?0?0??Other Liabilities?0?0??Total Non Current Liabilities?(151,365)?(154,020)??Total Assets Employed?99,630?82,069?? Statement of Cash Flows ?31st March 2012?31st March 2011???£000?£000??Cash Flows from Operating…
Here is your midterm exam. A completed exam must be posted in the assignments folder no later than 11:59 PM on Saturday, February 9 (Central European time). That gives you a window of 48 hours in which to complete the exam. Late assignments will not be accepted, nor will after the fact excuses. Plan ahead and do not put this off to the last minute.
You are to answer all five of the following questions, each of which WILL count for 20% of the exam grade. If any answers require a complicated calculation, include a clear explanation and / or calculation showing how you arrived at the answer. Answers that are not supported by your work will be marked down. All five questions deal with issues we have studied, so I hope you will not have too much difficulty with them.
Chapter 13 material : Common Stock Transactions and Stockholders’ Equity
On March 1, 2010, Blank Company began operation with a corporate charter authorizing 50,000 shares of $4 par value common stock. Over the company completed the following transactions:
March 1 Sold 15,000 shares of its common stock for $100,000.
Paid expenses incurred to obtain the charter and starting up and organizing the corporation $10,000.
April 10 Sold 6,500 shares of common stock for $65,000
15 Purchased 2,500 shares of Common Stock for $25,000.
May 31 The board of directors declared a $0.20 per share cash dividend to be paid on June 15 to shareholders of record on June 10.
Record the above transactions in T accounts.
Prepare the stockholders’ equity section of Blank Company’s balance sheet
at May 31, 2010.Net Income earned during the first three months was $15,000.
What effect, if any will Blank Company’s cash dividend declaration on May
31 have on its net income, retained earnings and cash flows?
Chapter 14 material: Corporate Income Statement
Information about of Newcomb Corporation’s income statement in 2009 follows:
Administrative expenses, $190,000
Cost of goods sold $420,000
Interest expense $20,000
Net Sales $890,000
Selling and administrative expenses, $190,000.
Prepare Newcomb Corporation’s income statement for 2009, including earnings per share. Assume a weighted average of 100,000 shares of Common Stock outstanding for 2009.
Chapter 15 Material: Recording a Bond Issue and Interest
Nora Corporation issued 8.5%, five year bonds with a face value of $8,000,000 on March 1, 2010, at 96. The semiannual interest payment dates are September 1 and March 1. Using the straight line method and ignoring year end accruals, , prepare journal entries for:
The issue of the bonds,
The first interest payment on September 1 and
The interest payment on March 1 2011.
Chapter 16 material: Long term Investments adjusted to market and equity methods.
On January 1, 2010, Cavalier Corporation purchased 8 percent of the voting stock of Onion Corporation for $500,000 and 45 percent of the voting stock of Dross Corporation for $4,000,000. During the year, Onion Corporation had net income of $200,000 and paid dividends of $80,000. Dross Corporation had net income of $600,000 and paid dividends of $400,000. The market value did not change for either company during the year.
Which investment should be accounted for using the adjusted to market method?
Which investment should be accounted for using the equity method?
At what amount should each investment be carried on the balance sheet at the end of the year? Explain your answers and show any calculations necessary to arrive at your answers.
Chapter 17 Material : Cash flows from operating activities, indirect method
For the year ended June 30, 2010, net income for Soak Company was $7,400. Depreciation expense was $2,000. During the year, Accounts Receivable increased by $4,400, Inventories increased by $7,000, Prepaid Rent decreased by $1,400, Accounts Payable increased by $14,000, Salaries Payable increased by 41,000and Income taxes Payable decreased by $600.
Prepare a schedule of cash flows from operating activities using the indirect method.
Common Stock Transactions and Stockholders’ Equity
On March 1, 2010, Blank Company began operation with a corporate charter authorizing 50,000 shares of $4 par value common stock. Over the company completed the following transactions:
March 1 Sold 15,000 shares of its common stock for $100,000.
Paid expenses incurred to obtain the charter and starting up and organizing the corporation $10,000.
April 10 Sold 6,500 shares of common stock for $65,000
15 Purchased 2,500 shares of Common Stock for $25,000.
May 31 The board of directors declared a $0.20 per share cash dividend to be paid on June 15 to shareholders of record on June 10.
Record the above transactions in T accounts.
Prepare the stockholders’ equity section of Blank Company’s balance sheet
at May 31, 2010.Net Income earned during the first three months was $15,000.
What effect, if any will Blank Company’s cash dividend declaration on May
31 have on its net income, retained earnings and cash flows?
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ACCT 221, Section C 803 Midterm Exam February 8 and 9, 2013 Here is your midterm exam. A completed exam must be posted in the assignments folder no later than 11:59 PM on Saturday, February 9 (Central European time). That gives you a window of 48 hours in which to complete the exam. Late assignments will not be accepted, nor will after the fact excuses. Plan ahead and do not put this off to the last minute. You are to answer all five of the following questions, each of which WILL count for 20% of the exam grade. If any answers require a complicated calculation, include a clear explanation and / or calculation showing how you arrived at the answer. Answers that are not supported by your work will be marked down. All five questions deal with issues we have studied, so I hope you will not have too much difficulty with them. Chapter 13 material: Common Stock Transactions and Stockholders’ Equity On March 1, 2010, Blank Company began operation with a corporate charter authorizing 50,000 shares of $4 par value common stock. Over the company completed the following transactions: March 1 Sold 15,000 shares of its common stock for $100,000. Paid expenses incurred to obtain the charter and starting up and organizing the corporation $10,000. April 10 Sold 6,500 shares of common stock for $65,000 15 Purchased 2,500 shares of Common Stock for $25,000. May 31 The board of directors declared a $0.20 per share cash dividend to be paid on June 15 to shareholders of record on June 10. Record the above transactions in T accounts. Prepare the stockholders’ equity section of Blank Company’s balance sheet at May 31, 2010. Net Income earned during the first three months was $15,000. What effect, if any will Blank Company’s cash dividend declaration on May 31 have on its net income, retained earnings and cash flows? Chapter 14 material: Corporate Income Statement Information about of Newcomb Corporation’s income statement in 2009…
Consider the following independent jobs. Overhead is applied in Department 1 at the rate of $6 per direct labor hour. Overhead is applied in Department 2 at the rate of $8 per machine hour. Direct labor wages average $10 per hour in each department.
Fill in the missing data for each job. If an amount box does not require an entry, leave it blank or enter zero (“0”). If required, round your answers to two decimal places.
IBM’s Report of Management IBM’s 2008 annual report includes the following selected paragraphs from its Report of Management found on page 58: IBM maintains an effective internal control structure. It consists, in part, of organizational arrangements with clearly defined lines of responsibility and delegation of authority, and comprehensive systems and control procedures. An important element of the control environment is an ongoing internal audit program. Our system also contains self monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. . . . PricewaterhouseCoopers LLP, an independent registered public accounting firm, is retained to audit IBM’s Consolidated Financial Statements and the effectiveness of the internal control over financial reporting. Its accompanying report is based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States). . . . The Audit Committee of the Board of Directors is composed solely of independent, non management directors, and is responsible for recommending to the Board the independent registered public accounting firm to be retained for the coming year, subject to stockholder ratification. The Audit Committee meets periodically and privately with the independent registered public accounting firm, with the company’s internal auditors, as well as with IBM management, to review accounting, auditing, internal control structure and financial reporting matters.
Required
1. Describe the main components of IBM’s internal control structure.
2. Who is IBM’s external auditor? In addition to auditing IBM’s financial statements, what else does this firm audit? What body’s standards does the firm follow in conducting its audit?
3. What is the composition of IBM’s Audit Committee? Describe its role. Making Financial Decisions
Identify each of the following reconciling items as:
(a) An addition to the cash balance according to the bank statement,
(b) A deduction from the cash balance according to the bank statement,
(c) An addition to the cash balance according to the company’s records, or
(d) A deduction from the cash balance according to the company’s records. (None of the transactions reported by bank debit and credit memoranda have been recorded by the company.)
1. Bank service charges, $48.
2. Outstanding checks, $8,125.50.
3. Deposit in transit, $12,200.
4. Note collected by bank, $8,750.
5. Check drawn by company for $150 but incorrectly recorded as $510.
6. Check for $200 incorrectly charged by bank as $2,000.
7. Check of a customer returned by bank to company because of insufficient funds, $1,200.
Internal control is subject to several inherent limitations. Indicate whether each of the following situations is an example of
(a) Human error,
(b) Collusion among employees,
(c) Changed conditions, or
(d) Cost benefit considerations:
________1. Effective separation of duties in a restaurant is impractical because the business is too small.
________2. The cashier and the manger of a retail shoe store work together to avoid the internal controls for the purpose of embezzling funds.
________3. The cashier in a pizza shop does not understand the procedures for operating the cash register and thus fails to ring up all the sales and count the cash at the end of the day.
________4. At a law firm, computer supplies are mistakenly delivered to the reception area instead of the receiving area because the supplier began using a different system of shipment. AS a result, the receipt of supplies is not recorded.
John Riley, a certified public accountant, has worked for the past eight years as a payroll clerk for Southeast Industries, a small furniture manufacturing firm in the Northeast. John recently experienced unfortunate circumstances. His teenage son required major surgery and the medical bills not covered by John’s insurance have financially strained John’s family. John works hard and is a model employee. Although he received regular performance raises during his first few years with Southeast. John’s wages have not increased in three years. John asked his supervisor, Bill Jameson, for a raise. Bill agreed that John deserved a raise, but told him he could not currently approve one because of sluggish sales. A disappointed John returned to his duties while the financial pressures in his life continued. Two weeks later, Larry Tyler, an assembly worker at Southwest, quit over a dispute with management. John conceived an idea. John’s duties included not only processing employee terminations but also approving time cards before paychecks were issued and then distributing the paychecks to firm personnel. John decided to delay processing Mr. Tyler’s termination, to forge timecards for Larry Tyler for the next few weeks, and to cash the checks himself. Since he distributed paychecks, no one would find out, and John reasoned that he was really entitled to the extra money anyway. In fact, no one did discover his maneuver and John stopped the practice after three weeks.
Required
a. Does John’s scheme affect Southeast’s balance sheet? Explain your answer.
b. Review the AICPA’s Articles of Professional Conduct and comment on any of the standards that have been violated.
c. Identify the three elements of unethical and criminal conduct recognized in the fraud triangle.
Johnson Corporation’s bank statement for October reports an ending balance of $6,248, whereas Johnson’s cash account shows a balance of $5,680 on October 31. The following additional information is available:
a. A $165 deposit made on October 31 was not recorded by the bank until November.
b. At the end of October, outstanding checks total $792.
c. The bank statement shows bank service charges of $20 not yet recorded by the company.
d. The company erroneously recorded for $397 a check actually written and paid by the bank for $379.
e. A $57 check from a customer, deposited by the company on October 29, was returned with the bank statement for lack of funds.
Required:
Prepare the October bank reconciliation for Johnson Corporation.
Wes and Tina are a married couple and provide financial assistance to several persons during the current year. For the situations below, determine whether the individuals qualify as dependency exemptions for Wes and Tina. In all of the situations below, assume that any dependency tests not mentioned have been met. 1. Brian, 24, is Wes and Tinas son. He is a FT student and lives in an apartment near campus. Wes and Tina provide over 50% of his support. Brian works as a waiter and earns $3800 2. Same as part 1 except Brian is a PT student. 3. Sherry, 22, is Wes and Tinas daughter. She is a FT student an lives in the dorms. West and Tina provide over 50% of her support. Sherry worked PT as a bookkeeper and earned $3800. 4. Same as part 3 except that Sherry is a PT student. 5. Granny, 82, is Tinas grandmother and lives with Wes and Tina. Durring the current year, her only source of income was SS of $4800, interest on US Bonds $3850. She uses her income to pay 40% of her total support, Wes and Tina pay 60%.
Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2009, at a price in excess of the subsidiary’s fair value. On that date, Willkom’s equipment (10 year life) has a book value of $300,000 but a fair value of $400,000. Szabo has equipment (10 year life) with a book value of $200,000 but a fair value of $300,000. Willkom uses the partial equity method to record its investment in Szabo. On December 31, 2011, Willkom has equipment with a book value of $210,000 but a fair value of $330,000. Szabo has equipment with a book value of $140,000 but a fair value of $270,000. What is the consolidated balance for the Equipment account as of December 31, 2011 (Hoyle 122) Hoyle, Joe Ben. Fundamentals of Advanced Accounting with Dynamic Accounting PowerWeband CPA Success SG Coupon, 3rd Edition. McGraw Hill Learning Solutions, 2009. .
During the year, Sheree had the following transactions involving capital assets. Gain on the sale of unimproved land (held as an investment for 5 years)Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦………………………………………………………Ac€¦Ac€¦Ac€¦..$5,000 Loss on the sale of a camper (purchased 3 yrs ago and used for family vacations)Ac€¦………………………………………………………Ac€¦Ac€¦..(15,000) Loss on the sale of Pfizer stock (purchased 9 mos ago as an investment)Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦………………………………………………….Ac€¦Ac€¦Ac€¦..(2,000) Gain on the sale of a fishing boat and trailer (acquired 11 mos ago @ an auction & used for recreational purposes)Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦5,000 Select ONE of the following to discuss. a. If Sheree is in the 33% bracket, how much income tax results? b. If Sheree is in the 15% bracket, how much income tax results? Show your work
1. In 2011, Raleigh sold 1,000 units at $500 each, and earned net income of $50,000. Variable expenses were $300 per unit, and fixed expenses were $150,000. The same selling price is expected for 2012. Raleigh’s variable cost per unit will rise by 10% in 2012 due to increasing material costs, so they are tentatively planning to cut fixed costs by $15,000. How many units must Raleigh sell in 2012 to maintain the same income level as 2011? 2. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q Chip) and 70% (Q Chip Plus). Q Chip has variable costs per unit of $36 and a selling price of $60. Q Chip Plus has variable costs per unit of $42 and a selling price of $78. The weighted average unit contribution margin for Ramirez is 3. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q Chip) and 70% (Q Chip Plus). Q Chip has variable costs per unit of $36 and a selling price of $60. Q Chip Plus has variable costs per unit of $42 and a selling price of $78. Ramirez’s fixed costs are $540,000. How many units of Q Chip would be sold at the break even point? 4. Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $3,330,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break even point?
(1) The accounting guideline that requires financial statement information to be supported by independent, unbiased evidence other than someone’s belief or opinion is the: Question options: a.Business entity principle. b.Monetary unit principle. c.Going concern principle. d.Cost principle. (2) Nike had income of $350 million and average invested assets of $2,000 million. Its ROA is: Question options: a.1.8%. b.35%. c.17.5%. d.5.7%. e.3.5%. (3) Which of the following accounting principles would require that all goods and services purchased be recorded at cost? Question options: a.Going concern principle. b.Continuing concern principle. c.Cost principle. d.Business entity principle. (4)If assets are $99,000 and liabilities are $32,000, then equity equals: Question options: a.$ 32,000. b.$ 67,000. c.$ 99,000. d.$131,000. e.$198,000. (5)Marian Mosely is the owner of Mosely Accounting Services. Which accounting principle requires Marian to keep her personal financial information separate from the financial information of Mosely Accounting Services? Question options: a.Monetary unit principle b.Going concern principle c.Cost principle d.Business entity principle (6) The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash equivalent amount given in exchange, is the: Question options: a.Accounting equation. b.Cost principle. c.Going concern principle. d.Realization principle. eBusiness entity principle. (7) Ethics: Question options: a.Are beliefs that separate right from wrong. b.And law often coincide. c.Help to prevent conflicts of interest. d.Are critical in accounting. e.All of the above. (8) The financial statement that shows the beginning balance of owner’s equity; the changes in equity that resulted from new investments by the owner, net income (or net loss), and withdrawals; and the ending balance, is the: Question options: a.Statement of financial position. b.Statement of cash flows. c.Balance sheet. d.Income statement. e.Statement of owner’s equity. (9) The principle that requires every business to be accounted for separately and distinctly from its owner or owners is known as the: Question options: a.Objectivity principle. b.Business entity principle. c.Going concern principle. d.Revenue recognition principle. e.Cost principle. (10) Net income: Question options: a.Occurs when revenues exceed expenses. b.Is the same as revenue. c.Equals resources owned or controlled by a company. d.Occurs when expenses exceed assets. e.Represents assets taken from a company for an owner’s personal use. ________________________________________
1) The economic analysis carried out during project identification and selection is rather superficial. Why is this? Consequently, what factors do you think tend to be most important for a potential project to survive this first phase of the life cycle? 2) Consider your use of a PC at either home or work and list tangible benefits from an information system. Based on this list, does your use of a PC seem to be beneficial? Why or why not? 3) Assume you are put in charge of launching a new Web site for a local nonprofit organization. What costs would you need to account for? Make a list of expected costs and benefits for the project. You dont need to list values, just sources of expense. Consider both one time and recurring costs. 4) Consider the situation you addressed in Problem and Exercise 3. Create numeric cost estimates for each of the costs you listed. Calculate the net present value and return on investment. Include a break even analysis. Assume a 10 percent discount rate and a five year time horizon. 5) Consider the situation you addressed in Problem and Exercise 3. Create a sample project scope statement, following the structure shown in Figure 4 13. 6) Assuming monetary benefits of an information system at $85,000 per year, one time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a five year time horizon, calculate the net present value of these costs and benefits of an information system. Also calculate the overall return on investment of the project and then present a break even analysis. At what point does break even occur? 7) Use the outline for the baseline project plan provided in Figure 4 12 to present the system specifications for the information system you chose for Problem and Exercise 3. 8) Change the discount rate for Problem and Exercise 6 to 10 percent and redo the analysis. 9) Change the recurring costs in Problem and Exercise 6 to $40,000 and redo the analysis. 10) Change the time horizon in Problem and Exercise 6 to three years and redo the analysis. 11) Assume monetary benefits of and information system of $40,000 the first year and increasing benefits of $10,000 a year for the next five years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5, = $90,000). One time development costs were $80,000 and recurring costs were $45,000 over the duration of the systems life. The discount rate for the company was 11 percent. Using a six year time horizon, calculate the net present value of these costs and benefits. Also, calculate the overall return on investment and then present a break even analysis. At what point does break even occur? 12) Change the discount rate for Problem and Exercise 11 to 12 percent and redo the analysis. 13) Change the recurring costs in Problem and Exercise 11 to $40,000 and redo the analysis. 14) For the system you chose for Problem and Exercise 3, complete section 1.0.A, the project overview, of the baseline project plan report. How important is it that this initial section of the baseline project plan report be done well? What could go wrong if this section is incomplete or incorrect?
1. Electrical costs at one of Gotch Corporation’s factories are listed below:
Machine ‘Hours Electrical Cost
March Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 3,731 $35,243
April Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 3,728 35,248
May Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦… 3,765 35,479
June Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦… 3,793 35,651 July Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦ 3,797 35,692
August Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦… 3,701 35,044
September Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 3,800 35,694
October Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 3,735 35,276
November Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.. 3,740 35,325
Management believes that electrical cost is a mixed cost that depends on machine hours. Using the high low method to estimate the variable and fixed components of this cost, these estimates would be closest to: a. $0.15 per machine hour; $35,115 per month b. $9.11 per machine hour; $1,249 per month c. $9.43 per machine hour; $35,406 per month d. $6.57 per machine hour; $10,728 per month
1 Firm B wants to hire Mrs. X to manage its advertising department. The firm offered Mrs. X a three year employment contract under which it will pay her an $80,000 annual salary in 0,1 and 2.Firm B’s tax rate for the three year period is 34 percent. a Assuming an 8 percent discount rate for both Firm B and Mrs. X, Compute the NPV of Mrs. X’s after tax cash flow from the employment contract and Firm B’s after tax cost of employment contract. b To reduce her tax cost, Mrs. X requests that the salary payment for year 0 be increase $140,000 and the salary payments for year 1 and 2 be reduced to $50,000.How would this revision in the timing of the payments change your NPV computation for both parties? c Firm B responds to Mrs. X’s request with a counter proposal. It will pay her $140,000 in year 0 but only $45,000 in years 1 and 2.compute the NPV of Firm B’s after tax cost under this proposal. From the firm’s perspective, is this proposal superior to its original (80,000 annually for three years”) d Should Mrs. X accepts the original offer or the counter proposal ? support your conclusion with a comparison of the NPV of each other.
part 1 Greener Grass Company (GGC) competes with its main rival, Better Lawns and Gardens (BLG), in the supply and installation of in ground lawn watering systems in the wealthy western suburbs of a major east coast city. Last year, GGCs price for the typical lawn system was $1,995 compared with BLGs price of $2,100. GGC installed 9,130 systems, or about 55% of total sales and BLG installed the rest. (No doubt many additional systems were installed by do it yourself homeowners since the parts are readily available at hardware stores.) GGC has substantial excess capacity”it could easily install 25,000 systems annually, as it has all the necessary equipment and can easily hire and train installers. Accordingly, GGC is considering expansion into the eastern suburbs, where the homeowners are less wealthy. In past years, both GGC and BLG have installed several hundred systems in the eastern suburbs but generally their sales efforts are met with the response that the systems are too expensive. GGC has hired you to recommend a pricing strategy for both the western and eastA?¬ern suburb markets for this coming season. You have estimated two distinct demand functions, as follows: Qw =1,035.548 6.07164Pgw + 2.83Pbw + 2,100Ag 1,500Ab + 0.2348Yw for the western market
1. Heathrow issues $2,500,000 of 6%, 15 year bonds dated January 1, 2011, that pays interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,160,279. a.Prepare the January 1, 2011, journal entry to record the bonds issuance 2.(a) For each semiannual period, complete the tables below to calculate the cash payment. (b) For each semiannual period, complete the tables below to calculate the straight line discount amortization. (c) For each semiannual period, complete the tables below to calculate the bond interest expense. 3. Complete the tables below to calculate the total bond interest expense to be recognized over the bonds’ life. 4. Prepare the first two years of an amortization table using the straight line method. Semiannual period end unamortized discount carrying value 01/01/2011 06/30/2011 12/31/2011 06/30/012 12/31/2012 5. Prepare the journal entries to record the first two interest payments.
1. Product cost under absorption costing is characteristically: A. Higher than under variable costing. B. Lower than under variable costing. C. Equal to variable costing. D. Higher sometimes and lower sometimes than variable costing. . A segment of a business responsible for both revenues and expenses would be referred to as: Answer A. Cost Center B. Investment Center C. Profit Center D. Residual Income Variable costing is attractive to managers as an alternative to absorption costing because: A. Absorption costing makes distinctions between fixed and variable product costs. B. Absorption costing is well suited to CVP analysis techniques. C. Absorption costing provides useful tools to managers for planning and control. D. To generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing. When production is equal to sales, which of the following is true? Answer A. No change occurs to inventories for either absorption costing or variable costing methods. B. The use of absorption costing produces a higher net income than the use of variable costing. C. The use of absorption costing produces a lower net income than the use of variable costing. D. The use of absorption costing causes inventory value to increase more than they would through the use of variable costing.
1.___ Rust Corporation distributes property to its sole shareholder, Andre. The property has a fair market value of $350,000, an adjusted basis of $205,000, and is subject to a liability of $220,000. Current E & P is $500,000. With respect to the distribution, which of the following statements is correct? a. Andre has dividend income of $350,000. b. Andre has dividend income of $205,000. c. Andre has dividend income of $145,000. d. Andre has dividend income of $130,000. 4.___The gross estate of Raul, decedent who died in 2012, includes 1,500 shares of stock of Orange Corporation (basis to Raul of $600,000, fair market value on date of death of $4.1 million). The estate will incur $2.2 million of death taxes and funeral and administration expenses, and the adjusted gross estate is $9 million. Orange (E & P of $5 million) redeems $2.2 million of the estates shares to pay taxes and expenses. What are the tax consequences of the redemption to Rauls estate? a. There is no recognized gain or loss on the redemption. b. $600,000 taxable gain. c. $1,600,000 taxable gain. d. $2,200,000 taxable gain. 5.___ The stock in Toucan Corporation is held equally by two brothers. Four years ago, the shareholders transfer property (basis of $200,000, fair market value of $220,000) to Toucan Corporation as a contribution to capital in a A?§351 transaction. In the current year and pursuant to a complete liquidation of Toucan, the property is distributed proportionately to the brothers. At the time of the distribution, the property had a fair market value of $40,000. What amount of loss will Toucan Corporation recognize on the distribution of the property? a. $0. b. $20,000. c. $160,000. d. $180,000.
1. (TCO E) Which of the following is not treated as a change in accounting principle? (Points : 5) A change from completed contract to percentage of completion A change from LIFO to FIFO for inventory valuation A change from full cost to successful efforts in the extractive industry A change to a different method of depreciation for plant assets 2. (TCO E) A company decides to switch from double declining balance method to that straight line method of recording depreciation. What type of change/correction is this? (Points : 5) Change in accounting principle Change in reporting entity Change in accounting estimate Correction of an error 3. (TCO E) On December 31, 2013, Gifts Galore, Inc. appropriately changed its inventory valuation method from weighted average cost to FIFO method for financial statement and income tax purposes. The change will result in a $1,500,000 increase in the beginning inventory at January 1, 2013. Assume a 30% income tax rate. The cumulative effect of this accounting change on beginning retained earnings is (Points : 5) $1,500,000. $1,050,000. $0. $450,000. 4. (TCO E) As of January 1, 2011, Survival Industries, Inc. purchased a boat at a cost of $400,000. When purchased, the company was using the double declining depreciation method. Key info on the asset at time of purchase is the following. Estimated useful life is 8 years. Residual Value is $0. At the beginning of 2014, the CFO decided to change to straight line depreciation method. Compute the depreciation expense for 2014. (Points : 5) $50,000 $80,750 $33,750 $16,875 5. (TCO E) Mystical Corporation found the following errors in their year end financial statements: As of Dec. 2012 As of Dec. 2013 Ending Inventory $32,000 understated $46,000 overstated Depreciation Exp. $7,000 understated On December 31, 2013, a fully depreciated machine was sold for $35,000 but the sale was not recorded until January 15, 2014 when the cash was received. In 2012, a three year insurance premium was prepaid for $45,000 of which the entire amount was expensed in the first year. There were no other errors or corrections. Ignore any tax considerations. What is the total net effect of errors on Mystical’s 2013 net income? (Points : 5) Working capital overstated by $31,000 Working capital overstated by $11,000 Working capital understated by $4,000 Working capital understated by $36,000 6. (TCO E) The four types of accounting changes, including error correction, are change in accounting principle; change in accounting estimate; change in reporting entity; and error correction. Required: The following are a series of situations. Indicate the type of change. 1 Changing the companies included in combined financial statements 2 Change in both estimate and acceptable accounting principles 3 Change from presenting nonconsolidated to consolidated financial statements 4 Change from FIFO to LIFO inventory procedures 5 Change in amortization period for an intangible asset 6 Change due to failure to recognize an accrued (uncollected) revenue 7 Change due to charging a new asset directly to an expense account 8 Change due to understatement of inventory 9 Change from straight line to sum of the years’ digits method of depreciation 10 Change in residual value of a depreciable plant asset 11 Change in the loss rate on warranty costs 12 Change in life of a depreciable plant asset 13 Change due to failure to recognize and accrue income 14 Change in expected recovery of an account receivable 15 Change from expensing to capitalizing certain costs, due to a change in periods benefited (Points : 15)
14. On January 30, Tensing Company purchased supplies of $2,000. The supplies were all consumed in February. Which of the following statements is true regarding the accounting for these supplies. A)The supplies should be charged to Supplies Expense in January and no adjusting entry is needed until the supplies are used in February
B)The supplies should be recorded as an asset in January and no adjusting entry is needed until the supplies are used in February
C)The supplies should not be recorded in the accounting records until used in February
D)The adjusting journal entry at the end of January will include a debit to Supplies Expense and a credit to Supplies for $2,000 15. The fiscal year of a business is usually determined by: A)the SEC
2.) Chae Corporation uses the weighted average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 1,000 units. The costs and percentage completion of these units in beginning inventory were: Cost Percent Complete Materials costs $7,200 75% Conversion costs $7,630 25% A total of 14,000 units were started and 13,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month. Materials costs $225,576 Conversion costs $600,560 The ending inventory was 80% complete with respect to materials and 75% complete with respect to conversion costs. The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round your cost per equivalent unit answers to 2 decimal places.) A). $823,881 B). $809,267 C). $761,640 D). $796,467
3.) Nando Company uses the weighted average method in its process costing system. Department J is the second of three sequential processes at the company. During October, Department J collected the following data: Labor and Overhead Units Percentage Complete Work in process, October 1 9,900 60% Units started 38,000 Completed and transferred 33,000 Work in process, October 31 14,900 10% Costs for October Transferred In Materials Labor and Overhead Work in process, October 1 $37,000 $17,800 $ 32,300 Added during the month $92,330 $121,110 $381,580 All materials are added at the beginning of the process. The total cost assigned to ending work in process inventory was: (Round your intermediate calculations to 2 decimal places.) A). $76,210 B). $83,440 C). $152,720 D). $101,320 Accounting
On May 31, 2014, Terrell Company had a cash balance per books of $6,781.50. The bank statement from Home Town State Bank on that date showed a balance of $6,804.60. A comparison of the statement with the cash account revealed the following facts.
1. The statement included a debit memo of $40 for the printing of additional company checks. 2. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Terrell Company for the correct amount. 3. Outstanding checks at May 31 totaled $276.25. Deposits in transit were $1,916.15. 4. On May 18, the company issued check No. 1181 for $685 to Barry Dietz on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terrell Company for $658. 5. A $3,000 note receivable was collected by the bank for Terrell Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note. 6. Included with the cancelled checks was a check issued by Bridges Company to Jon Newton for $600 that was incorrectly charged to Terrell Company by the bank. 7. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Terrell Company on account.
4.17 Calculating and interpreting inventory turnover ratios. Dell produces computers and related equipment on a made to order basis for consumers and business. Sun Microsystems design and manufactures higher end computers that function as servers and for use in computer aided design. Sun Microsystems sells primarily to business. It also provides services to business customers in addition to product sales of computers. Selected data for each firm for 2007 2009 appear in Exhibit 4.23. (Dells fiscal year end is in January; Suns fiscal year end is in June. As of the writing of this text, an acquisition of Sun by Oracle is pending.) Exhibit 4.23 Selected Data for Dell and Sun Microsystems (amounts in millions) Problem 4.17) 2009 2008 2007 Dell Cost of goods Sold $49,375 $48,855 $47,433 Average Inventories 1,024 920 618 Change in sales from previous year 1.10% 3.00% 4.10% Sun Microsystems Cost of goods Sold $5,948 $6,639 $6,778 Average Inventories 623 602 532 Change in sales from previous year 10.40% 2.10% 3.70% a. Calculate the inventory turnover ratio for each firm for 2007 2009 b. Suggest reasons for the differences in the inventory turnover ratios of these two firms. c. Suggest reasons for the changes in the inventory turnover ratios during the three year period.
9. Which of the following is the appropriate journal entry if a company performs a service and is paid immediately?
A. Debit to Cash, Debit to Revenue
B. Debit to Cash, Credit to Revenue
C. Debit to Accounts Receivable, Credit to Cash
D. Debit to Revenue, Credit to Accounts Receivable
E. Debit to Accounts Receivable, Credit to Revenue
10. Which of the following is the appropriate journal entry if a company purchases equipment costing $100,000 by paying cash of $10,000?
A. Debit to Cash, Debit to Equipment, Credit to Accounts Payable
B. No entry should be made
C. Debit to Equipment, Credit to Notes Payable, Credit to Cash
D. Debit to Cash, Debit to Notes Payable, Credit to Equipment
E. Debit to Equipment, Debit to Notes Payable, Credit to Cash
11. What are the total assets for Shiver Ice House?
Common Stock
$120,000
Accounts Payable
$25,000
Cash
$116,640
Accounts Receivable
$22,450
Supplies
$ 1,500
Office Equipment
$23,300
Prepaid Rent
$ 3,200
Unearned Revenue
$ 4,152
Revenue
$ 20,000
Utilities Expense
$ 422
Retained Earnings
$ 30,000
Shaving Equipment
$31,640
A. $291,340
B. $106,962
C. $198,730
D. $218,730
E. $221,580
12. What is net income for Shiver Ice House?
Common Stock
$120,000
Accounts Payable
$25,000
Cash
$116,640
Accounts Receivable
$22,450
Supplies
$ 1,500
Office Equipment
$23,300
Prepaid Rent
$ 3,200
Unearned Revenue
$ 4,152
Revenue
$ 20,000
Utilities Expense
$ 422
Retained Earnings
$ 30,000
Shaving Equipment
$31,640
A. $19,578
B. $20,528
C. $23,728
D. $49,578
E. $24,578
13. What is total for the debits on the Trial Balance for Shiver Ice House?
Common Stock
$120,000
Accounts Payable
$25,000
Cash
$116,640
Accounts Receivable
$22,450
Supplies
$ 1,500
Office Equipment
$23,300
Prepaid Rent
$ 3,200
Unearned Revenue
$ 4,152
Revenue
$ 20,000
Utilities Expense
$ 422
Retained Earnings
$ 30,000
Shaving Equipment
$31,640
A. $291,340
B. $106,964
C. $199,152
D. $193,390
E. $203.152
14. Find net income using the following transactions.1. Bill Co. paid $2,000 for one month rent
1.
Bill Co. paid $2,000 for one month rent
2.
Bill Co. paid $1,200 for two weeks wages
3.
Bill Co. performed $5,200 in consulting services on account
4.
Bill Co billed a customer $1,500 for services performed
5.
Bill Co. received $5,200 in payment for item 3
6.
Bill Co performed services and immediately collected $2,000
7.
Bill Co. paid $500 for advertising in the local paper
A. $10,200
B. $ 5,000
C. $ 8,700
D. $13,900
E. $ 7,000
15. During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?
A. $700
B. $1,100
C. $2,900
D. $0
E. $4,300
16. Identifying business activities requires selecting transactions and events relevant to an organization. Which of the following events would be recorded in the accounting records of Acme Car Wash?
A. Acme washes 500 cars
B. J.B. Smith, a customer, buys lunch at the restaurant next door to Acme while waiting for her car to be washed
C. Clean Company, a supplier, sells 50 pounds of soap to ABC Company
D. Sudsey Company, a supplier, goes out of business
E. Acme hires Andrea as a receptionist
17. Internal users of accounting information always include: (Points : 1)
On January 1, year 1, Jessica received 10,000 shares of restricted stock from her employer, Rocket Corporation. On that date, the stock price was $10 per share. On receiving the restricted stock, Jessica made the §83(b) election. Jessica’s restricted shares will all vest at the end of year 4. After the shares vest, she intends to sell them immediately to fund an around the world cruise. Unfortunately, Jessica decided that she couldn’t wait four years and quit her job to start her cruise on January 1, year 3.
a. What are the year 1 tax consequences of these transactions to Jessica, assuming her marginal tax rate is 33 percent and her long term capital gains rate is 15 percent?
b. What are the year 3 tax consequences of these transactions to Jessica, assuming her marginal tax rate is 33 percent and her long term capital gains rate is 15 percent?
Lars Osberg, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance would cost Lars $8,500 to purchase if he pays for it himself (Lars’s AGI is too high to receive any tax deduction for the insurance as a medical expense). Volvo, Lars’s employer, has a 40 percent marginal tax rate. Answer the following questions about this benefit (ignore FICA taxes in your analysis).
a. What is the maximum amount of before tax salary Lars would give up to receive health insurance from Volvo?
b. What would be the after tax cost to Volvo to provide Lars with health insurance if it could purchase the insurance through its group plan for $5,000?
c. Assume that Volvo could purchase the insurance for $5,000. Lars is interested in getting health insurance and he is willing to receive a lower salary in exchange for the health insurance. What is the least amount by which Volvo would be willing to reduce Lars’s salary while agreeing to pay his life insurance?
d. Will Volvo and Lars be able to reach an agreement by which Volvo will provide Lars’s health insurance?
Hart, an individual, bought an asset for $500,000 and has claimed $100,000 of depreciation deductions against the asset. Hart has a marginal tax rate of 30 percent. Answer the questions presented in the following alternative scenarios (assume Hart had no property transactions other than those described in the problem):
a. What is the amount and character of Hart’s recognized gain if the asset is tangible personal property sold for $450,000? What effect does the sale have on Hart’s tax liability for the year?
b. What is the amount and character of Hart’s recognized gain if the asset is tangible personal property sold for $550,000? What effect does the sale have on Hart’s tax liability for the year
c. What is the amount and character of Hart’s recognized gain if the asset is tangible personal property sold for $350,000? What effect does the sale have on Hart’s tax liability for the year?
d. What is the amount and character of Hart’s recognized gain if the asset is a non residential building sold for $450,000? What effect does the sale have on Hart’s tax liability for the year?
e. Now assume that Hart is a corporation. What is the amount and character of its recognized gain if the asset is a nonresidential building sold for $450,000? What effect does the sale have on Hart’s tax liability for the year (assume the same 30 percent marginal tax rate)?
f. Now assuming that the asset is real property, which entity type should be used to minimize the taxes paid on real estate gains?
Use the following items to determine the total assets, total liabilities, net worth, total cash inflows, and total cash outflows. (Omit the “$” sign in your response.)
Youve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skillset as well as the manufacturing facilities. As the controller of ABC Company, the CEO has come to you with a new opportunity that hes been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABCs existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide. In order to help out the CEO, you need to prepare a six to eight page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations.
Youve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skillset as well as the manufacturing facilities. As the controller of ABC Company, the CEO has come to you with a new opportunity that hes been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABCs existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide. In order to help out the CEO, you need to prepare a six to eight page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations. I. An overall risk profile of the company based on current economic and industry issues that it may be facing. II. Current company cash flow a. You need to complete a cash flow statement for the company using the direct method. b. Once youve completed the cash flow statement, answer the following questions: i. What does this statement of cash flow tell you about the sources and uses of the company? ii. Is there anything ABC Company can do to improve the cash flow? iii. Can this project be financed with current cash flow from the company? Why or why not? iv. If the company needs additional financing beyond what ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company obtain the additional financing, equity or corporate debt, and why? III. Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product. a. What is the product cost for the expansion product? b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product? c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product? d. Assuming the same sales mix of these two products, what are the contribution margins and break even points by product? IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years: Year 1, $15,000 Year 2, $13,000 Year 3, $10,000 Year 4, $10,000 Year 5, $6,000 ABC Company uses the net present value method to analyze investments and desires a minimum rate of return of 12% on the equipment. a. What is the net present value of the proposed investment ignore income taxes and depreciation? b. Assuming a 5 year straight line depreciation, how will this impact the factorys fixed costs for each of the 5 years (and the implied product costs)? What about cash flow? c. Considering the cash flow impact of the equipment as well as the time value of money, would you recommend that ABC Company purchases the equipment? Why or why not? SPREADSHEET FOR I ABC Company’s current financial information (before/without expansion) Dec. 31,19X2 Dec. 31,19X1 Cash $ 5,000 $ 7,000 Accounts receivable (net) $ 12,000 $ 18,000 Merchandise inventory $ 35,000 $ 28,000 Property plant, & equipment $ 40,000 $ 30,000 Less: Accumulated depreciation $ (17,000) $ (10,000) Total assets $ 75,000 $ 73,000 Accounts payable* $ 25,000 $ 21,000 Income taxes payable $ 4,000 $ 1,000 Common stock $ 24,000 $ 24,000 Retained earnings $ 22,000 $ 27,000 Total liabilities & stock, equity $ 75,000 $ 73,000 The firm’s accrual basis income statement revealed the following data: Sales $ 120,000 Cost of goods sold $ 80,000 selling and administrative expenses $ 25,000 Depreciation expense $ 7,000 Income taxes $ 3,000 Dividends declared and paid during 19X2 $ 10,000 ABC purchased $10,000 of equipment for cash on August 14. (There was no interest expense.) SPREAD SHEET FOR II ABC’s Product information Current Product Expansion Product (estimate) Selling Price $12.00 ? Units produced and expected to be sold 80,000 5,000 Machine Hours 40,000 5,000 Direct Materials $1.30 per unit $5.60 per unit Direct labor dollars needed per product $2.80 per unit $4.00 per unit Variable Factory Overhead $1.00 per Machine Hour $1.00 per Machine Hour Variable Selling Expense $0.20 per unit $0.20 per unit Total Fixed Costs: Fixed Factory Overhead $ 198,000 Fixed Selling expenses $ 191,250
Terry Hutchison worked as a self employed lawyer until two years ago when he retired. He used the cash method of accounting in his business for tax purposes. Five years ago, Terry represented his client ABC corporation in an antitrust lawsuit against XYZ corporation. During that year, Terry paid self employment taxes on all of his income. ABC won the lawsuit but Terry and ABC could not agree on the amount of his earnings. Finally, this year, the issue got resolved and ABC paid Terry $90,000 for the services he provided five years ago. Terry plans to include the payment in his gross income but because he spends most of his time playing golf and absolutely no time working on legal matters, he does not intend to pay self employment taxes on the income. Is Terry subject to self employment taxes on this income?
Brittany started a law practice as a sole proprietor. She owned a computer, printer, desk, and file cabinet she purchased during law school (several years ago) that she is planning to use in her business. What is the depreciable basis that Brittany should use in her business for each asset, given the following information?
After several profitable years running her business, Ingrid decided to acquire the assets of a small competing business. On May 1 of year 1, Ingrid acquired the competing business for $300,000. Ingrid allocated $50,000 of the purchase price to goodwill. Ingrid’s business reports its taxable income on a calendar year basis.
a. How much amortization expense on the goodwill can Ingrid deduct in year 1, year 2, and year 3?
b. In lieu of the original facts, assume that $40,000 of the purchase price was allocated to goodwill and $10,000 of the purchase price was allocated to a customer phone list that has an expected life of two years. How much amortization expense on the goodwill and the phone list can Ingrid deduct in year 1, year 2, and year 3?
c. Assume that the only intangible asset Ingrid acquired was the customer phone list with a useful life of two years and that $10,000 of the purchase price was allocated to the customer list. How much amortization expense for the customer phone list can Ingrid deduct in year 1, year 2, and year 3, and how will she account for the fact that the phone list is no longer useful after April of year 3?
Bethany incurred $20,000 in research and experimental costs for developing a specialized product during July of year 1. Bethany went through a lot of trouble and spent $10,000 in legal fees to receive a patent for the product in August of year 3.
a. What amount of research and experimental expenses for year 1, year 2, and year 3 may Bethany deduct if she elects to amortize the expenses over 60 months?
b. How much patent amortization expense would Bethany deduct in year 3 assuming she elected to amortize the research and experimental costs over 60 months?
c. If Bethany chose to capitalize but not amortize the research and experimental expenses she incurred in year 1, how much patent amortization expense would Bethany deduct in year 3?
Last Chance Mine (LC) purchased a coal deposit for $750,000. It estimated it would extract 12,000 tons of coal from the deposit. LC mined the coal and sold it reporting gross receipts of $1 million, $3 million, and $2 million for years 1 through 3, respectively. During years 1 – 3, LC reported net income (loss) from the coal deposit activity in the amount of ($20,000), $500,000, and $450,000, respectively. In years 1 – 3, LC actually extracted 13,000 tons of coal as follows:
Depletion
Tons extracted per year
(1)
Tons of Coal
(2)
Basis
(2)/(1)
Rate
Year 1
Year 2
Year 3
12,000
$750,000
$62.50
2,000
7,200
3,800
a. What is Last Chance’s cost depletion for years 1, 2, and 3?
b. What is Last Chance’s percentage depletion for each year (the applicable percentage for coal is 10 percent)?
Using the cost and percentage depletion computations from the previous parts, what is Last Chance’s actual depletion expense for each year?
In year 0, Canon purchased a machine to use in its business for $56,000. In year 3, Canon sold the machine for $42,000. Between the date of the purchase and the date of the sale, Canon depreciated the machine by $32,000.
a. What is the amount and character of the gain Canon will recognize on the sale, assuming that it is a partnership?
b. What is the amount and character of the gain Canon will recognize on the sale, assuming that it is a corporation?
c. What is the amount and character of the gain Canon will recognize on the sale, assuming that it is a corporation and the sale proceeds were increased to $60,000?
d. What is the amount and character of the gain Canon will recognize on the sale, assuming that it is a corporation and the sale proceeds were decreased to $20,000?
Baker Corporation owned a building located in Kansas. Baker used the building for its business operations. Last year a tornado hit the property and completely destroyed it. This year, Baker received an insurance settlement. Baker had originally purchased the building for $350,000 and had claimed a total of $100,000 of depreciation deductions against the property. What is Baker’s realized and recognized gain or (loss) on this transaction and what is its basis in the new building in the following alternative scenarios?
a. Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the current year.
b. Baker received $450,000 in insurance proceeds and spent $500,000 rebuilding the building during the current year.
c. Baker received $450,000 in insurance proceeds and spent $400,000 rebuilding the building during the current year.
d. Baker received $450,000 in insurance proceeds and spent $450,000 rebuilding the building during the next three years.
Aishwarya’s husband passed away in 2012. She needs to determine whether Jasmine, her 17 year old step daughter who is single, qualifies as her dependent in 2013. Jasmine is a resident but not a citizen of the United States. She lived in Aishwarya’s home from June 15 through December 31, 2013. Aishwarya provided more than half of Jasmine’s support for the 2013.
a. Is Aishwarya allowed to claim a dependency exemption for Jasmine for 2013?
b. Would Aishwarya be allowed to claim a dependency exemption for Jasmine for 2013 if Aishwarya provided more than half of Jasmine’s support in 2013, Jasmine lived in Aishwarya’s home from July 15 through December 31 of 2013, and Jasmine reported gross income of $5,000 in 2013?
c. Would Aishwarya be allowed to claim a dependency exemption for Jasmine for 2013 if Aishwarya provided more than half of Jasmine’s support in 2013, Jasmine lived in Aishwarya’s home from July 15 through December 31 of 2013, and Jasmine reported gross income of $2,500 in 2013?
Yes, Jasmine would qualify as Aishwarya’s qualifying relative as follows:
In each of the following independent situations, determine the taxpayer’s filing status and the number of personal and dependency exemptions the taxpayer is allowed to claim.
a. Frank is single and supports his 17 year old brother, Bill. Bill earned $3,000 and did not live with Frank.
b. Geneva and her spouse reside with their son, Steve, who is a 20 year old undergraduate student at State University. Steve earned $13,100 at a part time summer job, but he deposited this money in a savings account for graduate school. Geneva paid all of the $12,000 cost of supporting Steve.
c. Hamish’s spouse died last year, and Hamish has not remarried. Hamish supports his father Reggie, age 78, who lives in a nursing home and had interest income this year of $2,500.
d. Irene is married but has not seen her spouse since February. She supports her spouse’s 18 year old child Dolores, who lives with Irene. Dolores earned $4,500 this year.
e. Assume the same facts as in part d. Also assume that Craig is Irene’s husband. Craig supports his 12 year old son Ethan, who lives with Craig. Ethan did not earn any income.
This year, Major Healy paid $40,000 of interest on a mortgage on his home (Major Healy borrowed $800,000 to buy the residence and it is currently worth $1,000,000), $6,000 on a $120,000 home equity loan on his home (loan proceeds were used to buy antique cars), and $10,000 of interest on a mortgage on his vacation home (loan of $200,000; home purchased for $500,000). Major Healy’s AGI is $220,000.
a. How much interest expense can Major Healy deduct as an itemized deduction?
b. Assume the original facts, except that Major Healy’s home had a fair market value of $1,000,000 when he purchased the home and took out the home equity debt, but now the home is worth $500,000. How much interest expense can Major Healy deduct as an itemized deduction?
North Inc. is a calendar year, accrual basis taxpayer. At the end of the year 1, North accrued and deducted the following bonuses for certain employees for financial accounting purposes.
· $7,500 for Lisa Tanaka, a 30 percent shareholder.
· $10,000 for Jared Zabaski, a 35 percent shareholder.
· $12,500 for Helen Talanian, a 20 percent shareholder.
· $5,000 for Steve Nielson, a 0 percent shareholder.
Unless stated otherwise, assume these shareholders are unrelated.
How much of the accrued bonuses can North Inc. deduct in year 1 under the following alternative scenarios?
a. North paid the bonuses to the employees on March 1 of year 2.
b. North paid the bonuses to the employees on April 1 of year 2.
c. North paid the bonuses to employees on March 1 of year 2 and Lisa and Jared are related to each other, so they are treated as owning each other’s stock in North.
d. North paid the bonuses to employees on March 1 of year 2 and Lisa and Helen are related to each other, so they are treated as owning each other’s stock in North.
Mark received 10 ISOs at the time he started working for Hendricks Corporation five years ago when Hendricks’s price was $5 per share (each option gives him the right to purchase 10 shares of Hendricks Corporation stock for $5 per share). Now that Hendricks’s share price is $35 per share, he intends to exercise all options and hold all of his shares for more than year. Assume that more than a year after exercise, Mark sells the stock for $35 a share.
a. What are Mark’s tax consequences on the grant date, the exercise date, and the date he sells the shares assuming his ordinary marginal rate is 30 percent and his long term capital gains rate is 15 percent?
b. What are Hendricks’s tax consequences on these dates assuming its marginal tax rate is 25 percent?
In 1983, a number of computer software companies reported use of an accounting procedure that was investigated by the SEC. The accounting policy is to capitalize the cost of developing computer software and amortize it over the life of the software (usually three to five years). This procedure is used by large and small companies, but the impact is more pronounced on smaller, new companies, in which a greater portion of their activity is devoted to software development.
An official of Comserv, a small company that specializes in software, said that small comp costs that smaller companies would not be able to put as much cash into their own growth and development because of SFAS No. 86.
The SEC’s concern was whether this accounting policy was consistent with SFAS No. 2 co Required:
a. Evaluate the software capitalization argument with reference to SFAS No. 2.
b. Why is the choice of accounting policies (expensing vs. capitalization) more likely to affect smaller companies?
c. Comment on the claim that small companies “wouldn’t be able to invest as much cash in their own growth if they couldn’t use [capitalization].” Is this a real economic consequence?
If you were a FASB member, how would you have voted on this issue?
See the income statement of Waste Management, Inc., for the year ending December 31, 1998 in the text. Also shown is a note from its financial statements showing the elements of its comprehensive income items, which were shown as part of the statement of changes in equity.
Required :
(a) Recast the income statement for December 31, 1998, so that it includes comprehensive income.
(b) Even though not allowed by the FASB, compute the EPS for comprehensive income.
(c) Do you think that elements specific to comprehensive income should be shown only in the statement of changes in equity?
(d) Do you think there are circumstances in which Waste Management might desire to show comprehensive income elements within the income statement itself?
Nowell Company is experimenting with comprehensive liability income tax allocation called for in SFAS No. 109 but, in addition, they are employing discounting. No temporary differences exist up to 2000. Shown here is a schedule of tax depreciation, book depreciation, and income before depreciation.
Tax Depreciation
Book Depreciation
Income Before
Depreciation
Year
A1
A2
A1
A2
2005
$50,000
$35,000
$300,000
2006
40,000
$60,000
35,000
$50,000
400,000
2007
30,000
50,000
35,000
50,000
420,000
2008
20,000
40,000
35,000
50,000
440,000
The tax rate is 45 percent. The discount rate is 8 percent.
Required:
Prepare income tax entries for2005, 2006, 2007, and 2008discounting deferred tax liabilities at 8 percent. Why would using discounting be a stronger asset liability orientation than not discounting deferred tax liabilities?
Gillette Company, maker of shaving products and many other personal products, showed a net income of $1.428 billion in 1998 and $1.427 billion in 1997 on page one of its 1998 annual report. A note to the 1998 income said that the 1998 income of $1.428 billion was to be reduced $347 million due to reorganization and realignment expenses. Consistent with this, the net income in the consolidated statement of income for 1998 was $1.081 billion.
In addition, following information appeared in the footnotes for the 1998 corporate annual report (figures are in millions).
1998
1997
Noncurrent deferred tax assets:
Benefit plans
$180
$163
Merger related costs
13
12
Operating loss and credit carryforwards
31
33
Valuation allowance
(29)
(31)
Net noncurrent deferred tax assets
$195
$177
Required:
a. Why do you think Gillette initially showed its income for 1998 to be $1.428 billion? Discuss.
b. Is the expensing of the reorganization and realignment costs of $347 million after taxes for 1998 correct? Explain.
c. What is the valuation allowance?
d. Why do you think Gillette maintains this account?
e. Do you think that earnings management is being used by Gillette?
Human Genome Sciences, Inc., a biopharmaceutical company, discovers, develops, and markets new gene and protein based drugs. Its 1998 annual report showed property, plant, and equipment net of accumulated depreciation of $20,965,000 with total net assets of $244,247,000.
A note on operating leases revealed the following:
Operating Leases
The Company leases office and laboratory premises and equipment pursuant to operating leases expiring at various dates through 2017. The leases contain various renewal options. Minimum annual rentals are as follows:
1999
$5,990,790
2000
6,074,955
2001
6,197,186
2002
6,278,051
2003
5,353,707
Thereafter (2004–2017)
35,001,144
$64,895,833
Required :
a. Assume that the company’s cost of capital is 10 percent and that operating lease payments between 2004 and 2017 are equal amounts per year. By how much would Human Genome Sciences’s property, plant, and equipment and its total net assets increase by on December 31, 1998 if these leases were capitalized?
Assume that the company’s net income for 1998 was $20 million. What was its return on assets (ROA) (a) before and (b) after capitalizing the operating leases? Use straight line depreciation over 14 years for the capitalized leases. Operating lease expense for 1998 is $5,900,000.
Wright Company leases an asset for five years on December 31, 2000. Annual lease cost of $10,000 is payable on each December 31 beginning with the year 2001. In addition to the annual lease cost, the lease contract calls for a guaranteed residual value of $3,000.
The asset has an economic life of seven years. Wright’s incremental borrowing rate is 8 percent. The asset has an acquisition cost of $45,000. There are no purchase options.
Required :
a. As things now stand, is this a capital lease or an operating lease? Show figures.
b. What can Wright do to convert this lease to an operating lease? Explain and show figures.
c. Will lessee and lessor’s accounting for this lease be symmetrical (capital lease for both lessor and lessee or operating lease for both lessor and lessee)? Explain.
d. Do you think that Wright’s action in (b) represents a loophole to avoid capitalization or is it a useful part of the present leasing rules? Explain.
Assume the following facts concerning a sales type lease:
· The lease term is three years and qualifies as a capital lease for both lessor and lessee. The asset reverts to the lessor at the end of the lease term. Assume straight line depreciation by the lessee.
· Payments are $50,000 at the beginning of each year, plus a guaranteed residual value of $10,000 at the end of the lease term. The lessor estimates a total residual value of $15,000. Lease payments include $4,000 for executory costs under a maintenance agreement.
· Initial direct costs associated with the lease are $2,700.
· Cash sales price of the asset is $137,102.50. Lessor’s manufacturing cost is $100,000.
· The lessee does not know the lessor’s implicit rate, but its own incremental borrowing rate is 11 percent.
Required :
a. Prepare the accounting entries for both lessor and lessee for the three years. What happens in Year 3 if residual value is only $8,000?
b. Assume the same facts as before except that the asset is first sold to a finance company, which then leases the asset to the lessee. Prepare the required entries in all three years for lessor and lessee.
c. Evaluate the differences between requirements (a) and (b) as well as the differences between lessor and lessee.
One of the four capitalization tests of SFAS No. 13 is that the lease term is 75 percent or more of the asset’s remaining economic life. Lease term is defined as follows in SFAS No. 13 (as amended by SFAS No. 98, para. 22a):
The fixed noncancellable term of the lease plus (i) all periods, if any, covered by bargain renewal options, (ii) all periods, if any, for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured, (iii) all periods, if any, covered by ordinary renewal options during which a guarantee by the lessee of the lessor’s debt related to the leased property is expected to be in effect, (iv) all periods, if any, covered by ordinary renewal options preceding the date as of which a bargain purchase option is exercisable, and (v) all periods, if any, representing renewals or extensions of the lease at the lessor’s option; however, in no case shall the lease term extend beyond the date a bargain purchase option becomes exercisable. A lease which is cancellable (i) only upon the occurrence of some remote contingency, (ii) only with the permission of the lessor, (iii) only if the lessee enters into a new lease with the same lessor, or (iv) only upon payment by the lessee of a penalty in an amount such that continuation of the lease appears, at inception, reasonably assured shall be considered “noncancellable” for purposes of this definition.
Required :
How can this test be circumvented through either the structuring of the lease contract or interpretation of the test? What are other ways in which lease capitalization could be avoided through the structuring of lease terms or interpretation of the tests? What problem does this exercise illustrate?
This problem shows the importance of considering the importance of converting operating leases to capital leases for the purpose of financial statement analysis. It is based upon the techniques developed and illustrated in Imhoff, Lipe, and Wright (1991 and 1997) though it is much simplified from their presentation.
McAdoo Restaurants is a large franchise. Their balance sheet showed the following on December 31, 2000 (in thousands).
Assets (net)
$80,000
Liabilities
$45,000
Owner’s equity
35,000
Assets
$80,000
Liabilities and equities
$80,000
Net income after taxes was $6,500 for 2001. McAdoo’s marginal tax rate is 35 percent. On December 31, 2000, McAdoo entered into several major lease contracts. These leases were all for 10 years and were operating leases. Starting in 2001, total annual lease payments, due on each December 31, are $3,000. McAdoo’s marginal cost of capital rate is 10 percent. No change in liabilities occurred during the year and there were no transactions with owners.
Required:
a. Convert the operating lease to a capital lease which is 1 year old (Hint: Use the present value of a 10 year ordinary annuity). Assume that straight line depreciation is used for both book and tax purposes. There would be a zero salvage value.
b. Determine the net income after taxes if the leases are treated as capital leases.
c. Determine the return on assets under the (a) operating lease assumption and (b) capital lease assumption.
d. Determine the debt equity ratio under the (a) operating lease assumption and (b) capital lease assumption.
Do you think it is useful to convert operating leases to capital leases for financial statement analysis purposes? Discuss.
The following items pertain to a parent company and its 60 percent owned subsidiary at year end. There are no cross guarantees of debt between the parent and subsidiary.
Acquirer Company bought Servile Company for $5,000,000 on January 2, 2004. The fair market value of the individual net assets was $3,500,000. In succeeding years, the fair market value of Servile’s costs and goodwill were as follows:
Year
Fair Market
Value of
Servile
Cost of Servile’s
Net Assets and
Goodwill
2005
$7,000,000
$7,100,000
2006
7,300,000
6,700,000
2007
8,000,000
9,300,000
Required:
a. What amount of goodwill should be recognized as a result of the acquisition of Servile in 2004?
b. Determine the amounts of the goodwill write offs (if any) in 2005, 2006, and 2007.
The United States imposes an excise tax on the sale of domestic airline tickets. Let’s assume that in 2006 the total excise tax was $5.80 per airline ticket (consisting of the $3.30 flight segment tax plus the $2.50 September 11 fee). According to data from the Bureau of Transportation Statistics, in 2006, 656 million passengers traveled on domestic airline trips at an average price of $389.08 per trip. The accompanying table shows the supply and demand schedules for airline trips. The quantity demanded at the average price of $389.08 is actual data; the rest is hypothetical.
Price of trip
Quantity of trips demanded (millions)
Quantity of trips supplied (millions)
$389.17
655
1,100
$389.08
656
1,000
$384.00
685
685
$383.28
700
656
$383.27
701
655
What is the government tax revenue in 2006 from the excise tax? b. On January 1, 2007, the total excise tax increased to $5.90 per ticket. What is the equilibrium quantity of tickets transacted now? What is the average ticket price now? What is the 2007 government tax revenue? c. Does this increase in the excise tax increase or decrease government tax revenue?
Consider the original market for pizza in Collegetown, illustrated in the accompanying table. Collegetown officials decide to impose an excise tax on pizza of $4 per pizza.
Price of pizza
Quantity of pizza demanded
Quantity of pizza supplied
$10
0
6
$9
1
5
$8
2
4
$7
3
3
$6
4
2
$5
5
1
$4
6
0
$3
7
0
$2
8
0
$1
9
0
a. What is the quantity of pizza bought and sold after the imposition of the tax? What is the price paid by consumers? What is the price received by producers?
b. Calculate the consumer surplus and the producer surplus after the imposition of the tax. By how much has the imposition of the tax reduced consumer surplus? By how much has it reduced producer surplus?
c. How much tax revenue does Collegetown earn from this tax?
You work for the Council of Economic Advisers, providing economic advice to the White House. The president wants to overhaul the income tax system and asks your advice. Suppose that the current income tax system consists of a proportional tax of 10% on all income and that there is one person in the country who earns $110 million; everyone else earns less than $100 million. The president proposes a tax cut targeted at the very rich so that the new tax system would consist of a proportional tax of 10% on all income up to $100 million and a marginal tax rate of 0% (no tax) on income above $100 million. You are asked to evaluate this tax proposal.
Would this tax system create more or less tax revenue, other things equal? Is this tax system more or less efficient than the current tax system? Explain.
Ralph invited a potential client to dinner and the theatre. Ralph paid $250 for the dinner and $220 for the theatre tickets in advance. They first went to dinner and then they went to the theatre. a. What amount can Ralph deduct if, prior to the dinner, he met with the potential client to discuss future business prospects? b. What amount can Ralph deduct if he and the client only discussed business during the course of the dinner?
c. What amount can Ralph deduct if he and the potential client tried to discuss business during the course of the theatre performance but did not discuss business at any other time?
What amount can Ralph deduct if the potential client declined Ralph’s invitation, so Ralph took his accountant to dinner and the theatre to reward his accountant for a hard day at work? At dinner, they discussed the accountant’s workload and upcoming assignments.
Renee manufactured and sold a “gadget,” a specialized asset used by auto manufacturers that qualifies for the domestic production activities deduction. Renee incurred $15,000 in direct expenses in the project which includes $2,000 of wages Renee paid to employees in the manufacturing of the gadget. What is Renee’s domestic production activities deduction for the gadget in each of the following alternative scenarios?
a. Renee sold the gadget for $25,000 and she reported AGI of $75,000 before considering the manufacturing deduction.
b. Renee sold the gadget for $25,000 and she reported AGI of $5,000 before considering the manufacturing deduction.
c. Renee sold the gadget for $40,000 and she reported AGI of $50,000 before considering the manufacturing deduction.
This year Amy purchased $2,000 of equipment for use in her business. However, the machine was damaged in a traffic accident while Amy was transporting the equipment to her business. Note that because Amy did not place the equipment into service during the year, she does not claim any depreciation expense for the equipment.
a. After the accident, Amy had the choice of repairing the equipment for $1,800 or selling the equipment to a junk shop for $300. Amy sold the equipment. What amount can Amy deduct for the loss of the equipment?
b. After the accident, Amy repaired the equipment for $800. What amount can Amy deduct for the loss of the equipment?
c. After the accident, Amy could not replace the equipment so she had the equipment repaired for $2,300. What amount can Amy deduct for the loss of the equipment?
Brown Thumb Landscaping is a calendar year, accrual method taxpayer. In September, Brown Thumb negotiated a $14,000 contract for services it would provide to the city in November of the current year. The contract specifies that Brown Thumb will receive $4,000 in October as a down payment for these services and it will receive the remaining $10,000 in January of next year.
a. How much income from this $14,000 contract will Brown Thumb recognize in the current year? Explain.
b. How much income from this $14,000 contract will Brown Thumb recognize in the current year if it uses the cash method of accounting?
c. Suppose that the total amount to be paid under the contract with the city is estimated at $14,000 but may be adjusted to $12,000 next year during the review of the city budget. What amount from the contract, if any, should Brown Thumb recognize as income this year? Explain.
d. Suppose that in addition to the basic contract, Brown Thumb will be paid an additional $3,000 if its city landscape design wins the annual designer competition next year. Should Brown Thumb accrue $3,000 revenue this year? Why or why not?
On April 1 of year 0 Stephanie received a $9,000 payment for full payment on a three year service contract (under the contract Stephanie is obligated to provide advisory services for the next three years).
a. What amount of income should Stephanie recognize in year 0 if she uses the accrual method of accounting (she recognized $2,250 for financial accounting purposes)?
b. What amount of income will Stephanie recognize in year 1 if she uses the accrual method of accounting?
c. What amount of income will Stephanie recognize in year 2, if she uses the accrual method of accounting?
d. What amount of income will Stephanie recognize in year 0 if she recognizes $5,000 of income from the contract for financial statement purposes?
Adam elects the accrual method of accounting for his business. What amount of deductions does Adam recognize in year 0 for the following transactions?
a. Adam guarantees that he will refund the cost of any goods sold to a client if the goods fail within a year of delivery. In December of year 0, Adam agreed to refund $2,400 to clients, and he expects to make payment in January of year 1.
b. On December 1 of year 0, Adam paid $480 for a one year contract with CleanUP Services to clean his store. The agreement calls for services to be provided on a weekly basis.
c. Adam was billed $240 for annual personal property taxes on his delivery van. Because this was the first time Adam was billed for these taxes, he did not make payment until January. However, he considers the amounts immaterial.
SNIDER CORPORATION Balance Sheet December 31, 2010 Assets Current assets: Cash $ 55,600 Marketable securities 22,000 Accounts receivable (net) 198,000 Inventory 239,000 Total current assets $ 514,600 Investments 62,400 Plant and equipment. 683,000 Less: Accumulated depreciation (216,000) Net plant and equipment 467,000 Total assets $ 1,044,000 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 94,600 Notes payable 72,800 Accrued taxes 12,800 Total current liabilities 180,200 Long term liabilities: Bonds payable 150,400 Total liabilities $ 330,600 Stockholders’ equity Preferred stock, $50 par value 100,000 Common stock, $1 par value 80,000 Capital paid in excess of par 190,000 Retained earnings 343,400 Total stockholders’ equity 713,400 Total liabilities and stockholders’ equity $ 1,044,000 SNIDER CORPORATION Income Statement For the Year Ending December 31, 2010 Sales (on credit) $ 2,009,000 Less: Cost of goods sold 1,354,000 Gross profit 655,000 Less: Selling and administrative expenses 529,000 * Operating profit (EBIT) 126,000 Less: Interest expense 26,800 Earnings before taxes (EBT) 99,200 Less: Taxes 86,400 Earnings after taxes (EAT) $ 12,800 *Includes $37,000 in lease payments. Using the above financial statements for the Snider Corporation, calculate the following ratios. (Enter only numeric values rounded to 2 decimal places. Omit the “%” sign in your response.) (a) Profitability ratios Profitability ratios Profit margin % Return on assets (investment) % Return on equity % (b) Assets utilization ratios Assets utilization ratios Receivable turnover Average collection period days Inventory turnover Fixed asset turnover Total asset turnover (c) Liquidity ratios Liquidity ratios Current ratio Quick ratio (d) Debt utilization ratios Debt utilization ratios Debt to total assets % Times interest earned Fixed charge coverage
Snug As A Bug Blankets has the following inventory data: July 1 Beginning Inventory 15 units at $8.00 July 5 Purchases 90 units at $84 July 14 Sale 60 units July 21 Purchases 45 units $87 July 30 Sale 42 units Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July? Answer $8,703 $8,658 $8,694. $8,874 ‘ At May 1, 2012, Heineken Company had beginning inventory consisting of 100 units with a unit cost of $7. During May, the company purchased inventory as follows:200 units at $7300 units at $8The company sold 500 units during the month for $12 per unit. Heineken uses the average cost method. Heineken’s gross profit for the month of May is Answer $2,250 $3,750 $4,500 $6,000 ‘ To adjust a company’s LIFO cost of goods sold to FIFO cost of goods sold Answer the ending LIFO reserve is added to LIFO cost of goods sold. the ending LIFO reserve is subtracted from LIFO cost of goods sold. an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold. Many companies use just in time inventory methods. Which of the following is not an advantage of this method? Answer It limits the risk of having obsolete items in inventory. Companies may not have quantities to meet customer demand. It lowers inventory levels and costs. Companies can respond to individual customer requests. Atom Company just began business and made the following four inventory purchases in June: June 1 150 units $825 June 10 200 units $1,120 June 15 200 units $1,140 June 28 150 units $885 Total: $3970 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is Answer $1,385. $1,425. $1,455. $1,475. ‘ Hogan Industries had the following inventory transactions occur during 2012: Units Cost/Unit Feb.1, 2012 Purchase 18 $45 Mar. 14, 2012 Purchase 31 $47 May 1, 2012 Purchase 22 $49 The company sold 51 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company’s gross profit using LIFO? (rounded to whole dollars) Answer $2,441 $2,365 $848 $772 Laser Listening has the following inventory data: Nov. 1 Inventory 30 units @ $8.00 each Nov. 8 Purchase 120 units @ $8.60 each Nov. 17 Purchase 60 units @ $8.40 each Nov. 25 Purchase 90 units @ $8.80 each A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Assuming that the specific identification method is used and that ending inventory consists of 30 units from each of the three purchases and 10 units from the November 1 inventory, cost of goods sold is Answer $854. $1,714. $1,708. $1,672 Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most? Answer FIFO LIFO Average Cost Income tax expense for the period will be the same under all assumptions. ‘ Redeker Company had the following records: 2012 2011 2010 Ending inventory $34,580 $27,650 $30,490 Cost of goods sold $182,000 $163,500 $174,200 What is Redeker’s average days in inventory for 2012? (rounded) Answer 62.39 days 64.95 days 61.76 days 2,147 days ‘ Dole Industries had the following inventory transactions occur during 2012 Units Cost/Unit Feb.1, 2012 Purchase 54 $90 Mar. 14, 2012 Purchase 93 $94 May 1, 2012 Purchase 66 $98 The company sold 153 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $2,000, what is the company’s after tax income using LIFO? (rounded to whole dollars) Answer $2,632 $3,242 $2,162 $1,842
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 $252,800 of manufacturing overhead for an estimated allocation base of $158,000 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), $150,000. c. Utility bills incurred in the factory, $21,000. d. Costs for salaries and wages were incurred as follows: Direct labor $ 215,000 Indirect labor $ 94,100 Selling and administrative salaries $ 142,000 e. Maintenance costs incurred in the factory, $20,000. f. Advertising costs incurred, $126,000. g. Depreciation recorded for the year, $47,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets). h. Rental cost incurred on buildings, $85,000 (90% of the space is occupied by the factory, and 10% is occupied by sales and administration). i. Miscellaneous selling and administrative costs incurred, $15,000. j. Manufacturing overhead cost was applied to jobs, $ ? k. Cost of goods manufactured for the year, $554,000. l. Sales for the year (all on account) totaled $1,200,000. These goods cost $550,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were as follows: Raw materials $ 15,000 Work in process $ 26,000 Finished Goods $ 33,000 I got all of the t charts right: Accounts receivable: $1,200,000 Raw materials: $14,000 Work in process: 77,000 Finished goods: 37,000 Manufacturing overhead 4500 Accounts payable 416,000 Accumulated depreciation 47,000 Depreciation expense: 14,100 Salaries and wages payable: 451,100 Selling and Admin salaries: 142,000 Miscellaneous expenses: 15,000 Advertising: 126,000 Rent: 8,500 COGS: 150,000 Sales: 1,200,000 COGM: 554,000 Adjusted COGS: 554,500 Net income: 339,900 I cant figure out this last question below: Job 218 was one of the many jobs started and completed during the year. The job required $3,200 in direct materials and 400 hours of direct labor time at a rate of $12 per hour. If the job contained 570 units and the company billed at 75% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the companys cost analyst has determined that if a truck is driven 99,000 miles during a year, the average operating cost is 10.6 cents per mile. If a truck is driven only 66,000 miles during a year, the average operating cost increases to 11.9 cents per mile. Required: 1. Using the high low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the “Variable cost per mile” to 3 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.) Variable cost $ per mile Fixed cost $ per year 2. Express the variable and fixed costs in the form Y = a + bX. (Round the “Variable cost per mile” to 3 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.) Y = $ + $ X 3. If a truck were driven 82,500 miles during a year, what total cost would you expect to be incurred? (Round the “Variable cost per mile” to 3 decimal places. Round your intermediate and final answers to the nearest dollar amount. Omit the “$” sign in your response.) Total annual cost $
Starkey Cos Sales, current assets, and current liabilities (all In thousands of dollars) have been reported as follows over the last 5 years (Year 5 is the most recent year):
Year 5
Year 4
Year 3
Year 2
Year 1
Sales
$5,625
$5,400
$4,950
$4,725
$4,500
Current Assets:
Cash
64
72
84
88
80
Accounts Rec
560
496
432
416
400
Inventory
896
880
816
864
800
Total Current Assets
$1,520
$1,448
$1,332
$1,368
$1,280
Current Liab.
390
318
324
330
300
Required:
1. Express all of the asset, liability, and sales data in trend percentages. Use Year 1 as the base year.
Statement of Cash Flows”Indirect Method The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2013 and 2012, is shown as follows: Dec. 31, 2013 Dec. 31, 2012 Assets Cash $291,940 $275,330 Accounts receivable (net) 105,760 98,880 Inventories 298,550 292,770 Investments 0 113,430 Land 153,130 0 Equipment 329,400 258,850 Accumulated depreciation equipment (77,120) (69,800) Total $1,101,660 $969,460 Liabilities and Stockholders’ Equity Accounts payable (merchandise creditors) $199,400 $190,980 Accrued expenses payable (operating expenses) 19,830 25,210 Dividends payable 11,020 8,730 Common stock, $10 par 59,490 47,500 Paid in capital in excess of par common stock 223,640 131,850 Retained earnings 588,280 565,190 Total $1,101,660 $969,460 The following additional information was taken from the records: 1. The investments were sold for $132,710 cash. 2. Equipment and land were acquired for cash. 3. There were no disposals of equipment during the year. 4. The common stock was issued for cash. 5. There was a $68,650 credit to Retained Earnings for net income. 6. There was a $45,560 debit to Retained Earnings for cash dividends declared. Instructions: Hide ‘ Hint(s) Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use a minus sign to indicate cash outflows, negative amounts or a decrease in cash. Mavenir Technologies Inc. Statement of Cash Flows For the Year Ended December 31, 2013 Cash flows from operating activities: $ Adjustments to reconcile net income to net cash flow from operating activities: Changes in current operating assets and liabilities: Net cash flow from operating activities $ Cash flows from investing activities: $ $ Net cash flow used for investing activities Cash flows from financing activities: $ Net cash flow provided by financing activities $ Cash at beginning of the year Cash at end of the year $
Draft a memo to a client comparing the advantages and disadvantages of using forward contracts and options to hedge foreign exchange risk.
On December 1, 2009, a U.S. based company entered into a three month forward contract to purchase 1 million Mexican pesos on March 1, 2010.
The following are the purchase rates for US dollar per peso
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Forward Contracts Complete the following assignment. Submit your responses in MSWord as one document. Label each section clearly. If you choose to use an Excel spreadsheet for question 2, please copy and paste your spreadsheet into your Word document. For written answers, please make sure your responses are well written, conform to APA formatting, and have proper citations, if needed. Draft a memo to a client comparing the advantages and disadvantages of using forward contracts and options to hedge foreign exchange risk. On December 1, 2009, a U.S. based company entered into a three month forward contract to purchase 1 million Mexican pesos on March 1, 2010. The following are the purchase rates for US dollar per peso Date ?Spot Rate ?Forward Rate (March, 2010)??December 1, 2009 ?$0.088 ?$0.084??December 31, 2009 ?$0.080 ?$0.074??March 1, 2010 ?$0.076? ??The company’s borrowing rate is 12 percent. The present value factor for two months at an annual interest rate of 12 percent (1 percent per month) is 0.9803. How will the U.S. company report the forward contract on its December 31, 2009, balance sheet?
The stockholders’ equity section of Senorita’s Restaurant at December 31, 2007, is as follows: Preferred stock, 10%, $10 par, 2,000 shares authorized, 1,000 shares issued $ 10,000 Additional paid in capital preferred 50,000 Common stock, $1 par value, authorized 10,000 shares, issued 6,000 shares 6,000 Additional paid in capital common 30,000 Retained earnings 70,000 Total contributed capital and retained earnings $166,000 Less: Treasury stock (1,000 common shares at cost) 13,000 Total stockholders’ equity $153,000 Senorita’s Restaurant has been in business for several years, but has paid no dividends for the first two years due to a temporary downturn in business. During the current year (year 3), Senorito’s has net earnings of $30,000, and the company’s board of directors intends to pay $4,000 as a total dividend. Calculate the amount of dividends that each class of stockholder will receive assuming the preferred stock is: A. cumulative and nonparticipating B. noncumulative and participating C. cumulative and participating
Summers and Winters formed a partnership on January 1. Summers contributed $90,000 cash and equipment with a market value of $60,000. Winters’ investment consisted of cash, $30,000; inventory, $20,000; and all at market values. Partnership net income for year 1 and year 2 was $75,000 and $120,000, respectively. 1.) Determine each partner’s share of the net income for EACH year, assuming each of the following independent situations: a. Income is divided based on the partners’ failure to sign an agreement b. Income is divided based on a 2:1 ratio (Summers; Winters) c. Income is divided based on the ratio of the partners’ original capital investments d. Income is divided based on the interest allowance of 12% on the original capital investments; salary allowance 2.) Prepare a journal entry to record the allocation of the year 1 income under alternative d. above. Thank you for your help!!
Suppose a BMW executive in Germany is trying to decide whether the company should continue to manufacture an engine component or purchase it from Frankfurt Corporation for $50 each. Demand for the coming year is expected to be the same as for the current year, 200,000 units. Data for the current year follow: Direct Material $5,000,000 Direct Labor 1,900,000 Factory overhead, variable 1,100,000 Factory overhead, fixed 3,000,000 Total costs 11,000,000 If BMW makes the components, the unit costs of direct material will increase by 10%. If BMW buys the components, 30% of the fixed costs will be avoided. The other 70% will continue regardless of whether the components are manufactured or purchased. Assume that variable overhead variable varies with output volume. 1. Prepare a schedule that compares the make or buy alternatives. Show totals and amounts per unit. Compute the numerical difference between making and buying. Assume that the capacity now used to make the components will become idle if the components are purchased. 2. Assume also that the BMW capacity in question can be rented to a local electronics firm for $1,150,000 for the coming year. Prepare a schedule that compares the net relevant costs of the three alternatives: make, buy, and leave capacity idle, buy and rent. Which is the most favorable alternative. By how much in total?
Aug. 1 Suzie applies for and obtains a $40,000 low interest loan for the company from the city council, which has recently passed an initiative encouraging business development related to outdoor activities. The loan is due in three years, and 6% annual interest is due each year on July 31.
Aug. 4 The company purchases 14 kayaks, costing $18,700.
Aug. 10 Twenty additional kayakers pay $3,600 ($180 each), in addition to the $9,100 that was paid in advance on July 30, on the day of the clinic. Tony conducts the first kayak clinic.
Aug. 17 Tony conducts a second kayak clinic and receives $12,300 cash.
Aug. 24 Office supplies of $1,300 purchased on July 4 are paid in full.
Sep. 1 To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed, purchasing a one year rental policy for $3,360 ($280 per month).
Sep. 21 Tony conducts a rock climbing clinic. The company receives $13,400 cash.
Oct. 17 Tony conducts an orienteering clinic. Participants practice how to understand a topographical map, read an altimeter, use a compass, and orient through heavily wooded areas. Clinic fees total $19,300.
Dec. 1 Tony decides to hold the company’s first adventure race on December 15. Four person teams will race from checkpoint to checkpoint using a combination of mountain biking, kayaking, orienteering, trail running, and rock climbing skills. The first team in each category to complete all checkpoints in order wins. The entry fee for each team is $570.
Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $70 in salary for each team that competes in the race. His salary will be paid after the race.
Dec. 8 The company pays $2,000 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense.
Dec. 12 The company purchases racing supplies for $2,300 on account due in 30 days. Supplies include trophies for the top finishing teams in each category, promotional shirts, snack foods and drinks for participants, and field markers to prepare the racecourse.
Dec. 15 Forty teams pay a total of $22,800 to race. The race is held.
Dec. 16 The company pays Victor’s salary of $2,800.
Dec. 31 The company pays a dividend of $4,500 ($2,250 to Tony and $2,250 to Suzie).
Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,300. Tony surprises Suzie by proposing that they get married. Suzie accepts!
The following information relates to year end adjusting entries as of December 31, 2012.
a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,400.
b. Six months’s worth of insurance has expired.
c. Four monthss worth of rent has expired.
d. Of the $1,300 of office supplies purchased on July 4, $250 remains.
e. Interest expense on the $40,000 loan obtained from the city council on August 1 should be recorded.
f. Of the $2,300 of racing supplies purchased on December 12, $180 remains.
g. Suzie calculates that the company owes $14,500 in income taxes.
Assume the following ending balances for the month of July.
Balance
Cash $ 24,330
Prepaid insurance 3,600
Supplies (Office) 1,300
Equipment (Bikes) 14,300
Accounts payable 1,300
Unearned revenue 9,100
Common stock 28,000
Service revenue (Clinic) 7,450
Advertising expense 1,020
Legal fees expense 1,300
Record transactions from August 1 through December 31.
The table below contains data on Fincorp, Inc., the balance sheet items correspond to values at year end of 2010 and 2011, while the income statement items correspond to revenues or expenses during the year ending in either 2010 or 2011. All values are in thousands of dollars. 2010 2011 Revenue $3,300 $3,400 Cost of goods sold 1,250 1,350 Depreciation 430 450 Inventories 385 520 Administrative expenses 430 480 Interest expense 80 80 Federal and state taxes* 330 350 Accounts payable 385 520 Accounts receivable 502 620 Net fixed assetsAc€ 4,300 5,030 Long term debt 1,300 1,700 Notes payable 1,085 770 Dividends paid 270 270 Cash and marketable securities 730 230 ________________________________________ * Taxes are paid in their entirety in the year that the tax obligation is incurred. Ac€ Net fixed assets are fixed assets net of accumulated depreciation since the asset was installed. What was the firms average tax bracket for each year? (Round your answers to 2 decimal places.) Average Tax Bracket 2010 % 2011
Tate Enterprises is a nonprofit organization that has a cost of capital of 10 percent. The organization is considering the replacement of its computer system. The old system has a net book value of $3,000 and a remaining useful life of five years, with no expected salvage value at the end of the five years.
The company estimates the system’s current salvage value to be $1,500. A new computer system will cost $10,000 and is expected to have a useful life of five years, with no salvage value. Annual cash operating costs are $4,000 for the old system and $2,000 for the new system.
Required
(If required, round all answers to the nearest whole dollar.)
A. What is the present value of the operating cash outflows for the old system?
$
B. What is the present value of the operating cash outflows for the new system? ???????????????
C. What is the present value of the salvage value of the old system if it is replaced now? $
Tax Preparation Scenario Summary You have a small tax accounting preparation and bookkeeping practice. A new client enters your office and places a box of receipts and bank statements on your desk and says that she would like to have a set of financials prepared and tax returns completed. She also states that the financials and the return will be given to her bank as part of the documentation needed to acquire a $300,000 bank loan. She would like you to complete the work within a week. As you review the documentation you note that some of the expenses and receipts for income are questionable and you would need more information in order to completely and accurately complete the forms she has requested. When you request the additional information from the client, she tells you that she has no more documentation and that is all you can be given. Your Role/Assignment You role in this scenario is to decide on what you will do, what you can do and how to proceed. Do you complete the financials and are you able to prepare the tax returns? What information do you give to the client so that she can present it to the bank in hopes of getting her $300,000 loan? You know that if she does not get the loan, then her business will not be able to continue and she will have to lay off her 5 employees and close her doors. What obligation do you have to help her and how can you help her? citing applicable IRS codes and accounting rules for your decision.. Key Players John / Owner: John wants to help the new client, as he knows that she needs the loan and he would like to have her continue as his client. He feels that she can add significant income to his business. But he wonders why her previous provider is not completing the work. Sue / Client: Sue has a small business that manufactures household knick knacks. She employees 5 people on a full time basis and have been in business for 3 years. She wants to expand and needs the $300,000 loan in order to do so. She has had an accountant in the past, but the accountant left her 6 months past and she has been trying to do the accounting work on her own.
Tim Duggan owns and manages Sky Restaurant, a 24 hour restaurant near the city’s medical complex. Tim employs 9 full time employees and 16 part time employees. He pays all of the full time employees by check, the amounts of which are determined by Tim’s public accountant, Cheryl Williams. Tim pays all of his part time employees in currency. He computes their wages and withdraws the cash directly from his cash register. Cheryl has repeatedly urged Tim to pay all employees by check. But as Tim has told his competitor and friend, Sara Hill, who owns the Sara’s Diner, “First of all, my part time employees prefer the currency over a check, and secondly I don’t withhold or pay any taxes or workmen’s compensation insurance on those wages because they go totally unrecorded and unnoticed.” Required: Who are the stakeholders in this situation? What are the legal and ethical considerations regarding Tim’s handling of payroll? Cheryl is aware of Tim’s method of payment of his part time employees. What are her ethical responsibilities in this situation? What internal control principle is being violated.
The trial balance for Pioneer Advertising Agency shows the following. Pioneer Advertising Agency Trial Balance October 31, 2012 Debit Credit Cash $15,757 Supplies 2,627 Prepaid Insurance 418 Equipment 4,948 Notes Payable $4,480 Accounts Payable 2,859 Unearned Service Revenue 1,420 Owners Capital 8,206 Owners Drawings 542 Service Revenue 11,875 Salaries and Wages Expense 3,710 Rent Expense 838 $28,840 $28,840 Assume the following adjustment data. 1. Supplies on hand at October 31 total $653. 2. Expired insurance for the month is $241. 3. Depreciation for the month is $82. 4. Unearned service revenue earned in October totals $554. 5. Services provided but not recorded at October 31 are $257. 6. Interest accrued at October 31 is $74. 7. Accrued salaries at October 31 are $1,142. Prepare the adjusting entries for the items above. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Tristar Production Company began operations on September 1, 2013. Listed below are a number of transactions that occurred during its first four months of operations. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $290,000 in cash for the property. According to appraisals, the land had a fair value of $204,600 and the building had a fair value of $105,400. 2. On September 1, Tristar signed a $59,000 noninterest bearing note to purchase equipment. The $59,000 payment is due on September 1, 2014. Assume that 8% is a reasonable interest rate. 3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $4,400. 4. On September 18, the company paid its lawyer $7,000 for organizing the corporation. 5. On October 10, Tristar purchased machinery for cash. The purchase price was $34,000 and $1,450 in freight charges also were paid. 6. On December 2, Tristar acquired various items of office equipment. The company was short of cash and could not pay the $7,400 normal cash price. The supplier agreed to accept 200 shares of the company’s nopar common stock in exchange for the equipment. The fair value of the stock is not readily determinable. 7. On December 10, the company acquired a tract of land at a cost of $39,000. It paid $7,000 down and signed a 10% note with both principal and interest due in one year. Ten percent is an appropriate rate of interest for this note. Required: Prepare journal entries to record each of the above transactions. 1. On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $290,000 in cash for the property. According to appraisals, the land had a fair value of $204,600 and the building had a fair value of $105,400. . 2. On September 1, Tristar signed a $59,000 noninterest bearing note to purchase equipment. The $59,000 payment is due on September 1, 2014. Assume that 8%% is a reasonable interest rate. . 3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $4,400. . 4. On September 18, the company paid its lawyer $7,000 for organizing the corporation. . 5. On October 10, Tristar purchased machinery for cash. The purchase price was $34,000 and $1,450 in freight
Accounting for the transfer of receivables with recourse has been problematic. At issue is whether such a transaction is, in substance, a sale, in which case a gain/loss would be recognized, or a financing transaction, in which case any gain/loss should be amortized over the original life of the receivable. (The receivable could be long term; for example, a sale of an interest bearing note.) SOP 74 6 concluded that most transfers with recourse are financing transactions based on the argument that a transfer of risk (i.e., no recourse) must exist for a sale to have occurred. In 1983, the FASB reached a different conclusion in SFAS No. 77. A sale is now recognized if (1) the seller surrenders control of future economic benefits embodied in the receivable and (2) the seller’s obligation under the recourse provisions can be reasonably estimated. If these conditions are not met, the proceeds from a transfer are reported on the balance sheet as a liability.
Required:
a. What is the critical issue in interpreting the nature of this transaction? How does interpretation of the critical issue lead to the two different viewpoints?
Explain why the SOP 74 6 view represents a revenue expense orientation, while the SFAS No. 77 represents an asset liability orientation.
In its 1994 monograph on future events, the FASB discussed several orientations that might be related to asset valuation. As an example of its thinking, assume that we are assessing future sales of a product for the purpose of determining the value of the asset which is used to manufacture the product. The product is expected to sell for $25 per unit. Probability and unit sales are shown here. Probability Estimated Sales
Probability
Estimated Sales
.45
0
.10
5000
.30
6000
.15
8000
Required
Part 1
Determine (a) the modal (most likely individual unit sales) (b) the cumulative probability (summed probability of sales being either positive or negative,) and (c) the weighted probability number (expected value of probability times estimated sales times sales price).
Part 2
How might these approaches be utilized to value the asset which is used to manufacture the product?
Case 7 2; Five Star Tools: Answer the “Required” questions at the beginning of page 3. Use the below to assist you in answering. Make sure to show all work when applicable. Five star tools is a small family owned firm that manufactures diamond coated cutting tools (chisels and saws) used by jewelers. Production involves three major processes. First, steel “blanks” (tools without diamond coating) are cut to size. Second, the blanks are sent to a chemical bath that prepares tools for the coating process.
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Case 7 2; Five Star Tools: Answer the “Required” questions at the beginning of page 3. Use the below to assist you in answering. Make sure to show all work when applicable. Five star tools is a small family owned firm that manufactures diamond coated cutting tools (chisels and saws) used by jewelers. Production involves three major processes. First, steel “blanks” (tools without diamond coating) are cut to size. Second, the blanks are sent to a chemical bath that prepares tools for the coating process. In the third major process, the blanks are coated with diamond chips in a proprietary process that simultaneously coats and sharpens the blade of each tool. Following, the coating process, each tool is inspected and defects are repaired or scrapped. In the past two years, the company has experienced significant growth and growing pains. The company is at capacity in the coating and sharpening process, which requires highly skilled workers and expensive equipment. Because of the bottleneck created by this operation, the company has missed deadlines on orders from several important customers. Maxfield Turner, son of Fredick Turner, founder of five star tools, is the president of the company. Over lunch he and Betty Spence, vice president of marketing, discussed the situation. “We’ve got to do something.” Betty began. “If we don’t think we can meet a customer’s order deadline, we should turn down the business. We can’t simply keep the customers waiting for product or we’ll develop a reputation as an unreliable supplier. You know as well as I do that this would be devastating to our business.” “I think there may be another approach, Betty,” replied Max. “Some of our products are exceptionally profitable. Maybe we should concentrate on them and drop some of the less profitable ones. That would free up our production resources. Or maybe we can figure out a way to run more product through the coating process. If we could just loosen that…
Preston Concrete is a major supplier of concrete to residential and commercial builders in the Pacific Northwest. The company’s policy is price deliveries at 25 percent over full cost per cubic yard (including an allowance for administrative costs). At the start of 2014, the company estimated costs as follows: Material costs = $75 per cubic yard Delivery costs = $500,000 per year + $10 (mile) + $50 (truck hour) Yard operation costs = $300,000 per year + $17 per cubic yard Administrative costs = $2,000,000 per year Delivery costs include a rate per mile, recognizing that more miles result in more gas and maintenance costs, and a rate per truck hour since, even if a delivery truck is kept waiting at a job site, the truck must be kept running (so, the concrete mix will not solidify) and the driver must be paid. At the start of 2014, the company estimated that it would deliver 500,000 cubic yards. Required: a.) On October 28, Fairview Construction Company asked Preston Concrete to deliver 6,000 cubic yards of concrete. The job will require driving 8,400 miles and 300 truck hours. What will the price be if Preston follows its normal pricing policy? b.) A sharp increase in interest rates has reduced housing starts and the demand for concrete. Fairview has indicated that it will sign a firm order agreement only if the price is $115 per cubic yard. Should Preston accept the order? Briefly, indicate factors that, while hard to quantify, should be taken into account in this decision.
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Case 8 1; Preston Concrete: Answer all “required” questions at the bottom of the page. SHOW all work when applicable and do not skip any of the required questions. Preston Concrete is a major supplier of concrete to residential and commercial builders in the Pacific Northwest. The company’s policy is price deliveries at 25 percent over full cost per cubic yard (including an allowance for administrative costs). At the start of 2014, the company estimated costs as follows: Material costs = $75 per cubic yard Delivery costs = $500,000 per year + $10 (mile) + $50 (truck hour) Yard operation costs = $300,000 per year + $17 per cubic yard Administrative costs = $2,000,000 per year Delivery costs include a rate per mile, recognizing that more miles result in more gas and maintenance costs, and a rate per truck hour since, even if a delivery truck is kept waiting at a job site, the truck must be kept running (so, the concrete mix will not solidify) and the driver must be paid. At the start of 2014, the company estimated that it would deliver 500,000 cubic yards. Required: On October 28, Fairview Construction Company asked Preston Concrete to deliver 6,000 cubic yards of concrete. The job will require driving 8,400 miles and 300 truck hours. What will the price be if Preston follows its normal pricing policy? A sharp increase in interest rates has reduced housing starts and the demand for concrete. Fairview has indicated that it will sign a firm order agreement only if the price is $115 per cubic yard. Should Preston accept the order? Briefly, indicate factors that, while hard to quantify, should be taken into account in this decision.
Assignment Type:Individual Project Deliverable Length:500–1,000 words Points Possible:125 Due Date:2/24/2013 11:59:59 PM CT APA formatted references
The SCQ Corporation manufactures specialty medical tools ranging from $10,000 to$15,000 per unit. The tools are used in hospitals, clinics, and the home hospitality market. SCQ Corporation has contracted with YOUCPA to assist in creating its cash flow statement. In the past, its income statement and balance sheet have been prepared by the internal accountant.
It would like you to assist in preparing the cash flows using both the direct and indirect method. Sales and balance sheet information for the years 2009–2010 are below:
Balance Sheet
SCQ Corporation
For period ending 12/31/2010
Assets
2010
2009
Liabilities
2010
2009
Cash
150
100
Account receivable
600
400
Accounts payable
400
300
Inventory
750
500
Accrued taxes payable
200
100
Current assets
1,500
1,000
Current liabilities
600
400
Land
50
50
Equipment
1,300
1,200
Note payable
330
300
Less: Acc. depreciation
700
600
Deferred taxes
35
20
Net fixed assets
600
600
Equity:
Total fixed assets
650
650
Common stock
640
500
Paid in capital
80
80
Retain earnings
465
350
Total equity
1,185
930
Total assets
2,150
1,650
Total equity and liabilities
2,150
1,650
Income Statement
SCQ Corporation
For period ending 12/31/ 2010
Items
2010
2009
Revenue
1,000
900
Cost of goods sold
400
350
Gross profit
600
550
Wages expense
110
100
Interest expense
50
40
Depreciation expense
100
90
Insurance expense
50
50
Other misc. expenses
90
80
Total expenses
400
360
Operating income
200
190
Taxes:
Deferred taxes
15
20
Taxes expense
70
67
Net income after taxes
115
103
Additions to retains earnings
115
103
The information below can be used to complete the direct method of cash flow:
Cash flows from operating activities
2010
Cash receipts
Received from sales of goods
930
Paid for inventory
400
Paid for employees
110
Paid for interest
50
Paid for taxes
70
Paid for other expenses
320
Cash paid for equipment
100
Cash received for common stock
120
Cash received from note payable
30
Assignment Guidelines:
Indirect method cash flow/cash flow statement:
What is the operational cash flow?
What is the investing cash flow?
What is the financing cash flow?
Direct method cash flow:
What is the operational cash flow?
What is the investing cash flow?
What is the financing cash flow?
What are the differences in the cash flow concepts and procedures between the direct and indirect methods?
Assignment Type:Individual Project Deliverable Length:500–1,000 words
Points Possible:125 Due Date:3/17/2013 11:59:59 PM CT
APA formatted references
YOUCPA is a regional CPA firm engaged in public audit work of small and medium size firms in the Midwest. The YOUCPA firm has their main office in Chicago, Illinois, and regional offices in Minneapolis, Minnesota and Indianapolis, Indiana. The managing partners are located in Chicago. YOUCPA also provides tax preparation and information consulting to customers and is an approved PCOAB audit firm.
Your client, the publicly traded Fresno Freezer Corporation, is located in Elgin, Illinois, a small city located outside of Chicago. The client has the main plant there and has distribution centers in Indianapolis and Minneapolis.
The Fresno Freezer Corporation has contracted with YOUCPA for an audit. During the audit, the audit team has asked you to determine if everyone on the engagement team is independent.
The following individuals are on the engagement team and on the management of YOUCPA:
Sarah Ball, Senior Partner, YOUCPA
Bill Davis, Managing Partner, YOUCPA
David Youssef, Manager of Taxation Services, YOUCPA
Yewel Faraday, Manager of Information Consulting, YOUCPA
Frank Bell, Supervisor of Auditing assigned to Client, YOUCPA
Beth Wright, Supervisor of Auditing assigned to Client, YOUCPA
Wilbur Singation, Auditor, YOUCPA
Sam Martin, Auditor, YOUCPA
Mary Franks, Auditor, YOUCPA
Phil Cole, Auditor, YOUCPA
Callie Smart, Auditor, YOUCPA
You, Auditor, YOUCPA
Background of each individual:
The following individuals are on the engagement team and on the management of YOUCPA:
Sarah Ball, Senior Partner, YOUCPA
Manages the YOUCPA partnership
No financial interest in client
No relative with firm
No past history working with client in a direct manner (meaning working for the client as an employee)
Bill Davis, Managing Partner, YOUCPA
Managing the audit of the client
No financial interest in the client
No relative with the firm
No past history working with the client in a direct manner
David Youssef, Manager of Taxation Services, YOUCPA
Manages the taxation services for the accounting firm
No financial interest in the client
No relative with the firm
No past history working with the client in a direct manner
Yewel Faraday, Manager of Information Consulting, YOUCPA
Manages the information consulting for the accounting firm
Yewel has no financial interest in the client
No relative with the client in a direct manner
Frank Bell, Supervisor of Auditing assigned to Client, YOUCPA
Will supervise the audit at the main plant
No financial interest in the client
Wife works with client as a worker in the plant
Wife has no control or influence on the impact or creation of the financial statements
Wife has been working there for 20 years
Beth Wright, Supervisor of Auditing assigned to Client, YOUCPA
Will be auditing the distribution locations
No financial interest directly in the client
Does own a mutual fund that is invested in the client
Mutual fund estimated value is 0.01% of the total value of the stock market value of the client
Mutual fund makes all decisions on who, when, and how much they invest in corporations
Total investment in the mutual fund is $1,000
Wilbur Singation, Auditor, YOUCPA
No financial interest in the client
No relative with the client
No past history working with the client in a direct manner
Has contacted a head hunter looking for a new, better position
Head hunter has discussed his qualifications with many firms, discreetly
Wilbur does not know the firms or the content of those discussions
Sam Martin, Auditor, YOUCPA
No financial interest in the client
Cousin works with the client in a role as the mail distribution person
Cousin handles the mail
Conversation with cousin has been rough in the past over a small debt the cousin still will not pay
The amount of the debt is $500
Mary Franks, Auditor, YOUCPA
No financial interest in the client
No relative with the client
No past history working with the client in a direct manner
Phil Cole, Auditor, YOUCPA
Recently joined the team
Used to work at the client less than a year ago
Was responsible for financial planning and control
Left to experience the auditing profession
Callie Smart, Auditor, YOUCPA
Just graduated from a prestigious online university in Illinois
No relative or any direct relationship to the client
No investment in the client
You, Auditor, YOUCPA
No investment in the client
No past working relationship with the client in a direct manner
No relatives working at the client
Assignment Guidelines:
For each individual on the engagement team and on the management of YOUCPA, complete the following:
Remco Gourmet Water Company produces and distributes bottled water in a variety of natural flavors. Jan Cancel, a partner in a local CPA firm, is conducting the first time ever audit of Remco. On the second day of her audit, she discovers that the CEO has acquired a large screen television, a speed boat, and a Jacuzzi for his personal use. All three items were delivered to the CEOs personal residence, and they were booked into the accounting records as consulting expenses. Jan examined Remcos most recent federal tax return and noticed that the items had been included in deductible consulting expenses. a. What should Jan Cancel do about her finding? b. What impact should the finding have on how she proceeds with the audit? c. What impact should the finding have on her audit opinion report?
As required by GAAP [FASB ASC 320, previously SFAS No. 115], Microsoft Corporation reports its investments available for sale at the fair value of the investment securities. The net unrealized holding gain is not reported in the income statement. Instead, it’s reported as part of Other comprehensive income and added to Accumulated other comprehensive income in shareholders’ equity. Comprehensive income is a broader view of the change in shareholders’ equity than traditional net income, encompassing all changes in equity from non owner transactions. Microsoft chose to report its Other comprehensive income as a separate statement in a disclosure note in its annual report: MSFT Annual Report 2011 What does Microsoft mean by the term “Reclassification adjustment for gains (losses) included in net income”? Can you think of an instance where reclassification adjustment could be used unethically?
Resources: Appendix A: The Home Depot, Inc. Annual Report in Fundamentals of Financial Accounting Write a 1,050 to 1,750 word paper in which you answer the following questions: ‘ What does the Consolidated Statements of Earnings”the income statement”tell you about the company? Why is this statement important? What business decisions could be made using the income statement? ‘ What does the balance sheet tell you about the company? Why is the balance sheet important? What business decisions could be made using the balance sheet? ‘ What does the statement of cash flows tell you about the company? What business decisions could be made using the statement of cash flows? ‘ What information is provided in the statements that will assist you in making these business decisions? What information is not provided that could assist in managerial decision making? Format your paper consistent with APA guidelines.
Reveen Products sells camping equipment. One of the companys products. a camp lantern. Sells for $90 per unit. Variable expenses are $63 per lantern. and fixed expenses associated with the lantern total $135.000 per month.
Required:
1. Compute the companys break even point in number of lanterns and in total sales dollars.
2. If the variable expense per lantern increase a percentage of the selling price, will it result in a higher or a lower of break even point? Why? (Assume that the fixed expenses remain unchanged.)
3. At present. the company is selling 8,000 lanterns perm on the. The sales manager is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution format income statements. one under present operating conditions. and one a, operations would appear after the proposed changes. Show both total and per unit data on your statements,
4. Refer to the data in (3)1 above, How man, lanterns would have to be sold at the new selling a price to yield a minimum net operating income of $72.000 per month?
Revenue Recognition and Matching Carrico Advertising, Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico’s activities during 2011. At the beginning of 2011, customers owed Carrico $45,800 for advertising services performed during 2010. During 2011, Carrico performed an additional $695,100 of advertising services on account. Carrico collected $708,700 cash from customers during 2011. At the beginning of 2011, Carrico had $13,350 of supplies on hand for which it owed suppliers $8,150. During 2011, Carrico purchased an additional $14,600 of supplies on account. Carrico also paid $19,300 cash owed to suppliers for goods previously purchased on credit. Carrico had $2,230 of supplies on hand at the end of 2011. Carrico’s 2011 operating and interest expenses were $437,600 and $133,400, respectively. 1. Calculate Carrico’s 2011 income before taxes. $
A review of the December 31, 2012, financial statements of Somer Corporation revealed that under the caption “extraordinary losses,” Somer reported a total of $1,030,000. Further analysis revealed that the $1,030,000 in losses was comprised of the following items:(1) Somer recorded a loss of $300,000 incurred in the abandonment of equipment formerly used in the business.(2) In an unusual and infrequent occurrence, a loss of $500,000 was sustained as a result of hurricane damage to a warehouse.(3) During 2012, several factories were shut down during a major strike by employees, resulting in a loss of $170,000.(4) Uncollectible accounts receivable of $60,000 were written off as uncollectible.Ignoring income taxes, what amount of loss should Somerreport as extraordinary on its 2012 income statement? Answer $1,030,000. $300,000. $500,000. $800,000.
The Rodgers Company makes 27,000 units of a certain component each year for use in one of its products. The cost per unit for the component at this level of activity is as follows: Rodgers has received an offer from an outside supplier who is willing to provide 27,000 units of this component each year at a price of $25 per component. Assume that direct labor is a variable cost. None of the fixed manufacturing overhead would be avoidable if this component were purchased from the outside supplier. Assume that there is no other use for the capacity now being used to produce the component and the total fixed manufacturing overhead of the company would be unaffected by this decision. If Rodgers Company purchases the components rather than making them internally, what would be the impact on the company’s annual net operating income? A) $94,500 increase B) $81,000 decrease C) $237,600 decrease D) $124,000 increase
Roshannon Corporation uses activity based costing to compute product margins. In the first stage, the activity based costing system allocates two overhead accounts equipment expense and indirect labor to three activity cost pools Processing, Supervising, and Other based on resource consumption. Data to perform these allocations appear below: In the second stage, Processing costs are assigned to products using machine hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. The activity rate for the Processing activity cost pool under activity based costing is closest to: A) $5.33 per MH B) $0.68 per MH C) $0.52 per MH D) $3.00 per MH
Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $32,700. Costs and expenses for the year were as follows: Cost of revenue $13,100 Selling, general, and administrative expenses 8,800 Depreciation 3,600 Assume that 75% of the cost of revenue and 20% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). a. What is Rotelco’s break even number of accounts, using the data and assumptions above? Round to the nearest whole number. b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar
You are saving for a Porsche Carrera Cabriolet, which currently sells for nearly half a million dollars. Your plan is to deposit $15,800 at the end of each year for the next 9 years. You expect to earn 7 percent each year. (Use Table 3.)
Requirement 1:
Determine how much you will have saved after 9 years. (Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.Omit the “$” sign in your response.)
FV of annuity
$
Requirement 2:
Determine the amount saved if you were able to deposit $18,300 each year. (Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.Omit the “$” sign in your response.)
FV of annuity
$
Requirement 3:
Determine the amount saved if you deposit $15,800 each year, but with 10 percent interest. (Round your intermediate calculations to 4 decimal places and final answers to 2 decimal places.Omit the “$” sign in your response.)
Scott is choosing between two checking account options. At Bank A, Scott will pay a $5 monthly maintenance fee and will earn 0.5% interest on his average monthly balance. At Bank Z, Scott is not charged a monthly fee and earns interest at the rate of 0.25% a month on his average monthly balance. [The amount to be credited or subtracted for the month is determined by first calculating the interest to be paid, then subtracting all bank fees or charges from this amount]. Based on the information provided, which of the following is true? aIf Scotts average monthly balance is $2,500 he will make more money if he chooses Bank Z. bIf Scotts average monthly balance is $2,000, his account will be credited $5 regardless of which bank he chooses. cAs long as his monthly balance stays at or above $1,000 Scott will always make more money if he uses Bank A. dIf Scotts average monthly balance is $200, he is paying the equivalent of 4% of his balance in maintenance charges, with Bank A.
Selected year end financial statements of McCord Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2010, were inventory, $32,400; total assets, $182,400; common stock, $90,000; and retailed earnings, $31,300.) Income Statement Sales $348,600 Cost of Goods Sold ‘ 229,150 Gross Profit ‘ 119,450 Operating Expenses ‘ 52,500 Interest Expense ‘ 3,100 Income before taxes ‘ 63,850 Income taxes ‘ 15,800 Net income $48,050 Balance Sheet Assets: Cash $9,000 Short term investments ‘ 7,400 Accounts receivable, net ‘ 28,200 Notes receivable (trade) ‘ 3,500 Merchandise inventory ‘ 31,150 Prepaid expenses ‘ 1,650 Plant assets, net ‘ 152,300 Total assets $233,200 Liabilities and Equity: Accounts Payable $16,500 Accrued wages payable ‘ 2,200 Income taxes payable ‘ 2,300 Long term note payable, secured by mortgage on plant assets ‘ 62,400 Common stock ‘ 90,000 Retailed earnings ‘ 59,800 Total liabilities and equity $233,200 Compute the following: (1) current ratio, (2) acid test ratio, (3) days sales uncollected, (4) inventory turnover, (5) days sales in inventory, (6) debt to equity ratio, (7) times interest earned, (8) profit margin ratio, (9) total asset turnover, (10) return on total assets, and (11) return on common stockholders equity.
1. All sales at Meeks Company, a wholesaler, are made on credit. Experience has shown that 70% of the accounts receivable are collected in the month of the sale, 26% are collected in the month following the sale, and the remaining 4% are uncollectible. Actual sales for March and budgeted sales for the following four months are given below: March (actual sales) $200,000 April $300,000 May $500,000 June $700,000 July $400,000 The company’s cost of goods sold is equal to 60% of sales. All purchases of inventory are made on credit.
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1. All sales at Meeks Company, a wholesaler, are made on credit. Experience has shown that 70% of the accounts receivable are collected in the month of the sale, 26% are collected in the month following the sale, and the remaining 4% are uncollectible. Actual sales for March and budgeted sales for the following four months are given below: ?March (actual sales)?$200,000???April?$300,000???May?$500,000???June?$700,000???July?$400,000?? The company’s cost of goods sold is equal to 60% of sales. All purchases of inventory are made on credit. Meeks Company pays for one half of a month’s purchases in the month of purchase, and the other half in the month following purchase. The company requires that end of month inventories be equal to 25% of the cost of goods sold for the next month. Required: a. Compute the amount of cash, in total, which the company can expect to collect in May. b. Compute the budgeted dollar amount of inventory which the company should have on hand at the end of April. c. Compute the amount of inventory that the company should purchase during the months of May and June. d. Compute the amount of cash payments that will be made to suppliers during June for purchases of inventory. 2. The Fraley Company, a merchandising firm, has planned the following sales for the next four months: ??March?April?May?June???Total budgeted sales?$50,000?$70,000?$90,000?$60,000?? Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month’s sales on account are collected according to the following pattern: ???Month of sale?70%???First month following month of sale?20%???Second month following month of sale?8%???Uncollectible?2%?? The company requires a minimum cash balance of $4,000 to start a month. Required: a. Compute the budgeted cash receipts for June. b. Assume the following budgeted data for June: ?Purchases?$52,000???Selling and administrative expenses?$10,000???Depreciation?$8,000???Equipment…
Simple Plant manufactures DNA test strips. Manufacturing overhead is applied to units produced using direct labor dollars as the alloation base. The overhead rate is calculated rate prior to the beginning of the fisccal year that runs January 1 to December 31. Simple Plant has one manufacturing employee, J. Kusic, and one overhead expense besides indirect labors, property taxes. J Kusic’s salary and fringe benefits for next year are forecast to be $50,000. Kusic is expected to work 2,000 hours at a cost of $25 per hour ($50,000/2,000). Eighty percent of Kusic’s time is budgeted to be direct labor, and the reminder is budgeted to be indirect labor. Property taxes are projected to be $110,000. There was no beginning balance of work in process of work in process on January 1.
Sininsky Mining, Inc., has just discovered two new mining sites for iron ore. Geologists and engineers have come up with the following estimates regarding costs and ore yields if the mines are opened: Site A Site B Variable extraction costs per ton $ 3.80 $ 4.00 Fixed costs over the life of the mine: Blasting $ 150,000 $ 185,000 Construction 225,000 240,000 Maintenance 25,000 20,000 Restoration costs 40,000 35,000 Total fixed costs $ 440,000 $ 480,000 Total tons of ore that can be extracted over the life of the mine: 200,000 160,000 Sininsky’s owners currently demand a return of 22 percent of the market price of iron ore. a. If the current market price of iron ore is $8.49 per ton, what is Sininsky’s target cost per ton? (Round your intermediate and final answer to 2 decimal places. Omit the “$” sign in your response.) Target cost $ b 1 Given the $8.49 market price, compute the total cost per ton for Site A and site B? (Omit the “$” sign in your response.) Total cost per ton Site A $ Site B $ b 2 Which of the mines, if any, should be opened? Neither Site A Both Site B c 1 The engineer working on Site B believes that if a custom conveyor system is installed, the variable extraction cost could be reduced to $3 per ton. The purchase price of the system is $25,000, but the costs to restore the site will increase to $45,000 if it is installed. Given the current $8.49 per ton market price, compute the new total cost per ton for Site B. (Round your intermediate and final answer to 2 decimal places. Omit the “$” sign in your response.) Total cost per ton Site B $ c 2 Should the custom conveyor system be purchased and installed? In other words, given the new total cost per ton, should Site B be opened? yes No
Smelly Perfume Company manufactures and distributes several different products. They currently use a plant wide allocation method for allocating overhead at a rate of $7 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Diane is the department manager of Department D which manufactures Product X. The product costs (per case of 24 bottles) and other information are as follows: J P X Direct materials $100.00 $ 72.00 $48.00 Direct labor 42.00 31.50 12.00 Overhead 28.00 21.00 14.00 $170.00 $124.50 $74.00 Machine hours 4 2 3 Number of cases (per year) 300 500 600 If Smelly changes its allocation basis to machine hours, what is the total product cost per case for Product P? a. $163.50 b. $144.00 c. $138.15 d. $117.15
Problem 5 1A Alternative cost flows perpetual LO P1 [The following information applies to the questions displayed below. Date Activities Units Acquired at Cost Units Sold at Retail Mar. 1 Beginning inventory 160 units @ $52.20/unit Mar. 5 Purchase 255 units @ $57.20/unit Mar. 9 Sales 320 units @ $87.20/unit Mar. 18 Purchase 115 units @ $62.20/unit Mar. 25 Purchase 210 units @ $64.20/unit Mar. 29 Sales 190 units @ $97.20/unit ________________________________________ ________________________________________ ________________________________________ ________________________________________ Totals 740 units 510 units 1. Compute cost of goods available for sale and the number of units available for sale. @ Cost of Good available for sale @Number of units available for sale 2. Compute the number of units in ending inventory Ending inventory 3. Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. For specific identification, the March 9 sale consisted of 95 units from beginning inventory and 225 units from the March 5 purchase; the March 29 sale consisted of 75 units from the March 18 purchase and 115 units from the March 25 purchase. (Round your per unit costs to 2 decimal places) a. FIFO Ending Inventory b. LIFO c. Weighted average d. Specific identification Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 95 units from beginning inventory and 225 units from the March 5 purchase; the March 29 sale consisted of 75 units from the March 18 purchase and 115 units from the March 25 purchase. (Round your per unit costs to 2 decimal places and inventory balances.) a. FIFO Gross Profit b. LIFO c. Weighted average d. Specific identification Problem 8 1A Plant asset costs; depreciation methods L.O. C1, P1 Xavier Construction negotiates a lump sum purchase of several assets from a company that is going out of business. The purchase is completed on January 1, 2011, at a total cash price of $820,000 for a building, land, land improvements, and four vehicles. The estimated market values of the assets are building, $511,450; land, $299,150; land improvements, $48,250; and four vehicles, $106,150. The companys fiscal year ends on December 31. 1. Prepare a table to allocate the lump sum purchase price to the separate assets purchased a. Prepare the journal entry to record the purchase 2. Compute the depreciation expense for year 2011 on the building using the straight line method, assuming a 15 year life and a $28,000 salvage value. Depreciation expense on the building 3. Compute the depreciation expense for year 2011 on the land improvements assuming a five year life and double declining balance depreciation. Depreciation expense on the land improvements
Problem 5 20 Basics of CVP Analysis; Cost Structure [LO1, LO3, LO4, LO5, LO6] Memofax, Inc., produces memory enhancement kits for fax machines. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company’s contribution format income statement for the most recent month is given below: Sales (13,500 units at $20 per unit) $ 270,000 Variable expenses 189,000 Contribution margin 81,000 Fixed expenses 90,000 Net operating loss $ (9,000) Required: 1. Compute the company’s CM ratio and its break even point in both units and dollars. (Omit the “%” and “$” signs in your response.) CM ratio % Break even point in units Break even point in dollars $ 2. The sales manager feels that an $8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $70,000 increase in monthly sales. If the sales manager is right, what will the revised net operating income or loss? (Use the incremental approach in preparing your answer.) (Omit the “$” sign in your response.) (Click to select)Net operating incomeNet operating loss is $ 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $35,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (Input all amounts as positive values. Omit the “$” sign in your response.) Contribution Income Statement (Click to select)Fixed expensesContribution marginSalesVariable expensesNet operating income (loss) $ (Click to select)Fixed expensesSalesNet operating income (loss)Variable expensesContribution margin (Click to select)Fixed expensesNet operating income (loss)Variable expensesSalesContribution margin (Click to select)Net operating income (loss)SalesContribution marginVariable expensesFixed expenses (Click to select)Contribution marginSalesFixed expensesNet operating income (loss)Variable expenses $ 4. Refer to the original data. The companys advertising agency thinks that a new package would help sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4,500? (Do not round intermediate calculations.) Sales units 5. Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $118,000 per month. a. Compute the new CM ratio and the new break even point in both units and dollars. (Do not round intermediate calculations. Omit the “%” and “$” signs in your response.) CM ratio % Break even point in units Break even point in dollars $ b. Assume that the company expects to sell 20,000 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Omit the “$” and “%” signs in your response.) Not Automated Automated Total Per Unit % Total Per Unit % (Click to select)Net operating income (loss)Variable expensesFixed expensesContribution marginSales $ $ $ $ (Click to select)Variable expensesContribution marginNet operating income (loss)SalesFixed expenses (Click to select)Contribution marginFixed expensesSalesNet operating income (loss)Variable expenses $ $ (Click to select)Contribution marginNet operating income (loss)Variable expensesFixed expensesSales (Click to select)Net operating income (loss)Variable expensesContribution marginFixed expensesSales $ $
Problem: Kingdom Leasing Inc. agrees to lease jousting equipment to Knight Inc. on Jan 1, 2012. They agree on the following terms: 1) The normal selling price of the jousting equipment is $325000 and the cost of the asset to Kingdom Leasing Inc. was $250000. 2) Knight will pay all maintenance, insurance and taxes costs directly and annual payments of $60000 on Jan 1 each year. 3) The lease begins on Jan 1, 2012 and payments will be in equal annual installments. 4) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). 5) At the end of the lease, the jousting ring will revert to Kingdom Leasing Inc. and have an unguaranteed residual value of $30000. Their implicit interest rate is 10%. 6) Kingdom Leasing, Inc. Incurred costs of $6500 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable. Required: a) Determine what type of lease this would be for the lessee and calculate the initial obligation. b) Prepare Knight Inc.’s amortization schedule for the lease terms. c) Prepare all the journal entries for Knight Inc. for 2012. Assume a calendar year fiscal year.
Product R19N has been considered a drag on profits at Buzzeo Corporation for some time and management is considering discontinuing the product altogether. Data from the company’s accounting system appear below: In the company’s accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $49,000 of the fixed manufacturing expenses and $30,000 of the fixed selling and administrative expenses are avoidable if product R19N is discontinued. What would be the effect on the company’s overall net operating income if product R19N were dropped? A) Overall net operating income would decrease by $59,000. B) Overall net operating income would decrease by $22,000. C) Overall net operating income would increase by $59,000. D) Overall net operating income would increase by $22,000.
Profitability Ratios The following selected data were taken from the financial statements of Squiggle Group Inc. for December 31, 2012, 2011, and 2010: December 31 2012 2011 2010 Total assets $182,000 $164,000 $146,000 Notes payable (10% interest) 60,000 60,000 60,000 Common stock 24,000 24,000 24,000 Preferred 4% stock, $100 par 12,000 12,000 12,000 (no change during year) Retained earnings 63,590 52,770 36,000 The 2012 net income was $11,300, and the 2011 net income was $17,250. No dividends on common stock were declared between 2010 and 2012. a. Determine the rate earned on total assets, the rate earned on stockholders’ equity, and the rate earned on common stockholders’ equity for the years 2011 and 2012. When required, round to one decimal place. 2012?? 2011?? Rate earned on total assets: Rate earned on stockholders’ equity: Rate earned on common stockholders’ equity:
Quiz Chapter 10 1. Generally speaking, it is the responsibility of the production department to see that material usage is kept in line with standards. A) True B) False 2. Standard costs greatly increase the complexity of the bookkeeping process. A) True B) False 3. Hickory Corporation, which produces commercial safes, has provided the following data: Picture Supplies cost is an element of variable manufacturing overhead. The variable overhead efficiency variance for supplies is closest to: A) $47,251 U B) $4,350 U C) $4,350 F D) $47,251 F 4. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Picture The following data pertain to operations for the last month: Picture What is the variable overhead rate variance for the month? A) $1,200 F B) $9,625 F C) $8,425 F D) $990 U 5. The Thompson Company uses standard costing and has established the following direct material and direct labor standards for each unit of Lept. Direct materials: 2 gallons at $4 per gallon Direct labor: 0.5 hours at $8 per hour During September, the company made 6,000 Lepts and incurred the following costs: Direct materials purchased: 13,400 gallons at $4.10 per gallon Direct materials used: 12,600 gallons Direct labor used: 2,800 hours at $7.65 per hour The materials quantity variance for September was: A) $2,460 unfavorable B) $5,600 unfavorable C) $2,400 unfavorable D) $5,740 unfavorable 6. Gentile Corporation makes a product with the following standard costs: Picture The company produced 6,000 units in May using 36,970 kilos of direct material and 4,340 direct labor hours. During the month, the company purchased 40,400 kilos of the direct material at $4.70 per kilo. The actual direct labor rate was $13.70 per hour and the actual variable overhead rate was $2.70 per hour. The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for May is: A) $1,440 U B) $1,302 F C) $1,302 U D) $1,440 F 7. Landram Corporation makes a product with the following standard costs: Picture In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934. The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for March is: A) $3,757 U B) $3,757 F C) $3,995 U D) $3,995 F 8. Landram Corporation makes a product with the following standard costs: Picture In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934. The company applies variable overhead on the basis of direct labor hours. The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for March is: A) $884 U B) $884 F C) $940 U D) $940 F 9. The Thompson Company uses standard costing and has established the following direct material and direct labor standards for each unit of Lept. Direct materials: 2 gallons at $4 per gallon Direct labor: 0.5 hours at $8 per hour During September, the company made 6,000 Lepts and incurred the following costs: Direct materials purchased: 13,400 gallons at $4.10 per gallon Direct materials used: 12,600 gallons Direct labor used: 2,800 hours at $7.65 per hour The labor efficiency variance for September was: A) $33,600 favorable B) $1,600 favorable C) $22,400 favorable D) $3,200 favorable 10. The following labor standards have been established for a particular product: Picture The following data pertain to operations concerning the product for the last month: Picture What is the labor rate variance for the month? A) $1,325 U B) $1,780 F C) $430 F D) $430 U
Quiz Chapter 12 1. An avoidable cost is a cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another. A) True B) False 2. When a company has a production constraint, the product with the highest contribution margin per unit of the constrained resource should be given highest priority. A) True B) False 3. Knaack Corporation is presently making part R20 that is used in one of its products. A total of 18,000 units of this part are produced and used every year. The company’s Accounting Department reports the following costs of producing the part at this level of activity: Picture An outside supplier has offered to produce and sell the part to the company for $27.70 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. If management decides to buy part R20 from the outside supplier rather than to continue making the part, what would be the annual impact on the company’s overall net operating income? A) Net operating income would increase by $162,000 per year. B) Net operating income would increase by $50,400 per year. C) Net operating income would decline by $50,400 per year. D) Net operating income would decline by $162,000 per year. 4. Cress Company makes four products in a single facility. Data concerning these products appear below: Picture The milling machines are potentially the constraint in the production facility. A total of 11,500 minutes are available per month on these machines. How many minutes of milling machine time would be required to satisfy demand for all four products? A) 12,000 B) 10,800 C) 9,000 D) 11,500 5. A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company’s overall net operating income would: A) decrease by $20,000 per year B) increase by $20,000 per year C) decrease by $10,000 per year D) increase by $30,000 per year 6. A customer has requested that Inga Corporation fill a special order for 2,000 units of product K81 for $25.00 a unit. While the product would be modified slightly for the special order, product K81’s normal unit product cost is $19.90: Picture Direct labor is a variable cost. The special order would have no effect on the company’s total fixed manufacturing overhead costs. The customer would like modifications made to product K81 that would increase the variable costs by $1.20 per unit and that would require an investment of $10,000 in special molds that would have no salvage value. This special order would have no effect on the company’s other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company’s overall net operating income would increase (decrease) by: A) $13,000 B) $(9,700) C) $10,200 D) $(2,200) 7. Part I51 is used in one of Pries Corporation’s products. The company makes 18,000 units of this part each year. The company’s Accounting Department reports the following costs of producing the part at this level of activity: Picture An outside supplier has offered to produce this part and sell it to the company for $15.80 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier’s offer were accepted, only $26,000 of these allocated general overhead costs would be avoided. If management decides to buy part I51 from the outside supplier rather than to continue making the part, what would be the annual impact on the company’s overall net operating income? A) Net operating income would decline by $81,800 per year. B) Net operating income would decline by $55,800 per year. C) Net operating income would decline by $119,800 per year. D) Net operating income would decline by $29,800 per year. 8. Beilke Corporation processes sugar beets in batches that it purchases from farmers for $53 a batch. A batch of sugar beets costs $12 to crush in the company’s plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $20 or processed further for $10 to make the end product industrial fiber that is sold for $26. The beet juice can be sold as is for $30 or processed further for $29 to make the end product refined sugar that is sold for $79. Which of the intermediate products should be processed further? A) beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar B) beet fiber should NOT be processed into industrial fiber; beet juice should be processed into refined sugar C) beet fiber should NOT be processed into industrial fiber; beet juice should NOT be processed into refined sugar D) beet fiber should be processed into industrial fiber; beet juice should NOT be processed into refined sugar 9. Zurasky Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Picture Are the materials costs and processing costs relevant in the choice between alternatives A and B? (Ignore the equipment rental and occupancy costs in this question.) A) Neither materials costs nor processing costs are relevant B) Only processing costs are relevant C) Only materials costs are relevant D) Both materials costs and processing costs are relevant 10. Zurasky Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below: Picture What is the differential cost of Alternative B over Alternative A, including all of the relevant costs? A) $44,000 B) $149,000 C) $105,000 D)
Quiz Chapter 9 1. While fixed costs should not be affected by a change in the level of activity within the relevant range, they may change for other reasons. A) True B) False 2. The revenue and spending variances are the differences between the static planning budget and the actual results for the period. A) True B) False 3. Fullagar Corporation’s cost formula for its manufacturing overhead is $15,400 per month plus $11 per machine hour. For the month of May, the company planned for activity of 7,500 machine hours, but the actual level of activity was 7,540 machine hours. The actual manufacturing overhead for the month was $102,710. The manufacturing overhead in the flexible budget for May would be closest to: A) $97,900 B) $98,422 C) $98,340 D) $102,710 4. Parisi Clinic uses client visits as its measure of activity. During March, the clinic budgeted for 2,300 client visits, but its actual level of activity was 2,350 client visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: Picture The net operating income in the flexible budget for March would be closest to: A) $11,100 B) $9,905 C) $10,340 D) $12,500 5. Clovis Midwifery’s cost formula for its wages and salaries is $2,680 per month plus $245 per birth. For the month of September, the company planned for activity of 118 births, but the actual level of activity was 121 births. The actual wages and salaries for the month was $33,290. The wages and salaries in the flexible budget for September would be closest to: A) $32,393 B) $31,590 C) $32,325 D) $33,290 6. Cadavieco Detailing’s cost formula for its materials and supplies is $1,990 per month plus $8 per vehicle. For the month of November, the company planned for activity of 92 vehicles, but the actual level of activity was 52 vehicles. The actual materials and supplies for the month was $2,440. The spending variance for materials and supplies in November would be closest to: A) $34 F B) $286 F C) $34 U D) $286 U 7. Fudala Snow Removal’s cost formula for its vehicle operating cost is $1,480 per month plus $308 per snow day. For the month of March, the company planned for activity of 11 snow days, but the actual level of activity was 16 snow days. The actual vehicle operating cost for the month was $6,130. The spending variance for vehicle operating cost in March would be closest to: A) $1,262 U B) $278 F C) $278 U D) $1,262 F 8. Gradert Framing’s cost formula for its supplies cost is $1,540 per month plus $12 per frame. For the month of September, the company planned for activity of 668 frames, but the actual level of activity was 666 frames. The actual supplies cost for the month was $9,980. The supplies cost in the planning budget for September would be closest to: A) $10,010 B) $9,532 C) $9,556 D) $9,980 9. Snyders Kennel uses tenant days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant day. During October, the kennel budgeted for 2,600 tenant days, but its actual level of activity was 2,610 tenant days. The kennel has provided the following data concerning the formulas to be used in its budgeting: Picture The activity variance for net operating income in October would be closest to: A) $2,581 U B) $99 F C) $2,581 F D) $99 U 10. Lantto Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $34,810 per month plus $2,850 per flight plus $12 per passenger. The company expected its activity in June to be 70 flights and 292 passengers, but the actual activity was 69 flights and 291 passengers. The actual cost for plane operating costs in June was $236,550. The plane operating costs in the flexible budget for June would be closest to: A) $237,814 B) $234,952 C) $236,550 D) $234,417
Ray, the owner of a small company, asked Holmes, a CPA, to conduct an audit of the company s records. Ray told Holmes that an audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Holmes immediately accepted the engagement and agreed to provide an auditor s report within 3 weeks. Ray agreed to pay Holmes a fixed fee plus a bonus if the loan was granted. Holmes hired two accounting students to conduct the audit and spent several hours telling them exactly what to do. Holmes told the students not to spend time reviewing the controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarizing the data in the accounting records that support Ray s financial statements. The students followed Holmes s instructions and after 2 weeks gave Holmes the financial statements, which did not include footnotes. Holmes reviewed the statements and prepared an unqualified auditor s report. The report did not refer to generally accepted accounting principles or to the consistent application of such principles. REQUIRED: Briefly describe each of the 10 generally accepted auditing standards and indicate how the action(s) of Holmes resulted in a failure to comply with each standard.
Please Record these transactions using the following titles: Cash , Accounts Receivable, Office Supplies, Office Equipment, Automobiles, Building, Land, Accounts Payable, Notes Payable, Common Stock, Dividend, Fees Earned, Salaries Expense, and Utilities Expense a. Pense invested $86,000 cash along with office equipment valued at $20,000 in exchange for common stock of a new company named EP Consulting. b. The company purchased land valued at $35,000 and a building valued at $165,000. The purchase is paid with $35,000 cash and a long term note payable for $165,000. c. The company purchased $2,300 of office supplies on credit. d. Pense invested his personal automobile in the company in exchange for more common stock. The automobile has a value of $16,000 and is to be used exclusively in the business. e. The company purchased $5,300 of additional office equipment on credit. f. The company paid $1,900 cash salary to an assistant. g. The company provided services to a client and collected $7,400 cash. h. The company paid $630 cash for this month’s utilities. i. The company paid $2,300 cash to settle the account payable created in transaction c. j. The company purchased $20,200 of new office equipment by paying $20,200 cash. k. The company completed $7,000 of services for a client, who must pay within 30 days. l. The company paid $1,800 cash salary to an assistant. m. The company received $3,500 cash in partial payment on the receivable created in transaction k. n. The company paid $2,700 cash for dividends.
The stockholders’ equity of Son Corporation on December 31, 2011, was as follows (in thousands):
15% preferred stock, $100 par, cumulative, nonparticipating, with
one year’s dividends in arrears …………………………… $1,000
Common stock, $10 par ……………………………………………. 2,000
Other paid in capital …………………………………………………. 200
Retained earnings ……………………………………………………. 300
Total stockholders’ equity ………………………………………… $3,500
Pam Corporation acquired 50 percent of Son’s preferred stock for $600,000 and 80 percent of its common stock for $2,000,000 on January 1, 2012. Son reported net income of $400,000 and paid dividends of $300,000 in 2012.
REQUIRED
1. Prepare the journal entries to record Pam’s 50% investment in Son preferred stock.
2. Calculate the excess fair value/book value differential from Pam’s 80% investment in Son common. Assume the differential is goodwill.
3. Compute Pam’s income from Son—preferred for 2012.
4. Compute Pam’s income from Son—common for 2012 (assume a 10 year amortization period for the fair value/book value differential).
5. Calculate the noncontrolling interest in Son that will appear in the consolidated balance sheet of Pam Corporation and Subsidiary on December 31, 2012.
The Torre Company has the following balances in stockholders equity on December 31st.
Common Stock $5.00 par, 60,000 issued $300,000?Additional paid in capital common 600,000?Preferred stock $100 par, 5,000 issued 500,000?Additional paid in capital preferred 100,000?Retained earnings 200,000?Treasury stock (cost $12.00 per share) 60,000?Answer the following questions:?1. How many shares of treasury stock are owned?
2. What was the average market price per share at which common stock was issued??3. What was the average market price per share at which preferred stock was issued??4. What is the total value of the Paid in Capital portion of stockholders equity??5. What is the total value of stockholders equity??6. How many shares of common stock are outstanding??7. If net income for the year was $75,000 and a preferred stock dividend of $20,000 was paid, what was the beginning value of retained earnings? How much is earnings per share for the year?
Thompson Payroll Service began in 2008 with 2,000,000 authorized and 450,000 issued and outstanding $7 par common shares. During 2008, Thompson entered into the following transactions:
a. Declared a $0.25 per share cash dividend on March 24.
b. Paid the $0.25 per share dividend on April 6.
c. Purchased 13,000 common shares for the treasury at a cost of $17 each on May 9.
d. Sold 4,600 unissued common shares for $29 per share on June 19.
e. Declared a $0.30 per share cash dividend on August 1.
f. Paid the $0.30 per share dividend on September 14.
g. Declared and paid a 20 percent stock dividend on October 25 when the market price of the common stock was $26 per share.
h. Declared a $0.50 per share cash dividend on November 20.
i. Paid the $0.50 per share dividend on December 20.
Required:
1. Prepare journal entries for each of these transactions.
2. What is the total amount of dividends (cash and stock) for the year?
3. Determine the effect on total assets and total stockholders’ equity of these dividend transactions.
(Treasury Stock—Cost Method—Equity Section Preparation) Washington Company has the following stockholders’ equity accounts at December 31, 2010.
Common Stock—$100 par value, authorized 8,000 shares$480,000
Retained Earnings 294,000
(a) Prepare entries in journal form to record the following transactions, which took place during 2011.
(1) 280 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.)
(2) A $20 per share cash dividend was declared.
(3) The dividend declared in No. 2 above was paid.
(4) The treasury shares purchased in No. 1 above were resold at $102 per share.
(5) 500 shares of outstanding stock were purchased at $105 per share.
(6) 350 of the shares purchased in No. 5 above were resold at $96 per share.
(b) Prepare the stockholders’ equity section of Washington Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2011 was $94,000. State law requires restriction of retained earnings for the amount of treasury stock.
Weisberg Corporation has 10,000 shares of $100 par value, 6%, preference shares and 50,000 ordinary shares of $10 par value outstanding at December 31, 2012.
Instructions
Answer the questions in each of the following independent situations.
(a) If the preference shares are cumulative and dividends were last paid on the preference shares on December 31, 2009, what are the dividends in arrears that should be reported on the December 31, 2012, statement of financial position? How should these dividends be reported?
(b) If the preference shares are convertible into seven shares of $10 par value ordinary shares and 3,000 shares are converted, what entry is required for the conversion, assuming the preference shares were issued at par value?
(c) If the preference shares were issued at $107 per share, how should the preference shares be reported in the equity section?
Answer the “Required” questions at the end of page 1. Use the below to assist you in answering. Make sure to show all work when applicable. Answer in words; along with showing work when possible.
Good Earth Products produces orange juice and candied orange peels. A 1,000 pound batch of oranges, costing $500, is transformed using labor of $50 into 100 pounds of orange peels and 300 pints of juice. The company has determined that the sales value of 100 pounds of peels at the split off point is $350, and the value of a pint of juice (not pasteurized or bottled) is $0.040. Beyond the split off point, the cost of the sugar coating and packaging the 100 pounds of peels is $60. The cost of pasteurizing and packaging the 300 pints of juice is $250. A 100 pound box of candied peels is sold to commercial baking companies for $600. Each pint of juice is sold for $1.75.
Required:
Allocate joint costs using the relative sales values at the split off point, and calculate the profit per 100 pound box of sugar coated peels and the profit per pint of juice. Round to the nearest dollar.
What is the incremental benefit (cost) to the company of sugar coating the peels rather than selling them in their condition at the split off point?
What is the incremental benefit (cost) to the company of pasteurizing and packaging a pint of juice rather than selling the juice at the split off point?
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7 14; Good Earth Products: Answer the “Required” questions at the end of page 1. Use the below to assist you in answering. Make sure to show all work when applicable. Answer in words; along with showing work when possible. Good Earth Products produces orange juice and candied orange peels. A 1,000 pound batch of oranges, costing $500, is transformed using labor of $50 into 100 pounds of orange peels and 300 pints of juice. The company has determined that the sales value of 100 pounds of peels at the split off point is $350, and the value of a pint of juice (not pasteurized or bottled) is $0.040. Beyond the split off point, the cost of the sugar coating and packaging the 100 pounds of peels is $60. The cost of pasteurizing and packaging the 300 pints of juice is $250. A 100 pound box of candied peels is sold to commercial baking companies for $600. Each pint of juice is sold for $1.75. Required: Allocate joint costs using the relative sales values at the split off point, and calculate the profit per 100 pound box of sugar coated peels and the profit per pint of juice. Round to the nearest dollar. What is the incremental benefit (cost) to the company of sugar coating the peels rather than selling them in their condition at the split off point? What is the incremental benefit (cost) to the company of pasteurizing and packaging a pint of juice rather than selling the juice at the split off point?
Don Lieberman and Associates, a CPA firm, uses job order costing to capture the costs of its audit jobs. There were no audit jobs in process at the beginning of November. Listed below are data concerning the three audit jobs conducted during November.
Lynn
Brian
Mike
Direct materials
$610
$500
$220
Auditor labor costs
$5,620
$7,630
$3,990
Auditor hours
73
93
50
Overhead costs are applied to jobs on the basis of auditor hours, and the predetermined overhead rate is $57per auditor hour. The Lynn job is the only incomplete job at the end of November. Actual overhead for the month was $12,380.
(a) Determine the cost of each job.
Cost
Lynn
$
Brian
$
Mike
$
(b) Indicate the balance of the Work in Process account at the end of November.
Balance in work in process account
$
(c) Calculate the ending balance of the Manufacturing Overhead account for November.
Balance in manufacturing overhead account
$
(a)
Lynn
Brian
Mike
Direct materials
$610
$500
$220
Auditor labor costs
5,620
7,630
3,990
Applied overhead
4,161
5,301
2,850
Total cost
$10,391
$13,431
$7,060
(b)The Lynn job is the only incomplete job, therefore, $10,391.
Berg Company incurs $240,000 overhead costs each year in its three main departments, setup ($15,000), machining ($165,000), and packing ($60,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg’s two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of products manufactured 600 400 Using ABC, how much overhead is assigned to Product B1 each year?
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Nate Bunyatipanon HW Practice Exercise 4 Acct 203 2. Berg Company incurs $240,000 overhead costs each year in its three main departments, setup ($15,000), machining ($165,000), and packing ($60,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg’s two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of products manufactured 600 400 Using ABC, how much overhead is assigned to Product B1 each year? 3. Keene, Inc. produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.20 per unit for a total of $4,200 for the month. If variable costs decrease by 5%, what happens to the break even level of units per month for Keene? A: It decreases about 15 units. B: It depends on the number of units the company expects to produce and sell. C: It is 5% higher than the original break even point. D: It decreases about 6 units 5. How much sales are required to earn a target net income of $96,000 if total fixed costs are $120,000 and the contribution margin ratio is 40%? 6. In 2011, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $390,000. The same variable expenses per unit and fixed expenses are expected for 2012. If Hagar cuts selling price by 4%, what is Hagar’s break even point in units for 2012? 7. In 2011, Carow sold 3,000 units at $500 each. Variable expenses were $250 per unit, and fixed expenses were $200,000. The same selling price is expected for 2012. Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, while decreasing variable costs per unit by 20%. What is Carow’s break even point in units for 2012? 8. In 2011,…
Tejada Company manufactures backpacks. During 2012, Tejada issued bonds at 10% interest and used the cash proceeds to purchase treasury stock. The following financial information is available for Tejada Company for the years 2012 and 2011.
?
Instructions
(a) Use the information above to calculate the following ratios for both years: (i) return on assets ratio, (ii) return on common stockholders’ equity ratio, (iii) payout ratio, (iv) debt to total assets ratio, and (v) times interest earned ratio.
(b) Referring to your findings in part (a), discuss the changes in the company’s profitability from 2011 to 2012.
(c) Referring to your findings in part (a), discuss the changes in the company’s solvency from 2011 to 2012.
(d) Based on your findings in (b), was the decision to issue debt to purchase common stock a wise one?
The balance sheet of Castle Corporation includes the following equity section:
Capital stock:
Common stock, $2 par, 50,000 shares authorized,
30,000 shares issued and outstanding ………………………..$ 60,000
Paid in capital in excess of par ………………………………. 71,800
Total capital stock ……………………………………………. $131,800
Retained earnings …………………………………………….. 73,000
Total equity ……………………………………………………. $204,800
Required:
1. Assume that Castle issued 30,000 shares for cash at the inception of the corporation and that no new shares have been issued since. Determine how much cash was received for the shares issued at inception.
2. Assume that Castle issued 15,000 shares for cash at the inception of the corporation and subsequently declared a 2 for 1 stock split. Determine how much cash was received for the shares issued at inception.
3. Assume that Castle issued 25,000 shares for cash at the inception of the corporation and that the remaining 5,000 shares issued are the result of stock dividends that capitalized retained earnings of $21,600. Determine how much cash was received for the shares issued at inception.
The books of Conchita Corporation carried the following account balances as of December 31, 2010.
The company decided not to pay any dividends in 2010. The board of directors, at their annual meeting on December 21, 2011, declared the following: ?oThe current year dividends shall be 6% on the preferred and $.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock.?? At the date of declaration, the preferred is selling at $80 per share, and the common at $12 per share. Net income for 2011 is estimated at $77,000.
(a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously.
(b) Could Conchita Corporation give the preferred stockholders 2 years’ dividends and common stockholders a 30 cents per share dividend, all incash?
Go to the book’s companion website and use information found there to answer the following questions related to The Coca Cola Company and PepsiCo, Inc.
(a) What is the par or stated value of Coca Cola’s and PepsiCo’s common or capital stock?
(b) What percentage of authorized shares was issued by Coca Cola at December 31, 2009, and by PepsiCo at December 26, 2009?
(c) How many shares are held as treasury stock by Coca Cola at December 31, 2009, and by PepsiCo at December 26, 2009?
(d) How many Coca Cola common shares are outstanding at December 31, 2009? How many PepsiCo shares of capital stock are outstanding at December 26, 2009?
(e) What amounts of cash dividends per share were declared by Coca Cola and PepsiCo in 2009? What were the dollar amount effects of the cash dividends on each company’s stockholders’ equity?
(f) What are Coca Cola’s and PepsiCo’s rate of return on common/capital stock equity for 2009 and 2008? Which company gets the higher return on the equity of its shareholders?
(g) What are Coca Cola’s and PepsiCo’s payout ratios for 2009?
(h) What was the market price range (high/low) for Coca Cola’s common stock and PepsiCo’s capital stock during the fourth quarter of 2009? Which company’s (Coca Cola’s or PepsiCo’s) stock price increased more (%) during 2009?
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) What is the par or stated value of M&S’s preference shares?
(b) What is the par or stated value of M&S’s ordinary shares?
(c) What percentage of M&S’s authorized ordinary shares was issued at
April 3, 2010?
(d) How many ordinary shares were outstanding at December 31, 2010, and
March 28, 2009?
(e) What was the pound amount effect of the cash dividends on M&S’s equity?
(f) What is M&S’s rate of return on ordinary share equity for 2010 and 2009?
The following information about the payroll for the week ended March 17 was obtained from the records of Butte Mining Co.:
?
Instructions
1. For the March 17 payroll, determine the employee FICA tax payable.
2. Illustrate the effect on the accounts and financial statements of paying and recording the March 17 payroll.
3. Determine the following amounts for the employer payroll taxes related to the March 17 payroll: (a) FICA tax payable, (b) state unemployment tax payable, and (c) federal unemployment tax payable.
4. Illustrate the effect on the accounts and financial statements of recording the liability for the March 17 payrolltaxes.
Common Stock (400,000 shares issued) ……………………….2,000,000
Paid in Capital in Excess of Par Value—Preferred Stock ……….200,000
Paid in Capital in Excess of Stated Value—Common Stock ….1,600,000
Retained Earnings ………………………………………………2,860,000
A review of the accounting records reveals this information:
1. Preferred stock is 7%, $100 par value, noncumulative. Since January 1, 2009, 10,000 shares have been outstanding; 20,000 shares are authorized.
2. Common stock is no par with a stated value of $5 per share; 600,000 shares are authorized.
3. The January 1, 2010, balance in Retained Earnings was $2,380,000.
4. On October 1, 60,000 shares of common stock were sold for cash at $8 per share.
5. A cash dividend of $400,000 was declared and properly allocated to preferred and common stock on November 1. No dividends were paid to preferred stockholders in 2009.
6. Net income for the year was $880,000.
7. On December 31, 2010, the directors authorized disclosure of a $130,000 restriction of retained earnings for plant expansion. (Use Note A.)
Instructions
(a) Reproduce the retained earnings account (T account) for the year.
(b) Prepare the stockholders’ equity section of the balance sheet at December 31.
Common Stock (350,000 shares issued) …………………………3,500,000
Paid in Capital in Excess of Par Value—Preferred Stock …………250,000
Paid in Capital in Excess of Par Value—Common Stock …………700,000
Retained Earnings …………………………………………………915,000
A review of the accounting records reveals this information:
1. Preferred stock is $50 par, 10%, and cumulative; 8,000 shares have been outstanding since January 1, 2009.
2. Authorized stock is 20,000 shares of preferred and 500,000 shares of common with a $10 par value.
3. The January 1, 2010, balance in Retained Earnings was $660,000.
4. On July 1, 20,000 shares of common stock were sold for cash at $16 per share.
5. A cash dividend of $220,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2009.
6. Net income for the year was $475,000.
7. On December 31, 2010, the directors authorized disclosure of a $150,000 restriction of retained earnings for plant expansion. (Use Note X.)
Instructions
(a) Reproduce the retained earnings account for the year.
(b) Prepare the stockholders’ equity section of the balance sheet at December 31.
The R&D division of Mozy Corp. has just developed a chemical for sterilizing the vicious Brazilian ?okiller bees?? which are invading Mexico and the southern United States. The president of Mozy is anxious to get the chemical on the market because Mozy profits need a boost—and his job is in jeopardy because of decreasing sales and profits. Mozy has an opportunity to sell this chemical in Central American countries, where the laws are much more relaxed than in the United States.
The director of Mozy’s R&D division strongly recommends further research in the laboratory to test the side effects of this chemical on other insects, birds, animals, plants, and even humans. He cautions the president, ?oWe could be sued from all sides if the chemical has tragic side effects that we didn’t even test for in the lab.?? The president answers, ?oWe can’t wait an additional year for your lab tests. We can avoid losses from such lawsuits by establishing a separate wholly owned corporation to shield Mozy Corp. from such lawsuits. We can’t lose any more than our investment in the new corporation, and we’ll invest just the patent covering this chemical. We’ll reap the benefits if the chemical works and is safe, and avoid the losses from lawsuits if it’s a disaster.?? The following week, Mozy creates a new wholly owned corporation called Ziegler Inc., sells the chemical patent to it for $10, and watches the spraying begin.
Instructions
(a) Who are the stakeholders in this situation?
(b) Are the president’s motives and actions ethical?
(c) Can Mozy shield itself against losses of Ziegler Inc.?
Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of backing. Prices are $0.30 per foot of framing, $6.00 per square foot of glass, and $2.25 per square foot of backing. Ending inventory should be 150% of beginning inventory. Purchases are paid for in the month acquired. Question 1: Determine the quantity of framing, glass, and backing that is to be purchased during August. (five points) Question 2: Determine the total costs of direct materials for August purchases. (five points) Problem 2 Russell Company has the following projected account balances for June 30, 20X2: Accounts payable $40,000 Sales $800,000 Accounts receivable 100,000 Capital stock 400,000 Depreciation, factory 24,000 Retained earnings ? Inventories (5/31 & 6/30) 180,000 Cash 56,000 Direct materials used 200,000 Equipment, net 240,000 Office salaries 80,000 Buildings, net 400,000 Insurance, factory 4,000 Utilities, factory 16,000 Plant wages 140,000 Selling expenses 60,000 Bonds payable 160,000 Maintenance, factory 28,000 Question 1: Calculate the budgeted net income for June 20X2.(five points) Question 2: Calculate the budgeted total assets as of June 30, 20X2. (five points) Problem 3 Tylon’s Hardware uses a flexible budget to develop planning information for its warehouse operations. For 20X2, the company anticipated that it would have 96,000 sales units for 664 customer shipments. Average storage bin usage for various inventories was estimated to be 200 per day. The costs and cost drivers were determined to be as follows: Item Fixed Variable Cost driver Product handling $10,000 $1.25 per 100 units Storage 3.00 per storage bin Utilities 1,000 1.50 per 100 units Shipping clerks 1,000 1.00 per shipment Supplies 0.50 per shipment During the year, the warehouse processed 90,000 units for 600 customer shipments. The workers used 225 storage bins on average each day to sort, store, and process goods for shipment. The actual costs for 20X2 were: Item Actual costs Product handling $10,900 Storage 465 Utilities 2,020 Shipping clerks 1,400 Supplies 340 Question 1: Determine the 20X2 static budget variances. (five points) Question 2: Determine the 20X2 flexible budget variances. (five points)
pokesman Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow:
Bike parts
$
345,800
Factory machinery depreciation
61,500
Factory supervisor salaries
134,500
Factory direct labor
199,980
Factory supplies
41,900
Factory property tax
28,750
Advertising cost
26,500
Administrative salaries
53,500
Administrative related depreciation
18,200
Total expected costs
$
910,630
Requirement 1:
Determine the predetermined overhead rate per direct labor hour if the average direct labor rate is $11.11 per hour. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Predetermined overhead rate
$
per DL Hour
Requirement 2:
Determine the amount of applied overhead if 18,300 hours are worked in the upcoming year. (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
The Pole Division of Hillyard Company produces poles which can be sold to outside customers or transferred to the Flag Division of Hillyard Company. Last year the Flag Division bought 50,000 poles from Pole at $2.50 each. The following data are available for last year’s activities in the Pole Division: In order to sell 50,000 poles to the Flag Division, the Pole Division must give up sales of 30,000 poles to outside customers. That is, the Pole Division could sell 380,000 poles each year to outside customers (rather than only 350,000 poles as shown above) if it were not making sales to the Flag Division. Suppose that last year an outside supplier would have been willing to provide the Flag Division with the basic poles at $2.10 each. If Flag had chosen to buy all of its poles from the outside supplier instead of the Pole Division, the change in net operating income for the company as a whole would have been: A) $45,000 increase B) $20,000 decrease C) $20,000 increase D) $25,000 increase
Prepare a case analysis of the Accounting Fraud at Worldcom case. Consider the following questions as part of your analysis. 1. What are the pressures that lead executives and managers to “cook the books?” 2. What is the boundary between earnings smoothing or earnings management and fraudulent reporting? 3. Why were the actions taken by WorldCom managers not detected earlier? What processes or systems should be in place to prevent or detect quickly the types of actions that occurred in WorldCom? 4. Were the external auditors and board of directors blameworthy in this case? Why or why not? 5. Betty Vinson: victim or villain? Should criminal fraud charges have been brought against her? How should employees react when ordered by their employer to do something they do not believe in or feel uncomfortable doing?
The present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Required: Using a present value table (Table 6 4 and Table 6 5), your calculator, or a computer program present value function, calculate the present value of $100,000 for each of the following items (parts a”f) using these facts, except (a) Interest is compounded semiannually. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ (b) Interest is compounded quarterly. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ (c) A discount rate of 12% is used. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ (d) A discount rate of 20% is used. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ (e) The cash will be received in three years. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ (f) The cash will be received in seven years. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the “$” sign in your response.) Present value $ rev: 08_08_2011 check my workeBook Linkreferences Worksheet Difficulty: Easy Learning Objective: 06 10 The role of time value of money concepts in financial reporting and their usefulness in decision making.
Presented below is an incomplete income statement and an incomplete comparative balance sheet of Bondi Corporation. Additional information: 1. The accounts receivable turnover for 2014 is 10 times. 2. All sales are on account. 3. The profit margin for 2014 is 14.5%. 4. Return on assets is 20% for 2014. 5. The current ratio on December 31, 2014, is 3. 6. The inventory turnover for 2014 is 4.2 times. Compute the missing information given the ratios above. (Note: Start with one ratio and derive as much information as possible from it before trying another ratio. List all missing amounts under the ratio used to find the information.) BONDI CORPORATION Income Statement For the Year Ended December 31, 2014 Net sales $13,860,000 Cost of goods sold ? Gross profit ? Operating expenses 1,980,000 Income from operations ? Other expenses and losses ? Interest expense Income before income taxes ? Income tax expense 726,000 Net income $ ? BONDI CORPORATION Balance Sheets December 31 Assets 2014 2013 Current assets Cash $ 633,600 $ 495,000 Accounts receivable (net) ? 1,254,000 Inventory ? 2,270,400 Total current assets ? 4,019,400 Plant assets (net) 6,098,400 5,880,600 Total assets ? $ $9,900,000 Liabilities and Stockholders Equity Current liabilities ? $ $1,089,000 Long term notes payable ? 4,356,000 Total liabilities ? 5,445,000 Common stock, $1 par 3,960,000 3,960,000 Retained earnings 528,000 495,000 Total stockholders equity 4,488,000 4,455,000 Total liabilities and stockholders equity ? $9,900,000
Presented below is information related to Brokaw Corp. for the year 2010. Net sales $1,200,000 Write off inventory due to obsolescence $80,000 Cost of goods sold 780,000 Depreciation expense omitted by accident in 2009 40,000 Selling expenses 65,000 Interest expense 50,000 Administrative expenses 48,000 Cash dividends declared 45,000 Dividend revenue 20,000 Retained earnings at December 31, 2009 980,000 Interest revenue 7,000 Effective tax rate of 34% on all items (a) Prepare a multiple step income statement for 2010. Assume that 60,000 ordinary shares are outstanding. (Round earnings per share 2 decimal places, e.g. 5.25 and all other answers to zero decimal places, e.g. 2,250. Enter all amounts as positive amounts and subtract where necessary. List multiple entries from largest to smallest amount, e.g. 10, 5, 2.)
PROBLEM 1. The Huyden Company builds equipment to customer’s specifications. On March 1, two jobs were in process with the following costs and information: Job 43 Job 44 Direct materials $10,200 $34,400 Direct labor 21,000 10,400 Applied overhead* 4,950 7,370 Total cost $36,150 $52,170 Machine hours 45 67 *Applied on the basis of machine hours During March, Job 45 was started and Job 44 was completed and delivered to the customer. Job 43 was missing a part that was backordered and would be completed in June. The following costs were incurred in March: Job 43 Job 44 Job 45 Direct materials $2,300 $4,500 $12,700 Direct labor $2,400 $3,300 $4,500 Machine hours 21 11 23 It is Huyden’s policy to bill clients at cost plus 40 percent. Required: a. Calculate the overhead rate that Huyden is using. b. Calculate the overhead applied to each job during the month of March. c. Calculate the balance in work in process on March 31. d. What was the price of Job 44?
Problem 12 1A Allocating partnership income L.O. P2 [The following information applies to the questions displayed below.] Kim Ries, Tere Bax, and Josh Thomas invested $40,000, $56,000, and $64,000, respectively, in a partnership. During its first calendar year, the firm earned $124,500. Prepare the entry to close the firms Income Summary account as of its December 31 year end and to allocate the $124,500 net income to the partners under each of the following separate assumptions: references The partners have no agreement on the method of sharing income and loss. (Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31 income summary ………… 124,500 kim……………………………………..? tere………………………………………..? josh……………………………………….? Problem 12 1A Part 2 (2) The partners agreed to share income and loss in the ratio of their beginning capital investments. (Do not round intermediate calculations and round your final answers to nearest dollar amount. Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31 income summary …………..124,500 kim…………………………………….? tere……………………………………..? josh……………………………………..?
Problem 2 5A Recording transactions; posting to ledger; preparing a trial balance L.O. C3, A1, P1, P2 Business transactions completed by Eric Pense during the month of September are as follows. a. Pense invested $86,000 cash along with office equipment valued at $20,000 in exchange for common stock of a new company named EP Consulting. b. The company purchased land valued at $35,000 and a building valued at $165,000. The purchase is paid with $35,000 cash and a long term note payable for $165,000. c. The company purchased $2,300 of office supplies on credit. d. Pense invested his personal automobile in the company in exchange for more common stock. The automobile has a value of $16,000 and is to be used exclusively in the business. e. The company purchased $5,300 of additional office equipment on credit. f. The company paid $1,900 cash salary to an assistant. g. The company provided services to a client and collected $7,400 cash. h. The company paid $630 cash for this month’s utilities. i. The company paid $2,300 cash to settle the account payable created in transaction c. j. The company purchased $20,200 of new office equipment by paying $20,200 cash. k. The company completed $7,000 of services for a client, who must pay within 30 days. l. The company paid $1,800 cash salary to an assistant. m. The company received $3,500 cash in partial payment on the receivable created in transaction k. n. The company paid $2,700 cash for dividends. Required: 1. Record these transactions using the following titles: Cash (101); Accounts Receivable (106); Office Supplies (108); Office Equipment (163); Automobiles (164); Building (170); Land (172); Accounts Payable (201); Notes Payable (250); Common Stock (307); Dividends (319); Fees Earned (402); Salaries Expense (601); and Utilities Expense (602). 1. Journal Entry Worksheet Transaction/ General ledger/ debit/ /credit 2. Open the ledger accounts for the account titles referred in part 1 and post the journal entries from part 1 to the ledger accounts and enter the balance after each posting. (Enter the transactions in the order presented. Do not skip rows.) 3. Prepare a trial balance as of the end of September 30 Debit and credit
always results in a lower cost assigned to goods or services
all of these
4 points
Question 3
The controller of an organization participates inAnswer
planning
controlling
decision making
all of these
4 points
Question 4
The objective of profit maximizationAnswer
should be the only goal of an organization
is an objective of Financial accounting but not Management accounting
should be achieved through legal and ethical means
should outweigh the goal of product quality
4 points
Question 5
Which of the following areas is notemphasized on the CMA examination?Answer
external auditing and business law
economics, finance, and management
decision analysis and information systems
financial accounting and reporting
4 points
Question 6
An indirect costAnswer
can be easily and accurately traced to a cost object.
is hard to trace.
should never be assigned to a cost object.
do none of these.
4 points
Question 7
Which of the following is an example of an intangible product?Answer
hamburgers
computers
automobiles
dental care
4 points
Question 8
Which of the following is an example of direct labor?Answer
chef in a restaurant
janitor in a production plant
security guard for the factory
management accountant
4 points
Question 9
Overhead includesAnswer
indirect labor.
indirect materials.
supplies.
all of these.
4 points
Question 10
The unit costAnswer
is the total product costs divided by the number of units produced
includes period costs
is the total prime costs divided by the number of units produced
is the total conversion costs divided by the number of units produced
4 points
Question 11
Prime cost isAnswer
indirect materials cost and indirect labor cost
direct materials cost and direct labor cost
direct labor cost and overhead cost
selling cost and administrative cost
4 points
Question 12
Conversion cost is the sum ofAnswer
direct materials cost and direct labor cost
indirect labor cost and overhead cost
product costs and period costs
direct labor cost and overhead cost
4 points
Question 13
Which of the following is an example of a period cost?Answer
research and development
selling and marketing
general accounting
all of these
4 points
Question 14
The cost of the partially completed goods at the end of the period would beAnswer
beginning work in process inventory
cost of goods manufactured
ending work in process inventory
ending finished goods inventory
4 points
Question 15
Which of the following would be found on the Balance Sheet of a manufacturer?Answer
cost of goods sold
cost of goods manufactured
factory building
all of the these
4 points
Question 16
Figure 2 1. Concam Inc. manufactures television sets. Last month direct materials (electronic components, etc.) costing $500,000 were put into production. Direct labor of $800,000 was incurred, overhead equaled $450,000, and selling and administrative costs totaled $360,000. The company manufactured 8,000 television sets during the month. Assume that there were no beginning or ending work in process balances.
Refer to Figure 2 1: The per unit conversion cost was:Answer
$218.75
$156.25
$162.50
$100.00
4 points
Question 17
Figure 2 1. Concam Inc. manufactures television sets. Last month direct materials (electronic components, etc.) costing $500,000 were put into production. Direct labor of $800,000 was incurred, overhead equaled $450,000, and selling and administrative costs totaled $360,000. The company manufactured 8,000 television sets during the month. Assume that there were no beginning or ending work in process balances.
Refer to Figure 2 1: The total product costs for last month were:Answer
$1,750,000
$2,110,000
$1,300,000
$1,250,000
4 points
Question 18
Figure 2 1. Concam Inc. manufactures television sets. Last month direct materials (electronic components, etc.) costing $500,000 were put into production. Direct labor of $800,000 was incurred, overhead equaled $450,000, and selling and administrative costs totaled $360,000. The company manufactured 8,000 television sets during the month. Assume that there were no beginning or ending work in process balances.
Refer to Figure 2 1: The total per unit prime cost was:Answer
$263.75
$62.50
$162.50
$156.25
4 points
Question 19
Figure 2 1. Concam Inc. manufactures television sets. Last month direct materials (electronic components, etc.) costing $500,000 were put into production. Direct labor of $800,000 was incurred, overhead equaled $450,000, and selling and administrative costs totaled $360,000. The company manufactured 8,000 television sets during the month. Assume that there were no beginning or ending work in process balances.
Refer to Figure 2 1: What was the amount of cost of goods manufactured last month?Answer
$1,750,000
$1,250,000
$1,300,000
$2,110,000
4 points
Question 20
During the month of June, Telecom Inc. had cost of goods manufactured of $112,000, direct materials cost of $52,000, direct labor cost of $37,000 and overhead cost of $26,000. The Work in Process balance at June 30 equaled $10,000. What was the Work in Process balance on June 1?Answer
$7,000
$13,000
$10,000
$115,000
4 points
Question 21
Lakeland, Inc. manufactured 5,000 units during the month of March. They incurred direct materials cost of $100,000 and overhead cost of $40,000. If their per unit prime cost was $26.00 per unit how much direct labor cost did they incur during March?Answer
$20,000
$35,000
$90,000
$30,000
4 points
Question 22
Figure 2 3. Bartlow, Inc. had the following Income Statement for the month of May.
Sales Revenue
$428,000
Cost of Goods Sold
205,440
Gross Margin
222,560
Less:
Selling Expenses
81,320
Administrative Expenses
72,760
Operating Income
$ 68,480
Refer to Figure 2 3: What was the sales revenue percent?Answer
100%
48%
52%
16%
4 points
Question 23
Figure 2 3. Bartlow, Inc. had the following Income Statement for the month of May.
Sales Revenue
$428,000
Cost of Goods Sold
205,440
Gross Margin
222,560
Less:
Selling Expenses
81,320
Administrative Expenses
72,760
Operating Income
$ 68,480
Refer to Figure 2 3: What was the cost of goods sold percent?Answer
100%
19%
52%
48%
4 points
Question 24
Figure 2 4. Junko Company makes typewriters. During the year Junko manufactured 97,000 typewriters. Finished Goods Inventory had the following units on hand:
January 1
1,260
December 31
1,040
Refer to Figure 2 4: How many typewriters did Junko sell during the year?Answer
96,780
97,220
97,000
98,260
4 points
Question 25
Figure 2 5. In July, Econo Company purchased materials costing $21,000 and incurred direct labor cost of $18,000. Overhead totaled $32,000 for the month. Information on inventories was as follows:
July 1
July 31
Materials
$6,200
$7,100
Work in Process
$ 700
$1,200
Finished Goods
$3,300
$2,700
Refer to Figure 2 5: What was the cost of direct materials used in July?Answer
$21,000
$20,100
$21,900
$20,500
4 points
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Johnstone Inc. began operations in January 2011 and reported the following results for each of its 3 years of operations.
2011 $260,000 net loss 2012 $40,000 net loss 2013 $700,000 net income
At December 31, 2013, Johnstone Inc. capital accounts were as follows.
6% cumulative preferred stock, par value $100; authorized, issued,
and outstanding 5,000 shares ………………………………………………..$500,000
Common stock, par value $1.00; authorized 1,000,000 shares;
issued and outstanding 750,000 shares ………………………………………$750,000
Johnstone Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Johnstone began operations. The state law permits dividends only from retained earnings.
Instructions
(a) Compute the book value of the common stock at December 31, 2013.
(b) Compute the book value of the common stock at December 31, 2013, assuming that the preferred stock has a liquidating value of $106 per share.
Kitakyushu Inc., a client, is considering the authorization of a 10% common stock dividend to common stockholders. The financial vice president of Kitakyushu wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of directors.
Instructions
(a) The first topic the vice president wishes to discuss is the nature of the stock dividend to the recipient. Discuss the case against considering the stock dividend as income to the recipient.
(b) The other topic for discussion is the propriety of issuing the stock dividend to all ?ostockholders of record?? or to ?ostockholders of record exclusive of shares held in the name of the corporation as treasury stock.?? Discuss the case against issuing stock dividends on treasury shares.
Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2008, Lindsey Hunter took part in the following selected transactions.
1. Issued 5,000 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,000.
2. Issued 1,000 shares of stock for land appraised at $50,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.
3. Purchased 500 shares of treasury stock at $43 per share. The treasury shares purchased were issued in 2003 at $40 per share.
Instructions
(a) Prepare the journal entry to record item 1.
(b) Prepare the journal entry to record item 2.
(c) Prepare the journal entry to record item 3 using the cost method.
Lois Kenseth, president of Sycamore Corporation, is concerned about several large stockholders who have been very vocal lately in their criticisms of her leadership. She thinks they might mount a campaign to have her removed as the corporation’s CEO. She decides that buying them out by purchasing their shares could eliminate them as opponents, and she is confident they would accept a ?ogood?? offer. Kenseth knows the corporation’s cash position is decent, so it has the cash to complete the transaction. She also knows the purchase of these shares will increase earnings per share, which should make other investors quite happy. (Earnings per share is calculated by dividing net income available for the common shareholders by the weighted average number of shares outstanding. Therefore, if the number of shares outstanding is decreased by purchasing treasury shares, earnings per share increases.)
Marriott Corporation split into two companies: Host Marriott Corporation and Marriott International. Host Marriott retained ownership of the corporation’s vast hotel and other properties, while Marriott International, rather than owning hotels, managed them. The purpose of this split was to free Marriott International from the ?obaggage?? associated with Host Marriott, thus allowing it to be more aggressive in its pursuit of growth. The following information (in millions) is provided for each corporation for their first full year operating as independent companies.
?
Instructions
(a) The two companies were split by the issuance of shares of Marriott International to all shareholders of the previous combined company. Discuss the nature of this transaction.
(b) Calculate the debt to total assets ratio for each company.
(c) Calculate the return on assets and return on common stockholders’ equity ratios for each company.
(d) The company’s debtholders were fiercely opposed to the original plan to split the two companies because the original plan had Host Marriott absorbing the majority of the company’s debt. They relented only when Marriott International agreed to absorb a larger share of the debt. Discuss the possible reasons the debtholders were opposed to the plan to split the company.
Martinez Company’s ledger shows the following balances on December 31, 2010.
5% preferred stock—$10 par value, outstanding 20,000 shares $ 200,000
Common stock—$100 par value, outstanding 30,000 shares 3,000,000
Retained earnings 630,000
Assuming that the directors decide to declare total dividends in the amount of $266,000, determine how much each class of stock should receive under each of the conditions stated below. One year?~s dividends are in arrears on the preferred stock.
(a) The preferred stock is cumulative and fully participating.
(b) The preferred stock is noncumulative and nonparticipating.
(c) The preferred stock is noncumulative and is participating in distributions in excess of a 7% dividend rate on the common stock.
Matsui Corporation’s charter authorized issuance of 100,000 shares of $10 par value common stock and 50,000 shares of $50 preferred stock. The following transactions involving the issuance of shares of stock were completed. Each transaction is independent of the others.
1. Issued a $10,000, 9% bond payable at par and gave as a bonus one share of preferred stock, which at that time was selling for $106 a share.
2. Issued 500 shares of common stock for machinery. The machinery had been appraised at $7,100; the seller’s book value was $6,200. The most recent market price of the common stock is $15 a share.
3. Issued 375 shares of common stock and 100 shares of preferred stock for a lump sum amounting to $11,300. The common stock had been selling at $14 and the preferred stock at $65.
4. Issued 200 shares of common stock and 50 shares of preferred stock for furniture and fixtures. The common stock had a fair market value of $16 per share; the furniture and fixtures have a fair value of $6,200.
Instructions
Record the transactions listed above in journal entry form.
McNabb Corp. had $100,000 of 7%, $20 par value preferred stock and 12,000 shares of $25 par value common stock outstanding throughout 2011.
(a) Assuming that total dividends declared in 2011 were $64,000, and that the preferred stock is not cumulative but is fully participating, common stockholders should receive 2011 dividends of what amount?
(b) Assuming that total dividends declared in 2011 were $64,000, and that the preferred stock is fully participating and cumulative with preferred dividends in arrears for 2010, preferred stockholders should receive 2011 dividends totaling what amount?
(c) Assuming that total dividends declared in 2011 were $30,000, that the preferred stock is cumulative, nonparticipating and was issued on January 1, 2010, and that $5,000 of preferred dividends were declared and paid in 2010, the common stockholders should receive 2011 dividends totaling what amount?
a. An entry must be made showing the effect on stockholders’ equity.
b. The market price of the outstanding stock is increasing because a split is evidence of a profitable company.
c. The par value of the stock is changed in the reverse proportion as the stock split.
d. The stockholders have a higher proportionate ownership of the company.
2. The balance of the $0.50 par value common stock account for Patriot Company was $60,000 before its recent 3 for 1 stock split. The market price of the stock was $30 per share before the stock split. What occurred as a result of the stock split?
a. The balance in the retained earnings account decreased.
b. The balance in the common stock account was reduced to $20,000.
c. The market price of the stock was not affected.
d. The market price of the stock dropped to approximately $10 per share.
3. When a company declares a 3 for 1 stock split, the number of outstanding shares:
a. Is tripled compared to the number of shares that were outstanding prior to the split.
b. Stays the same, but the number of issued shares triples.
c. Is tripled, while the number of issued shares is reduced to one third of the original issued shares.
d. Is reduced, and the number of issued shares is tripled.
4. Shea Company has 20,000 shares of 5 percent, $40 par value, cumulative preferred stock. In 2008, no dividends were declared on preferred stock.
In 2009, Shea had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. If they have $150,000 available for dividends in 2009, how much could it pay to the common stockholders?
a. $70,000
b. $110,000
c. $130,000
d. $150,000
5. Comprehensive income is:
a. Considered an appropriation of retained earnings when reported in the stockholders’ equity section of the balance sheet.
b. The result of all events and transactions that affect income during the accounting period that are reported on the income statement.
c. Reporting all items that are not under management’s control on the statement of retained earnings.
d. An all inclusive approach to income that includes transactions that affect stockholders’ equity with the exception of those transactions that affect owners.
6. FASB’s concept of comprehensive income:
a. Excludes transactions that involve the payment of dividends.
b. Requires that all transactions must be shown on the income statement.
c. Has a primary drawback because it allows management to manipulate the income figure to a certain extent.
d. Allows items that are not necessarily under management’s control, such as natural disasters, to be shown as an adjustment of retained earnings.
7. Garner Corporation issued $100,000 in common stock dividends in 2008.
Its net income for 2008 was $200,000. What is Garner’s dividend payout ratio?
1. Which of the following is not a direct nor indirect component of stockholders’ equity?
a. Dividends payable
b. Loss on sale of equipment
c. Retained earnings
d. Net income
2. Which of the following statements is true with regard to contributed capital?
a. Preferred stock is stock that has been retired.
b. It is very unlikely corporations may have more than one class of stock outstanding.
c. The outstanding number of shares is the maximum number of shares that can be issued by a corporation.
d. The shares that are in the hands of the stockholders are said to be outstanding.
3. Authorized stock represents the:
a. Maximum number of shares that can be issued.
b. Number of shares that have been sold.
c. Number of shares that are currently held by stockholders.
d. Number of shares that have been repurchased by the corporation.
4. Harvey Corporation shows the following in the stockholders’ equity section of its balance sheet: The par value of its common stock is $0.50 and the total balance in the common stock account is $37,500. Also noted is that 5,000 shares are currently designated as treasury stock. The number of shares outstanding is:
a. 80,000.
b. 75,000.
c. 72,500.
d. 70,000.
5. With regard to preferred stock,
a. Its issuance provides no flexibility to the issuing company because its terms always require mandatory dividend payments.
b. No dividends are expected by the stockholders.
c. Its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared.
d. There is a legal requirement for a corporation to declare a dividend on preferred stock.
6. Murphy Parts Shop began business on January 1, 2007. The corporate charter authorized issuance of 10,000 shares of $2 par value common stock and 4,000 shares of $8 par value, 6 percent cumulative preferred stock. Murphy issued 2,400 shares of common stock for cash at $20 per share on January 2, 2007. What effect does the entry to record the issuance of stock have on total stockholders’ equity?
a. Increase of $4,800
b. Decrease of $4,800
c. Decrease of $48,000
d. Increase of $48,000
7. Marx Company began business on January 1, 2007. The corporate charter authorized issuance of 5,000 shares of $1 par value common stock, and 4,000 shares of $8 par value, 6 percent cumulative preferred stock, of which none were issued. On July 1, Marx issued 1,000 shares of common stock in exchange for two years rent on a retail location. The cash rental price is $2,400 per month and the rental period begins on July 1. What is the correct entry to record the July 1 transaction?
a. Debit to Cash, $57,600; Credit to Prepaid Rent, $57,600
b. Debit to Prepaid Rent, $57,600; Credit to Common Stock, $57,600
c. Debit to Prepaid Rent, $57,600; Credit to Common Stock, $1,000; Credit to Additional Paid In Capital Common, $56,600
d. Debit to Prepaid Rent, $57,600; Credit to Common Stock, $5,000; Credit to Additional Paid In Capital Common, $52,600
Myers Company provides you with the following condensed balance sheet information. For each transaction below, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.)
(a) Myers declares and pays a $0.50 per share cash dividend.
(b) Myers declares and issues a 10% stock dividend when the market price of the stock is $14 per share.
(c) Myers declares and issues a 30% stock dividend when the market price of the stock is $15 per share.
(d) Myers declares and distributes a property dividend. Myers gives one share of ABC stock for every two shares of Myers Company stock held. ABC is selling for $10 per share on the date the property dividend is declared.
(e) Myers declares a 2 for 1 stock split and issues newshares.
Jan. 15 Declared and paid a $1.05 cash dividend per share to stockholders.
Apr. 15 Declared and paid a 10% stock dividend. The market price of the stock was $14 per share.
May 15 Reacquired 2,000 common shares at a market price of $15 per share.
Nov. 15 Reissued 1,000 shares held in treasury at a price of $18 per share.
Dec. 31 Determined that net income for the year was $370,000.
Accounting
Journalize the above transactions. (Include entries to close net income to Retained Earnings.)
Determine the ending balances for Paid in Capital, Retained Earnings, and Stockholders’ Equity.
Analysis
Calculate the payout ratio and the return on common stock equity ratio.
Principles
R. Federer is examining Agassi’s financial statements and wonders whether the ?ogains?? or ?olosses?? on Agassi’s treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.
This comprehensive problem requires you to complete the accounting cycle for Stevens Realty twice. This will allow you to review Chapters 1 to 4, while reinforcing the relationships among all parts of the accounting cycle. By completing two cycles, you will see how the ending June balances in the ledger are used to accumulate data in July.
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Stevens Realty Reviewing the Accounting Cycle Twice This comprehensive problem requires you to complete the accounting cycle for Stevens Realty twice. This will allow you to review Chapters 1 to 4, while reinforcing the relationships among all parts of the accounting cycle. By completing two cycles, you will see how the ending June balances in the ledger are used to accumulate data in July. First, examine the chart of accounts for Stevens Realty (attached). On June 1 John Stevens opened a real estate office in Hamilton called Stevens Realty. The following transactions were completed for the month of June. 2009 June 1 John Stevens invested $9,000 cash in the real estate agency along with $4,000 worth of office equipment. 1 Rented office space and paid three months’ rent in advance, $3,000, cheque 601. 2 Bought a company automobile on account. 4 Purchased office supplies. Wrote cheque 603, $300. 5 Purchased additional office supplies on account, $150. 6 Sold a house and collected a $6,000 commission. 8 Paid gas bill for car, $22. Cheque 604. 15 Paid the salary of the part time office secretary, $350. Cheque 605. 17 Sold a building lot and earned a commission, $6,500. Payment is to be received on July 8. 20 John Stevens withdrew $1,000 from the business to pay personal expenses. Cheque 606. 21 Sold a house and collected a $3,500 commission. 22 Paid gas bill for car. $25. Cheque 607. 24 Paid $600 to repair automobile. Cheque 608. 30 Paid the salary of the part time office secretary, $350. Cheque 609. 30 Paid the June telephone bill, $510. Cheque 610. 30 Received advertising bill for June, $1,200. The bill is to be paid on July 2. Required Work for June 1. Journalize transactions and post to ledger accounts. 2. Prepare a trial balance in the first two columns of the worksheet and complete the worksheet using the following adjustment data: a. One month’s rent had expired b. An inventory shows $50 worth of office…
Pinson Corporation was organized on January 1, 2010. It is authorized to issue 20,000 shares of 6%, $50 par value preferred stock and 500,000 shares of no par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 80,000 shares of common stock for cash at $4 per share.
Mar. 1 Issued 12,000 shares of preferred stock for cash at $54 per share.
May 1 Issued 120,000 shares of common stock for cash at $5 per share.
Sept. 1 Issued 5,000 shares of common stock for cash at $6 per share.
Nov. 1 Issued 3,000 shares of preferred stock for cash at $56 per share.
Instructions
(a) Journalize the transactions.
(b) Post to the stockholders’ equity accounts. (Use T accounts.)
(c) Prepare the paid in capital portion of the stockholders’ equity section at December 31, 2010.
Pun Corporation acquired 80 percent of Set Corporation’s preferred stock for $175,000 and 90 percent of Set’s common stock for $630,000 on July 1, 2011. Set’s stockholders’ equity on December 31, 2011, was as follows (in thousands):
Stockholders’ Equity
9% preferred stock, cumulative, nonparticipating,
$100 par, call price $105 ………………………… $200
Common stock, $10 par …………………………………… 500
Paid in capital in excess of par ……………………………… 40
Retained earnings …………………………………………… 160
Total stockholders’ equity …………………………………. $900
Set had net income of $24,000 in 2010 and $46,000 in 2011, but declared no dividends in either year. Assume that preferred dividends accrue ratably throughout each year and that Set’s net assets were fairly valued on July 1, 2011.
REQUIRED
1. Determine the account balances of Pun Corporation’s investments in Set’s preferred and common stocks at December 31, 2011, on the basis of a one line consolidation.
2. Prepare workpaper entries to consolidate the balance sheets of Pun and Set at December 31, 2011.
Recall from Chapter 13 that Hincapie Co. (a specialty bike accessory manufacturer) is expecting growth in sales of some products targeted to the low price market. Hincapie is contemplating a preference share issue to help finance this expansion in operations. The company is leaning toward preference shares because ownership will not be diluted, but the investors will get an extra dividend if the company does well. The company management wants to be certain that its reporting of this transaction is transparent to its current shareholders and wants you to research the disclosure requirements related to its capital structure.
Instructions
Access the IFRS authoritative literature 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 questions. (Provide paragraph citations.)
(a) Identify the authoritative literature that addresses disclosure of information about capital structure.
(b) What information about share capital must companies disclose? Discuss how Hincapie should report the proposed preference share issue.
Larkspur Corp. manufactures bird feeders. It currently has two product lines, the standard and the deluxe. Larkspur has a total of $184,060 in overhead.
The company has identified the following information about its overhead activity pools and the two product lines:
Activity Pools
Cost Driver
Cost Assigned to Pool
Quantity Consumed by Standard
Quantity Consumed by Deluxe
Material handling
Number of moves
$
2,440
19 moves
42 moves
Quality control
Number of inspections
$
33,120
190 inspections
155 inspections
Machine maintenance
Number of machine hrs
$
148,500
4,600 machine hours
5,300 machine hours
Requirement 1:
Suppose Larkspur used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations. Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
Overhead assigned
Standard Model
$
Deluxe Model
$
Requirement 2:
Calculate the activity rates for each cost pool in Larkspur’s ABC system. (Omit the “$” sign in your response.)
Activity Rates
Material Handling
$
per move
Quality Control
$
per inspection
Maintenance
$
per machine hour
Requirement 3:
Calculate the amount of overhead that Larkspur will assign to the standard line if it uses an ABC system. (Omit the “$” sign in your response.)
Standard Model:
Material Handling
$
Quality Control
$
Maintenance
$
Total Overhead Assigned
$
Requirement 4:
Determine the amount of overhead Larkspur will assign to the deluxe line if it uses an ABC system.(Omit the “$” sign in your response.)
Deluxe Model:
Material Handling
$
Quality Control
$
Maintenance
$
Total Overhead Assigned
$
2,
Tyler Tooling Company uses a job order costing system with overhead applied to products on the basis of machine hours. For the upcoming year, the company estimated its total manufacturing overhead cost at $241,410 and total machine hours at 61,900. During the first month of operations, the company worked on three jobs and recorded the following actual direct materials cost, direct labor cost, and machine hours for each job:
Job 101
Job 102
Job 103
Total
Direct materials cost
$11,700
$7,500
$5,000
$24,200
Direct labor cost
$17,300
$5,100
$4,300
$26,700
Machine hours
1,300 hours
2,200 hours
1,000 hours
4,500 hours
Job 101 was completed and sold for $51,800.
Job 102 was completed but not sold.
Job 103 is still in process.
Actual overhead costs recorded during the first month of operations totaled $18,150.
Requirement 1:
Calculate the predetermined overhead rate. (Round your answer to 1 decimal place. Omit the “$” sign in your response.)
Requirement 2:
Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations. (Round Predetermined overhead rate to 1 decimal place and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Total manufacturing overhead
$
Requirement 3:
Compute the balance in the Work in Process Inventory account at the end of the first month. (Round Predetermined overhead rate to 1 decimal place and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Ending work in process inventory
$ a
Requirement 4:
How much gross profit would the company report during the first month of operations before making an adjustment for over- or underapplied manufacturing overhead? (Round Predetermined overhead rate to 1 decimal place and final answer to the nearest whole dollar amount. Omit the “$” sign in your response.)
Requirement 5:
Determine the balance in the Manufacturing Overhead account at the end of the first month. Is it over- or underapplied? (Round Predetermined overhead rate to 1 decimal place and final answer to the nearest whole dollar amount. Input the amount as positive value. Omit the “$” sign in your response.)
Shown below is the liabilities and stockholders’ equity section of the balance sheet for Ingalls Company and Wilder Company. Each has assets totaling $4,200,000.
?
For the year, each company has earned the same income before interest and taxes.
?
At year end, the market price of Ingalls’s stock was $101 per share, and Wilder’s was $63.50. Assume balance sheet amounts are representative for the entire year.
Instructions
(a) Which company is more profitable in terms of return on total assets?
(b) Which company is more profitable in terms of return on stockholders’ equity?
(c) Which company has the greater net income per share of stock? Neither company issued or reacquired shares during the year.
(d) From the point of view of net income, is it advantageous to the stockholders of Ingalls Co. to have the long term debt outstanding? Why?
(e) What is the book value per share for eachcompany?
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $441,000 or a new model 240 machine costing $387,000 to replace a machine that was purchased 7 years ago for $429,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. In making the decision to buy the model 240 machine rather than the model 370 machine, the differential cost was:
Manufacturers Southern leased high tech electronic equipment from Edison Leasing on January 1, 2011. Edison purchased the equipment from International Machines at a cost of $117,590. Related Information: Lease term: 2 years (8 quarterly periods) Quarterly rental payments: $16,000 at the beginning of each period Economic life of asset: 2 years Fair value of asset: $117,590 Implicit interest rate: 10% (Also lessees incremental borrowing rate) Required: Prepare a lease amortization schedule for the term of the lease. Also record the appropriate entries for Manufacturers Southern from the inception of the lease through January 1, 2012. Depreciation is recorded at the end of each fiscal year (December 31) on a straight line basis. (Round “PV factor” to 5 decimal places. Round your answers to the nearest whole dollar amount. Leave no cells blank be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.)
Maplewood Co. uses process costing to account for the production of canned energy drinks. Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. Equivalent units have been calculated to be 12,000 units for materials and 10,000 units for conversion costs. Beginning inventory consisted of $7,000 in materials and $4,000 in conversion costs. April costs were $36,000 for materials and $40,000 for conversion costs. Ending inventory still in process was 4,000 units (100% complete for materials, 50% for conversion). The value of units completed and transferred out using the weighted average method would be
McEntire Corporation began operations on January 1, 2007. During its first 3 years of operations, McEntire reported net income and declared dividends as follows. net income dividend declared 2007 40000 0 2008 125000 50000 2009 160000 50000 The following information relates to 2010. Income before income tax $220,000 Prior period adjustment: understatement of 2008 depreciation expense (before taxes) 25000 Cumulative decrease in income from change in inventory methods (before taxes)$ 45,000 Dividends declared (of this amount, $25,000 will be paid on Jan. 15, 2011)$100,000 Effective tax rate 20% a>Prepare a 2010 retained earnings statement for McEntire Corporation. (Enter all amounts as positive amounts and subtract where necessary. List amounts from largest to smallest, eg 10,5,1.) b> Assume McEntire Corp. restricted retained earnings in the amount of $70,000 on December 31, 2010. After this action, what would McEntire report as total retained earnings in its December 31, 2010, statement of financial position? Total retained earnings $
Custom Metal Works produces castings and other metal parts to customer specifications. The company uses a job ordercosting systemand applies overhead costs to jobs on the basis of machine hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,320,000 in manufacturing overhead cost at an activity level of 576,000 machine hours.
The company had nowork in processat the beginning of the year. The company spent the entire month of January working on one large order—Job 382, which was an order for 8,000 machined parts. Cost data for January follow:
a.
Raw materials purchased on account, $315,000.
b.
Raw materials requisitioned for production, $270,000 (80% direct and 20% indirect).
c.
Labor cost incurred in the factory, $190,000, of which $80,000 wasdirect laborand $110,000 was indirect labor.
d.
Depreciation recorded on factory equipment, $63,000.
e.
Other manufacturing overhead costs incurred, $85,000 (credit AccountsPayable).
f.
Manufacturingoverhead costwas applied to production on the basis of 40,000 machine hours actually worked during January.
g.
The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, andappliedoverhead.)
Required:
1.
Prepare journal entries to record items (a) through (f) above. Ignore item (g) for the moment.(Do not round intermediate calculations.)
General Journal
Debit
Credit
a.
(Click to select)Wages and salaries payableRaw materialsAccounts receivableManufacturing overheadAccounts payableWork in processFinished goodsAccumulated depreciation
(Click to select)Accounts receivableAccumulated depreciationWages and salaries payableWork in processManufacturing overheadFinished goodsAccounts payableRaw materials
b.
(Click to select)Manufacturing overheadWages and salaries payableAccounts receivableAccumulated depreciationAccounts payableWork in processFinished goodsRaw materials
(Click to select)Manufacturing overheadAccounts payableAccounts receivableWork in processAccumulated depreciationFinished goodsWages and salaries payableRaw materials
(Click to select)Accumulated depreciationManufacturing overheadRaw materialsAccounts receivableAccounts payableFinished goodsWork in processWages and salaries payable
c.
(Click to select)Raw materialsAccumulated depreciationAccounts payableAccounts receivableFinished goodsWages and salaries payableWork in processManufacturing overhead
(Click to select)Accumulated depreciationAccounts receivableWork in processManufacturing overheadFinished goodsAccounts payableWages and salaries payableRaw materials
(Click to select)Manufacturing overheadWork in processAccounts receivableRaw materialsAccumulated depreciationAccounts payableWages and salaries payableFinished goods
d.
(Click to select)Accounts payableFinished goodsManufacturing overheadWork in processAccumulated depreciationRaw materialsAccounts receivableWages and salaries payable
(Click to select)Accumulated depreciationAccounts receivableFinished goodsRaw materialsWork in processWages and salaries payableAccounts payableManufacturing overhead
e.
(Click to select)Raw materialsFinished goodsWages and salaries payableWork in processAccounts receivableManufacturing overheadAccounts payableAccumulated depreciation
(Click to select)Accounts payableFinished goodsManufacturing overheadRaw materialsAccounts receivableWages and salaries payableWork in processAccumulated depreciation
f.
(Click to select)Accounts payableManufacturing overheadFinished goodsRaw materialsWork in processWages and salaries payableAccumulated depreciationAccounts receivable
(Click to select)Finished goodsWages and salaries payableAccumulated depreciationRaw materialsAccounts payableAccounts receivableManufacturing overheadWork in process
2.
Prepare T accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T accounts.(Do not round intermediate calculations. Record the transactions in the given order.)
Manufacturing Overhead
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
Work in Process
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
(Click to select)(a)(b)(c)(d)(e)(f)(g)
3.
Prepare a journal entry for item (g) above.(Do not round intermediate calculations.)
General Journal
Debit
Credit
g.
(Click to select)Work in processWages and salaries payableAccumulated depreciationFinished goodsManufacturing overheadAccounts payableAccounts receivableRaw materials
(Click to select)Raw materialsManufacturing overheadFinished goodsWork in processWages and salaries payableAccounts receivableAccumulated depreciationAccounts payable
4.
Compute the unitproduct costthat will appear on the job cost sheet for Job 382.(Do not round intermediate calculations. Round your answer to 2 decimal places.)
In mid 2010 a pound of apples cost $1.38, while oranges cost $1.22. Ten years earlier the price of apples was only $.98 a pound and that of oranges was $.76 a pound. a. What was the annual compound rate of growth in the price of the two fruits? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Annual Compound rate growth for apples % Compound rate growth for oranges % b. If the same rates of growth persist in the future, what will be the price of apples in 2030? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of apples in 2030 $ c. What about the price of oranges? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of oranges in 2030 $ check my workreferencesebook & resources eBook: Inflation and the Time Value of Money Worksheet Difficulty: Intermediate Learning Objective: 05 06 Understand the difference between real and nominal cash flows and between real and nominal interest rates
Moloney Corporation produces and sells a single product. Data concerning that product appear below: Selling Price per unit……$200 Variable Exp. per unit………80 Contribution Margin…….$120 Fixed expenses are $898,000 per month. The company is current selling 9,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $16 per unit. In exchange, the sales staff would accept a decrease in their salaries of $117,000 per month. (This is the company’s savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company’s monthly new operating income of this change?
During the month of December 20 1, TJ’s Specialty Shop engaged in the following transactions: Dec. 1 Sold merchandise on account to Anne Clark, $2,000, plus tax of $100. Sale no. 637. 2 Issued check no. 806 to Owen Enterprises in payment of December 1 balance of $1,600, less 2% discount. 3 Issued check no. 807 to Nathen Co. in payment of December 1 balance of $3,000, less 2% discount. 4 Purchased merchandise on account from Owen Enterprises, $1,550. Invoice no. 763, dated December 4, terms 2/10, n/30. 4 Issued check no. 808 in payment of telephone expense for the month of November, $180. 6 Purchased merchandise on account from Evans Essentials, $2,350. Invoice no. 621, dated December 5, terms net 30. 8 Sold merchandise for cash, $4,840, plus tax of $242. 9 Received payment from Heather Waters in full settlement of account, $490. 9 Sold merchandise on account to Lucy Greene, $800, plus tax of $40. Sale no. 638. 10 Issued check no. 809 to West Wholesalers in payment of December 1 balance of $1,000. 11 Issued check no. 810 in payment of advertising expense for the month of December, $400. 12 Sold merchandise on account to Martha Boyle, $1,260, plus tax of $63. Sale no. 639. 12 Received payment from Anne Clark on account, $1,340. 13 Issued check no. 811 to Owen Enterprises in payment of December 4 purchase. Invoice no. 763, less 2% discount. 13 Martha Boyle returned merchandise for a credit, $740, plus sales tax of $37. 15 Issued check no. 812 in payment of wages (Wages Expense) for the two week period ending December 14, $1,100. 15 Received payment from Lucy Greene on account, $1,960. 16 Sold merchandise on account to Kim Fields, $160, plus sales tax of $8. Sale no. 640. 17 Returned merchandise to Evans Essentials for credit, $150. 18 Issued check no. 813 to Evans Essentials in payment of December 1 balance of $1,250, less the credit received on December 17. 19 Sold merchandise on account to Lucy Greene, $620, plus tax of $31. Sale no. 641. 22 Received payment from John Dempsey on account, $1,560. 23 Issued check no. 814 for the purchase of supplies, $120. (Debit Supplies) (continued) Dec. 24 Purchased merchandise on account from West Wholesalers, $1,200. Invoice no. 465, dated December 24, terms net 30. 26 Purchased merchandise on account from Nathen Co., $800. Invoice no. 817, dated December 26, terms 2/10, n/30. 27 Issued check no. 815 in payment of utilities expense for the month of November, $630. 27 Sold merchandise on account to John Dempsey, $2,020, plus tax of $101. Sale no. 642. 29 Received payment from Martha Boyle on account, $2,473. 29 Issued check no. 816 in payment of wages (Wages Expense) for the two week period ending December 28, $1,100. 30 Issued check no. 817 to Meyers Trophy Shop for a cash purchase of merchandise, $200. As of December 1, TJ’s account balances were as follows: Account Account No. Debit Credit Cash 101 $ 11,500 Accounts Receivable 122 8,600 Merchandise Inventory 131 21,800 Supplies 141 1,035 Prepaid Insurance 145 1,380 Land 161 8,700 Building 171 52,000 Accum. Depr. Building 171.1 $ 9,200 Store Equipment 181 28,750 Accum. Depr. Store Equipment 181.1 9,300 Accounts Payable 202 6,850 Wages Payable 219 Sales Tax Payable 231 970 Mortgage Payable 251 12,525 Tom Jones, Capital 311 90,000 Tom Jones, Drawing 312 8,500 Income Summary 313 Sales 401 116,000 Sales Returns and Allowances 401.1 690 Purchases 501 60,500 Purchases Returns and Allowances 501.1 460 Purchases Discounts 501.2 575 Freight In 502 175 Wages Expense 511 25,000 Advertising Expense 512 4,300 Supplies Expense 524 Telephone Expense 525 2,000 Utilities Expense 533 6,900 Insurance Expense 535 Depr. Expense Building 540 Depr. Expense Store Equipment 541 Miscellaneous Expense 549 2,700 Interest Expense 551 1,350 $245,880 $245,880 TJ’s also had the following subsidiary ledger balances as of December 1: Accounts Receivable Ledger CUSTOMER BALANCE Martha Boyle 12 Jude Lane $3,250 Hartford, CT 06117 Anne Clark 52 Juniper Road Hartford, CT 06118 1,340 John Dempsey 700 Hobbes Dr. 1,560 Avon, CT 06108 Kim Fields 5200 Hamilton Ave. ___ Hartford, CT 06117 Lucy Greene 236 Bally Lane Simsbury, CT 06123 Heather Waters 447 Drury Lane West Hartford, CT 06107 1,960 490 Accounts Payable Ledger VENDOR Evans Essentials BALANCE 34 Harry Ave. East Hartford, CT 05234 $1,250 Nathen Co. 1009 Drake Rd. Farmington, CT 06082 3,000 Owen Enterprises 43 Lucky Lane Bristol, CT 06007 1,600 West Wholesalers 888 Anders Street 1,000 Newington, CT 06789 At the end of the year, the following adjustments (a) (g) need to be made: (a, b) Merchandise inventory as of December 31, $19,700. $19,700. (c) Unused supplies on hand, $525. (d ) Unexpired insurance on December 31, $1,000. (e) Depreciation expense on the building for the year, $800. (f) Depreciation expense on the store equipment for the year, $450. (g) Wages earned but not paid as of December 31, $330. Requirements and working papers for this problem are special journals based. (REQUIRED: SPECIAL JOURNALS) 1. If you are not using the working papers, open a general ledger, an accounts receivable ledger, and an accounts payable ledger as of December 1. Enter the December 1 balance of each of the accounts, with a check mark in the Posting Reference column. 2. Enter transactions for the month of December in the proper journals. Post immediately to the accounts receivable and accounts payable ledgers. 3. 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 year end work sheet, an income statement, a statement of owner’s equity, and a 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. (HINT: Close all expense and revenue account balances listed in the Income Statement columns of the work sheet. Then, close Income Summary and Tom Jones, Drawing to Tom Jones, Capital.) 8. Prepare a post closing trial balance. 9. Journalize and post reversing entries for the adjustments where appropriate, as of January 1, 20 2.
Newkirk Co. has identified one of its cost pools to be quality control and has assigned $57,084 to that pool. Number of inspections has been chosen as the cost driver for this pool; Newkirk performs 26,800 inspections annually. Suppose Newkirk manufactures two products that consume 10,184 and 16,616 inspections each.
Required :
Using activity rates, determine the amount of quality control cost to be assigned to each of Newkirks product lines. (Round your intermediate calculations and final answers to 2 decimal places. Omit the “$” sign in your response.)
Please note that i have seen some previous answers and they have been of no help to me.
Chesapeake Sailmakers uses job order costing. Manufacturing overhead is charged to individual jobs through the use of a predetermined overhead rate based on direct labor costs. The following information appears in the company’s Work in Process Inventory account for the month of June:
Debits to account:
Balance, June 1
$
7,200
Direct materials
13,000
Direct labor
9,100
Manufacturing overhead (applied to jobs as 150% of direct labor cost)
14,000
Total debits to account
$
43,300
Credits to account:
Transferred to Finished Goods Inventory account
33,200
Balance, June 30
$
10,100
a.
Assuming that the direct labor charged to the jobs still in process at June 30 amounts to $2,100, compute the amount of manufacturing overhead and the amount of direct materials that have been charged to these jobs as of June 30. (Omit the “$” sign in your response.)
Manufacturing overhead applied to jobs
$
Direct materials charged to jobs
$
b.
Prepare general journal entries to summarize: (Omit the “$” sign in your response.)
1.
The manufacturing costs (direct materials, direct labor, and overhead) charged to production during June.
2.
The transfer of production completed during June to the Finished Goods Inventory account.
3.
The cash sale of 90 percent of the merchandise completed during June at a total sales price of $53,000. Show the related cost of goods sold in a separate journal entry.
Nova Company’s total overhead cost at various levels of activity are presented below: Month Machine Hours Total Overhead Cost April 52,500 $ 205,200 May 42,000 $ 180,000 June 63,000 $ 230,400 July 73,500 $ 255,600 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine hour level of activity is: Utilities (variable) $ 54,600 Supervisory salaries (fixed) 64,000 Maintenance (mixed) 61,400 Total overhead cost $ 180,000 Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements. Requirement 1: Estimate how much of the $255,600 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $255,600 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Omit the “$” sign in your response.) Maintenance cost $ Requirement 2: Using the high low method, estimate a cost formula for maintenance. (Round the variable portion of the formula to 2 decimal places. Omit the “$” sign in your response.) Y = $ + $ X Requirement 3: Express the company’s total overhead cost in the linear equation form Y = a +bX. (Round the variable portion of the formula to 2 decimal places. Omit the “$” sign in your response.) Y = $ + $ X Requirement 4: What total overhead cost would you expect to be incurred at an operating activity level of 46,200 machine hours? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Total overhead costs $ check my workeBook Links (2)references
Nova Company’s total overhead cost at various levels of activity are presented below:
Month Machine Hours Total Overhead Cost
April 52,500 $ 205,200
May 42,000 $ 180,000
June 63,000 $ 230,400
July 73,500 $ 255,600
Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 42,000 machine hour level of activity is:
Utilities (variable) $ 54,600
Supervisory salaries (fixed) 64,000
Maintenance (mixed) 61,400
Total overhead cost $ 180,000
Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements.
Requirement 1: Estimate how much of the $255,600 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $255,600 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) (Omit the “$” sign in your response.)
Maintenance cost $
Requirement 2: Using the high low method, estimate a cost formula for maintenance. (Round the variable portion of the formula to 2 decimal places. Omit the “$” sign in your response.)
Y = $ + $ X
Requirement 3: Express the company’s total overhead cost in the linear equation form Y = a +bX. (Round the variable portion of the formula to 2 decimal places. Omit the “$” sign in your response.)
Y = $ + $ X
Requirement 4: What total overhead cost would you expect to be incurred at an operating activity level of 46,200 machine hours? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)
On October 31, the stockholders equity section of Ennis Company consists of common stock $300,000 and retained earnings $900,000. Ennis is considering the following two courses of action: (1) declaring and distributing a 5% stock dividend on the 30,000, $10 par value shares outstanding, or (2) effecting a 2 for 1 stock split that will reduce par value to $5 per share. The current market price is $14 per share. Prepare a tabular summary of the effects of the alternative actions on the components of stockholders equity, outstanding shares, and par value per share. Before Action After Stock Dividend After Stock Split Stockholders equity Paid in capital Common stock $ $ $ In excess of par Total paid in capital Retained earnings Total stockholders equity $ $ $ Outstanding shares Par value per share $ $ $
Optimal policy mix Assume that Atlas Sporting Goods, Inc., has $800,000 in assets. If it goes with a low liquidity plan for the assets, it can earn a return of 15 percent, but with a high liquidity plan the return will be 12 percent. If the firm goes with a short term financing plan, the financing costs on the $800,000 will be 8 percent, and with a long term financing plan, the financing costs on the $800,000 will be 10 percent. (Review Table 6 11 for parts a, b, and c of this problem.) a. Compute the anticipated return after financing costs with the most aggressive asset financing mix. b. Compute the anticipated return after financing costs with the most conservative asset financing mix. c. Compute the anticipated return after financing costs with the two moderate approaches to the asset financing mix. d. If the firm used the most aggressive asset financing mix described in part a and had the anticipated return you computed for part a, what would earnings per share be if the tax rate on the anticipated return was 30 percent and there were 20,000 shares outstanding? e. Now assume the most conservative asset financing mix described in part b will be utilized. The tax rate will be 30 percent. Also assume there will only be 5,000 shares outstanding. What will earnings per share be? Would it be higher or lower than the earnings per share computed for the most aggressive plan computed in part d?
Pablo Management has five part time employees, each of whom earns $100 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2011. The end of the year, December 31, 2011 falls on a Monday. The next week, the five employees worked only four days because New Years Day was an unpaid holiday. All five employees are paid as usual on Friday, January 4, 2012. (a) Prepare the adjusting entry that would be recorded on Monday, December 31, 2011. (Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31, 2011 (b) Prepare the journal entry that would be made to record payment of the employees wages on Friday, January 4, 2012. (Omit the “$” sign in your response.) Date General Journal Debit Credit Jan. 4, 2012
A partial adjusted trial balance of Safin Company at January 31, 2012, shows the following. SAFIN COMPANY ADJUSTED TRIAL BALANCE JANUARY 31, 2012 Debit Credit Supplies $1,030 (debit) Prepaid Insurance 3,180 (debit) Salaries and Wages Payable $930 (credit) Unearned Revenue 880 (credit) Supplies Expense 950 (debit) Insurance Expense 530 (debit) Salaries and Wages Expense 1,930 (debit) Service Revenue 2,130 (credit). Answer the following questions, assuming the year begins January 1. If the amount in Supplies Expense is the January 31 adjusting entry, and $850 of supplies was purchased in January, what was the balance in Supplies on January 1? Beginning balance of supplies $__________ If $2,830 of salaries and wages was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2011? Beginning balance of salaries and wages payable $_________ If $1,730 was received in January for services performed in January, what was the balance in Unearned Service Revenue at December 31, 2011? Beginning unearned service revenue December 31, 2011 $__________ Sorry, my chart got messed up. The debits and credits are indicated next to the amounts. Someone attempted to answer this question for me, but they used all different numbers and I could not follow along.
Paul and Paula Petroceli were trying to decide whether to go to the symphony or to the baseball game. They already have two nonrefundable tickets to “Pops Night at the Symphony” that cost $40 each. This is the only concert of the season they considered attending because it is the only one with the type of music they enjoy. The baseball game is the last one of the season, and it will decide the league championship. They can purchase tickets to the game for $20 each. The Petrocelis will drive 50 miles round trip to either even. Variable costs for operating their automobile are $0.18 per mile and fixed costs average $0.13 per mile for the 15,000 miles they drive annually. Parking at the symphony is free, but it costs $6 at the baseball game. To attend either event, Paul and Paula will hire a babysitter at $7 per hour. They expect to be gone 5 hours to attend the baseball game but only 4 hours to attend the symphony. Compare the cost of attending the baseball game with the cost of attending the symphony. Focus on relevant costs. Compute the difference in cost, and indicate which alternative is more costly to the Petrocelis.
Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2012, the following accounts were included in stockholders’ equity.
During a recent period, the fast food chain Wendy’s International purchased many treasury shares. This caused the number of shares outstanding to fall from 124 million to 105 million. The following information was drawn from the company’s financial statements (in millions).
?
Instructions
Use the information provided to answer the following questions.
(a) Compute earnings per share, return on common stockholders’ equity, and return on assets for both years. Discuss the change in the company’s profitability over this period.
(b) Compute the dividend payout ratio. Also compute the average cash dividend paid per share of common stock (dividends paid divided by the average number of common shares outstanding).
Discuss any change in these ratios during this period and the implications for the company’s dividend policy.
(c) Compute the debt to total assets ratio and interest coverage ratio. Discuss the change in the company’s solvency. (d) Based on your findings in (a) and (c), discuss to what extent any change in the return on common stockholders’ equity was the result of increased reliance on debt.
(e) Does it appear that the purchase of treasury stock and the shift toward more reliance on debt were wise strategic moves?
Earnhart Corporation has outstanding 3,000,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2012, was $24,000,000, and it then had Paid in Capital in Excess of Par—Common Stock of $5,000,000. During 2012, the company’s net income was $4,700,000. A cash dividend of $0.60 a share was declared on May 5, 2012, and was paid June 30, 2012, and a 6% stock dividend was declared on November 30, 2012, and distributed to stockholders of record at the close of business on December 31, 2012. You have been asked to advise on the proper accounting treatment of the stock dividend.
The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows.
October 31, 2012 ……………….$31
November 30, 2012 …………….$34
December 31, 2012 …………….$38
Instructions
(a) Prepare the journal entry to record the declaration and payment of the cash dividend.
(b) Prepare the journal entry to record the declaration and distribution of the stock dividend.
(c) Prepare the stockholders’ equity section (including schedules of retained earnings and additional paid in capital) of the balance sheet of Earnhart Corporation for the year 2012 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the accounting for the stock dividend, and add separately appropriate comments or explanations regarding the basis chosen.
Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ (National Association of Securities Dealers Quotes). Faith Evans Corp. has issued 10,000 units. Each unit consists of a $500 par, 12% subordinated debenture and 10 shares of $5 par common stock. The investment banker has retained 400 units as the underwriting fee. The other 9,600 units were sold to outside investors for cash at $880 per unit. Prior to this sale the 2 week asking price of common stock was $40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.
Instructions
(a) Prepare the journal entry to record Evans’ transaction, under the following conditions.
(1) Employing the incremental method.
(2) Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
(b) Briefly explain which method is, in your opinion, the better method.
Jetson Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012 activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $150,000. The maximum output capacity of the company is 40,000 units per year.Contribution Margin Income StatementFor Year Ended December 31, 2011Sales 750000 Variable costs 600000 Contribution margin 150000 Fixed costs 200000 Net loss (50000). Prepare a forecasted contribution margin income statement for 2012 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold (20,900 units) will not change, and no income taxes will be due. I am having trouble computing the variable cost. Can someone please help me? I tried to compute 20900*19.20 and 20900*19.19 but it isn’t the correct answer. Everytime I ask this question this is the answer I get. This seems reasonable to me: First, you are looking for an after tax income (or profit) of $140, 000 assuming a tax rate of 30%. Hence, this means you would need to earn a pre tax income of X * (100% 30%) = $140,000, or X = $140,000 / .7 = $200,000. Second, the original unit cost can be determined by solving the equation, Sales (Fixed costs + Variable costs) = $50,000 or, $750,000 (200,000 + (U x 20,000)) = $50,000, where U = unit cost. Solving for U, $750,000 $200,000 20,000U = $50,000 20,000U = 600,000, U = $30 / unit Third, The variable unit cost can be reduced by 50%, hence the new unit cost = $30 x 50% = $15. So, here is what we know: if we invest another $150,000 and automate more operations then our new unit cost will be $15/unit. This means our new fixed costs will increase by the cost of the new machine: new fixed costs = old fixed cost + new machine cost = $200,000 + $150,000 = $300,000. Now we put it all together, For 2012, Profit = Sales (New Fixed Costs + (Number of Units x Unit cost)), or $200,000 = Sales ($350,000 + (40,000 x $15)), or $200,000 = Sales ($350,000 + $600,000), or Sales = $200,000 + $950,000 Sales = $1,150,000 Summarizing: We can make an after tax profit of $140,000, if we generate a pre tax profit of $200,000 at a 30% tax rate, by selling $1,150,000 at a cost of $950,000. Our cost of $950,000 includes our fixed costs of $350,000 plus a variable cost of $600,000. Our variable cost was calculated by reducing our old variable cost by 50% and producing the maximum number of units
John and Kathy Brown have just been audited and the IRS agent disallowed the business loss they claimed in 2010. The agent asserted that the activity was a hobby, not a business. John and Kathy live in Rochester, New York, near Lake Ontario. Kathy is a CPA, and John was formerly employed by an insurance firm. Johns firm moved in 2005 and John resolved not to move to the firms new location. Instead of seeking other employment John felt he could supplement his income by using his fishing expertise. He had been an avid fisherman for 15 years and he owned a large Chris Craft fly bridge that he chartered to paying parties. In 2006, Kathy and John developed a business plan, established a bank account for the charter activities, developed a bookkeeping system and acquired insurance to cover the boat and the passengers. John fulfilled all the requirements to receive a US Coast Guard operating license, a New York sport trolling license and a sellers permit. These licenses and permits were necessary to legally operate a charter boat. The first year of their activity was 2006. John advertised in local papers and regional sport fishing magazines. He usually had three or four half day paying parties each week. John spent at least one day maintaining and repairing his boat. Kathy usually accompanied John on charters three or four times each year. Johns charter activity was unprofitable the first two years. In 2008, John and Kathy restructured the activity to improve profitability. The restructuring included increasing advertising, participating in outdoor shows and negotiating small contracts with local businesses. After the restructuring, the activity provided a small profit in 2008 and 2009. Prepare a memo to the Browns recommending what position they should take and why. Show the logic used to arriving at your recommendation.
On July 1, 2000, TIM, Inc. started as a business entity. A summary of transactions through December 31, 2000 is presented below. 1. Stockholders invested $50,000 in cash in Bank Boston in the name of the business. 2. New computer equipment is purchased for $6,000 in cash. Equipment will be used for 3 years. 3. Office rent for half a year is paid in advance, $8,000. 4. Dividends of $500 paid to existing shareholders. 5. Paid $10,000 to employees for services provided. 6. Paid utility bills, $2000. 7. Provided (and completed) design services on account to customers, $30,000. 8. Collected cash of $2,000 for services billed in 7. Required: a) Prepare a tabular analysis of the transactions using the Balance Sheet Equation (BSE) through December 31, 2000. Be sure to label your transactions. b) Prepare the balance sheet as of December 31, 2000. From what part of the BSE table did you get the information to prepare the balance sheet? c) Prepare the income statement for the period from July 1, 2000 through December 31, 2000. From what part of the BSE table did you get the information to prepare the income statement? d) How much cash flowed in and out of TIM, Inc. in the period from July 1, 2000 through December 31, 2000? How much of this cash inflow or outflow do you consider relevant to TIM, Inc.s operations? e) Compare the net cash flow that is considered relevant to operations (from (d) above) and TIM, Inc.s profits in the same period. What transactions and events account for the difference? f) Which of the accounts you created in the BSE table are considered “temporary”, and which ones are considered “permanent”? Briefly explain the difference
Keegan incorporated his sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100% of the corporations stock. The property transferred to the corporation had the following fair market values and tax adjusted bases. FMV: Inventory: $20,000 Building: $70,000 Land: $150,000 Total : $240,000 Tax Adjusted Basis: Inventory: $14,000 Building: $50,000 Land: $100,000 Total : $164,000 The fair market value of the corporations stock, received in the exchange equaled the fair market value of the assets transferred to the corporation by Keegan. What amount of gain or loss does Keegan realize on the transfer of the property to his corporation? Assuming the gain or loss realized above is deferred under Section 351, what is Keegans basis in the stock he receives in his corporation?
Kelly Company applies manufacturing overhead to products at a predetermined rate of $50 per direct labor hour. Its actual manufacturing costs for the most recent period are summarized here:
Item
Description
Total Cost
Direct materials
Used on Jobs 101 and 102
$
83,000
Indirect materials
Used on multiple jobs
14,500
Hourly labor wages
840 hours @ $25 per hour
220 hours for Job 101 =
$
5,500
320 hours for Job 102 =
8,000
300 hours for Job 103 =
7,500
21,000
Factory supervision
3,350
Production engineer
5,100
Factory janitorial work
1,900
General and administrative salaries
9,700
Other manufacturing overhead costs (factory rent, insurance, depreciation, etc.)
6,500
Other general and administrative costs (office rent, insurance, depreciation, etc.)
4,500
Requirement 1:
Post the preceding information to Kelly Companys Manufacturing Overhead T account. (Record the transactions in the given order. Omit the “$” sign in your response.)
Manufacturing Overhead
Requirement 2:
Compute over or underapplied manufacturing overhead. (Input the amount as positive value. Omit the “$” sign in your response.)
Ken is a self employed architect in a small firm with four employees: himself, his office assistant, and two drafters, all of whom have worked for Ken full time for the last four years. The office assistant earns $30000 per year and each drafter earns $40000. Kens new earning from self employment (after deducting all expenses and one half of self employment taxes) are $305000. Ken is considering whether to establish a SEP plan and has a few questions: A] Is he eligible to establish an SEP plan? B] Is he required to cover his employees under the plan? Why or Why not? C] If his employees must be covered, what is the maximum amount that can be contributed on their behalf? D] If the employees are not covered, what is the maximum amount Ken can contribute for himself? E] If Ken is required to contribute for his employees and chooses to contribute the maximum amount, what is the maximum amount Ken can contribute for himself? (Hint Calculate the employee amounts first.) Ignore any changes in Kens self employment tax.
Kinnion Medical Clinic has budgeted the following cash flows. Jan. Feb. March Cash receipts $100,00 $100,600 $126,000 CASH PAYMENTS for inventory purchases $90,000 $72,000 $85,000 for S&A expenses $ 31,000 32,000 27,000 Kinnion Medical had a cash balance of $8,000 on January 1. The company desires to maintain a cash cushion of $5,000. Funds are assumed to be borrowed, in increments of $1,000, and repaid on the last day of each month; the interest rate is 1% per month. Kinnion pays its vendor on the last day of the month also. The company had a monthly $40,000 beginning balance in its line of credit liability account from this years quarterly results. CASH BUDGET JAN. FEB. MARCH beginning cash balance ?? ?? ?? add cash receipts ?? ?? ?? Cash available (a) ?? ?? ?? LESS CASH PAYMENTS for inventory purchases ?? ?? ?? for s&a expenses ?? ?? ?? interest exp at 1% per month ?? ?? ?? total budgeted payments (b) ?? ?? ?? PAYMENTS MINUS RECEIPTS surplus (shortage) (a b) ?? ?? ?? FINANCING ACTIVITY borrowing (repayment) (c) ?? ?? ?? ending cash balance (a b+c) 5,600 5,000 5,000 (40,000) *1%=??? (40,000 + 19,000) *1%=??? (40,000 + 19,000 2,010) * 1%=???
Laningham Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs equipment depreciation and supervisory expense are allocated to three activity cost pools Machining, Order Filling, and Other based on resource consumption. Data to perform these allocations appear below: In the second stage, Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow: How much overhead cost is allocated to the Machining activity cost pool under activity based costing in the first stage of allocation? A) $2,100 B) $38,100 C) $36,000 D) $14,800
Lead time Audio Max Electronics Company manufactures electronic stereo equipment. The manufacturing process includes printed circuit (PC) card assembly, final assembly, testing, and shipping. In the PC card assembly operation, a number of individuals are responsible for assembling electronic components into printed circuit boards. Each operator is responsible for soldering components according to a given set of instructions. Operators work on batches of 80 printed circuit boards. Each board requires 5 minutes of assembly time. After each batch is completed, the operator moves the assembled cards to the final assembly area. This move takes 10 minutes to complete. The final assembly for each stereo unit requires 20 minutes and is also done in batches of 80 units. A batch of 80 stereos is moved into the test building, which is across the street. The move takes 20 minutes. Before conducting the test, the test equipment must be set up for the particular stereo model. The test setup requires 30 minutes. The units wait while the setup is performed. In the final test, the 80 unit batch is tested one at a time. Each test requires 7 minutes. The completed batch, after all testing, is sent to shipping for packaging and final shipment to customers. A complete batch of 80 units is sent from final assembly to shipping. The Shipping Department is located next to final assembly. Thus, there is no move time between these two operations. Packaging and labeling requires 8 minutes per unit. Instructions: 1. Determine the amount of value added and non value added lead time and the value added ratio in this process for an average stereo unit in a batch of 80 units. Round percentages to one decimal place. Categorize the non value added time into wait and move time. Value added minutes min Non value added minutes: Wait time minutes min Move time minutes min Total non value added time min Total lead time min Value added ratio (as a percent) % 2. How could this process be improved so as to reduce the amount of waste in the process? The input in the box below will not be graded, but may be reviewed and considered by your instructor.
LIFESAVER FOR CORRECT ANSWERS. Accounting: Identifying adjusting entries with explanations? For each of the following entries, enter the letter of the explanation that most closely describes it in the space beside each entry. (You can use letters more than once.)
A. To record receipt of unearned revenue
B. To record this periods earning of prior unearned revenue
C. To record payment of an accrued expense
D. To record receipt of an accrued revenue
E. To record an accrued expense
F. To record an accrued revenue
G. To record this periods use of a prepaid expense
Like Kind Exchange: Boot. Determine the realized gain or loss, the recognized gain or loss, and the basis of the equipment received for the following like kind exchanges:
Thom Jones (SSN 000 00 1111) is an unincorporated manufacturer of widgets. He uses the LCM method to value his inventory and reports the following for 2012:
Sales (less returns and allowances) $1,250,000
Cost of goods sold 500,000
Office Expenses 10,000
Depreciation ?
Legal Expenses 4,000
Salary Expenses 36,000
Travel Expenses 30,000
Repair Expenses 20,000
Information related to Mr. Jones’s depreciation:
Cost of office furniture acquired and placed in service on April 15, 2012 (7 year recovery).
Thom elected to expense the maximum amount possible under Sec. 179 and the bonus
depreciation provision. $480,000
Cost of other property acquired and placed in service on August 1, 2012:
5 year recovery property (computers not listed property) $6,000
7 year recovery property (equipment) 54,000
Depreciation on assets purchased prior to 2012: 28,000
Complete Thom’s 20102Form 4562 and Schedule C of Form 1040.
The companys net income for the year was $153 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends were $28. The net cash provided by (used in) operating activities for the year was:
Machinery purchased for $58,760 by Carver Co. in 2008 was originally estimated to have a life of 8 years with a salvage value of $4,520 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2013, it is determined that the total estimated life should be 10 years with a salvage value of $5,085 at the end of that time. Assume straight line depreciation. (a) Prepare the entry to correct the prior years depreciation, if necessary. (b) Prepare the entry to record depreciation for 2013. (If no entry is required, select “No entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.) No. Account Titles and Explanation Debit Credit (a) (b)
Mae Li is beneficiary of a $70,000 insurance policy on her father’s life. Upon his death, she elects to receive the proceeds in installments from the insurance company that carries the policy. She will receive $16,000 per year for five years. What are the tax consequences each year? (Points : 5) All $16,000 each year is taxable. $10,000 interest is taxable in the first year. There is no taxable income. $2,000 of the $16,000 payment is taxable each year. 10. Amanda, who lost her modeling job, sued her employer for age discrimination. She was awarded $75,000 in lost wages, $25,000 for emotional distress, and $150,000 punitive damages. The amount taxable is (Points : 5) $ 0 . $150,000. $225,000. $250,000. 11. Bella transfers a $150,000 life insurance policy on her life to a partnership in which she is a partner. Subsequent to Bella’s transfer, the partnership pays $10,000 of premiums before Bella’s death. How much of the insurance proceeds of $150,000 is includable in income? (Points : 5) $ 0 $75,000 $140,000 $150,000
The maintenance department’s costs are allocated to other departments based on the number of hours of maintenance use by each department. The maintenance department has fixed costs of $500,000 and variable costs of $30 per hour of maintenance provided. The variable costs include the salaries of the maintenance workers. More maintenance workers can be added if greater maintenance is demanded by the other departments without affecting the fixed costs of the maintenance department. The maintenance department expects to provide 10,000 hours of maintenance.a. What is the application rate for the maintenance department?b. What is the additional cost to the maintenance department of providing another hour of maintenance?c. What problem exists if the managers of other departments can choose how much maintenance to be performed?d. What problem exists if the other departments are allowed to go outside the organization to buy maintenance services?
Mallard Auto Parts, Inc. has on hand 1,000 fenders for 1953 Studebakers. Mallard purchased the fenders in 1965 for $30 each, and the selling price is $400 each. Only rarely does Mallard sell a Studebaker fender, and it is highly unlikely that more than 100 of the remaining fenders will ever be sold. However, Mallard has ample storage space and feels an obligation to Studebaker owners. Therefore, the company will NOT salvage the fenders and will continue to sell them for $400 each. Scrap value of the fenders is $5 each. Under the lower of cost or market inventory method: Mallard can expense the 900 excess fenders. Mallard can expense all 1,000 of the fenders because of the unlikelihood that they will be sold. the fenders should be valued at $7,500 [(100 x $30) + (900 x $5)]. the fenders should be valued at $5,000 (1,000 x $5) None of the above
J. P. Max Department Stores J. P. Max is a department store carrying a large and varied stock of merchandise. Management is considering leasing part of its floor space for $72 per square foot per year to an outside jewelry company that would sell merchandise. Two areas currently in use are being considered: home appliances (1,000 square feet) and televisions (1,200 square feet). These departments had annual profits of $64,000 for appliances and $82,000 for televisions after allocated fixed occupancy costs of $7 per square foot were deducted. Allocated fixed occupancy costs include property taxes, mortgage interest, insurance, and exterior maintenance for the department store. Required: Considering all the relevant factors, which department should be leased and why? Used by permission of McGraw Hill.
James Company began the month of October with inventory of $29,000. The following inventory transactions occurred during the month: a. The company purchased merchandise on account for $43,000 on October 12, 2013. Terms of the purchase were 3/10, n/30. James uses the net method to record purchases. The merchandise was shipped f.o.b. shipping point and freight charges of $640 were paid in cash. b. On October 18 the company returned merchandise costing $4,400. The return reduced the amount owed to the supplier. The merchandise returned came from beginning inventory, not from the October 12 purchase. c. On October 31, James paid for the merchandise purchased on October 12. d. During October merchandise costing $20,100 was sold on account for $30,800. e. It was determined that inventory on hand at the end of October cost $46,850. Required: 1. Assuming that the James Company uses a periodic inventory system, prepare journal entries for the above transactions including the adjusting entry at the end of October to record cost of goods sold
On January 1, 2011, Labtech Circuits borrowed $100,000 from First Bank by issuing a three year, 8% note, payable on December 31, 2013. Labtech wanted to hedge the risk that general interest rates will decline, causing the fair value of its debt to increase. Therefore, Labtech entered into a three year interest rate swap agreement on January 1, 2011, and designated the swap as a fair value hedge. The agreement called for the company to receive payment based on an 8% fixed interest rate on a notional amount of $100,000 and to pay interest based on a floating interest rate tied to LIBOR. The contract called for cash settlement of the net interest amount on December 31 of each year. Floating (LIBOR) settlement rates were 8% at inception and 9%, 7%, and 7% at the end of 2011, 2012, and 2013, respectively. The fair values of the swap are quotes obtained from a derivatives dealer. These quotes and the fair values of the note are as follows: Required: 1. Calculate the net cash settlement at the end of 2011, 2012, and 2013. 2. Prepare the journal entries during 2011 to record the issuance of the note, interest, and necessary adjustments for changes in fair value. 3. Prepare the journal entries during 2012 to record interest, net cash interest settlement for the interest rate swap, and necessary adjustments for changes in fair value. A 18 4. Prepare the journal entries during 2013 to record interest, net cash interest settlement for the interest rate swap, necessary adjustments for changes in fair value, and repayment of the debt. 5. Calculate the carrying values of both the swap account and the note in each of the three years. 6. Calculate the net effect on earnings of the hedging arrangement in each of the three years. (Ignore income taxes.) 7. Suppose the fair value of the note at December 31, 2011, had been $97,000 rather than $98,241 with the additional decline in fair value due to investors’ perceptions that the creditworthiness of Labtech was worsening. How would that affect your entries to record changes in the fair values?
on january 1, sandro purchased a franchise for $75,000. $15,000 was paid when the agreement was signed and the balance is is payble in 4 annual payments of $15,000.the present value at jan 1, 2012, of the 4 annual payments discounted at 14% is $43,700.the agreement also provides that 5%revenue from the frachise must be paid to the frachisor annualy. sandors revenue from 2012 was $900,000. sandro incurred $65,000of expermintal and development costs.legal fee and other cost $17,600. useful life of 8 years trademark was purchaed for $36,000 on july 1,2000. expendiutres cost $10,200. useful life 20 years questions prepare a schedual showing the intangible assets section of sandro’s balance shet and dec 31, 2012. show supporting computation in good form prepare a schedula showing all expenses resulitng from the transactions that would appear on sandro’s income statment for year eneded dec 2012. shwo supporting compuatations
On January 15, 2012, National Star Inc. purchased 112,000 shares of Krypton Labs Inc. directly from one of the founders for a price of $36 per share. Krypton Labs has 400,000 shares outstanding, including the National Star shares. On July 2, 2012, Krypton paid $274,000 in total dividends to its shareholders. On December 31, 2012, Krypton reported a net income of $1,028,000 for the year. National Star Inc. uses the equity method in accounting for its investment in Krypton Labs. Hide ‘ Hint(s) a. Provide the National Star Inc. journal entries for the transactions involving its investment in Krypton Labs Inc. during 2012. 2012 Jan. 15 2012 July 2 2012 Dec. 31 Hide Feedback Partially Correct Check My Work Feedback a. Jan 15: Increase the investment and decrease Cash for the purchase price (Shares x Per share amount). July 2: Calculate the ownership percentage by dividing the acquired shares by the total shares outstanding. Multiply the percentage by the total dividend and debit cash and credit Investment to reduce the investment by the share of dividends. b. Determine the December 31, 2012, balance of Investment in Krypton Labs Inc. Stock. $
Vedula Advertising Agency was founded by Murali Vedula in January 2007. Presented here are both the adjusted and unadjusted trial balances as of December 31, 2012.
VEDULA ADVERTISING AGENCY Trial Balance December 31, 2012
Unadjusted
Adjusted
Dr.
Cr.
Dr.
Cr.
Cash
$ 11,000
$ 11,000
Accounts Receivable
16,000
19,500
Supplies
9,400
6,500
Prepaid Insurance
3,350
1,790
Equipment
60,000
60,000
Accumulated Depreciation—
Equipment
$ 25,000
$ 30,000
Notes Payable
8,000
8,000
Accounts Payable
2,000
2,000
Interest Payable
0
560
Unearned Service Revenue
5,000
3,100
Salaries and Wages Payable
0
820
Common Stock
20,000
20,000
Retained Earnings
5,500
5,500
Dividends
10000
10000
Service Revenue
57600
63000
Salaries and Wages Expense
9000
9,820
Insurance Expense
1,560
Interest Expense
560
Depreciation Expense
5,000
Supplies Expense
2,900
Rent Expense
4350
4,350
$123,100
$123,100
$132,980
$132,980
Instructions
(a) Journalize the annual adjusting entries that were made.
(b) Prepare an income statement and a retained earnings statement for the year ended December 31, and a classified balance sheet at December 31.
(c) Identify which accounts should be closed on December 31.
(d) If the note has been outstanding 10 months, what is the annual interest rate on that note?
(e) If the company paid $10,500 in salaries in 2012, what was the balance in Salaries and Wages Payable on December 31, 2011?
P3 9 (Adjusting and Closing)Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.
Instructions
(a)Enter the balances in ledger accounts. Allow five lines for each account.
(b)From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)
(1)The buildings have an estimated life of 30 years with no salvage value (straight line method).
(2)The equipment is depreciated at 10% per year.
(3)Insurance expired during the year $3,500.
(4)The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.
(5)It is estimated that 12% of the accounts receivable will be uncollectible.
(6)Salaries and wages earned but not paid by December 31, $3,600.
P 3 11 (Cash and Accrual Basis)On January 1, 2012, Norma Smith and Grant Wood formed a computer sales and service enterprise in Soapsville, Arkansas, by investing $90,000 cash. The new company, Arkansas Sales and Service, has the following transactions during January.
1.Pays $6,000 in advance for 3 months’ rent of office, showroom, and repair space.
2.Purchases 40 personal computers at a cost of $1,500 each, 6 graphics computers at a cost of $2,500 each, and 25 printers at a cost of $300 each, paying cash upon delivery.
3.Sales, repair, and office employees earn $12,600 in salaries and wages during January, of which $3,000 was still payable at the end of January.
4.Sells 30 personal computers at $2,550 each, 4 graphics computers for $3,600 each, and 15 printers for $500 each; $75,000 is received in cash in January, and $23,400 is sold on a deferred payment basis.
5.Other operating expenses of $8,400 are incurred and paid for during January; $2,000 of incurred expenses are payable at January 31.
Instructions
(a)Using the transaction data above, prepare
(1) a cash basis income statement and
(2) an accrual basis income statement for the month of January.
(b)Using the transaction data above, prepare
(1) a cash basis balance sheet and
(2) an accrual basis balance sheet as of January 31, 2012.
(c)Identify the items in the cash basis financial statements that make cash basis accounting inconsistent with the theory underlying the elements of financial statements.
Tingey Industries sells merchandise on a consignment basis to dealers. The selling price of the merchandise averages 25% above cost of merchandise. The dealer is paid a 10% commission on the sales price for all sales made. All dealer sales are made on a cash basis. The following consignment sales activities occurred during 2011.
Westinghouse Electric Corporation The following note appears in the ?oSummary of Significant Accounting Policies?? section of the Annual Report of Westinghouse Electric Corporation.
Note 1 (in part): Revenue Recognition. Sales are primarily recorded as products are shipped and services are rendered. The percentage of completion method of accounting is used for nuclear steam supply system orders with delivery schedules generally in excess of five years and for certain construction projects where this method of accounting is consistent with industry practice.
WFSI revenues are generally recognized on the accrual method. When accounts become delinquent for more than two payment periods, usually 60 days, income is recognized only as payments are received. Such delinquent accounts for which no payments are received in the current month, and other accounts on which income is not being recognized because the receipt of either principal or interest is questionable, are classified as nonearning receivables.
Instructions
(a) Identify the revenue recognition methods used by Westinghouse Electric as discussed in its note on significant accounting policies.
(b) Under what conditions are the revenue recognition methods identified in the first paragraph of Westinghouse’s note above acceptable?
(c) From the information provided in the second paragraph of Westinghouse’s note, identify the type of operation being described and defend the acceptability of the revenue recognition method.
MedCo is a large manufacturing company, currently using a large printing press in its operations and is considering two replacements: the PDX341 and PDW581. The PDX341 costs £500,000 and has annual maintenance costs of £10,000 for the first five years and £15,000 for the next five years. After 10 years, the PDX341 will be scrapped (salvage value is zero). In contrast, the PDW581 can be acquired for £50,000 and requires maintenance of £30,000 a year for its 10 year life. The salvage value of the PDW581 is expected to be zero in 10 years.
Complete the following:
Assuming that MedCo must replace their current printing press (it has stopped functioning), has a 10% cost of capital and all cash flows are after tax, which replacement press is the more appropriate as calculated by using the NPV approach?
Hand in Assignment Question
ABC Wines Company is considering the acquisition of a new irrigation system for its extensive vineyards. The system could either be bought outright for £10 million or via a finance lease requiring three annual payments in advance of £3.7 million. The leasing company is not the supplier or manufacturer of the equipment.
The new system is expected to give the following pre tax net cash savings over the existing system in use:
Year
Pre tax net cash savings
1
£6 million
2
£5 million
3
£3 million
The system would require replacement in three years’ time and have no residual value. The outright purchase would be financed by a loan with an interest rate of 8%.
Assume that corporation tax is charged at 25% and is payable one year in arrears. Writing down allowances is available on the depreciation of the equipment. The company uses the reducing balance method for depreciation at 25%. Lease payments are allowable for tax in full.
The company has no gearing at present and a cost of capital of 13%.
Complete the following:
Evaluate whether ABC Wines should go ahead with the installation of the new irrigation system and whether they should use the purchase or the lease option. (Tip: You should use NPV to perform the analysis; writing down allowances should be taken into consideration.)
Explain the primary ways in which finance leases differ from operating leases.
Wood Mode Company is involved in the design, manufacture, and installation of various types of wood products for large construction projects. Wood Mode recently completed a large contract for Stadium Inc., which consisted of building 35 different types of concession counters for a new soccer arena under construction. The terms of the contract are that upon completion of the counters, Stadium would pay $2,000,000. Unfortunately, due to the depressed economy, the completion of the new soccer arena is now delayed. Stadium has therefore asked Wood Mode to hold the counters at its manufacturing plant until the arena is completed. Stadium acknowledges in writing that it ordered the counters and that they now have ownership. The time that Wood Mode Company must hold the counters is totally dependent on when the arena is completed. Because Wood Mode has not received additional progress payments for the arena due to the delay, Stadium has provided a deposit of $300,000.
Instructions
(a) Explain this type of revenue recognition transaction.
(b) What factors should be considered in determining when to recognize revenue in this transaction?
(c) Prepare the journal entry(ies) that Wood Mode should make, assuming it signed a valid sales contract to sell the counters and received at the time of sale the $300,000 payment.
(a) What is the par or stated value of Coca Cola’s and PepsiCo’s common or capital stock?
(b) What percentage of authorized shares was issued by Coca Cola at December 31, 2007, and by PepsiCo at December 29, 2007?
(c) How many shares are held as treasury stock by Coca Cola at December 31, 2007, and by PepsiCo at December 29, 2007?
(d) How many Coca Cola common shares are outstanding at December 31, 2007? How many PepsiCo shares of capital stock are outstanding at December 29, 2007?
(e) What amounts of cash dividends per share were declared by Coca Cola and PepsiCo in 2007? What were the dollar amount effects of the cash dividends on each company’s stockholders’ equity?
(f) What are Coca Cola’s and PepsiCo’s rate of return on common/capital stock equity for 2007 and
2006? Which company gets the higher return on the equity of its shareholders?
(g) What are Coca Cola’s and PepsiCo’s payout ratios for 2007?
(h) What was the market price range (high/low) for Coca Cola’s common stock and PepsiCo’s capital stock during the fourth quarter of 2007? Which company’s (Coca Cola’s or PepsiCo’s) stock price increased more (%) during 2007?
1. A parent company and its 100% owned subsidiary have only common stock outstanding (10,000 shares for the parent and 3,000 shares for the subsidiary), and neither company has issued other potentially dilutive securities. The equation to compute consolidated EPS for the parent company and its subsidiary is:
(a) ( Net income of parent + Net income of subsidiary ) A? 13,000 shares
(b) ( Net income of parent + Net income of subsidiary ) A? 10,000 shares
(c) Net income of parent A? 13,000 shares
(d) Net income of parent A? 10,000 shares
2. A parent company has a 90% interest in a subsidiary that has no potentially dilutive securities outstanding. In computing consolidated EPS:
(a) Subsidiary common shares are added to parent common shares and common share equivalents
(b) Subsidiary EPS and parent EPS amounts are combined
(c) Subsidiary EPS computations are not needed
(d) Subsidiary EPS computations are used in computing basic earnings
3. In computing a parent company’s diluted EPS, it may be necessary to subtract the parent’s equity in subsidiary realized income and replace it with the parent’s equity in subsidiary diluted earnings. The subtraction in this replacement computation is affected by:
(a) Constructive gain from purchase of parent bonds
(b) Current amortization from investment in the subsidiary
A list of terms and a list of definitions or examples are presented below. Make a list of the numbers 1 through 12 and match the letter of the most directly related definition or example with each number.
Terms
1. Stock warrant
2. Date of record
3. Par value
4. Stock split
5. Treasury stock
6. Stock dividend
7. Preferred stock
8. Outstanding shares
9. Authorized shares
10. Declaration date
11. Comprehensive income
12. Retained earnings
Definitions and Examples
a. The state of Louisiana set an upper limit of 1,000,000 on the number of shares that Gump’s Catch, Inc., can issue.
b. Shares that never earn dividends
c. On October 15, 2008, General Electric announced its intention to pay a dividend on common stock.
d. Shares issued minus treasury shares
e. Common stock divided by the number of shares issued
f. A stock issue that requires no journal entry
g. Shares that may earn guaranteed dividends
h. Capitalizes retained earnings.
i. A right to purchase stock at a specified future time and specified price
j. Emerson Electric will pay a dividend to all persons holding shares of its common stock on December 15, 2008, even if they just bought the shares and sell them a few days later.
k. Any changes to stockholders’ equity from transactions with nonowners
l. The accumulated earnings over the entire life of the corporation that have not been paid out in dividends
Ralph Newkirk is considering a bid for the hot dog and soft drink concession at the 14 football games for the season. There will be 7 college games and 7 professional games. Average attendance at college games is 30,000; at professional games attendance is 60,000. Ralph estimates that he sells one hot dog and one soft drink for each two persons attending a game.
Hot dog
Soft drink
Selling price
$1.50
$1.00
Variable costs:
Hot dog
0.32
Roll
0.14
Mustard, onion, etc.
0.02
Soft drink and ice
0.22
In addition, salespeople earn a 20 percent commission on all sales. Fixed costs per game are $8,000 for rentals of heating, cooking, mixing, and cooling equipment.
The stadium management requested that bids be made in the form of royalties on sales. The highest percentage of sales bid will win the contract.
What percentage of sales can Newkirk pay as royalty to the stadium and earn $180,000 for the season? (Round to nearest one tenth of a percentage point.)
If Newkirk bids 12 percent of sales, what income can he expect? (Is your answer consistent with your answer in requirement 1?)
Assume that Newkirk gets the concession at a royalty of 12 percent of sales. He wants to know how much margin of safety he has in two ways. He is uncertain about total attendance and about the percentage of total attendees who buy a hot dog and drink. What is his break even point for the season, expressed as (a) total attendance assuming one hot dog and drink per two attendees, and (b) the percentage of attendees who must buy a hot dog and drink if total attendance is as expected but the number of hot dogs and drinks each buys is uncertain?
What kinds of information does Newkirk need if he is also deciding to bid for the concession at baseball games at the same stadium?
(Analysis and Classification of Equity Transactions) Penn Company was formed on July 1, 2008. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8% $25 par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Penn Company.
Common Stock
Prior to the 2010–11 fiscal years Penn Company had 110,000 shares of outstanding common stock issued as follows.
1. 85,000 shares were issued for cash on July 1, 2008, at $31 per share.
2. On July 24, 2008, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 2002 and had an estimated fair value of $220,000 on July 24, 2008.
3. 20,000 shares were issued on March 1, 2009, for $42 per share.
During the 2010–11 fiscal year, the following transactions regarding common stock took place.
November 30, 2010 Penn purchased 2,000 shares of its own stock on the open market at $39 per share.
Penn uses the cost method for treasury stock.
December 15, 2010 Penn declared a 5% stock dividend for stockholders of record on January 15, 2011, to be issued on January 31, 2011. Penn was having a liquidity problem and could not afford a cash dividend at the time. Penn’s common stock was selling at $52 per share on December 15, 2010.
June 20, 2011 Penn sold 500 shares of its own common stock that it had purchased on November 30, 2010, for $21,000.
Preferred Stock
Penn issued 40,000 shares of preferred stock at $44 per share on July 1, 2009.
Cash Dividends
Penn has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2011, are shown below. No cash dividends were declared during June 2011 due to the company’s liquidity problems.
Retained Earnings
As of June 30, 2010, Penn’s retained earnings account had a balance of $690,000. For the fiscal year ending June 30, 2011, Penn reported net income of $40,000.
Prepare the stockholders’ equity section of the balance sheet, including appropriate notes, for Penn Company as of June 30, 2011, as it should appear in its annual report to the shareholders.
1. Lora Picture Framing began March with 73 units of inventory that cost $23 each. During the month, Lora made the following purchases and sales: Date Units Price $ March 3 Purchase March 8 Sal
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1. Lora Picture Framing began March with 73 units of inventory that cost $23 each. During the month, Lora made the following purchases and sales: Date?Units?Price $??March 3 Purchase March 8 Sales March 12 Purchase?March 12 Purchase March `15 Sales March 19 Sales March 25 Purchase?112 85 60 45 55 75 65?25 27 30 35 ??The business uses the perpetual inventory system. Required 1. Determine the ending inventory and cost of goods sold amounts for the March financial statements under (a) average cost, (b) FIFO cost, and (c) LIFO cost. Round average cost per unit to the nearest cent and all other amounts to the nearest dollar. (6 Marks) 2. Sales price per unit is $50. Calculate Nelson’s gross profit for March under each method. (3 Marks) 3. Physical stock count at 31 March revealed 89 units of inventory on hand. Under FIFI method calculate loss of inventory and record the journal entry to bring the ending inventory to its correct balance. (1 Mark)
(Conceptual Issues—Equity) Statements of Financial Accounting Concepts set forth financial accounting and reporting objectives and fundamentals that will be used by the Financial Accounting Standards Board in developing standards. Concepts Statement No. 6 defines various elements of financial statements.
Answer the following questions based on SFAC No. 6.
(a) Define and discuss the term ?oequity.??
(b) What transactions or events change owners’ equity?
(c) Define ?oinvestments by owners?? and provide examples of this type of transaction. What financial statement element other than equity is typically affected by owner investments?
(d) Define ?odistributions to owners?? and provide examples of this type of transaction. What financial statement element other than equity is typically affected by distributions?
(e) What are examples of changes within owners’ equity that do not change the total amount of owners’ equity?
Hedging to offset risk The treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five Treasury futures contracts at $107,000 per contract. It is July and the contracts must be closed out in December of this year. Long term interest rates are currently 7.3 percent. If they increase to 8.5 percent, assume the value of the contracts will go down by 10 percent. Also if interest rates do increase by 1.2 percent, assume the firm will have additional interest expense on its business loans and other commitments of $63,000. This expense, of course, will be separate from the futures contracts. a. What will be the profit or loss on the futures contract if interest rates go to 8.5 percent by December when the contract is closed out? b. Explain why a profit or loss took place on the futures contracts. c. After considering the hedging in part a, what is the net cost to the firm of the increased interest expense of $63,000? What percent of this $63,000 cost did the treasurer effectively hedge away? d. Indicate whether there would be a profit or loss on the futures contracts if interest rates went down.
Help im new to this. this is what i have to do … You have a small tax accounting preparation and bookkeeping practice. A new client enters your office and places a box of receipts and bank statements on your desk and says that she would like to have a set of financials prepared and tax returns completed. She also states that the financials and the return will be given to her bank as part of the documentation needed to acquire a $300,000 bank loan. She would like you to complete the work within a week. As you review the documentation, you note that some of the expenses and receipts for income are questionable and you would need more information in order to completely and accurately complete the forms she has requested. When you request the additional information from the client, she tells you that she has no more documentation and that is all you can be given. A. You role in this scenario is to decide on what you will do, what you can do, and how to proceed. Do you complete the financials, and are you able to prepare the tax returns? What information do you give to the client so that she can present it to the bank in hopes of getting her $300,000 loan? You know that if she does not get the loan, her business will not be able to continue and she will have to lay off her five employees and close her doors. What obligation do you have to help her, and how can you help her? B. citing applicable IRS codes and accounting rules for your decision
Can you please help me solve this? I’m trying to go through practice problems to study for an exam.
Metro Express has 5 sales employees, each of whom earns $4,000 per month and is paid on the last working day of the month. Each employee’s wages are subject to FICA social security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $110 for each employee.
Solve part a: Prepare the general journal entry to accrue the monthly sales salaries expense at January 31.
Solve part b:
The employer payroll taxes for Metro Express include FICA taxes, federal unemployment taxes of 0.8% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer’s payroll taxes at January 31 for Metro Express. (Assume that none of the employees has reached the unemployment limit of $7,000.)
Can anyone hep me with how to put these items on a balance sheet? Kenneth HudsonACG3082 Spring 2013 Accounting for Non Majors: ACG3082_Spring2013_AccountingNonMajors_Kaplan W3 Ch4 Assignment Bookkeeping & Transactions instructions | help Question #1 (of 8)Question #2 (of 8)Question #3 (of 8)Question #4 (of 8)Question #5 (of 8)Questions #6 7 (of 8)Question #8 (of 8) Use the sub navigation below to navigate within this series of questions. 1.value: 10.00 points The transactions relating to the formation of Blue Co. Stores, Inc., and its first month of operations follow: a. The firm was organized and the owners invested cash of $8,200. b. The firm borrowed $5,200 from the bank; a short term note was signed. c. Display cases and other store equipment costing $1,550 were purchased for cash. The original list price of the equipment was $1,920, but a discount was received because the seller was having a sale. d. A store location was rented, and $1,300 was paid for the first month’s rent. e. Inventory of $14,900 was purchased; $8,800 cash was paid to the suppliers, and the balance will be paid within 45 days. f. During the first week of operations, merchandise that had cost $4,800 was sold for $6,000 cash. g. A newspaper ad costing $120 was arranged for; it ran during the second week of the store’s operations. The ad will be paid for in the next month. h. Additional inventory costing $4,500 was purchased; cash of $1,100 was paid, and the balance is due in 30 days. i. In the last three weeks of the first month, sales totaled $13,250, of which $9,100 was sold on account. The cost of the goods sold totaled $8,700. j. Employee wages for the month totaled $2,000; these will be paid during the first week of the next month. k. The firm collected a total of $3,500 from the sales on account recorded in transaction i. l. The firm paid a total of $4,250 of the amount owed to suppliers from transaction e. Required: (a) Record each transaction in the appropriate columns. (Negative amounts should be indicated by a minus sign. Leave no cells blank be certain to enter “0” wherever required. Enter the total of the expense column as a positive amount. Omit the “$” signs in your response.) Assets Liabilities Owners’ Equity Transaction Cash + Accounts Receivable + Merchandise Inventory + Equipment = Notes Payable + Accounts Payable + Paid in Capital + Retained earnings + Revenues Expenses a. b. c. d. e. f. g. h. i. j. k. l. Total + + + = + + + + (b) Calculate the total assets, liabilities, and owners’ equity at the end of the month and calculate the amount of net income for the month. (Omit the “$” signs in your response.) Assets $ Liabilities $ Owners’ equity $ Net income $
Hobson acquires 40 percent of the outstanding voting stock of Stokes Company on January 1, 2012, for $365,700 in cash. The book value of Stokess net assets on that date was $760,000, although one of the companys buildings, with a $71,200 carrying value, was actually worth $111,450. This building had a 10 year remaining life. Stokes owned a royalty agreement with a 20 year remaining life that was undervalued by $114,000. Stokes sold inventory with an original cost of $65,100 to Hobson during 2012 at a price of $93,000. Hobson still held $22,800 (transfer price) of this amount in inventory as of December 31, 2012. These goods are to be sold to outside parties during 2013. Stokes reported a loss of $71,100 for 2012, $43,600 from continuing operations and $27,500 from an extraordinary loss. The company still manages to pay a $5,000 cash dividend during the year. During 2013, Stokes reported a $56,400 net income and distributed a cash dividend of $7,000. It made additional inventory sales of $74,000 to Hobson during the period. The original cost of the merchandise was $46,250. All but 30 percent of this inventory had been resold to outside parties by the end of the 2013 fiscal year. Prepare all journal entries for Hobson for 2012 and 2013 in connection with this investment. Assume that the equity method is applied. (Do not round intermediate calculations.)
House of Pianos, Inc., purchases pianos from a well known manufacturer and sells them at the retail level. The pianos sell, on the average, for $3,300 each. The average cost of an piano from the manufacturer is $1,492. The costs that the company incurs in a typical month are presented below: Costs Cost Formula Selling: Advertising ………………………………….. $955 per month Delivery of pianos …………………………. $61 per piano sold Sales salaries and commissions…………. $4,823 per month, plus 4% of sales Utilities ……………………………………….. $633 per month Depreciation of sales facilities ………….. $4,944 per month Administrative: Executive salaries ………………………….. $13,490 per month Depreciation of office equipment ………. $943 per month Clerical ……………………………………….. $2,499 per month, plus $37 per piano sold Insurance ……………………………………. $719 per month During November, the company sold and delivered 60 pianos. Required: 1. Prepare a traditional income statement for September. 2. Prepare a contribution format income statement for September. Show costs and revenues on both a total and a per unit basis down through contribution margin. 3. Refer to the income statement you prepared in (2) above. Why might it be misleading to show the fixed costs on a per unit basis?
Hurst Mats manufactures custom replacement floor mats for automobiles. The floor mats are made of spun nylon on highly automated, expensive machinery. Hurst manufactures two mat styles: Plush and Deluxe. Hursts unionized work force makes it difficult for Hurst to compete on price. So far it has been able to successfully compete on quality, innovative design, and delivery schedule. However, the leaders of Hursts union are aggressive and are seeking additional work related job guarantees. Hurst management would like to reduce its dependence on unionized labor. Hursts manufacturing process is overhead driven; most of the overhead arises from the common machinery that produces the Plush and Deluxe floor mats. Nonunionized engineers and technicians maintain the equipment. Expensive lubricants and filters are required to operate the machines, which require large amounts of electricity and natural gas. Each mat style is produced in batches that consist of 10 mats per batch. Plush and Deluxe do not put differential demands on the equipment other
I would like some help on number 12 of the chapter 1 homework of the Connect Access please.
(see links of images, they were too large to upload)
J. D. Simpson started The Simpson Co., a new business that began operations on May 1. The Simpson Co. completed the following transactions during its first month of operations.
May 1
J. D. Simpson invested $44,500 cash in the company.
1
The company rented a furnished office and paid $2,600 cash for Mays rent.
3
The company purchased $1,880 of office equipment on credit.
5
The company paid $770 cash for this months cleaning services.
8
The company provided consulting services for a client and immediately collected $6,000 cash.
12
The company provided $2,400 of consulting services for a client on credit.
15
The company paid $770 cash for an assistants salary for the first half of this month.
20
The company received $2,400 cash payment for the services provided on May 12.
22
The company provided $3,400 of consulting services on credit.
25
The company received $3,400 cash payment for the services provided on May 22.
26
The company paid $1,880 cash for the office equipment purchased on May 3.
27
The company purchased $90 of advertising in this months (May) local paper on credit; cash payment is due June 1.
28
The company paid $770 cash for an assistants salary for the second half of this month.
30
The company paid $300 cash for this months telephone bill.
30
The company paid $280 cash for this months utilities.
31
J. D. Simpson withdrew $1,700 cash from the company for personal use.
.
I answered this above question already, here is my answer:http://i45.tinypic.com/152onba.png
I started on it but started to get confused.. Help is greatly appreciated!
I would like help on the following question (image links):
I need help plz The balance sheet for Bearing Industries Inc. at the end of the current fiscal year indicated the following: Bonds payable, 10% (issued in 2002, due in 2022) $1,800,000 Preferred $10 stock, $50 par 88,500 Common stock, $5 par 398,250 Income before income tax was $396,000, and income taxes were $59,700, for the current year. Cash dividends paid on common stock during the current year totaled $89,208. The common stock was selling for $32 per share at the end of the year. Determine each of the following. Round answers to one decimal place, except for dollar amounts which should be rounded to the nearest whole cent. a. Number of times bond interest charges are earned: b. Number of times preferred dividends are earned: c. Earnings per share on common stock: $ d. Price earnings ratio: e. Dividends per share of common stock: $ f. Dividend yield:
I need help with the question below. A job order cost sheet for Lowry Company is shown below. Job No. 92 For 2,000 Units Date Direct Direct Manufacturing Materials Labor Overhead Beg. bal. Jan. 1 6,400 6,300 4,725 8 6,300 12 9,100 7,280 25 2,300 27 4,700 3,760 15,000 20,100 15,765 Cost of completed job: Direct materials $15,000 Direct labor 20,100 Manufacturing overhead 15,765 Total cost $50,865 Unit cost ($50,865/2,000) $25.43 (a) On the basis of the foregoing data, answer the following questions. (1) What was the balance in Work in Process Inventory on January 1 if this was the only unfinished job? Balance in Work in Process Inventory on January 1 $ (2) If manufacturing overhead is applied on the basis of direct labor cost, what overhead rate was used in each year? Last year Current year Overhead rate % % (b) Prepare summary entries at January 31 to record the current years transactions pertaining to Job No. 92. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Jan. 31 (To record raw materials used) 31 (To record factory labor used) 31 (To record manufacturing overhead) 31 (To record job completed)
I really need help with the following problem. I can’t get this to save my LIFE! Someone Please help me! Youve just been hired onto ABC Company as the corporate controller. ABC Company is a manufacturing firm that specializes in making cedar roofing and siding shingles. The company currently has annual sales of around $1.2 million, a 25% increase from the previous year. The company has an aggressive growth target of reaching $3 million annual sales within the next 3 years. The CEO has been trying to find additional products that can leverage the current ABC employee skillset as well as the manufacturing facilities. As the controller of ABC Company, the CEO has come to you with a new opportunity that hes been working on. The CEO would like to use the some of the shingle scrap materials to build cedar dollhouses. While this new product line would add additional raw materials and be more time intensive to manufacture than the cedar shingles, this new product line will be able to leverage ABCs existing manufacturing facilities as well as the current staff. Although this product line will require added expenses, it will provide additional revenue and gross profit to help reach the growth targets. The CEO is relying on you to help decide how this project can be afforded Provide details about the estimated product costs, what is needed to break even on the project, and what level of return this product is expected to provide. In order to help out the CEO, you need to prepare a six to eight page report that will contain the following information (including exhibits, but excluding your references and title page). Refer to the accompanying Excel spreadsheet (available through your online course) for some specific cost and profit information to complete the calculations. I. An overall risk profile of the company based on current economic and industry issues that it may be facing. II. Current company cash flow a. You need to complete a cash flow statement for the company using the direct method. b. Once youve completed the cash flow statement, answer the following questions: i. What does this statement of cash flow tell you about the sources and uses of the company? ii. Is there anything ABC Company can do to improve the cash flow? iii. Can this project be financed with current cash flow from the company? Why or why not? iv. If the company needs additional financing beyond what ABC Company can provide internally (either now or sometime throughout the life of the project), how would you suggest the company obtain the additional financing, equity or corporate debt, and why? III. Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product. a. What is the product cost for the expansion product? b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product? c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product? d. Assuming the same sales mix of these two products, what are the contribution margins and break even points by product? IV. Potential investments to accelerate profit: ABC company has the option to purchase additional equipment that will cost about $42,000, and this new equipment will produce the following savings in factory overhead costs over the next five years: Year 1, $15,000 Year 2, $13,000 Year 3, $10,000 Year 4, $10,000 Year 5, $6,000 ABC Company uses the net present value method to analyze investments and desires a minimum rate of return of 12% on the equipment. a. What is the net present value of the proposed investment ignore income taxes and depreciation? b. Assuming a 5 year straight line depreciation, how will this impact the factorys fixed costs for each of the 5 years (and the implied product costs)? What about cash flow? c. Considering the cash flow impact of the equipment as well as the time value of money, would you recommend that ABC Company purchases the equipment? Why or why not? SPREADSHEET FOR I ABC Company’s current financial information (before/without expansion) Dec. 31,19X2 Dec. 31,19X1 Cash $ 5,000 $ 7,000 Accounts receivable (net) $ 12,000 $ 18,000 Merchandise inventory $ 35,000 $ 28,000 Property plant, & equipment $ 40,000 $ 30,000 Less: Accumulated depreciation $ (17,000) $ (10,000) Total assets $ 75,000 $ 73,000 Accounts payable* $ 25,000 $ 21,000 Income taxes payable $ 4,000 $ 1,000 Common stock $ 24,000 $ 24,000 Retained earnings $ 22,000 $ 27,000 Total liabilities & stock, equity $ 75,000 $ 73,000 The firm’s accrual basis income statement revealed the following data: Sales $ 120,000 Cost of goods sold $ 80,000 selling and administrative expenses $ 25,000 Depreciation expense $ 7,000 Income taxes $ 3,000 Dividends declared and paid during 19X2 $ 10,000 ABC purchased $10,000 of equipment for cash on August 14. (There was no interest expense.) SPREAD SHEET FOR II ABC’s Product information Current Product Expansion Product (estimate) Selling Price $12.00 ? Units produced and expected to be sold 80,000 5,000 Machine Hours 40,000 5,000 Direct Materials $1.30 per unit $5.60 per unit Direct labor dollars needed per product $2.80 per unit $4.00 per unit Variable Factory Overhead $1.00 per Machine Hour $1.00 per Machine Hour Variable Selling Expense $0.20 per unit $0.20 per unit Total Fixed Costs: Fixed Factory Overhead $ 198,000 Fixed Selling expenses $ 191,250
I can’t figure out where the answers come from or how to calculate. The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. CANTON CORPORATION Income Statement for 2010 Sales $292,250 (16,700 units at $17.50) Cost of goods sold 175,350 (16,700 units at $10.50) Gross profit 116,900 Selling and administrative expense 17,535 Depreciation 17,500 Operating profit 81,865 Taxes (30%) 24,560 After tax income 57,305 (a) Assume in 2011 the same 16,700 unit volume is maintained, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $10.50 per unit. Also assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute after tax income for 2011. (Round your answer to the nearest whole number. Omit the “$” sign in your response.) After tax income $ ___________________ (b) In part a, by what percent did after tax income increase as a result of a 10 percent increase in the sales price? (Round your answer to 2 decimal places. Omit the “%” sign in your response.) Gain in after tax income ______________________% (c) Now assume that in 2012 the volume remains constant at 16,700 units, but the sales price decreases by 15 percent from its year 2011 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $11.00 per unit. Further, assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute the after tax income. (Round your sales price to 2 decimal places and final answer to the nearest dollar amount. Omit the “$” sign in your response.) After tax income __________________________
I am unclear on how I get the Net income using the indirect method for the statement of cash flow using the balance sheet provided below.
Problem 14 1 (Algorithmic) Statement of Cash Flows”Indirect Method
The comparative balance sheet of Mavenir Technologies Inc. for December 31, 2013 and 2012, is shown as follows:
Dec. 31, 2013
Dec. 31, 2012
Assets
Cash
$266,160
$248,160
Accounts receivable (net)
96,420
89,130
Inventories
272,190
263,880
Investments
0
102,240
Land
139,610
0
Equipment
300,310
233,310
Accumulated depreciation equipment
(70,310)
(62,910)
Total
$1,004,380
$873,810
Liabilities and Stockholders’ Equity
Accounts payable (merchandise creditors)
$181,790
$172,140
Accrued expenses payable (operating expenses)
18,080
22,720
Dividends payable
10,040
7,860
Common stock, $10 par
54,240
42,820
Paid in capital in excess of par common stock
203,890
118,840
Retained earnings
536,340
509,430
Total
$1,004,380
$873,810
The following additional information was taken from the records:
The investments were sold for $119,620 cash.
Equipment and land were acquired for cash.
There were no disposals of equipment during the year.
The common stock was issued for cash.
There was a $67,980 credit to Retained Earnings for net income.
There was a $41,070 debit to Retained Earnings for cash dividends declared.
Instructions:
Hide
Hint(s)
Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use a minus sign to indicate cash outflows, negative amounts or a decrease in cash.
Part I51 is used in one of Pries Corporations products. The company makes 18,000 units of this part each year. The companys Accounting Department reports the following costs of producing the part at this level of activity: An outside supplier has offered to produce this part and sell it to the company for $15.80 each. If this offer is accepted, the supervisors salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside suppliers offer were accepted, only $26,000 of these allocated general overhead costs would be avoided. If management decides to buy part I51 from the outside supplier rather than to continue making the part, what would be the annual impact on the companys overall net operating income? A) Net operating income would decline by $81,800 per year. B) Net operating income would decline by $55,800 per year. C) Net operating income would decline by $119,800 per year. D) Net operating income would decline by $29,800 per year
(Ignore income taxes in this problem.) Northstate College has a telephone system that is in poor condition. The system can be either overhauled or replaced with a new system. The following data have been gathered concerning these two alternatives: Present System Proposed New System Purchase cost when new………………………………………….. $100,000 $150,000 Accumulated depreciation……………………………………….. 90,000 Overhaul cost needed now………………………………………. 80,000 Annual cash operating costs…………………………………….. 30,000 20,000 Salvage value now………………………………………………….. 10,000 Salvage value in 8 years…………………………………………… 2,000 15,000 Working capital required…………………………………………. 50,000 Northstate College uses a 12% discount rate and the total cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years. The net present value of the overhaul alternative is?
The Immanuel Company has just obtained a request for a special order of 6,000 jigs to be shipped at the end of the month at a selling price of $7 each. The company has a production capacity of 90,000 jigs per month with total fixed production costs of $144,000. At present, the company is selling 80,000 jigs per month through regular channels at a selling price of $11 each. For these regular sales, the cost for one jig is: If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be affected by this order. At what selling price per unit should Immanuel be indifferent between accepting or rejecting the special offer? A) $7.40 B) $7.70 C) $6.40 D) $4.90
The income statement of Benning Co. for the month of July shows net income of $1,400 based on Service Revenue $5,500, Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $600. In reviewing the statement, you discover the following. 1.Insurance expired during July of $400 was omitted. 2.Supplies expense includes $200 of supplies that are still on hand at July 31. 3.Depreciation on equipment of $150 was omitted. 4.Accrued but unpaid wages at July 31 of $300 were not included. 5.Services provided but unrecorded totaled $500. Instructions Complete the correct income statement for July 2010. (List amounts from largest to smallest eg 10, 5, 3, 2.) Benning Co. Income Statement For the Month Ended July 31, 2010 Revenues Service RevenuePrepaid InsuranceSuppliesEquipmentUtilities ExpenseUnearned RevenueAccumulated DepreciationWages ExpenseAccrued RevenueWages PayableSupplies ExpenseInsurance ExpenseDepreciation Expense $ Expenses EquipmentPrepaid InsuranceService RevenueUnearned RevenueAccumulated DepreciationSuppliesDepreciation ExpenseWages PayableInsurance ExpenseWages ExpenseAccrued RevenueSupplies ExpenseUtilities Expense $ Prepaid InsuranceInsurance ExpenseAccrued RevenueAccumulated DepreciationEquipmentWages PayableSupplies ExpenseUtilities ExpenseService RevenueWages ExpenseDepreciation ExpenseSuppliesUnearned Revenue Insurance ExpenseUtilities ExpenseUnearned RevenueDepreciation ExpenseWages ExpenseSupplies ExpenseService RevenueAccrued RevenuePrepaid InsuranceWages PayableSuppliesAccumulated DepreciationEquipment Wages ExpensePrepaid InsuranceDepreciation ExpenseUnearned RevenueSuppliesAccrued RevenueAccumulated DepreciationUtilities ExpenseWages PayableEquipmentInsurance ExpenseSupplies ExpenseService Revenue Utilities ExpenseInsurance ExpenseService RevenueAccumulated DepreciationWages PayableSupplies ExpensePrepaid InsuranceSuppliesUnearned RevenueAccrued RevenueWages ExpenseEquipmentDepreciation Expense Total Expenses Net income $
An individual is considered to materially participate in an activity if any of the following tests are met with the exception of (Points : 2) the individual participates in the activity for more than 500 hours during the year. the individual participates in the activity for 75 hours during the year, and that participation is more than any other individual’s participation for the year. the individual has materially participated in the activity in any five years during the immediate preceding 10 taxable years. the individual’s participation in the activity for the year constitutes substantially all of the participation in the activity by all individuals. 2. Tom and Shawn own all of the outstanding stock of Brady Corporation. This year, Brady generates taxable income of $20,000 from active business operations, and also reports investment interest of $22,000 and losses of $28,000 from a passive activity. As a result, Brady Corporation reports (Points : 2) net income of $42,000. interest income of $22,000 and a passive loss carryover of $8,000. business income of $20,000 and a passive loss carryover of $6,000. business income of $20,000, interest income of $22,000, and a passive loss carryover of $28,000
Investing in real estate does present some opportunity for the creation of wealth, much like any other investment does. Taxation of rental real estate, however, does present some unique rules, and these rules can have a dramatic impact on the investor’s realized gain or loss from the real estate rental activity. Let’s begin outlining the tax consequences by describing the various capacities in which an individual can own and rent real estate. Asked differently, are there distinctions in the tax law that depend on the manner in which the property is held or used, such as between those who rent real estate as a full time business and those who merely rent a vacation home? What are the rules that we follow in telling one type of rental property or rental ownership from another?
Investments in the stock market have increased at an average compound rate of about 5% since 1919. It is now 2012. a. If you invested $1,000 in the stock market in 1919, how much would that investment be worth today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment $ ____________ b. If your investment in 1919 has grown to $1 million, how much did you invest in 1919? (Do not round intermediate calculations. Round your answer to 2 decimal places.) What is present value __________ Present value $ check my workreferencesebook & resources eBook: Future Values and Compound InteresteBook: Present Values Worksheet Learning Objective: 05 01 Calculate the future value to which money invested at a given interest rate will grow. Difficulty: Basic Learning Objective: 05 02 Calculate the present value of a future payment
FF&T Corporation is a confectionery wholesaler that frequently buys and sells securities to meet various investment objectives. The following selected transactions relate to FF&Ts investment activities during the last two months of 2013. At November 1, FF&T held $48 million of 20 year, 10% bonds of Convenience, Inc., purchased May 1, 2013, at face value. Management has the positive intent and ability to hold the bonds until maturity. FF&Ts fiscal year ends on December 31. Nov. 1 Received semiannual interest of $2.4 million from the Convenience, Inc., bonds. Dec. 1 Purchased 12% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30. 31 Purchased U.S. Treasury bills that mature in two months for $8.9 million. 31 Recorded any necessary adjusting entry(s) relating to the investments. The fair values of the investments at December 31 were: Convenience bonds $ 44.7 million Facsimile Enterprises bonds 30.9 million U.S. Treasury bills 8.9 million prepare the journal entry for following transactions: 1. Received semiannual interest of $2.4 million from the Convenience, Inc., bonds. 2. Purchased 12% bonds of Facsimile Enterprises at their $30 million face value, to be held until they mature in 2026. Semiannual interest is payable May 31 and November 30. 3. Purchased U.S. Treasury bills that mature in two months for $8.9 million. 4.Recorded any necessary adjusting entry(s) relating to the investments.
The following calendar year end information is taken from the December 31, 2011, adjusted trial balance and other records of Plaza Company Advertising expense $ 30,750 Direct labor $ 677,480 Depreciation expense”Office equipment 9,250 Income taxes expense 235,725 Depreciation expense”Selling equipment 10,600 Indirect labor 58,875 Depreciation expense”Factory equipment 35,550 Miscellaneous production costs 10,425 Factory supervision 104,600 Office salaries expense 65,000 Factory supplies used 9,350 Raw materials purchases 927,000 Factory utilities 35,000 Rent expense”Office space 24,000 Inventories Rent expense”Selling space 28,100 Raw materials, December 31, 2010 168,850 Rent expense”Factory building 78,800 Raw materials, December 31, 2011 184,000 Maintenance expense”Factory equipment 37,400 Goods in process, December 31, 2010 17,700 Sales 4,527,000 Goods in process, December 31, 2011 21,380 Sales discounts 64,500 Finished goods, December 31, 2010 169,350 Sales salaries expense 394,560 Finished goods, December 31, 2011 138,490
The following facts relate to gift cards sold by Sunbru Coffee Company during 2011. Sunbru’s fiscal year ends on December 31. (a.) In October, 2011 sold $3,000 of gift cards, and redeemed $500 of those gift cards. (b.) In November, 2011, sold $4,000 of gift cards, and redeemed $1,400 of October gift cards and $700 of November gift cards. (c.) In December, 2011, sold $3,000 of gift cards, and redeemed $200 of October gift cards, $2,000 of November gift cards, and $400 of December gift cards. (d.) Sunbru views a gift card to be “broken” (with a remote probability of redemption) two months after the end of the month in which it is sold. Thus, an unredeemed gift card sold at any time during July would be viewed as broken as of September 30. Required: 1. Prepare all journal entries appropriate to be recorded only during the month of December, 2011 relevant to gift card sales, gift card redemptions, and gift card breakage. 2. Determine the balance of the unearned revenue liability to be reported in the December 31, 2011, balance sheet. Show the relevant T account information to support your answer
In each of the following independent situations, indicate the effect on taxable income and E & P, stating the amount of any increase (or decrease) that occurs as a result of the transaction. Assume E&P has already been increased by taxable income. Transaction Taxable Income Increase (Decrease) E&P Increase 1. Realized gain of $80,000 on involuntary conversion of building ($10,000 of gain is recognized) 2. Mining exploration costs incurred on May 1 of the current year; $24,000 is deductible from current year taxable income 3. Sale of equipment to unrelated third party for $240,000; basis is $120,000 (no election out of installment method; no payments are received in the current year). 4. Dividends of $20,000 received from 5% owned corporation, together with dividends received deduction (assume taxable income limit does not apply). 5. Domestic production activities deduction of $45,000 is claimed in current year. 6. Section 179 expense deduction of $100,000 in current year. 7. Impact of current year section 179 expense deduction for previous item in succeeding year. 8. MACRS depreciation of $80,000. ADS depreciation would have been $90,000. 9. Federal income taxes paid in the current year of $80,000
The following information relates to the manufacturing operations of O’Shaughnessy Mfg. Co. during the month of March. The company uses job order costing.
a.
Purchases of direct materials during the month amount to $55,000. (All purchases were made on account.)
b.
Materials requisitions issued by the Production Department during the month total $56,000.
c.
Time cards of direct workers show 2,000 hours worked on various jobs during the month, for a total direct labor cost of $32,000.
d.
Direct workers were paid $28,000 in March.
e.
Actual overhead costs for the month amount to $36,000 (for simplicity, you may credit Accounts Payable).
f.
Overhead is applied to jobs at a rate of $18 per direct labor hour.
g.
Jobs with total accumulated costs of $100,000 were completed during the month.
h.
During March, units costing $120,000 were sold for $200,000. (All sales were made on account.)
Prepare general journal entries to summarize each of these transactions in the company’s general ledger accounts.(Omit the “$” sign in your response.)
General Journal
Debit
Credit
a.
(Click to select) Rental equipment Direct labor Wages expense Rent expense Work in process inventory Materials inventory Utilities expense Accounts payable
(Click to select) Work in process inventory Accounts receivable Wages expense Office supplies Rent expense Salaries payable Accounts payable Utilities expense
b.
(Click to select) Depreciation expense Direct labor Wages expense Rental equipment Various accounts Rent expense Work in process inventory Finished goods inventory
(Click to select) Insurance expense Materials inventory Accounts payable Depreciation expense Various accounts Salaries payable Accrued wages payable Office supplies
c.
(Click to select) Rent expense Utilities expense Various accounts Finished goods inventory Depreciation expense Salaries payable Selling and administrative expenses Work in process inventory
(Click to select) Utilities expense Accounts payable Salaries payable Depreciation expense Selling and administrative expenses Direct labor Rental equipment Work in process inventory
d.
(Click to select) Rent expense Office supplies Selling and administrative expenses Various accounts Finished goods inventory Direct labor Salaries payable Interest expense
(Click to select) Wages expense Various accounts Accounts receivable Salaries payable Cash Depreciation expense Utilities expense Cost of goods sold
e.
(Click to select) Direct labor Utilities expense Manufacturing overhead Salaries payable Depreciation expense Cost of goods sold Accounts payabl Deferred revenue
(Click to select) Direct labor Insurance expense Various accounts Salaries payable Rent expense Finished goods inventory Accounts payable Utilities expense
f.
(Click to select) Salaries payable Accumulated depreciation Work in process inventory Depreciation expense Rental equipment Preferred stock Direct labor Accounts payable
(Click to select) Utilities expense Cost of goods sold Rental equipment Various accounts Manufacturing overhead Depreciation expense Salaries payable Accounts payable
g.
(Click to select) Rent expense Finished goods inventory Work in process inventory Deferred revenue Utilities expense Accounts payable Depreciation expense Cost of goods sold
(Click to select) Depreciation expense Cost of goods sold Accounts payable Rental equipment Various accounts Work in process inventory Interest expense Rent expense
h.
(Click to select) Sales tax payable Depreciation expense Utilities expense Salaries payable Cash Accounts receivable Direct labor Work in process inventory
(Click to select) Accounts payable Wages expense Direct labor Accrued wages payable Deferred revenue Sales Utilities expense Work in process inventory
(Click to select) Accounts payable Utilities expense Cost of goods sold Accrued wages payable Work in process inventory Rental equipment Sales tax payable Office supplies
(Click to select) Cost of goods sold Depreciation expense Accounts payable Interest expense Income taxes expense Finished goods inventory Various accounts Rental equipment
Please explain how to do it and what i use in the journal entires I dont understand and want to
V) STRAYER. N.T7 UNIVERSITY ACC 557 — Assignments and Rubrics
Assignment 1: Review of Accounting Ethics Due Week 3 and worth 200 points
Many organizations have been in the news over the past few years due to accounting ethical breaches that have affected their customers, employees, or the general public. Search the Internet or the Strayer Library to locate a story in the news that depicts an accounting ethical breach. You may select from any type of organization about which you have information or a curiosity.
Write a four to five (4 5) page paper in which you: 1. Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. Provide support for your answer. 2. Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach. 3. Determine how the organizational ethical issue was detected and how management failed to create an ethical environment. 4. Analyze the accounts impacted and / or accounting guidelines violated and the resulting impact to the business operation. 5. As a CFO, recommend which measures could have been taken to prevent this ethical breach and how each measure should be implemented in the future. 6. Use at least four (4) quality academic resources in this assignment. Note: Wikipedia and other Websites do not quality as academic 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.
The specific course learning outcomes associated with this assignment are: • Examine accounting principles and concepts used in businesses. • Prepare and record financial transactions in the accounting cycle according to GAAP and IFRS accounting methodology. • Use technology and information resources to research issues in financial accounting. • Write clearly and concisely about financial accounting using proper writing mechanics.
Grading for this assignment will be based on answer quality, logic / organization of the paper, and language and writing skills, using the following rubric.
Points: 200
Assignment 1: Review of Accounting Ethics
Criteria
Unacceptable Below 70% F
Fair 70 79% C
1. Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory
Did not submit or incompletely assessed whether or not you believe that the current business and
Partially assessed whether or not you believe that the current business and regulatory environment is
Proficient 80 89% B
Exemplary 90 100% A
Satisfactorily assessed whether or not you believe that the current business and regulatory
Thoroug hly assessed whether or not you believe that the current business and _ regulatory
The following selected transactions relate to contingencies of Eastern Products Inc. which began operations in July, 2011. Eastern’s fiscal year ends on December 31. Financial statements are published in April, 2012. 1. No customer accounts have been shown to be uncollectible as yet, but Eastern estimates that 3% of credit sales will eventually prove uncollectible. Sales were $300 million (all credit) for 2011. 2. Eastern offers a one year warranty against manufacturer’s defects for all its products. Industry experience indicates that warranty costs will approximate 2% of sales. Actual warranty expenditures were $3.5 million in 2011 and were recorded as warranty expense when incurred. 3. In December, 2011, Eastern became aware of an engineering flaw in a product that poses a potential risk of injury. As a result, a product recall appears inevitable. This move would likely cost the company $1.5 million. 4. In November, 2011, the State of Vermont filed suit against Eastern, asking civil penalties and injunctive relief for violations of clean water laws. Eastern reached a settlement with state authorities to pay $4.2 million in penalties on February 3, 2012. 5. Eastern is the plaintiff in a $40 million lawsuit filed against a customer for costs and lost profits from contracts rejected in 2011. The lawsuit is in final appeal and attorneys advise that it is virtually certain that Eastern will be awarded $30 million. Required: Prepare the appropriate journal entries that should be recorded as a result of each of these contingencies. If no journal entry is indicated, state why.
In which of the following situations is the individual is an independent contractor rather than an employee? (Points : 5) a nurse who is directly supervised by doctors in an office a computer programmer who is instructed as to what projects to undertake, programming language and format, and hours of work a nurse who travels to several different patients. She sets her own hours and is responsible for the delivery of nursing care and end result a teacher whose hours, classroom responsibilities, content and methods of instruction are established by the school 34. Gwen traveled to New York City on a business trip for her employer. Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area. Gwen’s plane fare for the trip was $250. Meals cost $160 per day. Hotels and other incidental expenses amounted to $250 per day. For the days spent sightseeing, Gwen rented an automobile at $60 per day. Gwen was not reimbursed by her employer for any expenses. Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions. Gwen may deduct (after limitations) (Points : 5) $570. $890. $1,487. $1,570.
Footballs Galore produces both pigskin and artificial leather footballs that are stitched by one of two machines. Selected data related to producing a batch of 10 footballs for each product follow. Sales Price: $500 (Pig Skin) vs $250 (artificial leather) Direct materials $150 (Pig Skin) vs $50 (artificial leather) Direct Labor $45 (Pig Skin) vs $40 (artificial leather) Variable Overhead $30 (Pig Skin) vs $20 (artificial leather) Stitching Hours 2 (Pig Skin) cs 1 (artificial leather) Only two machines are capable of stitching the footballs. They have a maximum capacity of 3,000 total stitching hours per year. Required A. What is the contribution margin per limited resource for each type of football? Contribution margin Pig skin football: $ per unit Artificial leather football: $ per unit B. Determine the contribution margin per sticthing hour that each football type generates. Contribution margin Pig Skin Footballs: (Round to nearest cent.) $ per stitching hour Artificial Leather Footballs: $ per stitching hour
Francine incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100% of the corporations stock. The property transferred to the corporation had the following fair market values and tax adjusted bases. FMV: Inventory: $30,000 Building: $130,000 Land: $50,000 Total : $210,000 Tax Adjusted Basis: Inventory: $10,000 Building: $80,000 Land: $100,000 Total : $190,000 The corporation also assumed a mortgage of $60,000 attached to the building and land. The fair market value of the corporations stock received in the exchange was $150,000. What amount of gain or loss does Francine realize on the transfer of the property to her corporation? What amount of gain or loss does Francine recognize on the transfer of the property to her corporation?
Frank Weston, supervisor of the Fremont Corporations Machining DepartmentAc€¦ the departments cost control report given below reflects direct labor wages and supplies as variable costs; supervision and depreciation as fixed costs; and maintenance and utilities as mixed costs. The fixed component of the budgeted maintenance cost is $92,000; the fixed component of the budgeted utilities cost is $11,700. a) Evaluate the companys cost control report and explain why the variances were all unfavorable. b) Prepare a performance report that will help Mr. Westons superiors assess how well costs were controlled in the Machining Department. Freemont Corporation Machining Department Cost Control Report For the Month Ended June 30 Planning Budget Actual Results Variances Machine hours 35,000 38,000 Direct labor wages $80,500 $86,100 $5,600 U Supplies 21,000 23,100 2,100 U Maintenance 134,000 137,300 3,300 U Utilities 15,200 15,700 500 U Supervision 38,000 38,000 0 Depreciation 80,000 80,000 0 Total $368,700 $380,200
Gary Bauer opens a computer consulting business called Technology Consultants and completes the following transactions in April. April 1 Bauer invested $100,000 cash along with $24,000 in office equipment in the company in exchange for common stock. Apr 2 The company prepaid $7,200 cash for twelve months rent for an office. (Hint: Debit Prepaid Rent for $7,200.) Apr 3 The company made credit purchases of office equipment for $12,000 and office supplies for$2,400. Payment is due within 10 days. Apr 6 The company completed services for a client and immediately received $2,000 cash. Apr 9 The company completed an $8,000 project for a client, who must pay within 30 days. Apr 13 The company paid $14,400 cash to settle the account payable created on April 3. Apr 19 The company paid $6,000 cash for the premium on a 12 month insurance policy. (Hint:Debit Prepaid Insurance for $6,000.) Apr 22 The company received $6,400 cash as partial payment for the work completed on April 9. Apr 25 The company completed work for another client for $2,640 on credit. Apr 28 The company paid $6,200 cash for dividends. Apr 29 The company purchased $800 of additional office supplies on credit. Apr 30 The company paid $700 cash for this months utility bill I have created a general journal. Need help with inputs in the ledger account. From the ledge account the ending balance for Cash should be $73,900 but it just not coming out to that amount. Thank you
Geox Company produces and sells a specialized software package used by valuation analysts throughout the world. The software contains a series of modules connected to online databases in such a way that valuation analysts can quickly and accurately calculate estimated market values for private companies. Geox uses a subscription model to sell its product. Subscribers pay an initial fee, which permits them to immediately download and begin using the software. At the end of one year, subscribers must pay an annual fee or the subscription expires and the software stops working. Geox began operations only several years ago with three brothers pitching in and working together in the garage of the oldest brother, Ricky. He developed the concepts behind the product and its marketing. Middle brother Zeek is a software engineer and did all programming work. The youngest brother, Tricky, developed the Web site and did all of the work setting it up and billing customers. He manages everything to do with accounting. Geox has rapidly grown from only a handful of subscribers to more than 10,000. Because of this growth, Tricky hired three full time staff members for technical support and service. He does all of the billing himself with the help of his wife and oldest son. His present billing system was designed for only a small number of subscribers. Customers input their payment information into a secure Web form on Geoxs site. Tricky then receives the payment details via e mail. He then e mails the customer a code from his database, which the customer inputs into the software to make it work for one year. Tricky has become very good at handling the customer subscriptions and payments, despite the large number of transactions. Still, the large customer load often causes him to work too many hours, so he wants an automated system to handle all customer orders. He found an open source shopping cart system that he likes on the Web. He prefers an open source system so that Zeek can customize it as needed. Zeek is one of the worlds best programmers, and he would never tolerate relying on any accounting system to which he could not make programming changes. Tricky is presently using the Isolex accounting system, which is also completely open source. It handles all payroll and expenses. It also handles revenues, but Tricky enters them manually, in weekly totals. All main data files in the Isolex system are stored in MySQL databases. The means that Zeek can easily integrate the Isolex system with any of the many online shopping cart and billing systems that also support MySQL. Tricky is considering three open source shopping cart and billing system packages. He is very worried about security because he has heard many stories of hackers breaking into online systems such as the one he is contemplating. a. Assume that you are called in as a forensic accountant to advise Geox. How would you suggest evaluating the contemplated open source shopping cart systems? b. How does the fact that the systems are open source affect their security?
Grossman Products began operations in 2011. The following selected transactions occurred from September 2011 through March 2012. Grossman’s fiscal year ends on December 31. 2011: (a.) On September 5, Grossman opened a checking account and negotiated a short term line of credit of up to $10,000,000 at 10% interest. The company is not required to pay any commitment fees. (b.) On October 1, Grossman borrowed $8,000,000 cash and issued a 5 month promissory note with 10% interest payable at maturity. (c.) Grossman received $3,000 of refundable deposits in December for reusable containers. (d.) For the September through December period, sales totaled $5,000,000. The state sales tax rate is 4% and 75% of sales are subject to sales tax. (e.) Grossman recorded accrued interest. 2012: (f.) Grossman paid the promissory note on the March 1 due date. (g.) Half of the storage containers are returned in March, with the other half expected to be returned over the next 6 months. Required: 1. Prepare the appropriate journal entries for the 2011 transactions. 2. Prepare the liability section of the balance sheet at December 31, 2011, based on the data supplied. 3. Prepare the appropriate journal entries for the 2012 transactions.
Hacker Aggregates mines and distributes various types of rocks. Most of the company’s rock is sold to contractors who use the product in highway construction projects. Treva Hacker, company president, believes that the company needs to advertise to increase sales. She has proposed a plan to the other managers that Hacker Aggregates spend $100,000 on a targeted advertising campaign. The company currently sells 25,000 tons of aggregate for total revenue of $5,000,000. Other data related to the company’s production and operational costs follow: Direct labor: $1,500,000 Variable Production Overhead: 200,000 Fixed Production Overhead: 350,000 Selling and administrative expenses: Variable 50,000 Fixed 300,000 A. Compute the break even point in units (i.e., tons) for Hacker Aggregates. tons B. Compute the contribution margin ratio for Hacker Aggregates. Enter as a decimal and round to 2 places.
Harriman Enterprises has three possible projects. Each project requires the same initial investment of $1,000,000. Harriman’s chief financial officer has prepared the following cash flow projections for each project:
Jim Harriman, the company’s president, is unsure of which project to pursue. Each holds promise for the company, but he is confused about what to do because each project generates the same amount of cash flow over the four year period.
Ignoring taxes, compute the net present value of each project at a 15 percent cost of capital.
The Dec 31 2011 adjusted trial balance of business solutions(reflecting its transactions from october through december of 2011 Follows All Debits Cast 48,372 Accounts Receivable 5668 Computer supplies 580 Prepaid Insurance 1,665 Prepaid rent 825 Office equipment 8000 Computer equipment 20,000 S Rey withdrawls 7,100 Depreciation expense Office equipment 400 Depreciation expense Computer equip 1250 Wages expense 3,875 Insurane expesne 555 Rent expense 2475 Computer supplies expense 3065 advertising expense 2753 Mileage expense 896 Miscellaneous expense 250 Repairs expense computer 1305 Inceome summary 0 All credits now Accumulated depreciation office equipment 400 Accumulated depreciation computer equipment 1250 Accounts payable 1100 Wages payable 500 Unearned computer sercices revenue 1500 S Rey Capital 73,000 Totals Debit 109,034 Total Credit 109,034 Record and post the necessary closing entries for business solutions Prepare a post closing trial balance as of December 31 2011 Can anybody help me with this problem ??/
I’m posting a homework question below. It has been posted before. I’d like to know if someone can walk through it with me, I can tell you what I understand and where I’m stuck.
The inventory on hand at the end of 2013 for the Reddall Company is valued at a cost of $87,450. The following items were not included in this inventory:
Purchased goods in transit, under terms FOB shipping point, invoice price $3,700, freight costs $170.
Goods out on consignment to Marlman Company, sales price $2,800, shipping costs of $210.
Goods sold to Grina Co. under terms FOB destination, invoiced for $1,700, which included $251 freight charges to deliver the goods. Goods are in transit.
Goods held on consignment by the Reddall Company at a sales price of $2,700, which included sales commission of 20% of sales price.
Purchased goods in transit, shipped FOB destination, invoice price $21,00 which included freight charges of $190.
Required:
Determine the cost of the ending inventory that Reddall should report on its December 31, 2013 balance sheet, assuming that its selling price is 140% of the cost of the inventory.
Deliverables 1. Describe the healthy meal that you have created from the fast food restaurant using the nutritional value of menu items. a. Name the restaurant and then, write a nutritional analysis of the meal you have created (explain all of the nutrients found in the meal like carbs, protein, fat, and some essential vitamins and minerals) b. Discuss your reaction to the analysis Make sure to explain why you feel the way you do about this meal. For example, if your meal is composed primarily of fat, discuss that point; if you meal supplies a lot of sugar per serving, discuss that as well. Please also remember to link excess or limited amounts of nutrients with diseases or the potential for disease (too much fat may put you at risk for heart disease, not enough calcium may not support bone health, etc. Please make sure this section is as detailed as possible. c. How will this information affect your future food choices? Make sure to explain why/why not you will eat this meal again and support your answer with the information found in the above sections. 2. Describe the unhealthiest meal that you have created from the fast food restaurant using the nutritional value of menu items. a. Name the restaurant and then, write a nutritional analysis of the meal you have created (explain all of the nutrients found in the meal like carbs, protein, fat, and some essential vitamins and minerals) b. Discuss your reaction to the analysis Make sure to explain why you feel the way you do about this meal. For example, if your meal is composed primarily of fat, discuss that point; if you meal supplies a lot of sugar per serving, discuss that as well. Please also remember to link excess or limited amounts of nutrients with diseases or the potential for disease (too much fat may put you at risk for heart disease, not enough calcium may not support bone health, etc. Please make sure this section is as detailed as possible. c. How will this information affect your future food choices? Make sure to explain why/why not you will eat this meal again and support your answer with the information found in the above sections.
PART A: Determine the cost of a job: E Z Boy started and finished Job 310 during April. The company’s records show that the following direct materials were requisitioned for Job 310: Lumber: 50 units @ $9.00 per unit Padding: 15 yards @ $20.00 per yard Upholstery fabric: 30 yards @ $25.00 per yard Labor time records show the following employees (direct labor) worked on Job 310: Vince Owens: 10 hours at $10 per hour Patrick Erin: 15 hours at $15 per hour E Z Boy allocates manufacturing overhead at a rate of $9 per direct labor hour. Requirements: Compute the total amount of direct materials, direct labor and manufacturing overhead that should be shown on Job 310’s job cost record. Job 310 consists of five recliners. If each recliner sells for $600, what is the gross profit per recliner? The attachment provides you a chart to help complete the problem. You may attach the completed chart to demonstrate your work, but please provide the answer: Gross profit per recliner.
PART B: Using activity based costing, what are indirect costs allocated while direct costs are not allocated? Discuss the difference between “allocate” and “assign”.
Based on the above question Fill the Following table…
Job Cost Record for Job #310
Total per 1 unit
Direct Materials:
Lumber: 50 units @ $9.00 per unit
$ 450
Padding: 15 yards at $20 per unit
Upholstery fabric: 30 yards at $25 per yard
Direct Labor:
Vince Owens
Patrick Erin
Total Direct Labor
Manufacturing Overhead Allocated
$$9 per direct labor hour (calculated above)
Total Job Cost
Sales Price per recliner $ 600.00
Cost per recliner (Total job Cost divided by 5 recliners) _____________
Gross profit per recliner $ ____________
You may attach this worksheet for the problem and enter the Gross profit per recliner as a number in the assignment section.
Display Labs Inc recently began production of a new product, flat panel displays, which required the investment of $1,800,000 in assets. The costs of producing and selling 9000 units of flat panel displays are as follows: Variable cost per unit, direct materials $90, direct labor $20, Factory overhead $40, Selling and adminstration expenses $35 totalling $185. The fixed costs are Factory overhead $360,000, selling and administration exenses $180,000. Display Labs is currently considering establishing a selling price for flat panel displays. The president of display labs has decided to use cost plus approach to product pricing and has indicated the displays must earn a 20% rate of return on invested assets. 1. Determine the product cost concept for cost amount per unit, markup percentages, selling price of flat panel displays. 2. using the total cost concept determine the cost per unit, markup percentage rounded to two decimal places and selling price rounded to nearest whole dollae. 3. using variable cost concept for the cost amount per unit, the markup percentage rounded two decimal places and selling price of flat panels 4. assune that as of august 1,2012 5000 units of flat panel displays has been produced and sold during the current year.analysis of domestic market indicates that 4000 additional units are expected to b sold during the remainder of the year at normal product price determined under product cost concept. On Aug 3, 2012 Display labs revieve an offer from Video systems for 1500 units if flat panel displays for $225 each. Video systems will market the units in canada under its own name brand and no selling and adminstative costs wer associated with thesale will be incurred by display labs. The additional business is not expected to affect the domestic sales of flatpanel displays and additional units could be produced using existing capacity.
Distributions from corporations to the shareholders in a nonliquidating distribution will usually be classified as a dividend up to the amount of the corporation’s (Points : 5) earnings and profits. retained earnings. taxable income for the year. stock basis. 6. Bill and Hillary, husband and wife, file separate returns. Bill and Hillary live in a community property state that considers separate property income to be community income. Bill’s salary is $82,000 and Hillary’s salary is $80,000. Hillary receives dividend income of $7,000 from stock inherited from her parents. Bill receives interest income of $5,000 from bonds purchased with his salary after marriage. Bill and Hillary receive $10,000 dividend income from stock they purchased jointly. Bill’s income would be (Points : 5) $92,000. $93,000. $94,500. $97,000.
Dykema Corporation uses activity based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing costs are assigned to products using machine hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. The activity rate for the Processing activity cost pool under activity based costing is closest to: A) $15.00 per MH B) $3.60 per MH C) $0.46 per MH D) $0.31 per MH
Rosss Lipstick Companys long term debt agreements make certain demands on the business. For example, Ross may not purchase treasury stock in excess of the balance of retained earnings. Also, long term debt may not exceed stockholderss equity, and the current ration may not fall below 1.50. If Ross fails to meet any of these requirements, the companys lenders have the authority to take over management of the company.
Changes in consumer demand have made it hard for Ross to attract customers. Current liabilities have mounted faster than current assets, causing the current ratio to fall 1.47. Before releasing financial statements, Rosss management is scrambling to improve the current ratio. The controller points that an investment can be classified as either long term or short term, depending on managements intention. By deciding to convert an investment to cash within one year, Ross can classify the investment as short term a current asset. On the controllers recommendation, Rosss board of directors votes to reclassify long term investments as short term.
Requirements
What effect will reclassifying the investments have on the current ratio? Is Rosss true financial position stronger as a result of reclassifying the investments?
Shortly after the financial statements are released, sales improve; too, does the current ratio. As a result, Rosss management decides not to sell the investments it had reclassified as short term. Accordingly, the company reclassifies the investments as long term. Has management behaved unethically? Give the reasoning underlying your answer.
Elhard Company produces a single product. The cost of producing and selling a single unit of this product at the companys normal activity level of 40,000 units per month is as follows:
The normal selling price of the product is $51.10 per unit. An order has been received from an overseas customer for 2,000 units to be delivered this month at a special discounted price. This order would have no effect on the companys normal sales and would not change the total amount of the companys fixed costs. The variable selling and administrative expense would be $0.10 less per unit on this order than on normal sales. Direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $41.60 per unit. By how much would this special order increase (decrease) the companys net operating income for the month?
Engstrom, Inc., uses 10,000 pounds of a specific component in the production of life preservers each year. Presently, the component is purchased from an outside supplier for $11 per pound. For some time now, the factory has had idle capacity that could be utilized to make the component. Engstrom’s costs associated with manufacturing the component are as follows: Direct material per pound: $3 Direct Labor per pound $3 Variable Overhead per Pound $2 Fixed Overhead per unit (based on annual production of 10,000 pounds) $2 In addition, if the component is manufactured by Engstrom, the company will hire a new factory supervisor at an annual cost of $32,000. Required: If Engstrom chooses to make the component instead of buying it from the outside supplier, what would be the change, if any, in the company’s income?
Enter question here…In mid 2010 a pound of apples cost $1.38, while oranges cost $1.22. Ten years earlier the price of apples was only $.98 a pound and that of oranges was $.76 a pound. a. What was the annual compound rate of growth in the price of the two fruits? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Annual Compound rate growth for apples % Compound rate growth for oranges % ________________________________________ b. If the same rates of growth persist in the future, what will be the price of apples in 2030? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of apples in 2030 $ c. What about the price of oranges? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of oranges in 2030 $
Equivalent Units of Production The Converting Department of Forever Fresh Towel and Tissue Company had 920 units in work in process at the beginning of the period, which were 25% complete. During the period, 19,200 units were completed and transferred to the Packing Department. There were 1,040 units in process at the end of the period, which were 75% complete. Direct materials are placed into the process at the beginning of production. Determine the number of equivalent units of production with respect to direct materials and conversion costs. If an amount is zero or a blank, enter in “0” Forever Fresh Towel and Tissue Company Number of Equivalent Units of Production Direct Materials Conversion Whole Units Equivalent Unit Equivalent Units Inventory in process __________ ____________ _____________ Started and completed __________ ____________ _____________ Transferred to Packing __________ ____________ _____________ Department Inventory In process ending __________ ____________ _____________ Total __________ ____________ _____________
an estimate of the demand function for household furniture produced the folloing results: F= 0.0036Y1.08RR0.16p 0.48 r(2)=0.996 where F= furniture expenditures per household Y = disposible personal income per household R = value of private residential construction per household P = ratio of the furniture price index to the consumer price index a. determine the point price and income elasticities for household furniture. b. what interpretation would you give to the exponent for R? Why do you suppose R was included in the equation as a variable? c. If you were a supplier to the furniture manufacturer, would you have preferred to see the analysis performed in physical sales units rather than dollars of revenue? How would this change alter the interpretation of the price coefficient, presently estimated as 0.48?
As you examined this week, Netflix and its competitors have faced interesting decisions regarding product offerings and pricing. As Netflix pursued offering online movie downloads in 2005, its primary competitor, Blockbuster, revised its product offering in response. In addition, both companies have examined the appropriate pricing schema to remain competitive with their respective product offerings. ‘Develop simple cost volume profit models for Netflix and Blockbuster. ‘What is the unit volume break even level of Netflix? ‘What is the break even revenue level of Blockbuster? ‘How can Netflix and Blockbuster achieve profits equal to 10% of revenues? ‘How can Blockbuster improve profitability given the CVP model? ‘What conditions would allow Netflix to increase price, and how would that affect profits?
Exercise 1 4 High Low Method [LO4] The Edelweiss Hotel in Vail, Colorado, has accumulated records of the total electrical costs of the hotel and the number of occupancy days over the last year. An occupancy day represents a room rented out for one day. The hotel’s business is highly seasonal, with peaks occurring during the ski season and in the summer. Month Occupancy Days Electrical Costs January 2,630 $ 10,783 February 3,130 $ 12,833 March 3,640 $ 13,583 April 1,090 $ 4,469 May 1,770 $ 7,257 June 1,730 $ 7,093 July 4,440 $ 14,854 August 3,860 $ 13,815 September 2,170 $ 8,897 October 1,210 $ 4,961 November 1,790 $ 7,339 December 2,930 $ 12,013 Required: 1. Using the high low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy day. (Round the “Variable cost per occupancy day” to 2 decimal places and the “Fixed cost” to the nearest dollar amount.)
Exercise 14 4 Straight line amortization of bond premium L.O. P3 Prairie Dunes Co. issues bonds dated January 1, 2011, with a par value of $800,000. The bonds annual contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $819,700. 1. What is the amount of the premium on these bonds at issuance? (Omit the “$” sign in your response.) Premium $ 2. How much total bond interest expense will be recognized over the life of these bonds? (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.) Total bond interest expense $ 3. Prepare an amortization table for these bonds; use the straight line method to amortize the premium. (Make sure that the unamortized premium equals “0” and the Carrying value equals the face value of the bonds in the last period. Round your intermediate calculations and final answers to the nearest dollar amount. Omit the “$” sign in your response.) Semiannual Interest Period End Unamortized Premium Carrying Value 1/01/2011 $_________________ $______________ 6/30/2011 $_________________ $______________ 12/31/2011 $_________________ $______________ 6/30/2012 $_________________ $______________ 12/31/2012 $_________________ $______________ 6/30/2013 $_________________ $______________ 12/31/2013 $_________________ $______________
Exercise 3 42 Adjusting Entries Allentown Services, Inc., is preparing adjusting entries for the year ending December 31, 2011. The following data are available: Interest is owed at December 31, 2011, on a six month, 8 percent note. Allentown borrowed $120,000 from NBD on September 1, 2011. Allentown provides daily building maintenance services to Mack Trucks for a quarterly fee of $2,700, payable on the fifteenth of the month following the end of each quarter. No entries have been made for the services provided to Mack Trucks during the quarter ended December 31, and the related bill will not be sent until January 15, 2012. At the beginning of 2011, the cost of office supplies on hand was $1,220. During 2011, office supplies with a total cost of $6,480 were purchased from Office Depot and debited to office supplies inventory. On December 31, 2011, Allentown determined the cost of office supplies on hand to be $970. On September 23, 2011, Allentown received a $7,650 payment from Bethlehem Steel for nine months of maintenance services beginning on October 1, 2011. The entire amount was credited to unearned service revenue when received. 1. Prepare the appropriate adjusting entries at December 31, 2011. a.) Dec. 31 Interest Expense ___________________________ Interest Payable ____________________________ (Record accrued interest) b.) Dec. 31 [______________] _________________________ Service Revenue ____________________________ (record earned revenue) d.) Dec. 31 Unearned Service Revenue ____________________ Service Revenue ____________________________ (record earned revenue) Can you please help me fill in the blanks, I’m having a lot of trouble. An explanation would be great. Thank you.
Exercise 3 5 Adjusting and paying accrued wages L.O. C1, P1 Pablo Management has seven part time employees, each of whom earns $205 per day. They are normally paid on Fridays for work completed Monday through Friday of the same week. They were paid in full on Friday, December 28, 2011. The end of the year, December 31, 2011 falls on a Monday. The next week, the seven employees worked only four days because New Years Day was an unpaid holiday. All the seven employees are paid as usual on Friday, January 4, 2012. (a) Prepare the adjusting entry that would be recorded on Monday, December 31, 2011. (Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31, 2011 (b) Prepare the journal entry that would be made to record payment of the employees wages on Friday, January 4, 2012. (Omit the “$” sign in your response.) Date General Journal Debit Credit Jan. 4, 2012
Exercise 4 6 Analyzing and recording merchandise transactions both buyer and seller L.O. P1, P2 On May 11, Smythe Co. accepts delivery of $35,000 of merchandise it purchases for resale from Hope Corporation. With the merchandise is an invoice dated May 11, with terms of 3/10, n/90, FOB shipping point. The goods cost Hope $23,450. When the goods are delivered, Smythe pays $450 to Express Shipping for delivery charges on the merchandise. On May 12, Smythe returns $1,800 of goods to Hope, who receives them one day later and restores them to inventory. The returned goods had cost Hope $1,206. On May 20, Smythe mails a check to Hope Corporation for the amount owed. Hope receives it the following day. (Both Smythe and Hope use a perpetual inventory system.) 1. Prepare journal entries that Smythe Co. records for these transactions. (Round your answers to the nearest dollar amount. Omit the “$” sign in your response.) Date General Journal Debit Credit May 11 Purchased merchandise on credit. Paid shipping charges on purchased merchandise. May 12 Returned unacceptable merchandise. May 20 Paid balance within the discount period.
Write a business report of 2000 words ±10% and submit the completed).
Turnitin ‘Similarity Index’ of greater than 15% will result in a mark of zero being awarded.
Failure to comply with any of the previous information will automatically result in a fail grade being awarded.
Submission date: available on Moodle2 20/11/2013
Topic:
Based on an industry sector of your choice (not IT); select an appropriate company for analysis. This company will form the basis of your first assignment and is worth 60% of the module mark.
1. Business Information – 20 marks (approx. 400 words)
a) The background of the company. (5 marks)
b) The industry sector; the main competitors to the company in the sector; the position of the company in the market with regard to performance; and scale of its operations in relation to its competitors. (10 marks)
c) The products or services provided by the company; and their main selling points compared with similar products/services from its competitors. (5 marks)
2. Additional Information – 40 marks (approx. 800 words)
Based on at least five of the weekly topics covered in the syllabus for this module, apply DSS tools and techniques to each carefully chosen problem domain within the business (10 marks per topic).
3. Recommendations. – 40 marks (approx. 800 words)
An assessment as to the DSS and BI requirements for your chosen company in order for them to remain competitive in the future given the industry specific pressures. This must be based on current business paradigms and have some connection to topical events. (30 marks)
Use proven DSS nomenclatures of your choice to relate the information. (10 marks)
4. Style, structure and presentation –
N.B. Failure to cite and reference correctly will negatively impact upon marks awarded within each and every section of your report.
The report should be properly structured, using a variety of presentation modes (e.g. text, tables, pictures, graphs, etc.) and written in the third person, non possessive. Assume the report will be read by board members of the company and should be written and styled in an appropriate manner for managers at this level.
The information in the report should be your own work, properly referenced (CU Harvard) with a bibliography identifying sources.)
5. Marking Rubric
Mark range
Criteria
>70%
Excellent evaluation of the chosen company and relevant sector to include its reason for being and competitive position;
Excellent demonstration of understanding as regards the tools, techniques, language, and underlying theory which has been learnt as part of the student’s extensive self directed learning in addition to the material covered in class.
60 69%
Very good evaluation of the chosen company and relevant sector to include its reason for being and competitive position;
Very good demonstration of understanding as regards the tools, techniques, language, and underlying theory which has been learnt as part of the student’s self directed learning in addition to the material covered in class.
50 59%
Good evaluation of the chosen company and relevant sector to include its reason for being and competitive position;
Good demonstration of understanding as regards the tools, techniques, language, and underlying theory which has been learnt as part of the student’s minimal self directed learning in addition to the material covered in class.
40 49%
Adequate evaluation of the chosen company and relevant sector to include its reason for being and competitive position;
Adequate demonstration of understanding as regards the tools, techniques, language, and underlying theory which has been learnt in class.
Largely descriptive language which shows no (or very little) understanding of the topics covered in class and their application to the questions posed.
Cost of quality and value added/non value added reports Mountain States Cable Co. provides cable TV and Internet service to the local community. The activities and activity costs of Mountain States are identified as follows: Hide a. Prepare a cost of quality report. Assume that sales are $2,000,000. If required, round percentages to one decimal place. Mountain States Cable Company Cost of Quality Report Quality Cost Classification Quality Cost Percent of Total Quality Cost Percent of Total Sales Prevention $ % % Appraisal Internal failure External failure Total $ % % Hide b. Prepare a value added/non value added analysis. Mountain States Cable Company Value Added/Non Value Added Activity Analysis Category Amount Percent Value added $ % Non value added Total $ % Any insight would be greatly appreciated Thank You!
Corporate Financial Management Assignment 1 INSTRUCTIONS TO STUDENTS This Assignment consist of one Question Assignment carries Total of 100 Marks Due Date:
Question (100 Marks) The Following financial information related to GlobeMau co: 20X720X6$$000000Sales (all on credit) 37400 26720Cost of Sales 34408 23781Operating Profit 2992 2939Finance costs (interest payments) 355 274Profit before Taxation 2637 266520X720X6$$$$000000000000Non Current Assets 13632 12750Current Assets Inventory 46002400Trade receivables 4600220092004600Current Liabilities Trade Payables 47502000Overdraft 3225160079753600Net Current Assets 1225 100014857 137508% Bonds 2425 242512432 11325Capital and Reserves Share Capital 6000 6000Reserves 6432 532512432 11325The average variable overdraft interest rate in each year was 5%. The 8% bonds are redeemable in ten years’ time. Required: Use the above financial information to discuss, with supporting calculations, the financial performance of GlobeMau.
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Corporate Financial Management Assignment 1 INSTRUCTIONS TO STUDENTS This Assignment consist of one Question Assignment carries Total of 100 Marks Due Date:Question (100 Marks) The Following financial information related to GlobeMau co: 20X7 20X6 $ $ 000 000 Sales (all on credit) 37400 26720 Cost of Sales 34408 23781 Operating Profit 2992 2939 Finance costs (interest payments) 355 274 Profit before Taxation 2637 2665 20X7 20X6 $ $ $ $ 000 000 000 000 Non Current Assets 13632 12750 Current Assets Inventory 4600 2400 Trade receivables 4600 2200 9200 4600 Current Liabilities Trade Payables 4750 2000 Overdraft 3225 1600 7975 3600 Net Current Assets 1225 1000 14857 13750 8% Bonds 2425 2425 12432 11325 Capital and Reserves Share Capital 6000 6000 Reserves 6432 5325 12432 11325 The average variable overdraft interest rate in each year was 5%. The 8% bonds are redeemable in ten years’ time. Required: Use the above financial information to discuss, with supporting calculations, the financial performance of GlobeMau.
Bulldog Appliances uses the periodic inventory system. Details regarding the inventory of appliances at August 1, 2009, purchases invoices during the year, and the inventory count at July 31, 2010, are summarized as follows:
1. Determine the cost of the inventory on July 31, 2010, by the first in, first out method.
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.
First In, First Out Method
Model
Quantity
Unit Cost
Total Cost
ALN3
$
$
ALN3
UGA1
UGA1
SL89
F69
H60W
H60W
J600T
J600T
ZZH0
ZZH0
Total
$
2. Determine the cost of the inventory on July 31, 2010, by the last in, first out method.
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.
Last In, First Out Method
Model
Quantity
Unit Cost
Total Cost
ALN3
$
$
UGA1
UGA1
UGA1
SL89
SL89
F69
H60W
H60W
H60W
J600T
J600T
ZZH0
ZZH0
Total
$
3. Determine the cost of the inventory on July 31, 2010, by the average cost method.
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.
Average Cost Method
Model
Quantity
Unit Cost
Total Cost
ALN3
$
$
UGA1
SL89
F69
H60W
J600T
ZZH0
Total
$
4. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of (a) rising prices and (b) declining prices.
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
Calculate lead time Michigan Machining Company machines metal parts for the automotive industry. Under the traditional manufacturing approach, the parts are machined through two processes: milling and finishing. Parts are produced in batch sizes of 60 parts. A part requires 5 minutes in milling and 7 minutes in finishing. The move time between the two operations for a complete batch is 10 minutes. Under the just in time philosophy, the part is produced in a cell that includes both the milling and finishing operations. The operating time is unchanged; however, the batch size is reduced to 5 parts and the move time is eliminated. Determine the value added, non value added, total lead time, and the value added ratio under the traditional and just in time manufacturing methods. If required, round percentages to one decimal place. Traditional Philosophy Just in Time Philosophy Value added time min min Non value added time min min Total lead time min min Value added ratio (as a percent) % %
Calculate the “t” value for independent groups for the following data using the formula presented in the module. Check the accuracy of your calculations. Using the raw measurement data presented above, determine whether or not there exists a statistically significant difference between the salaries of female and male human resource managers using the appropriate t test. Develop a research question, testable hypothesis, confidence level, and degrees of freedom. Draw the appropriate conclusions with respect to female and male HR salary levels. Report the required “t” critical values based on the degrees of freedom. Your response should be 2 3 pages. Salary Level Female HR Directors Male HR Directors $50,000 $58,000 $75,000 $69,000 $72,000 $73,000 $67,000 $67,000 $54,000 $55,000 $58,000 $63,000 $52,000 $53,000 $68,000 $70,000 $71,000 $69,000 $55,000 $60,000 *Do not forget what we all learned in high school about “0”s Assignment 2 Grading Criteria Maximum Points Calculate the “t” value and set up the posting as required. 15 Developed an appropriate research question. 15 Developed an appropriate testable hypothesis based on the research question. 15 Selected an appropriate confidence level and accurately stated the degrees of freedom along with the required critical value for “t.” 25 Drew the appropriate conclusion. 15 The posting was free of all grammatical and spelling errors. 15 Total: 100 For assistance with any problems you may have when completing this assignment”OR”to offer your assistance to classmates, please use the Problems and Solutions Discussion area located through the left side navigation link.
Calculating Missing Amounts and Cost of Goods Manufactured and Sold [LO6]
For each of the following independent cases (1’4), compute the missing values.(Input all amounts as positive values. Omit the “$” sign in your response.)
California Surplus Inc. qualifies to use the installment sales method for tax purposes and sold an investment on an installment basis. The total gain of $75000 was reported for financial reporting purposes in the period of sale. The installment period is 3 years; one third of the sale price is collected in 2012 and the rest in 2013. The tax rate was 35% in 2012, and 30% in 2013 and 30% in 2014. The accounting and tax data is shown below. Financial Accounting Tax Return 2012 (35% tax rate) Income before temporary difference $ 175,000 $ 175,000 Temporary difference $ 75,000 $ 25,000 Income $ 250,000 $ 200,000 2013 (30% tax rate) Income before temporary difference $ 200,000 $ 200,000 Temporary difference $ $ 25,000 Income $ 200,000 $ 225,000 2014 (30% tax rate) Income before temporary difference $ 180,000 $ 180,000 Temporary difference $ $ 25,000 Income $ 180,000 $ 205,000 Required: 1) Prepare the journal entries to record the income tax expense, deferred income taxes, and the income taxes payable for 2012, 2013, and 2014. No deferred income taxes existed at the beginning of 2012. 2) Explain how the deferred taxes will appear on the balance sheet at the end of each year. (Assume Installment Accounts Receivable is classified as a current asset.) 3) Show the income tax expense section of the income statement for each year, beginning with “Income before income taxes.”
Caren Smith opened a medical practice. During July, the first month of operation, the business, titled Caren Smith, M.D., P.C. (Professional Corporation), experienced the following events: Jul 6. Smith invested $55,000 in the business by opening a bank account in the name of C. Smith, M.D., P.C. The corporation issued common stock to Smith. 9. Paid $46,000 cash for land. 12. Purchased medical supplies for $1,800 on account. 15. Officially opened for business. 15 31. During the rest of the month, Smith treated patients and earned service revenue of $8,000, receiving cash. 29. Paid cash expenses: employees salaries, $1,600; office rent, $900; utilities, $100. 30. Returned supplies purchased on the 12th for the cost of those supplies, $700. 31. Paid $1,100 on account. Requirement 1. Analyze the effects of these events on the accounting equation of the medical practice of Caren Smith, M.D., P.C. Use a format similar to that of Exhibit 1 6, with headings for Cash, Medical supplies, Land, Accounts payable, Common stock, and Retained earnings.
Carpenter Associates The following information is for Carpenter Associates at the end of 2008. Sales $800,000 Sales returns & allowances 8,000 Accounts receivable, 12/31/08 175,000 Allowance for doubtful accounts, 12/31/08 (before adjustment for bad debts) 1,000 Estimated uncollectible accounts per aging schedule at 12/31/08 7,500 1. Refer to Carpenter Associates. If bad debts are estimated at 1% of net sales, how much will Carpenter report as bad debts expense for 2008? 2. Refer to Carpenter Associates. If the aging approach is used to estimate bad debts, how much bad debts expense will Carpenter report for 2008? 3. Refer to Carpenter Associates. If the aging approach is used to estimate bad debts, how much is the net realizable value of the accounts receivable at December 31, 2008? 4. Refer to Carpenter Associates. Assume that the net realizable value is $170,000 after the adjustment for bad debts in 2008. How much is the net realizable value of accounts receivable after a customer’s account of $2,500 is written off? Explain why. 5. Refer to Carpenter Associates. Determine the effect on Carpenter’s accounting equation of the yearend adjustment of bad debts using the aging approach.
Carpon Lumber sells lumber and general building supplies to building contractors in a medium sized town in Montana. Data regarding the store’s operations follow: ‘ Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for January. ‘ Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. ‘ The cost of goods sold is 75% of sales. ‘ The company desires to have an ending merchandise inventory equal to 60% of the next month’s cost of goods sold. Payment for merchandise is made in the month following the purchase. ‘ Other monthly expenses to be paid in cash are $21,100. ‘ Monthly depreciation is $19,000. ‘ Ignore taxes. The accounts receivable balance, net of uncollectible accounts, at the end of December would be: A) $154,000 B) $157,500 C) $85,500 D) $303,600
Designer Fads Company, a local retail clothing store, was established April 1, 2013. The company issued 8,500 shares of $10 par value common stock (30,000 shares authorizes); acquired inventory, supplies, and fixtures; borrowed $ 25,000 on a five year 10 percent note ( interest payable each March 31); secured a one year property insurance policy; and rented its store space for one year. The accountant for Designer Fads the complied the following trial balance as of April 1, 2013:
Designer Fads Company
Trial Balance
April 1, 2013
Cash $ 48,000
Inventory 42,000
supplies 2,800
Prepaid rent 13,200
fixtures 71,000
Accounts payable 31,750
note payable 25,000
common stock 85,000
contributed capital in excess of par 38,250
Insurance exp 3000
$180,000 $180,000
During the next three months, the accountants assembled the following data concerning Designer Fad’s activities during the quarter.
( Note: Whereas most data represent single transactions, some data have been accumulated).
Apr. 11 Paid salaries to salesclerks, $500.
Apr. 30 sold clothing totaling $27,000 ( $14,000 cash sales plus $13,000 on credit).
May 10 paid $20,000 of accounts payable balance
May 13 paid salaries to salesclerks $1800
May 20 purchased additional clothing on account from Shirts to Skirts, Inc $27,000 ( debit purchases account.)
May 21 collected $4800 of credit sales from customers.
May 25 returned goods to Shirts to Skirts Inc because of poor quality and received credit for the goods $1000.
May 31 sold merchandise totaling $30,000 ($13,000 cash sales plus $17,000 credit sales).
June 2 paid utility bills for April and May totaling $700
June 3 paid balance due shirts and skirts Inc.
June 10 purchased clothing on account from stitches co. $30,340
June 10 paid freight charges on clothing from stitches co. $200.
June 10 paid salaries to salesclerks $1900.
June 15 paid $8,840 toward amount owed Stitches Co.
June 18 issued 1,500 additional shares of common stock for $16 per share.
June 20 collected $13,300 on account from customers.
June 28 received a letter from a creditor requesting payment for $6,000 balance due since Apr 1, 2013.
June 28 paid balance due Stitches Co.
June 30 sold merchandise totaling $38,000 ( $25,000 cash sales plus $13,000 credit sales).
June 30 declared a quarterly dividend of $.50 per share on stock outstanding on June 30, 2013.
Additional data gathered that are pertinent to adjusting entries for the quarter are:
a. Accrued salaries for salesclerks $1,300.
b. Depreciation on fixtures $2,500.
c. Uncollected accounts are estimated to be 3 percent of credit sales.
d. $1,800 of the cash sales recorded on June 30 were gift certificated redeemable between July 1 and August 15, 2013.
e. utility bills for services during June $300
f. Supplies on hand June 30, 2013, $740
g. Income tax rate is 40 percent.
Note: Inventory on hand June 30, 2013, totaled $45,000
Required: On the basis of the data for Designer Fads Company:
a. Prepare entries in general journal form to record the transactions for the quarter ended June 30, 2013.
b. Set up T accounts, and post the entries to the T accounts. Indicate that an account has been posted by placing a check mark in the reference, or folio, column of the journal.
c. Prepare a trial balance, and enter it on a 10 column worksheet with columns for a trial balance, adjustments, and adjusted trial balance, an income statement, and a balance sheet.
d. complete the worksheet.
e. Prepare a quarterly income statement, a statement of retained earnings, and a balance sheet.
f. Journalize and post the adjusting entries. In the ledger accounts ( T accounts), indicate the adjusting entries with an A.
g. Journalize and post the closing entries. In the ledger accounts ( T accounts), indicate the closing entries with a C.
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2009. As of that date, Abernethy has the following trial balance: During 2009, Abernethy reported income of $80,000 while paying dividends of $10,000. During 2010, Abernethy reported income of $110,000 while paying dividends of $30,000. 17. Assume that Chapman Company acquired Abernethy’s common stock for $490,000 in cash. As of January 1, 2009, Abernethy’s land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2009, and December 31, 2010. (Hoyle 126) Hoyle, Joe Ben. Fundamentals of Advanced Accounting with Dynamic Accounting PowerWeband CPA Success SG Coupon, 3rd Edition. McGraw Hill Learning Solutions, 2009. .
Chapter 6 and 7 Problems Please complete the following 8 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button. Chapter 6 Exercise 2 2. Schedule of cash collections Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000. Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have the following collection pattern: Collected in the month of sale 60% Collected in the month following sale 35 Uncollectible 5 a. Prepare a schedule of cash collections for May through July. b. Compute the expected balance in Accounts Receivable as of July 31. Chapter 6 Exercise 4 4. Production and cash outlay computations RPR, Inc., anticipates that 120,000 units of product K will be sold during May. Each unit of product K requires four units of raw material A. Actual inventories as of May 1 and budgeted inventories as of May 31 follow. 1 May 31 May Product K (Units) 55,000 60,000 Rate Materials A (Units) 40,000 37,000 Each unit of raw material A costs $8; RPR pays for all purchases in the month of acquisition. Invoices that account for 80% of the cost of materials acquired will be paid within 10 days of receipt, entitling the company to a 2% cash discount. a. Determine the number of units of product K to be manufactured in May. b. Compute the May cash outlay for purchases of raw material A. July August September Beginning cash balance $10,000 $ ? $ ? Add: Cash receipts 50,000 63,000 71,000 Deduct: Cash payments 64,000 58,000 64,000 Cash excess (deficiency) before financing ($4,000) $ ? $ ? Financing Borrowing to maintain minimum balance ? ? ? Principal repayment ? ? ? Interest payment ? ? ? Ending cash balance $ ? $ ? $ ? Chapter 6 Exercise 5 5. Abbreviated cash budget; financing emphasis An abbreviated cash budget for Big Chuck Enterprises follows. Big Chuck wishes to maintain a $10,000 minimum cash balance at all times. Additional financing is available (and retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at the beginning of the month; retirements, in contrast, occur at the end of the month. Interest is paid at the time of repaying principal and computed on the portion of principal repaid. a. Find the unknowns in Big Chuck’s abbreviated cash budget. b. Determine the outstanding loan balance as of September 30, after any repayments have been made. Chapter 6 Problem 3 3. Comprehensive budgeting The balance sheet of Watson Company as of December 31, 19X1, follows. WATSON COMPANY Balance Sheet December 31, 19X1 Assets Cash $4,595 Accounts receivable 10,000 Finished goods (575 units x $7.00) 4,025 Direct materials (2,760 units x $0.50) 1,380 Plant & equipment $50,000 Less: Accumulated depreciation 10,000 40,000 Total assets $60,000 Liabilities & Stockholders’ Equity Accounts payable to suppliers $14,000 Common stock $25,000 Retained earnings 21,000 46,000 Total liabilities &. stockholders’ equity $60,000 The following information has been extracted from the firm’s accounting records: 1. All sales are made on account at $20 per unit. Sixty percent of the sales are collected in the month of sale; the remaining 40% are collected in the following month. Forecasted sales for the first five months of 19X2 are: January, 1,500 units, February, 1,600 units; March, 1,800 units; April, 2,000 units; May, 2,100 units. 2. Management wants to maintain the finished goods inventory at 30% of the following month’s sales. 3. Watson uses four units of direct material in each finished unit. The direct material price has been stable and is expected to remain so over the next six months. Management wants to maintain the ending direct materials inventory at 60% of the following month’s production needs. 4. Seventy percent of all purchases are paid in the month of purchase; the remaining 30% are paid in the subsequent month. 5. Watson’s product requires 30 minutes of direct labor time. Each hour of direct labor costs $7. Instructions: a. Rounding computations to the nearest dollar, prepare the following for January through March: 1) Sales budget 2) Schedule of cash collections 3) Production budget 4) Direct material purchases budget 5) Schedule of cash disbursements for material purchases 6) Direct labor budget b. Determine the balances in the following accounts as of March 31: 1) Accounts Receivable 2) Direct Materials 3) Accounts Payable Chapter 7 Exercise 3 3. Variances for direct materials and direct labor Banner Company manufactures flags of various countries. Each flag has a standard of eight square feet of fabric and three hours of direct labor time. Information about recent production activity follows. Actual cost of fabric: $4.50 per square foot Fabric consumed: 32,080 square feet Standard price per square foot of fabric: $4.25 Standard direct labor rate: $10.00 per hour Actual direct labor rate: $10.20 per hour Actual labor hours worked: 11,940 Actual production completed: 4,000 flags a. Compute the materials price variance and the materials quantity variance. b. Compute the labor rate variance and the labor efficiency variance. Chapter 7 Exercise 5 5. Overhead variances Nova Manufacturing applies factory overhead to products on the basis of direct labor hours. At the beginning of the current year, the company’s accountant made the following estimates for the forthcoming period: ‘ Estimated variable overhead: $500,000 ‘ Estimated fixed overhead: $400,000 ‘ Estimated direct labor hours: 40,000 It is now 12 months later. Actual total overhead incurred in the manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800. Assuming a direct labor standard of five hours per finished unit, calculate the following: a. Variable overhead efficiency variance b. Fixed overhead volume variance c. Overhead spending variance Chapter 7 Problem 1 1. P26 A1 Basic flexible budgeting (L.O. 2) Centron, Inc., has the following budgeted production costs: Direct materials $0.40 per unit Direct labor 1.80 per unit Variable factory overhead 2.20 per unit Fixed factory overhead Supervision $24,000 Maintenance 18,000 Other 12,000 Instructions: a. Prepare a flexible budget for 20,000, 22,500, and 25,000 units of activity. b. Was Centron’s experience in the quarter cited better or worse than anticipated? Prepare an appropriate performance report and explain your answer. c. Explain the benefit of using flexible budgets (as opposed to static budgets) in the measurement of performance. Chapter 7 Problem 5 5. P26 B3 Straightforward variance analysis (L.O. 5) Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows. Direct materials: 4 units @ $6.50 $26.00 Direct labor: 8 hours @ $8.50 68 Variable factory overhead: 8 hours @ $7.00 56 Fixed factory overhead: 8 hours @ 2.5 20 Total standard cost per unit $170.00 The following information pertains to activity for December: 1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations. 2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity. 3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year. 4. Actual production amounted to 6,500 completed units. Instructions: a. Compute Arrow’s direct material variances. b. Compute Arrow’s direct labor variances. c. Compute Arrow’s variances for factory overhead.
Citation Builders, Inc., builds office buildings and single family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10’20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 5% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in forfeiture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale. During 2013, Citation began construction of an office building for Altamont Corporation. The total contract price is $20 million. Costs incurred, estimated costs to complete at year end, billings, and cashcollections for the life of the contract are as follows: 2013 2014 2015 Costs incurred during the year $ 3,454,000 $ 9,821,000 $ 4,425,000 Estimated costs to complete as of year end 12,246,000 4,425,000 ” Billings during the year 1,700,000 12,800,000 5,500,000 Cash collections during the year 1,530,000 8,330,000 10,140,000 ________________________________________ Also during 2013, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $570,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2013 and paid for in full for $570,000 each by the buyers. The completed homes cost $423,000 each to construct. The construction costs incurred during 2013 for the nine uncompleted homes totaled $2,670,000. Required: 1. The percentage of completion method of recognizing revenues and costs on long term construction contracts is equivalent to recognizing revenue at the point of delivery. True or False 2. Answer the following questions assuming that Citation uses the completed contract method for its officebuilding contracts: a. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2013 and 2014? b. How much revenue related to this contract will Citation report in its 2013 and 2014 income statements? c. What will Citation report in its December 31, 2013, balance sheet related to this contract (ignore cash)? 3. Answer the following questions assuming that Citation uses the percentage of completion method for its office building contracts. a. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2013 and 2014? b. How much revenue related to this contract will Citation report in its 2013 and 2014 income statements? c. What will Citation report in its December 31, 2013, balance sheet related to this contract (ignore cash)? 4. Assume that as of year end 2014 the estimated cost to complete the office building is $8,850,000 and that Citation uses the percentage of completion method. a. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2014? b. How much revenue related to this contract will Citation report in the 2014 income statement? c. What will Citation report in its 2014 balance sheet related to this contract (ignore cash)? 5. Which method of accounting should Citation Builders, Inc adopt for its single family houses? Percentage of completion method or Completed contract method 6. What will Citation report in its 2013 income statement and 2013 balance sheet related to the single family home business (ignore cash in the balance sheet)?
Clay, who was single, died in 2012, and had a gross estate valued at $8500. 6 months after his death, the gross assets are valued at $9000. The estate incurs funeral and administrative expense of $125,000. Clay had debs amounting to $150,000 and bequeathed all of his estate to his children. During his life, Clay made no taxable gifts. 1. What is the amount of Clays taxable gift? 2. What is the tax base for computing Clays estate tax? 3. What is the amount of estate tax owed is the tentative estate tax (before credits) is $2,859,550? 4. Alternatively, is 6 months after his death, the gross assets in Clays estate declined in value to $7500, can the administrator of Clays estate elect the alternate valuation date? What are the important factors that the administrator should consider as whether the alternate valuation date should be elected?
Colorado Corporation was organized on January 1, 2012, with the investment of $250,000 in cash by its stockholders. The company immediately purchased an office building for $300,000, paying $210,000 in cash and signing a three year promissory note for the balance. Colorado signed a five year, $60,000 promissory note at a local bank during 2012 and received cash in the same amount. During its first year, Colorado collected $93,970 from its customers. It paid $65,600 for inventory, $20,400 in salaries and wages, and another $3,100 in taxes. Colorado paid $5,600 in cash dividends. Q:Prepare a statement of cash flows for the year ended December 31, 2012. If an amount is zero, enter “0”. Use the minus sign to indicate cash out flows and a decrease in cash or cash payments
Computer Mary’s income or deductions for 2012 using the (1) cash basis and (2) the accrual basis for each of the following: (a.) In May 2012, Mary paid a licence fee of $1200 for the period June 1, 2012 through May 31, 2013. (b) In December 2012, Mary collected $10,000 for January 2013 rents. In January 2013, Mary Collected $2,000 for December 2012 rents. (c) In June 2012, Mary paid $7,200 for an office equipment service contract for the period July 1, 2012 through Dec. 31, 2013. (d) In June 2012, Mary purchased office furniture for $273,000. She paid $131,000 in cash and gave $142,000 interest bearing note for the balance. The office furniture has an MARCS cost recovery period of 7 yrs. Mary did not make the 179 election and elected not to take additional first year depreciation.
Your consulting firm has been hired to help CRC evaluate its new membership plan and fee structure. Prepare a presentation for the clubs president, addressing the following questions: ‘ What are the key factors that CRC should consider in its evaluation of the new membership plan and fee structure? Why are these factors important? ‘ Develop a Schedule 1 (revenue) budget and a Schedule 7 (cash receipts) budget based on the new membership plan and fee structure. Will CRCs new membership plan and fee structure improve its ability to plan its cash receipts? Why or why not? ‘ What other types of analyses, beyond the Schedule 1 and 7 budgets, (both strictly financial and strategic) would you offer to perform for CRC in order for them to make a complete evaluation of the new membership plan and fee structure? Explain your rationale. ‘ Explain how CRCs cash management would differ from the present if the new membership plan and fee structure were adopted. ‘ From a strategic perspective, what are the advantages and disadvantages to implementing this membership plan and fee structure? Given the importance of the potentially clashing goals of better cash management, and increased revenue, would you recommend CRC go forward?
Corporal Inc. and Admiral Company compete with each other in the personal computer market. Corporal’s primary strategy is to assemble computers to customer orders, rather than for inventory. Thus, for example, Corporal will build and deliver a computer within four days of a customer entering an order on a Web page. Admiral, on the other hand, builds some computers prior to receiving an order, then sells from this inventory once an order is received. Below is selected financial information for both companies from a recent year’s financial statements (in millions): Corporal Inc. ,Admiral Company Corporal Inc Sales $26,280 ,Admiral Company Sales $34,800 Corporal Inc Cost of goods sold 21,900 , ,Admiral Company Cost of goods sold 32,850 Corporal Inc Inventory, beginning of period 956 ,Admiral Company Inventory, beginning of period 1,915 Corporal Inc Inventory, end of period 1,156 ,Admiral Company Inventory, end of period 2,315 a. Determine for both companies (1) the inventory turnover and (2) the number of days’ sales in inventory. Round to one decimal place. Assume 365 days a year. Inventory turnover for Corporal Inc and Admiral Company
Cost of Production and Journal Entries Franklin Paper Company manufactures newsprint. The product is manufactured in two departments, Papermaking and Converting. Pulp is first placed into a vessel at the beginning of papermaking production. The following information concerns production in the Papermaking Department for January. Account Work in Process”Papermaking Department Account No. Date Item Debit Credit Balance Debit Credit Jan. 1 Bal., 6,700 units, 80% completed 5,092 31 Direct materials, 35,700 units 67,830 72,922 31 Direct labor 18,840 91,762 31 Factory overhead 10,592 102,354 31 Goods transferred, 39,900 units ? ? 31 Bal., 2,500 units, 90% completed ? Hide Hint(s) a1. Prepare the January journal entry for the Papermaking Department for the materials charged to production. Hide Feedback Partially Correct Check My Work Feedback Materials are added to the Papermaking work in process and subtracted from the materials inventory. Hide a2. Prepare the January journal entry for the Papermaking Department for the conversion costs charged to production. For a compound transaction, if an amount box does not require an entry, leave it blank or enter “0”. Hide Feedback Partially Correct Check My Work Feedback Increase the Papermaking work in process and a liability for the labor costs. Decrease the Factory Overhead. Hide a3. Prepare the January journal entry for the Papermaking Department for the completed production transferred to the Converting Department. Hide Feedback Incorrect Check My Work Feedback Increase one inventory account and decrease another. b. Determine the Work in Process”Papermaking Department January 31 balance. $ Hide Feedback
P3 1 (Transactions, Financial Statements—Service Company) Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September. Sept. 1 Kawabata begins practice as a dentist and invests $20,000 cash. 2 Purchases dental equipment on account from Green Jacket Co. for $17,280. 4 Pays rent for office space, $680 for the month. 4 Employs a receptionist, Michael Bradley. 5 Purchases dental supplies for cash, $942. 8 Receives cash of $1,690 from patients for services performed. 10 Pays miscellaneous office expenses, $430. 14 Bills patients $5,820 for services performed. 18 Pays Green Jacket Co. on account, $3,600. 19 Withdraws $3,000 cash from the business for personal use. 20 Receives $980 from patients on account. 25 Bills patients $2,110 for services performed. 30 Pays the following expenses in cash: Salaries and wages $1,800; miscellaneous office expenses $85. 30 Dental supplies used during September, $330. Instructions (a) Enter the transactions shown above in appropriate general ledger accounts (use T accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation— Equipment, Accounts Payable, Owner’s Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5 year life on the equipment, the straight line method, and no salvage value. Do not use a drawing account. (b) Prepare a trial balance. (c) Prepare an income statement, a statement of owner’s equity, and an unclassified balance sheet. (d) Close the ledger. (e) Prepare a post closing trial balance.
P3 2 (Adjusting Entries and Financial Statements)Mason Advertising Agency was founded in January 2008. Presented below are adjusted and unadjusted trial balances as of December 31, 2012.
Instructions
(a)Journalize the annual adjusting entries that were made. (Omit explanations.)
(b)Prepare an income statement and a statement of retained earnings for the year ending December 31, 2012, and an unclassified balance sheet at December 31.
(c)Answer the following questions.
(1)If the note has been outstanding 3 months, what is the annual interest rate on that note?
(2)If the company paid $12,500 in salaries and wages in 2012, what was the balance in Salaries and Wages Payable on December 31, 2011?
P3 3 (Adjusting Entries)A review of the ledger of Baylor Company at December 31, 2012, produces the following data pertaining to the preparation of annual adjusting entries.
1.Salaries and Wages Payable $0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive $700 each per week, and three employees earn $600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.
2.Unearned Rent Revenue $429,000. The company began subleasing office space in its new building on November
1. Each tenant is required to make a $5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease. Date Term (in months) Monthly Rent Number of Leases Nov. 1 6 $6,000 5 Dec. 1 6 $8,500 4
3.Prepaid Advertising $13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below. Contract Date Amount Number of Magazine Issues A650 May 1 $6,000 12 B974 Oct. 1 7,200 24 The first advertisement runs in the month in which the contract is signed.
4.Notes Payable $60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June.
InstructionsPrepare the adjusting entries at December 31, 2012. (Show all computations).
P3 4 (Financial Statements, Adjusting and Closing Entries)The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.
Adjustment data:
1.Supplies on hand totaled $1,500.
2.Depreciation is $15,000 on the equipment.
3.Interest of $11,000 is accrued on notes payable at November 30.
Other data:
1.Salaries expense is 70% selling and 30% administrative.
2.Rent expense and utilities expense are 80% selling and 20% administrative.
3.$30,000 of notes payable are due for payment next year.
4.Maintenance and repairs expense is 100% administrative.
Instructions
(a)Journalize the adjusting entries.
(b)Prepare an adjusted trial balance.
(c)Prepare a multiple step income statement and retained earnings statement for the year and a classified balance sheet as of November 30, 2012.
P3 5 (Adjusting Entries)The accounts listed below appeared in the December 31 trial balance of the Savard Theater. Debit Credit Equipment $192,000 Accumulated Depreciation—Equipment $ 60,000 Notes Payable 90,000 Admissions Revenue 380,000 Advertising Expense 13,680 Salaries and Wages Expense 57,600 Interest Expense 1,400
Instructions
(a)From the account balances listed above and the information given below, prepare the annual adjusting entries necessary on December 31. (Omit explanations.)
(1)The equipment has an estimated life of 16 years and a salvage value of $24,000 at the end of that time. (Use straight line method.)
(2)The note payable is a 90 day note given to the bank October 20 and bearing interest at 8%. (Use 360 days for denominator.)
(3)In December, 2,000 coupon admission books were sold at $30 each. They could be used for admission any time after January 1.
(4)Advertising expense paid in advance and included in Advertising Expense $1,100. (5)Salaries and wages accrued but unpaid $4,700.
(b)What amounts should be shown for each of the following on the income statement for the year?
(1)Interest expense. (3)Advertising expense.
(2)Admissions revenue. (4)Salaries and wages expense.
P3 6 (Adjusting Entries and Financial Statements)Presented below are the trial balance and the other information related to Yorkis Perez, a consulting engineer.YORKIS PEREZ, CONSULTING ENGINEER TRIAL BALANCE DECEMBER 31, 2012Debit Credit Cash $ 29,500 Accounts Receivable 49,600 Allowance for Doubtful Accounts $ 750 Inventory 1,960 Prepaid Insurance 1,100 Equipment 25,000 Accumulated Depreciation—Equipment 6,250 Notes Payable 7,200 Owner’s Capital 35,010 Service Revenue 100,000 Rent Expense 9,750 Salaries and Wages Expense 30,500 Utilities Expenses 1,080 Office Expense 720 $149,210 $149,210 5 5 6 Problems145 146 Chapter 3 The Accounting Information System
1.Fees received in advance from clients $6,000.
2.Services performed for clients that were not recorded by December 31, $4,900.
3.Bad debt expense for the year is $1,430.
4.Insurance expired during the year $480.
5.Equipment is being depreciated at 10% per year.
6.Yorkis Perez gave the bank a 90 day, 10% note for $7,200 on December 1, 2012.
7.Rent of the building is $750 per month. The rent for 2012 has been paid, as has that for January 2013.
8.Office salaries and wages earned but unpaid December 31, 2012, $2,510.
Instructions
(a)From the trial balance and other information given, prepare annual adjusting entries as of December 31, 2012. (Omit explanations.)
(b)Prepare an income statement for 2012, a statement of owner’s equity, and a classified balance sheet. Yorkis Perez withdrew $17,000 cash for personal use during the year.
Assuming that a segment has both variable expenses and traceable fixed expenses, an increase in sales should increase profits by an amount equal to the sales times the segment margin ratio.
A) True
B) False
2. A segment is any portion or activity of an organization about which a manager seeks revenue, cost, or profit data.
A) True
B) False
3. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling
$135
Units in beg inventory
0
Units produced
5,000
Units Sold
4,900
Units in ending inventory
100
Variable Cost/unit
DM
$33
DL
$34
Variable MOH
$4
Variable selling and adminstration
$6
Fixed Costs:
Fixed MOH
$185,000
Fixed selling and adminstration
$88,200
What is the total period cost for the month under variable costing?
A) $185,000 B) $117,600 C) $273,200 D) $302,600
4. Which of the following are considered to be product costs under variable costing?
I. Variable manufacturing overhead.
II. Fixed manufacturing overhead.
III. Selling and administrative expenses.
A) I.
B) I and II.
C) I and III.
D) I, II, and III.
5. Abe Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling $
$126
Units in beg inventory
0
Units produced
8,700
Units Sold
8,400
Units in ending inventory
300
Variable Cost/unit
Dm
$ 30
DL
$ 48
Variable MOH
$ 3
Variable selling and adminstration
$ 7
Fixed Costs:
Fixed MOH
$ 156,600
Fixed selling and adminstration
$ 151,200
What is the unit product cost for the month under variable costing?
A) $99
B) $81
C) $106
D) $88
6. Cockriel Inc., which produces a single product, has provided the following data for its most recent month of operations:
# of units produced
8,000
Variable cost/unit
DM
$14
DL
$22
variable MOH
$1
Variable selling and admin
$6
Fixed Costs
Fixed MOH
$88,000
Fixed selling and adminstration
$ 608,000
There were no beginning or ending inventories. The variable costing unit product cost was:
A) $42 B) $43 C) $37 D) $48
7. Tsuchiya Corporation manufactures a variety of products. Last year, the company’s variable costing net operating income was $57,500. Fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $35,400. What was the absorption costing net operating income last year?
A) $22,100 B) $35,400 C) $57,500 D) $92,900
8. Fahey Company manufactures a single product that it sells for $25 per unit. The company has the following cost structure: There were no units in beginning inventory. During the year, 18,000 units were produced and 15,000 units were sold. Under absorption costing, the unit product cost is:
Aug. 1 Suzie applies for and obtains a $40,000 low interest loan for the company from the city council, which has recently passed an initiative encouraging business development related to outdoor activities. The loan is due in three years, and 6% annual interest is due each year on July 31. Aug. 4 The company purchases 14 kayaks, costing $18,700. Aug. 10 Twenty additional kayakers pay $3,600 ($180 each), in addition to the $9,100 that was paid in advance on July 30, on the day of the clinic. Tony conducts the first kayak clinic. Aug. 17 Tony conducts a second kayak clinic and receives $12,300 cash. Aug. 24 Office supplies of $1,300 purchased on July 4 are paid in full. Sep. 1 To provide better storage of mountain bikes and kayaks when not in use, the company rents a storage shed, purchasing a one year rental policy for $3,360 ($280 per month). Sep. 21 Tony conducts a rock climbing clinic. The company receives $13,400 cash. Oct. 17 Tony conducts an orienteering clinic. Participants practice how to understand a topographical map, read an altimeter, use a compass, and orient through heavily wooded areas. Clinic fees total $19,300. Dec. 1 Tony decides to hold the companys first adventure race on December 15. Four person teams will race from checkpoint to checkpoint using a combination of mountain biking, kayaking, orienteering, trail running, and rock climbing skills. The first team in each category to complete all checkpoints in order wins. The entry fee for each team is $570. Dec. 5 To help organize and promote the race, Tony hires his college roommate, Victor. Victor will be paid $70 in salary for each team that competes in the race. His salary will be paid after the race. Dec. 8 The company pays $2,000 to purchase a permit from a state park where the race will be held. The amount is recorded as a miscellaneous expense. Dec. 12 The company purchases racing supplies for $2,300 on account due in 30 days. Supplies include trophies for the top finishing teams in each category, promotional shirts, snack foods and drinks for participants, and field markers to prepare the racecourse. Dec. 15 Forty teams pay a total of $22,800 to race. The race is held. Dec. 16 The company pays Victors salary of $2,800. Dec. 31 The company pays a dividend of $4,500 ($2,250 to Tony and $2,250 to Suzie). Dec. 31 Using his personal money, Tony purchases a diamond ring for $4,300. Tony surprises Suzie by proposing that they get married. Suzie accepts! The following information relates to year end adjusting entries as of December 31, 2012. a. Depreciation of the mountain bikes purchased on July 8 and kayaks purchased on August 4 totals $8,400. b. Six months worth of insurance has expired. c. Four months worth of rent has expired. d. Of the $1,300 of office supplies purchased on July 4, $250 remains. e. Interest expense on the $40,000 loan obtained from the city council on August 1 should be recorded. f. Of the $2,300 of racing supplies purchased on December 12, $180 remains. g. Suzie calculates that the company owes $14,500 in income taxes. Assume the following ending balances for the month of July. Balance Cash $ 24,330 Prepaid insurance 3,600 Supplies (Office) 1,300 Equipment (Bikes) 14,300 Accounts payable 1,300 Unearned revenue 9,100 Common stock 28,000 Service revenue (Clinic) 7,450 Advertising expense 1,020 Legal fees expense 1,300 Record transactions from August 1 through December 31. Record adjusting entries as of December 31, 2012.
On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September, the following transactions occurred. 1. Paid $2,900 cash for accounts payable due. 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 $7,300, of which $2,500 is paid in cash and the balance is due in October. 5. Declared and paid a $400 cash dividend 6. Paid salaries $1,700, rent for September $900, and advertising expense $200. 7. Incurred utilities expense for month on account $170. 8. Received $10,000 from Capital Bank on a 6 month note payable.
The balance in the account Work in Process”Filling was as follows on December 1, 2012: Work in Process”Filling Department (4,800 units, 30% completed): Direct materials (4,800 x $11.60) $55,680 Conversion (4,800 x 30% x $7.50) 10,800 $66,480 The following costs were charged to Work in Process”Filling during December: Direct materials transferred from Reaction Department: 61,900 units at $11.40 a unit $705,660 Direct labor 249,060 Factory overhead 239,298 During December, 61,400 units of specialty chemicals were completed. Work in Process”Filling Department on December 31 was 5,300 units, 50% completed. Instructions: Hide 1. Prepare a cost of production report for the Filling Department for December. If an amount is zero, enter “0”. If required, round your cost per equivalent unit answers to two decimal places. Wilmington Chemical Company Cost of Production Report Filling Department For the Month Ended December 31, 2012 Unit Information Units charged to production: Inventory in process, December 1 Received from Reaction Department Total units accounted for by the Filling Department Units to be assigned cost: Equivalent Units Whole Units Direct Materials Conversion Inventory in process, December 1 Started and completed in December Transferred to finished goods in December Inventory in process, December 31 Total units to be assigned cost Cost Information Costs per equivalent unit: Direct Materials Conversion Total costs for December in Filling Department $ $ Total equivalent units Cost per equivalent unit $ $ Costs charged to production: Direct Materials Conversion Total Inventory in process, December 1 $ Costs incurred in December Total costs accounted for by the Filling Department $ Cost allocated to completed and partially completed units: Inventory in process, December 1 balance $ To complete inventory in process, December 1 $ Cost of completed December 1 work in process $ Started and completed in December $ Transferred to finished goods in December $ Inventory in process, December 31 Total costs assigned by the Filling Department $ Hide 2. Journalize the entries for costs transferred from Reaction to Filling and the cost transferred from Filling to Finished Goods. 3. Determine the increase or decrease in the cost per equivalent unit from November to December for direct materials and conversion costs. If required, round your answers to two decimal places. Increase or Decrease Amount Change in direct materials cost per equivalent unit: $ Change in conversion cost per equivalent unit: $ 4. Discuss the uses of the cost of production report and the results of part (3).
Balance Sheet Presentation of Available for Sale Investments During 2012, Toney Corporation held a portfolio of available for sale securities having a cost of $196,900. There were no purchases or sales of investments during the year. The market values at the beginning and end of the year were $232,300 and $187,100, respectively. The net income for 2012 was $181,100, and no dividends were paid during the year. The Stockholders’ Equity section of the balance sheet was as follows on December 31, 2011: Toney Corporation Stockholders’ Equity December 31, 2011 Common stock $41,000 Paid in capital in excess of par value 311,000 Retained earnings 409,600 Unrealized gain (loss) on available for sale investments 35,400 Total 797,000 Prepare the Stockholders’ Equity section of the balance sheet for December 31, 2012.
As Baldwin Company controller, you are responsible for informing the board of directors about its financial activities. At the board meeting, you present the following information. 2011 2010 2009 Sales trend percent 147.0% 135.0% 100.0% Selling expenses to sales 10.1% 14.0% 15.6% Sales to plant assets ratio 3.8 to 1 3.6 to 1 3.3 to 1 Current ratio 2.9 to 1 2.7 to 1 2.4 to 1 Acid test ratio 1.1 to 1 1.4 to 1 1.5 to 1 Inventory turnover 7.8 times 9.0 times 10.2 times Accounts receivable turnover 7.0 times 7.7 times 8.5 times Total assets turnover 2.9 times 2.9 times 3.3 times Return on total assets 10.4% 11.0% 13.2% Return on stockholders equity 10.7% 11.5% 14.1% Profit margin ratio 3.6% 3.8% 4.0% After the meeting, the companys CEO holds a press conference with analysts in which she mentions the following ratios. 2011 2010 2009 Sales trend percent 147.0% 135.0% 100.0% Selling expenses to sales 10.1% 14.0% 15.6% Sales to plant assets ratio 3.8 to 1 3.6 to 1 3.3 to 1 Current ratio 2.9 to 1 2.7 to 1 2.4 to 1 1. Why do you think the CEO decided to report ratios instead of the 11 prepared? 2. Comment on the possible consequences of the CEOs reporting of the ratios selected.
Bank loan to take cash discount Neveready Flashlights, Inc., needs $300,000 to take a cash discount of 2/10, net 70. A banker will loan the money for 60 days at an interest cost of $5,500. a. What is the effective rate on the bank loan? b. How much would it cost (in percentage terms) if the firm did not take the cash discount, but paid the bill in 70 days instead of 10 days? c. Should the firm borrow the money to take the discount? d. If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $300,000? e. What would be the effective interest rate in part d if the interest charge for 60 days were $6,850? Should the firm borrow with the 20 percent compensating balance? (The firm has no funds to count against the compensating balance requirement.)
Will Beck, Ron Beck, and Barb Beck formed the BBB Partnership by making capital contributions of $183,750, $131,250, and $210,000, respectively. They predict annual partnership net income of $225,000 and are considering the following alternative plans of sharing income and loss: (a) equally; (b) in the ratio of their initial capital investments; or (c) salary allowances of $40,000 to Will, $30,000 to Ron, and $45,000 to Barb; interest allowances of 10% on their initial capital investments; and the balance shared equally. references Problem 12 3A Part 3 3. Prepare the December 31 journal entry to close Income Summary assuming they agree to use plan (c) and that net income is $104,500. Also close the withdrawals accounts. (Round your answers to the nearest whole dollar amount. Omit the “$” sign in your response.) Date General Journal Debit Credit Dec. 31
Mary was married on January 2d of this year to Gary Golddigger. Despite Gary’s objection to Mary’s philanthropic ways, he signed a consent on a timely filed form 709 to split all gifts made by Mary during the year.
For his promise to marry and provide undying love and affection, Mary agreed on January 1 st to transfer 10,000 shares of XYZ, Inc. common stock to Gary and in return Gary transferred a legally binding contract promising to marry Mary the following day. The stock was valued at $50 per share on January 1 st. Mary actually didn’t get around to calling her broker until they returned from the honeymoon on January 10 th and the stock was retitled at that time when it was worth $52 per share.
Rent free use of an office owned by Mary provided to her daughter, Charlotte, out of which she will run her campaign to run for district attorney rental value for this year $40,000.
Mary pays her daughter Sheila’s private high school $5,000.00 to cover her expenses (in addition to the normal tuition) to travel to Florida to participate in a weeklong spring tournament for the school’s field hockey team.
Mary pays $75,000 to Dr. Cutslash for plastic surgery for her ex husband to enhance his possibilities as an aspiring soap opera actor. She has been divorced from him for 18 months.
Mary paid $50,000 to her indigent sister to be used towards a first time home purchase.
Mary exercised a power of appointment donated to her by her Mom over a trust created by Mom in Mom’s will. Mary’s power over the corpus was limited to exercise in favor of Mom’s children and grandchildren for their support, education, and health. Mary exercised such power in favor of her brother and appointed $15,000 of principal to such brother who used the money for his family’s medical insurance that he was purchase as a result of the Affordable Care Act.
When Gary threatens to leave, Mary agrees to take out a life insurance policy on her life and names Gary as beneficiary of the $500,000 death benefit. The first year’s premium, $25,000, was paid by Mary, the policy owner, this year.
Mary transfers a painting valued at $100,000 to the local art museum, a 501(c)(3) organization, with an agreement that they will jointly own the painting with each holding the right to display the painting 6 months out of the year. At her death, the museum will receive full title to the painting.
Mary bought a vacation home and titled it tenancy by the entireties with Gary. Mary paid $300,000 cash for the home.
Mary gives her son a Porsche Cayenne, fair market value 90,000 which she promised him three years ago only if he graduated Medical School, which he recently did.
Mary was recently informed by the executor of Mom’s will that Mom’s estate Mom died 1 year ago is eligible for a death benefit of $150,000 from her retirement plan. The executor was unaware of this asset until now. Mary, already filthy rich, wrote to the executor and refused this benefit. Since Mary was the only probate beneficiary, the benefit was divided by her three siblings in equal shares as required by the state intestacy statute.
Calculate Mary’s taxable gifts for this year. In your answer, you should address the issues of whether such transfers are (a) gifts for gift tax purposes, (b) taxable transfers e.g. are exclusions or deductions available, and (c) eligible for gift splitting.
Problem 2:
Donny Decedent died January 1st of this year. You have been engaged to prepare the Form 706 for the executor. Based on the following facts, determine (1) who receives the property at death, (2) how and when they get the property by what method of transfer, and (3) the items or property interests includible in Donny’s gross estate for federal estate tax purposes. Donny’s will leave all of his estate to his wife Donna.
Donny’s employer distributed $25,000 to his executor for unused vacation and sick leave time.
Donny owned a home titled as tenancy by the entireties with Donna valued at $400,000 at the time of his death. Donna paid the entire purchase $350,000 purchase price for the home two years before and she put Donny’s name on the deed.
Donny transferred $7,500,000 to a living revocable trust two years before his death. The trust terms permit Donny to distribute the money to himself or his children as he selects as long as he is alive. The trust also provides: “at the time of my death, transfer to my children, Dawn and David, in equal shares the maximum applicable exclusion amount available at the time of my death. . . .and transfer the remaining trust estate to the person who is my wife at the time of my death, and if I am not then married, distribute such share to Widener University.” Assume the maximum applicable exclusion amount is $5,250,000.
Donny transferred a $5,000,000 (value in 2008) vacation home (personal residence) to an irrevocable trust five years ago. The trust provided Donny with the right to live in the home for 10 years for 10 years. Assume the trust has five years until termination at his death. At the termination of the trust, his children are the remainder beneficiaries. At the time of his death, the principal of the trust is $4,000,000.
Donny’s employer has a nonqualified deferred compensation plan. The plan provides a benefit of $100,000 per year for ten years at the time of his retirement. Assume Donny retired two years ago and has received two years of payments. On his employer’s forms, he designated his wife as beneficiary of the remaining payments.
Donny has an interest in a trust created by his father in his father’s will. The trust is valued at $800,000 at the time of Donny’s death. The trust provided Donny with all income while he was alive. In addition, he could invade principal for any reason while he is alive. At the time of his death, Donny has the ability to appoint the principal to his lineal descendants as he chooses through specific reference to the power in his last will. If no reference is made to the power in Donny’s will, the property passes to his children in equal shares. Donny failed to exercise the power in his will.
Donny created an irrevocable trust two years ago. The trust provides for income for life to Donna with the remainder at her death to their two children, or their estates, in equal shares at her death. Donny places $20,000 each year in the trust and the trustee applies for, owns, and is the designated beneficiary of a $1,000,000 life insurance policy on Donny’s life.
Donny has a life income interest in a trust created for him five years ago by Donna with the principal worth $400,000 at the time of his death. The trust provides him with all income with the remainder at his death distributed to their two children. Donny has no rights or powers with respect to principal. Donna filed a gift tax return when creating the trust and elected to take the QTIP election for the gift tax marital deduction for the property transferred to the trust for Donny’s benefit.
Boise Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho, Oregon, and Washington. Boise Bike Corp. has declared the following annual dividends over a six year period ending December 31 of each year: 2007, $8,000; 2008, $24,000; 2009, $60,000; 2010, $75,000; 2011, $80,000; and 2012, $98,000. During the entire period, the outstanding stock of the company was composed of 20,000 shares of 2% cumulative preferred stock, $75 par, and 50,000 shares of common stock, $5 par. 1. Determine the total dividends and the per share dividends declared on each class of stock for each of the six years. There were no dividends in arrears on January 1, 2007. Summarize the data in tabular form. If required, round your answers to two decimal places. If the amount is zero, please enter “0”.
Our book distribution division sells to national bookstores. Our division allows for up to 25% of sales in returns. For the past 4 years, returns have averaged 20%. We record revenue based on revenue recognition when the right of return exists. Total Sales for 2012 $ 9,000,000 Sales Still Available for return for six months $ 2,000,000 Actual Returns on Sales not returnable 21% 2011 Sales collected in 2012 $ 2,500,000 2011 Sales returned in 2012 19% Required: (a) We have studied several methods of revenue recognition. Define and describe each of the following methods of revenue recognition, and indicate whether each is in accordance with generally accepted accounting principles. Point of sale. Completion of production. Percentage of completion. Installment sales. (b) Calculate the revenue to be recognized in fiscal year 2012 for each division of Patty Corporation in accordance with generally accepted accounting principles. Show all calculations for full credit.
Boxer Corporation manufactures metal toolboxes. It adds all materials at the beginning of the manufacturing process. The company has provided the following information:
Beginning work in process (23% complete)
39,000 units
Direct materials
$
40,000
Conversion cost
88,000
Total cost of beginning work in process
$
128,000
Number of units started
68,000
Number of units completed and transferred to finished goods
81,000
Ending work in process (59% complete)
Direct materials cost incurred
$
86,000
Conversion cost applied
159,000
Total cost added
$
245,000
Required:
Using the weighted average method of process costing, complete each of the following steps:
(a)
Reconcile the number of physical units worked on during the period.
Physical Units
Physical Units
Beginning units
Units completed
Units started
Ending units
Total units
Total units
(b)
Calculate the number of equivalent units.
Equivalent Units
Direct Materials
Conversion
Units completed
Ending inventory
Total
(c)
Calculate the cost per equivalent unit. (Round your answers to 5 decimal places. Omit the “$” sign in your response.)
Direct Materials
Conversion
Cost per equivalent unit
$
$
(d)
Reconcile the total cost of work in process. (Use rounded cost per Equivalent unit. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)
The break even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio. A) True B) False 2. If two companies have the same total sales and total expenses and make the same product, the volatility of net operating income with changes in sales will tend to be greater in the company with a higher proportion of fixed expenses in its cost structure. A) True B) False 3. Data concerning Carlo Corporation’s single product appear below: Selling price per unit $230 Variable expense per unit $69 Fixed expense per Unit $466,900 The break even in monthly dollar sales is closest to: A) $896,744 B) $466,900 C) $1,556,333 D) $667,000 4. Sensabaugh Inc., a company that produces and sells a single product, has provided its contribution format income statement for January. Sales(1,800 units) $91,800 Variable Expense $176,400 Contribution margin $82,800 Fixed expense $59,100 Net operating income $23,700 If the company sells 1,600 units, its total contribution margin should be closest to: A) $22,200 B) $28,800 C) $4,800 D) $32,400
Brisky Corporation uses activity based costing to compute product margins. In the first stage, the activity based costing system allocates two overhead accounts equipment depreciation and supervisory expense to three activity cost pools Machining, Order Filling, and Other based on resource consumption. Data to perform these allocations appear below: In the second stage, Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. What is the product margin for Product I3 under activity based costing? A) $6,400 B) $3,040 C) $7,600 D) $3,820
Revenue recognition at and after time of sale. Assume that during December 2008, Nordstrom sold $20 million of merchandise and another $12 million of gift cards, of which $24 million was on credit and the rest in cash. Nordstrom acquired the merchandise for $7.2 million. Further assume that Nordstrom estimates that 1% of all credit sales in December will be uncollectible, and customers will return 2% of all merchandise sold in December. Gift card sales are not included in merchandise sales for the purposes of estimating sales returns.
a. What journal entries will Nordstrom make in December 2008 to record December sates?
b. Assume that Nordstrom closes its books monthly. What adjusting entries will Nordstrom make in December 2008?
c. Assume no other transactions affecting taxable income for the month. How much income did Nordstrom earn before taxes in December 2008?
d. In January 2009, customers used gift cards to purchase $6 million of merchandise, with a cost to Nordstrom of $3.6 million. What journal entries will Nordstrom make in January 2009 to account for these sales? Assume the same sales return percentage as in December 2008.
Revenue recognition at and after tine of sale. Hilton Garden Inn, a division of Hilton Hotels, offers its customers two choices when reserving rooms. The customer may purchase a nonrefundable Internet special of $150 per night, or pay at the refundable rate of $220 per night. Whether a customer purchases the nonrefundable Internet special or the refundable room, the customer must charge the entire amount to a credit card at the time of booking. For the Internet special, subsequent cancellation of the reservation results in the customer forfeiting the entire amount of the reservation. For the refundable room, cancellation prior to 3:00 p.m. of the date of arrival results in a refund of the amount of the reservation and cancellation after 3:00 p.m. reu1ts in a forfeiture of one day at the reserved rate ($220). What journal entries would Hilton Hotels record for the following transactions assuming it attempts to make correct entries every day? Ignore the journal entries involving expenses. Assume that credit card companies credit Hilton Garden Inn’s bank account with cash on the same day that Hilton Garden Inn transmits a charge to a customer’s credit card, which is the day of the initial reservation.
(a) On February 2, 2008, a customer makes a nonrefundable Internet special reservation for four nights beginning February 16, 2008. The customer arrives at the hotel on February 16, 2008, and departs on February 20, 2008.
(b) On February 2, 2008, a customer makes a nonrefundable Internet special reservation for four nights beginning February 16, 2008, On February 14, 2008, the customer cancels the reservation.
(c) On February 2, 2008, a customer makes a refundable reservation for four nights beginning February 16, 2008. The customer arrives at the hotel on February 16, 2008, an departs on February 20, 2008.
(d) On February 2, 2008, a customer makes a refundable reservation for four nights beginning February 16, 2008. On February 14, 2008, the customers cancels the reservation.
(e) On February 2, 2008, a customers makes a refundable reservation for four nights beginning February 16, 2008. At 6:00 p.m. on February 16, 2008, the customer cancels the reservation.
Revenue recognition at time of sale. Assume that Lentiva Group Limited provided the following description of its revenue recognition practices in the notes to its 2007 financial statements.
?c Lentiva recognizes revenue from the sale of goods (such as sales of hardware and software) when it effectively transfers both ownership and risk of loss to the customer, generally when there is persuasive evidence a sales arrangement exists, the price is fixed or determinable, collectability is reasonably assured, and deliver has occurred.
?c Lentiva defers revenue from contracts to provide training services and amortizes those amounts as earned over the contract period, generally three years.
Assume that on January 1, 2008, Lentivu sold 50,000 laptop computers to the New York City public education system for $75 million. The price of the computers includes a contract for training services, which Lentiva will provide evenly over the next two years. Sold separately, the price of the training services is $100 per laptop, and the price of a laptop is $1,500. Lentiva’s cost of a laptop is $1,200, and the expected cost to provide the training is $50 per laptop. At the time of sale, the customer paid Lentiva $15 million, and promised to pay the remaining amount owed in 30 days. Assuming that the arrangement meets the first criterion to recognize revenue, what journal entries will Lentiva make on these dates:
Revenue recognition at time of sale. Marks and Spencer Group. Plc., a U.K. retailer, applies IFRS and reports its results in millions of pounds sterling (?L). The notes to its financial statements for the year ended March 29, 2008, provide the following information:
?c Revenue comprises sales of goods to customers less an appropriate deduction for returns and discounts. Marks and Spencer records revenues for sales of furniture and items purchased online upon delivery to the customer.
?c Marks and Spencer records trade receivables at their nominal amount less an allowance for any doubtful accounts and sales returns. The beginning balance in the allowance for uncollectible accounts and sales returns was ?L1.1 million, and the ending balance was ?L3.3 million. There were no recoveries of uncollectible accounts during the year.
For the year ended March 29, 2008, Marks and Spencer reported revenues (before discounts and returns) of ?L9,022.0 million. The cost of merchandise sold in 2008 was ?L5535.2 million. Assume that Marks and Spencer estimates discounts and returns of 1% of sales. Further assume that it made all sales on credit and that it estimates that 1.5% of revenue will be uncollectible.
a. What journal entry did Marks and Spencer record during the ar ended March 29, 2008, to recognize revenues and expenses?
b. What journal entry did Marks and Spencer make in the year ended March 29, 2008, to recognize sales returns and bad debts expense?
c. What wits the combined amount of sales returns and write offs of uncollectible accounts during the year ended March 29, 2008?
Revenue recognition for a franchise. Pickin Chicken Inc. and Country Delight Inc. both sell franchises for their chicken restaurants. The franchisee receives the right to use the franchisor’s products and to benefit from national training and advertising programs. The franchisee agrees to pay $50,000 for exclusive franchise rights in a particular city. Of this amount, the franchisee pays $20,000 on signing the franchise agreement and promises to pay the remainder in five equal annual installments of $6,000 each starting one year after the initial signing payment. Pickin Chicken recognizes franchise revenue as it signs agreements, whereas Country Delight recognizes franchise revenue on an installment basis.
In 2006, each company sold eight franchises. In 2007, each sold five franchises. In 2008, neither company sold a franchise.
(a) Calculate the amount of revenue recognized by each company doing 2006 2012.
(b) When do you think a franchisor should recognize franchise revenue? Why?
Revenue Recognition Nimble Health and Racquet Club (NHRC), which operates eight clubs in the Chicago metropolitan area, offers one year memberships the members may use any of the eight facilities but must reserve racquetball court time and pay a separate fee before using the court. As an incentive to new customers, NHRC advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. Membership fees are due at the beginning of the individual membership period. However, customers are given the option of financing the membership fee over the membership period at a 9% interest rate. Some customers have expressed a desire to take only the regularly scheduled aerobic classes without paying for a full membership. During the current fiscal year, NHRC began selling coupon books for aerobic classes to accommodate these customers. Each book is dated and contains 50 coupons that may be redeemed for any regularly scheduled aerobics class over a one year period. After the one year period, unused coupons are no longer valid. During 2008, NHRC expanded into the health equipment market by purchasing a local company that manufactures rowing machines and cross country ski machines. These machines are used in NHRC’s facilities and are sold through the clubs and mail order catalogs. Customers must make a 20% down payment when placing an equipment order; delivery is 60–90 days after order placement. The machines are sold with a 2 year unconditional guarantee. Based on past experience, NHRC expects the costs to repair machines under guarantee to be 4% of sales. NHRC is in the process of preparing financial statements as of May 31, 2011, the end of its fiscal year. Marvin Bush, corporate controller, expressed concern over the company’s performance for the year and decided to review the preliminary financial statements prepared by Joyce Kiley, NHRC’s assistant controller. After reviewing the statements, Bush proposed that the following changes be reflected in the May 31, 2011, published financial statements.
1. Membership revenue should be recognized when the membership fee is collected.
2. Revenue from the coupon books should be recognized when the books are sold.
3. Down payments on equipment purchases and expenses associated with the guarantee on the rowing and cross country machines should be recognized when paid. Kiley indicated to Bush that the proposed changes are not in accordance with generally accepted accounting principles, but Bush insisted that the changes be made. Kiley believes that Bush wants to manage income to forestall any potential financial problems and increase his year end bonus. At this point, Kiley is unsure what action to take.
(a) (1) Describe when Nimble Health and Racquet Club (NHRC) should recognize revenue from membership fees, court rentals, and coupon book sales.
(2) Describe how NHRC should account for the down payments on equipment sales, explaining when this revenue should be recognized.
(3) Indicate when NHRC should recognize the expense associated with the guarantee of the rowing and cross country machines.
(b) Discuss why Marvin Bush’s proposed changes and his insistence that the financial statement changes be made is unethical. Structure your answer around or to include the following aspects of ethical conduct: competence, confidentiality, integrity, and/or objectivity.
(c) Identify some specific actions Joyce Kiley could take to resolve this situation.
Revenue Recognition on Marina Sales with Discounts Taylor Marina has 300 available slips that rent for $800 per season. Payments must be made in full at the start of the boating season, April 1, 2011. Slips for the next season may be reserved if paid for by December 31, 2010. Under a new policy, if payment is made by December 31, 2010 a 5% discount is allowed. The boating season ends October 31, and the marina has a December 31 year end. To provide cash flow for major dock repairs, the marina operator is also offering a 20% discount to slip renters who pay for the 2012 season. For the fiscal year ended December 31, 2010, all 300 slips were rented at full price. Two hundred slips were reserved and paid for the 2011 boating season, and 60 slips were reserved and paid for the 2012 boating season.
(a) Prepare the appropriate journal entries for fiscal 2010.
(b) Assume the marina operator is unsophisticated in business. Explain the managerial significance of the accounting above to this person.
Revenue Recognition—Membership Fees Midwest Health Club offers one year memberships.
Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, MHC advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Richard Nies, corporate controller, recognized revenue ratably over the life of the membership. MHC is in the process of preparing its year end financial statements. Rachel Avery, MHC’s treasurer, is concerned about the company’s lackluster performance this year. She reviews the financial statements Nies prepared and tells Nies to recognize membership revenue when the fees are received. Answer the following questions.
Simona Amanar Industries has two operating divisions—Gina Construction Division and Chorkina Securities Division. Each division maintains its own accounting system and method of revenue recognition.
Gina Construction Division
During the fiscal year ended November 30, 2008, Gina Construction Division had one construction project in process. A $30,000,000 contract for construction of a civic center was granted on June 19, 2008, and construction began on August 1, 2008. 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, 2008, construction costs of $7,800,000 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, 2008, and were estimated to amount to only $16,200,000 because of an expected decline in raw materials costs. Revenue recognition is based upon a percentage of completion method.
Chorkina Securities Division
Chorkina Securities Division works through manufacturers’ agents in various cities. Orders for alarm systems and down payments are forwarded from agents, and the division ships the goods f.o.b. factory directly to customers (usually police departments and security guard companies). Customers are billed directly for the balance due plus actual shipping costs. The company received orders for $6,000,000 of goods during the fiscal year ended November 30, 2008. Down payments of $600,000 were received and $5,200,000 of goods were billed and shipped. Actual freight costs of $100,000 were also billed. Commissions of 10% on product price are paid to manufacturing agents after goods are shipped to customers. Such goods are warranted for 90 days after shipment, and warranty returns have been about 1% of sales. Revenue is recognized at the point of sale by this division.
Instructions
(a) There are a variety of methods of revenue recognition. Define and describe each of the following methods of revenue recognition and indicate whether each is in accordance with generally accepted accounting principles.
(1) Point of sale.
(2) Completed contract.
(3) Percentage of completion.
(4) Installment sales.
(b) Compute the revenue to be recognized in fiscal year 2008 for the two operating divisions of Simona Amanar Industries in accordance with generally accepted accounting principles.
E3 1 (Transaction Analysis—Service Company) Christine Ewing 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 $30,000 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 $5,100 with personal funds. (The computer will be used exclusively for business purposes.) Instructions Journalize the transactions in the general journal. (Omit explanations.)
E3 3 (Corrected Trial Balance)The following trial balance of Scarlatti Corporation does not balance. GERONIMO COMPANY TRIAL BALANCE APRIL 30, 2012Debit Credit Cash $ 2,100 Accounts Receivable 2,570 Prepaid Insurance 700 Equipment $ 8,000 Accounts Payable 4,500 Property Taxes Payable 560 Owner’s Capital 11,200 Service Revenue 6,960 Salaries and Wages Expense 4,200 Advertising Expense 1,100 Property Tax Expense 800 $18,190 $24,500 SCARLATTI CORPORATION TRIAL BALANCE APRIL 30, 2012Debit Credit Cash $ 5,912 Accounts Receivable 5,240 Supplies 2,967 Equipment 6,100 Accounts Payable $ 7,044 Common Stock 8,000 Retained Earnings 2,000 Service Revenue 5,200 Office Expense 4,320 $24,539 $22,244 An examination of the ledger shows these errors.
1.Cash received from a customer on account was recorded (both debit and credit) as $1,580 instead of $1,850.
2.The purchase on account of a computer costing $1,900 was recorded as a debit to Office Expense and a credit to Accounts Payable.
3.Services were performed on account for a client, $2,250, for which Accounts Receivable was debited $2,250 and Service Revenue was credited $225.
4.A payment of $95 for telephone charges was entered as a debit to Office Expenses and a debit to Cash. 5.The Service Revenue account was totaled at $5,200 instead of $5,280.
InstructionsFrom this information, prepare a corrected trial balance. balances for Accounts Receivable and Service Revenue are $2,750 and $6,690, respectively.
(d) A debit posting to Advertising Expense of $300 was omitted.
(e) A $3,200 cash drawing by the owner was debited to Owner’s Capital and credited to Cash.
E3 6 (Adjusting Entries)Stephen King, D.D.S., opened a dental practice on January 1, 2012. During the first month of operations, the following transactions occurred.
1.Performed services for patients who had dental plan insurance. At January 31, $750 of such services was earned but not yet billed to the insurance companies.
2.Utility expenses incurred but not paid prior to January 31 totaled $520.
3.Purchased dental equipment on January 1 for $80,000, paying $20,000 in cash and signing a $60,000, 3 year note payable. The equipment depreciates $400 per month. Interest is $500 per month.
4.Purchased a one year malpractice insurance policy on January 1 for $15,000.
5.Purchased $1,600 of dental supplies. On January 31, determined that $400 of supplies were on hand.
InstructionsPrepare the adjusting entries on January 31. (Omit explanations.) Account titles are Accumulated Depreciation—Equipment, Depreciation Expense, Service Revenue, Accounts Receivable, Insurance Expense, Interest Expense, Interest Payable, Prepaid Insurance, Supplies, Supplies Expense, Utilities Expenses, and Accounts Payable.
E3 7 (Analyze Adjusted Data)A partial adjusted trial balance of Safin Company at January 31, 2012, shows the following. 5 5 SAFIN COMPANY ADJUSTED TRIAL BALANCE JANUARY 31, 2012Debit Credit Supplies $ 900 Prepaid Insurance 2,400 Salaries and Wages Payable $ 800 Unearned Revenue 750 Supplies Expense 950 Insurance Expense 400 Salaries and Wages Expense 1,800 Service Revenue 2,000
InstructionsAnswer the following questions, assuming the year begins January
1. (a)If the amount in Supplies Expense is the January 31 adjusting entry, and $850 of supplies was purchased in January, what was the balance in Supplies on January 1?
(b)If the amount in Insurance Expense is the January 31 adjusting entry, and the original insurance premium was for one year, what was the total premium and when was the policy purchased?
(c)If $2,700 of salaries and wages was paid in January, what was the balance in Salaries and Wages Payable at December 31, 2011?
(d)If $1,600 was received in January for services performed in January, what was the balance in Unearned Service Revenue at December 31, 2011?
E3 8 (Adjusting Entries)William Bryant is the new owner of Ace Computer Services. At the end of August 2012, his first month of ownership, Bryant is trying to prepare monthly financial statements. Below is some information related to unrecorded expenses that the business incurred during August.
1.At August 31, Bryant owed his employees $2,900 in salaries and wages that will be paid on September
1.
2.At the end of the month, he had not yet received the month’s utility bill. Based on past experience, he estimated the bill would be approximately $600.
3.On August 1, Bryant borrowed $60,000 from a local bank on a 15 year mortgage. The annual interest rate is 8%.
4.A telephone bill in the amount of $117 covering August charges is unpaid at August 31.
InstructionsPrepare the adjusting journal entries as of August 31, 2012, suggested by the information above.
E3 10 (adjusting entries) Uhura resort opened for business on June 1 with eight air conditioned units. Its trial balance on august 31 as follows.
UHURA RESORT
TRIAL BALANCE
31 Aug 12
Debit
Credit
Cash
$19,600
Prepaid Insurance
4,500
Supplies
2,600
Land
20,000
Buildings
120,000
Equipment
16,000
Accounts Payable
$4,500
Unearned Rent Revenue
4,600
Mortgage Payable
50,000
Common Stock
100,000
Dividends
5,000
Rent Revenue
86,200
Salaries and Wages Expense
44,800
Utilities Expenses
9,200
Maintenance and Repairs Expense
3,600
$245,300
$245,300
Other Data: 1. The balance in prepaid insurance is a one year premium paid on June 1, 2010. 2. An inventory count on August 31 shows $650 of supplies on hand. 3. Annual depreciation rates are cottages (4%) and furniture (10%). Salvage value is estimated to be 10% of cost. 4. Unearned rent revenue of $3,800 was earned prior to August 31. 5. Salaries of $375 were unpaid at August 31 6. Rentals of $800 were due from tenants at August 31. 7. The mortgage interest rate is 8% per year.
Instructions: (a) Journalize the adjusting entries on August 31 for the 3 months period June 1 August 31. (omit explanation) (b) Prepare an adjusting trial balance on August 31
E3 12 (Prepare Financial Statements)Flynn Design Agency was founded by Kevin Flynn in January 2006. Presented below is the adjusted trial balance as of December 31, 2012.
Instructions (a)Prepare an income statement and a statement of retained earnings for the year ending December 31, 2012, and an unclassified balance sheet at December 31.Exercises139 140 Chapter 3 The Accounting Information System
(b)Answer the following questions.
(1)If the note has been outstanding 6 months, what is the annual interest rate on that note?
(2)If the company paid $17,500 in salaries and wages in 2012, what was the balance in Salaries and Wages Payable on December 31, 2011?
E3 17 (Transactions of a Corporation, Including Investment and Dividend) Snyder Miniature Golf and Driving Range Inc. was opened on March 1 by Mickey Snyder. The following selected events and transactions occurred during March. Mar. 1 Invested $60,000 cash in the business in exchange for common stock. 3 Purchased Michelle Wie’s Golf Land for $38,000 cash. The price consists of land $10,000; building $22,000; and equipment $6,000. (Make one compound entry.) 5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,600. 6 Paid cash $1,480 for a one year insurance policy. 10 Purchased golf equipment for $2,500 from Young Company, payable in 30 days. 18 Received golf fees of $1,200 in cash. 25 Declared and paid a $1,000 cash dividend. 30 Paid wages of $900. 30 Paid Young Company in full. 31 Received $750 of fees in cash. Snyder uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock, Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense. Instructions Journalize the March transactions. (Provide explanations for the journal entries.)
E 3 19 (Cash and Accrual Basis)Latta Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long term loan from its regular bank, Latta Corp. requests you as its independent CPA to convert its cash basis income statement data to the accrual basis. You are provided with the following summarized data covering 2011, 2012, and 2013. 2011 2012 2013 Cash receipts from sales: On 2011 sales $290,000 $160,000 $ 30,000 On 2012 sales –0– 355,000 90,000 On 2013 sales 408,000 Cash payments for expenses: On 2011 expenses 185,000 67,000 25,000 On 2012 expenses 40,000a 170,000 55,000 On 2013 expenses 45,000b 218,000 aPrepayments of 2012 expenses. bPrepayments of 2013 expenses.
Instructions (a)Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the cash basis.
(b)Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the accrual basis.
E 3 20 (Adjusting and Reversing Entries)When the accounts of Constantine Inc. are examined, the adjusting data listed below are uncovered on December 31, the end of an annual fiscal period.
1.The prepaid insurance account shows a debit of $6,000, representing the cost of a 2 year fire insurance policy dated August 1 of the current year.
2.On November 1, Rent Revenue was credited for $2,400, representing revenue from a subrental for a 3 month period beginning on that date.
3.Purchase of advertising supplies for $800 during the year was recorded in the Advertising Expense account. On December 31, advertising supplies of $290 are on hand.
4.Interest of $770 has accrued on notes payable.
Instructions Prepare the following in general journal form.
(a)The adjusting entry for each item.
(b)The reversing entry for each item where appropriate.
adshaw Corp. has identified three cost pools in its manufacturing process: equipment maintenance, setups, and quality control. Total cost assigned to the three pools is $160,500, $87,120, and $88,500, respectively. Cost driver estimates for the pools are 10,700 machine hours, 165 setups, and 454 quality inspections, respectively.
Required :
Calculate the activity rate for each of Bradshaws activity pools. (Round your answers to 2 decimal places.Omit the “$” sign in your response.)
Afton Co. purchased $24,000 of 4%, 10 year Davis County bonds on July 12, 2012, directly from the county at par value. The bonds pay semiannual interest on May 1 and November 1. On December 1, 2012, Afton Co. sold $6,000 of the Davis County bonds at 98 plus $20 accrued interest, less a $100 brokerage commission. For a compound transaction, if an amount box does not require an entry, leave it blank or enter “0”. Assume a 360 day year. Hide ‘ Hint(s) a. Provide the journal entry for the purchase of the bonds on July 12, plus 72 days of accrued interest. 2012 July 12 Check My Work Feedback a. Record the investment at face (debit), interest receivable (debit) for [face amount of bonds x interest rate x (72 days Af· 360 days)], and the cash paid for the sum of cash plus interest receivable. Hide b. Provide the journal entry for semiannual interest on November 1. Nov. 1 Check My Work Feedback b. Bond principal x interest rate x half a year = total interest. Record this amount as a debit to Cash. Reduce interest receivable (credit) by the amount calculated in requirement (a) and increase interest revenue (credit) for the difference between the cash and the interest receivable adjustment. c. Provide the journal entry for sale of the bonds on December 1. Dec. 1 Hide Feedback Partially Correct Check My Work Feedback c. Calculate the proceeds: 98% x face amount of bonds sold, plus accrued interest, less commission. Debit cash for this amount. Credit investments for the face amount of bonds sold and credit interest revenue for accrued interest amount. To complete the entry, enter the difference between the cash sale amount and the face investment amount + accrued interest as a gain or loss. Hide d. Provide the adjusting entry for accrued interest of $120 on December 31, 2012. Dec. 31 Hide Feedback Incorrect Check My Work Feedback d. Debit Interest Receivable and credit Interest Revenue for the accrued interest. [Interest = remaining bond face after sale x interest rate x (60 days from Nov. 1 to Dec. 31 Af· 360 days)]
Amberjack Company is trying to decide on an allocation base to use to assign manufacturing overhead to jobs. In the past, the company has always used direct labor hours to assign manufacturing overhead to products, but it is trying to decide whether it should use a different allocation base such as direct labor dollars or machine hours.
Actual and estimated data for manufacturing overhead, direct labor cost, direct labor hours, and machine hours for the most recent fiscal year are summarized here:
Estimated Value
Actual Value
Manufacturing overhead cost
$732,000
$842,000
Direct labor cost
$366,000
$377,000
Direct labor hours
14,640 hours
16,600 hours
Machine hours
18,300 hours
17,500 hours
Requirement 1:
Based on the companys current allocation base (direct labor hours), compute the following:
(a)
Predetermined overhead rate. (Omit the “$” sign in your response.)
Predetermined overhead rate
$ per direct labor hour
(b)
Applied manufacturing overhead. (Omit the “$” sign in your response.)
Manufacturing overhead
$
(c)
Over or underapplied manufacturing overhead. (Input the amount as positive value. Omit the “$” sign in your response.)
Overhead
$
Requirement 2:
If the company had used direct labor dollars (instead of direct labor hours) as its allocation base, compute the following:
(a)
Predetermined overhead rate. (Omit the “%” sign in your response.)
Predetermined overhead rate
% of direct labor cost
(b)
Applied manufacturing overhead. (Omit the “$” sign in your response.)
Manufacturing overhead
$
(c)
Over or underapplied manufacturing overhead. (Input the amount as positive value. Omit the “$” sign in your response.)
Overhead
$
Requirement 3:
If the company had used machine hours (instead of direct labor hours) as its allocation base, compute the following:
(a)
Predetermined overhead rate. (Omit the “$” sign in your response.)
Predetermined overhead rate
$ per machine hour
(b)
Applied manufacturing overhead. (Omit the “$” sign in your response.)
Manufacturing overhead
$
(c)
Over or underapplied manufacturing overhead. (Input the amount as positive value. Omit the “$” sign in your response.)
Overhead
$
Requirement 4:
Based on last years data alone, which allocation base would have provided the most accurate measure for applying manufacturing overhead costs to production?
he Ambrosia Corporation’s lead accountant shows the following info: On Jan 1, 2012, Ambrosia purchased a bottling machine for $800000 A) Straight line basis depreciation for 5 years for tax purposes B) Half year convention for 8 years for financial reporting (See Appendix 11A.) C) Tax exempt municipal bonds yielded interest of $150000 in 2013. D) Pretax financial income is $2300000 in 2012 and $2400000 in 2013. E) The company recognized an extraordinary gain of $150000 in 2013 (which is fully taxable). F) Taxable income is expected in future years with an expected tax rate of 35%. Required: 1) Compute taxable income and income taxes payable for 2013. 2) Prepare the journal entries for income tax expense, income taxes payable, and deferred taxes for 2013. 3) Prepare the deferred income taxes presentation for Dec 31, 2013 balance sheet.
Can someone please answer question P2 3 pages 90’91 in Libby Financial Accounting 7th edition? Thank you. Cougar Plastics Company has been operating for 3 years. At December 31, 2011, the accounting records reflected the following: Cash $19,000 Intangibles $3,000 Investments (short term) 2,000 Accounts Payable 15,000 Accounts Receivable 3,000 Accrued Liabilities Payable 2,000 Inventory 24,000 Notes Payable (short term) 7,000 Notes Receivable (long term) 1,000 Long Term Notes Payable 46,000 Equipment 48,000 Contributed Capitol 90,000 Factory Building 90,000 Retained Earnings 30,000 During the year 2012, the company has the following summarized activities: 1. Purchased short term investments for $9,000 cash. 2. Lent $7,000 to a supplier who signed a 2 year note. 3. Purchased equipment that cost $18,000: paid $6,000 cash and signed a one year note for the balance. 4. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance. 5. Issued an additional 2,000 shares of capitol stock for $12,000 cash. 6. Borrowed $12,000 cash from a local bank, payable in 3 months. 7. Purchased a patent (an intangible asset) for $3,000 cash. 8. Built an addition to the factory for $25,000; paid $9,000 in cash and signed a 3 year note for the balance. 9. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000. Please answer: 1. Create T accounts for each of the accounts on the balance sheet and enter the balances at the end of 2011 as beginning balances for 2012. 2. Record each of the events for 2012 in T accounts (including referencing) and determine the ending balances. 3. Explain your response to event (4). 4. Prepare a classified balance sheet at December 2012. 5. Compute the current ratio for 2012. What does this suggest about Cougar Plastics?
Application: Evaluating Decision Making Scenarios Using Linear Profit Modeling For this week’s Application Assignment, you will analyze cost behaviors and decision making scenarios using the linear profit model. In a Word document, complete the exercises below and submit your responses per the instructions that follow. Darien Industries Darien Industries operates a cafeteria for its employees. The operation of the cafeteria requires fixed costs of $4,700 per month and variable costs of 40 percent of sales. Cafeteria sales are currently averaging $12,000 per month. Darien has an opportunity to replace the cafeteria with vending machines. Gross customer spending at the vending machines is estimated to be 40 percent greater than current sales because the machines are available at all hours. By replacing the cafeteria with vending machines, Darien would receive 16 percent of the gross customer spending and avoid all cafeteria costs. How much does monthly operating income change if Darien Industries replaces the cafeteria with vending machines? Used by permission of McGraw Hill. Silky Smooth Lotions Silky Smooth lotions come in three sizes: 4, 8, and 12 ounces. The following table summarizes the selling prices and variable costs per case of each lotion size. Fixed costs are $771,000. Current production and sales are 2,000 cases of 4 ounce bottles; 4,000 cases of 8 ounce bottles; and 1,000 cases of 12 ounce bottles, Silky Smooth typically sells the three lotion sizes in fixed proportions as represented by the preceding sales amounts. Required: How many cases of 4 , 8 , and 12 ounce lotion bottles must be produced and sold for Silky Smooth to break even, assuming that the three sizes are sold in fixed proportions? Used by permission of McGraw Hill. J. P. Max Department Stores J. P. Max is a department store carrying a large and varied stock of merchandise. Management is considering leasing part of its floor space for $72 per square foot per year to an outside jewelry company that would sell merchandise. Two areas currently in use are being considered: home appliances (1,000 square feet) and televisions (1,200 square feet). These departments had annual profits of $64,000 for appliances and $82,000 for televisions after allocated fixed occupancy costs of $7 per square foot were deducted. Allocated fixed occupancy costs include property taxes, mortgage interest, insurance, and exterior maintenance for the department store. Required: Considering all the relevant factors, which department should be leased and why? Used by permission of McGraw Hill. Bidwell Company Data for the Bidwell Company are as follows: Required: 1.Based on the preceding data, calculate break even sales in units. 2.If Bidwell Company is subject to an effective income tax rate of 40 percent, calculate the number of units Bidwell would have to sell to earn an after tax profit of $90,000. 3.If fixed costs increase $31,500 with no other cost or revenue factors changing, calculate the break even sales in units.
Arrow Enterprises uses a standard costing system. The standard cost sheet for product no. 549 follows. Direct materials: 4 units @ $6.50 $26.00 Direct labor: 8 hours @ $8.50 68 Variable factory overhead: 8 hours @ $7.00 56 Fixed factory overhead: 8 hours @ 2.5 20 Total standard cost per unit $170.00 The following information pertains to activity for December: 1. Direct materials acquired during the month amounted to 26,350 units at $6.40 per unit. All materials were consumed in operations. 2. Arrow incurred an average wage rate of $8.75 for 51,400 hours of activity. 3. Total overhead incurred amounted to $508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the year. 4. Actual production amounted to 6,500 completed units. Instructions: a. Compute Arrow’s direct material variances. b. Compute Arrow’s direct labor variances. c. Compute Arrow’s variances for factory overhead.
Asset Impairment At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10 year service life and no residual value. The straight line depreciation method was used to measure depreciation for 2009 and 2010. Late in 2011, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2012 and 2013) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values. The controller, Heather Meyer, was asked by Harvey Dent, the company’s chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Heather determined that there has been an impairment of value requiring an immediate write down of the equipment of $12,900,000. The remaining book value would then be depreciated over the equipment’s revised service life. The CEO does not like Heather’s conclusion because of the effect it would have on 2011 income. “Looks like a simple revision in service life from 10 years to 5 years to me,” Dent concluded. “Let’s go with it that way, Heather.” What is the difference in before tax income between the CEO’s and Heather’s treatment of the situation? Discuss Heather Meyer’s ethical dilemma. Do you agree with the ethical perspectives of your classmates? What implications could this have on future Healthy Life Food Company dealings?
Installment Sales Computation and Entries—Periodic Inventory Mantle Inc. sells merchandise for cash and also on the installment plan. Entries to record cost of goods sold are made at the end of each year. Repossessions of merchandise (sold in 2010) were made in 2011 and were recorded correctly as follows.
Deferred Gross Profit, 2010 7,200
Repossessed Merchandise 8,000
Loss on Repossession 2,800
Installment Accounts Receivable, 2010 18,000
Part of this repossessed merchandise was sold for cash during 2011, and the sale was recorded by a debit to Cash and a credit to Sales. The inventory of repossessed merchandise on hand December 31, 2011, is $4,000; of new merchandise, $127,400. There was no repossessed merchandise on hand January 1, 2011. Collections on accounts receivable during 2011 were:
Installment Accounts Receivable, 2010 $80,000
Installment Accounts Receivable, 2011 50,000
The cost of the merchandise sold under the installment plan during 2011 was $111,600. The rate of gross profit on 2010 and on 2011 installment sales can be computed from the information given.
Instructions
(a) From the trial balance and other information given above, prepare adjusting and closing entries as of December 31, 2011.
(b) Prepare an income statement for the year ended December 31, 2011. Include only the realized gross profit in the incomestatement.
Installment Sales Computations and Entries Paul Dobson Stores sell appliances for cash and also on the installment plan. Entries to record cost of sales are made monthly.
The accounting department has prepared the following analysis of cash receipts for the year.
Interest Revenue from Installment Sale Becker Corporation sells farm machinery on the installment plan. On July 1, 2010, Becker entered into an installment sale contract with Valente Inc. for a 8 year period. Equal annual payments under the installment sale are $100,000 and are due on July 1. The first payment was made on July 1, 2010. Additional information
1. The amount that would be realized on an outright sale of similar farm machinery is $586,842.
2. The cost of the farm machinery sold to Valente Inc. is $425,000.
3. The finance charges relating to the installment period are based on a stated interest rate of 10%, which is appropriate.
4. Circumstances are such that the collection of the installments due under the contract is reasonably assured. What income or loss before income taxes should Becker record for the year ended December 31, 2010, as a result of the transaction above?
Long Term Contract with Interim Loss On March 1, 2010, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2012. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2010, 2011, and 2012 are given below.
(a) Using the percentage of completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
(b) Using the completed contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore incomestaxes.)
Long Term Contract—Percentage of Completion Widjaja Company is accounting for a long term construction contract using the percentage of completion method. It is a 4 year contract that is currently in its second year. The latest estimates of total contract costs indicate that the contract will be completed at a profit to Widjaja Company.
(a) What theoretical justification is there for Widjaja Company’s use of the percentage of completion method?
(b) How would progress billings be accounted for? Include in your discussion the classification of progress billings in Widjaja Company financial statements.
(c) How would the income recognized in the second year of the 4 year contract be determined using the cost to cost method of determining percentage of completion?
(d) What would be the effect on earnings per share in the second year of the 4 year contract of using the percentage of completion method instead of the completed contract method? Discuss.
On June 4, Seller Company signed a sales agreement with Buyer Company to deliver and install a piece of factory equipment. The total contract price is $300,000. Customers usually buy an equipment/installation package, but Seller Company does sell equipment without installation and also installs equipment sold by other companies. The selling price of the equipment without installation is $290,000. The separate price for installation of this piece of equipment is $20,000. Seller Company could pay $280,000 to another equipment company to accept the obligation to provide and deliver the equipment to Buyer. Seller could pay $17,000 to an installation company to accept the obligation of installing the equipment.
(1) Using the customer consideration model, make the journal entry necessary on the date the sales agreement is signed. Assume that Buyer Company paid all of the $300,000 in cash when the agreement was signed.
Pankratov Lakes is a new recreational real estate development which consists of 500 lake front and lake view lots. As a special incentive to the first 100 buyers of lake view lots, the developer is offering 3 years of free financing on 10 year, 12% notes, no down payment, and one week at a nearby established resort—?oa $1,200 value.?? The normal price per lot is $12,000. The cost per lake view lot to the developer is an estimated average of $2,000. The development costs continue to be incurred; the actual average cost per lot is not known at this time. The resort promotion cost is $700 per lot. The notes are held by Davis Corp., a wholly owned subsidiary.
Instructions
(a) Discuss the revenue recognition and gross profit measurement issues raised by this situation.
(b) How would the developer’s past financial and business experience influence your decision concerning the recording of these transactions?
(c) Assume 50 persons have accepted the offer, signed 10 year notes, and have stayed at the local resort. Prepare the journal entries that you believe are proper.
(d) What should be disclosed in the notes to the financial statements?
Recognition of Profit and Balance Sheet Amounts for Long Term Contracts Yanmei Construction Company began operations January 1, 2010. During the year, Yanmei Construction entered into a contract with Lundquist Corp. to construct a manufacturing facility. At that time, Yanmei estimated that it would take 5 years to complete the facility at a total cost of $4,500,000. The total contract price for construction of the facility is $6,000,000. During the year, Yanmei incurred $1,185,800 in construction costs related to the construction project. The estimated cost to complete the contract is $4,204,200. Lundquist Corp. was billed and paid 25% of the contract price. Prepare schedules to compute the amount of gross profit to be recognized for the year ended December 31, 2010, and the amount to be shown as ?ocosts and recognized profit on uncompleted contract in excess of related billings?? or ?obillings on uncompleted contract in excess of related costs and recognized profit?? at December 31, 2010, under each of the following methods.
(a) Completed contract method.
(b) Percentage of completion method. Show supporting computations in good form
Recognition of Profit and Balance Sheet Presentation, Percentage of Completion On February
1, 2010, Hewitt Construction Company obtained a contract to build an athletic stadium. The stadium was to be built at a total cost of $5,400,000 and was scheduled for completion by September 1, 2012. One clause of the contract stated that Hewitt was to deduct $15,000 from the $6,600,000 billing price for each week that completion was delayed. Completion was delayed 6 weeks, which resulted in a $90,000 penalty Below are the data pertaining to the constructions period.
Instructions
(a) Using the percentage of completion method, compute the estimated gross profit recognized in the years 2010–2012.
(b) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivable and inventoryaccounts.
Recognition of Profit and Entries on Long Term Contract On March 1, 2010, Chance Company entered into a contract to build an apartment building. It is estimated that the building will cost $2,000,000 and will take 3 years to complete. The contract price was $3,000,000. The following information pertains to the construction period.
Instructions
(a) Compute the amount of gross profit to be recognized each year assuming the percentage of completion method is used.
(b) Prepare all necessary journal entries for 2012.
(c) Prepare a partial balance sheet for December 31, 2011, showing the balances in the receivables and inventoryaccounts.
Recognition of Profit on Long Term Contract Shanahan Construction Company has entered into a contract beginning January 1, 2010, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.
Instructions
(a) Using the percentage of completion method, compute the estimated gross profit that would be recognized during each year of the construction period.
(b) Using the completed contract method, compute the estimated gross profit that would be recognized during each year of the constructionperiod.
1.) Ultramega Company collected $11,760 in May of 2012 for 4 months of service which would take place from October of 2012 through January of 2013. The revenue reported from this transaction during 2012 would be (A) $8,820. (B) $0. (C) $2,840. (D) $11,760. 2.) On July 1, Runner’s Sports Store paid $10,000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runners Sports Store is (A) Debit Rent Expense, $2,500; Credit Prepaid Rent, $2,500. (B) Debit Rent Expense, $10,000; Credit Prepaid Rent, $10,000. (C) Debit Rent Expense, $10,000; Credit Prepaid Rent, $2,500. (D) Debit Prepaid Rent, $2,500; Credit Rent Expense, $2,500. 3.) Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Live Wire on August 5. Live Wire receives the check in the mail on August 6. When should Live Wire show that the revenue was earned? (A) August 1 (B) July 31 (C) August 6 (D) August 5 4.) In recording an accounting transaction in a double entry system (A) there must always be entries made on both sides of the accounting equation. (B) there must only be two accounts affected by any transaction. (C) the number of debit accounts must equal the number of credit accounts. (D) the amount of the debits must equal the amount of the credits. 5.) Revenues are (A) the cost of services used during the period. (B) the cost of assets consumed during the period. (C) gross increases in owner’s equity resulting from business activities. (D) actual or expected cash outflows. 6.) Communication of economic events is the part of the accounting process that involves (A) quantifying transactions into dollars and cents. (B) identifying economic events. (C) recording and classifying information. (D) preparing accounting reports.
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 Companys 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? 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 products 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 Companys 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 Companys 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? 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?
1.Jan, who is an employee, drove her automobile a total of 40,000 business miles in 2011. She also has receipts for business related use as follows:
Parking
$500
Fuel
900
Tolls
200
Jan receives no reimbursement from her employer. Jan has an AGI for the year of $50,000 and no other itemized deductions. If Jan uses the standard mileage method, she can deduct from AGI (after limitations) (Points : 2)
$19,600. $20,100. $21,000. $22,000.
2.Norman traveled to San Francisco for four days on vacation, and while there spent another two days conducting business for his employer. Norman’s plane fare for the trip was $500; meals cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days. Norman was not reimbursed by his employer for any expenses. Norman’s AGI for the year is $40,000 and he did not have any other miscellaneous itemized deductions. Norman may deduct (after limitations) (Points : 2)
$250. $800. $1,050. $1,200.
3.Steven is a representative for a textbook publishing company. Steven attends a convention which will also be attended by many potential customers. During the week of the convention, Steven incurs the following costs in entertaining potential customers.
Meal costs
$ 1,500
Entertainment of customers
3,500
Having recently been to a company seminar on the new tax laws, Steven makes sure that business is discussed at the various dinners, and that the entertainment is on the same day as the different dinners. Steven is reimbursed $2,000 by his employer under an accountable plan. Steven’s AGI for the year is $50,000, and while he itemizes deductions, he has no other miscellaneous itemized deductions. What is the amount and character of Steven’s deduction after any limitations? (Points : 2)
$500 from AGI $500 for AGI $2,000 from AGI $2,000 for AGI
4.Brett, an employee, makes the following gifts, none of which are reimbursed:
Brett’s supervisor
$30
Brett’s secretary
40
4 customers ($27 each)
108
Gift wrapping customer gifts
10
What amount of the gifts is deductible before application of the 2% of AGI floor for miscellaneous itemized deductions? (Points : 2)
$135 $150 $170 $180
5.Bill obtained a new job in Boston. He incurred the following moving expenses:
Transportation of household goods and personal effects
$2,600
Cost of transporting Bill’s family
2,000
House hunting trip
1,700
Payments to lessor to cancel a lease
500
Assuming Bill is entitled to deduct moving expenses, what is the amount of the deduction? (Points : 2)
$2,600 $4,600 $6,300 $6,800
6.Vincent is a university professor who accepts a visiting position at another university for six months and obtains a leave of absence from his current employer. Vincent spends the following amounts at the new location:
Furnished apartment
$ 4,800
Meals
3,000
Vincent has AGI for the year of $50,000. Vincent’s deductible travel expenses, after the 2% limitation, are (Points : 2)
$800. $1,300. $5,300. $6,300.
7.Gwen traveled to New York City on a business trip for her employer. Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area. Gwen’s plane fare for the trip was $250. Meals cost $160 per day. Hotels and other incidental expenses amounted to $250 per day. For the days spent sightseeing, Gwen rented an automobile at $60 per day. Gwen was not reimbursed by her employer for any expenses. Her AGI for the year is $50,000 and she itemizes but has no other miscellaneous itemized deductions. Gwen may deduct (after limitations) (Points : 2)
$570. $890. $1,487. $1,570.
8.Gayle, a doctor with significant investments in the stock market, traveled on a cruise ship to attend a general business seminar that was held at a hotel in a foreign country. The cost of the cruise for four days is $2,500. Gayle can deduct (Points : 2)
$0. $1,250. $2,000. $2,500.
9.Donald takes a new job and moves to a new residence. The distances are as follows:
Old residence to new job
70 miles
Old residence to old job
8 miles
By how many miles does the move exceed the minimum distance requirement for the moving expense deduction? (Points : 2)
12 miles 20 miles 62 miles none of the above
10.Fran, who is self employed, drove her automobile a total of 35,000 business miles in 2011. She also has receipts for business related use as follows:
Parking
$500
Fuel
900
Tolls
200
Fran has an AGI for the year of $50,000. If Fran uses the standard mileage rate method, she can deduct (Points : 2)
1.suppose that author kessel places an order to buy 100 shares of Google. explain how the order will be processed if it’s a market order. would it make any difference if it had been a limit order? explain. 2.using a resource like the wall street journal or Barron’s( either in print or online), find the latest values for each of the following market averages and indexes, and how each has performed over the past 6 months: A. DJIA B. S&P 500 C. NASDAQ Composite D. S&P MidCap 400 E. Dow Jones Wilshire 5000 F. Russell 2000 3.using the stock quotations in exhibit 11.4, find the 52 week high and low for Nucor’s common. what is the stock’s latest dividend yield? what was the closing price, and at which P/E ration was the stock trading? Of the stocks listed in exhibit 11.5, which had the highest price/earnings ratio and the biggest change in price? which three stocks had the highest dividend yields, and which three had the highest closing prices?
2. Assume that youve just inherited $350,000 and have decided to invest a big chunk of it ($250,000, to be exact) in common stocks. Your objective is to build up as much capital as you can over the next 15 to 20 years, and youre willing to tolerate a “good deal of risk. a. What types of stocks (blue chips, income stocks, and so on) do you think youd be most interested in, and why? Select at least three types of stocks and briefly explain the rationale for selecting each. b. Would your selections change if you were dealing with a smaller amount of money”say, only $50,000? What if you were a more risk averse investor? c. If your objective was not necessarily to build up as much capital as you can, but to obtain your own financial objectives which three specific stocks would your purchase with the $250,000. Please indicate how much you would invest in each and what your reasoning for selecting each stock is.
General Corporation employs a job order cost system. On May 1 the following balances were extracted from the general ledger;
Work in process $ 35,200
Finished goods 86,900
Cost of goods sold 128,700
Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures are subdivided as follows:
Direct Materials
Direct Labor
Job No.
Amount
Job No.
Amount
101
$5,000
101
$7,800
115
19,500
103
20,800
116
36,200
115
42,000
Other
35,800
116
18,000
$96,500
Other
25,900
$114,500
Job no. 115 was the only job in process at the end of the month. Job no. 101 and three “other” jobs were sold during May at a profit of 20% of cost. The “other” jobs contained material and labor charges of $21,000 and $17,400, respectively.
General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job orders. The firm’s fiscal year ends on May 31.
Instructions:
a. Compute the total overhead applied to production during May.
b. Compute the cost of the ending work in process inventory.
c. Compute the cost of jobs completed during May.
d. Compute the cost of goods sold for the year ended May 31.
2. The Dewey Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labor hours. Estimates for the year just ended are as follows: Estimated manufacturing overhead $240,000 Estimated direct labor hours 40,000 During the year Dewey Company used 37,000 direct labor hours. At the end of the year, Dewey Company records revealed the following information: Raw materials inventory $ 35,000 Work in process inventory 60,000 Finished goods inventory 105,000 Cost of goods sold 400,000 Manufacturing overhead costs incurred 210,000 Required: a. Calculate the predetermined overhead rate for the year. b. Determine the amount of overhead applied during the year. c. Determine the amount of underapplied or overapplied manufacturing overhead for the year.
2. (Show Work) Goold Corporation uses activity based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools Machining, Order Filling, and Other. The costs in those activity cost pools appear below: Machining $3200 Order Filling $7600 Other $5200 Machining costs are assigned to products using machine hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: MHs (Machining) Orders (Order filling) Product R9 3900 700 Product H2 16100 1300 Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. Sales and Direct Cost Data Product R9 Product H2 Sales (total) $28,200 $36,800 Direct Materials $17300 $13500 Direct labor $6700 $13500 The activity rate for Machining under activity based costing is closest to: A. $0.11 per MH B. $0.80 per MH C. $0.16 per MH D. $1.43 per MH
In 2012, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2012, Esther had a weighted average of 200,000 common shares outstanding. Compute Esther’s 2012 earnings per share. Answer $2.25 $3.75 $3.00 $1.95 An income statement shows “income before income taxes and extraordinary items” in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the “income before extraordinary items” is Answer $900,000. $1,780,000. $820,000. $1,860,000. James, Inc. incurred the following infrequent losses during 2012: $140000 write down of equipment leased to others. $80000 adjustment of accruals on long term contracts. $120000 write off of obsolete inventory. In its 2012 income statement, what amount should James report as total infrequent losses that are not considered extraordinary? Answer $220,000. $260,000. $340,000. $200,000. A review of the December 31, 2012, financial statements of Somer Corporation revealed that under the caption “extraordinary losses,” Somer reported a total of $1,030,000. Further analysis revealed that the $1,030,000 in losses was comprised of the following items:(1) Somer recorded a loss of $300,000 incurred in the abandonment of equipment formerly used in the business.(2) In an unusual and infrequent occurrence, a loss of $500,000 was sustained as a result of hurricane damage to a warehouse.(3) During 2012, several factories were shut down during a major strike by employees, resulting in a loss of $170,000.(4) Uncollectible accounts receivable of $60,000 were written off as uncollectible.Ignoring income taxes, what amount of loss should Somerreport as extraordinary on its 2012 income statement? Answer $1,030,000. $300,000. $500,000. $800,000. For the year ended December 31, 2012, Transformers Inc. reported the following: Net income $120,000 Preferred dividends declared 20,000 Common dividend declared 4,000 Unrealized holding loss, net of tax 2,000 Retained earnings 160,000 Common stock 80,000 Accumulated Other Comprehensive Income, Beginning Balance 10,000 What would Transformers report as the ending balance of Retained Earnings? Answer $254,000 $266,000 $278,000 $256,000 At Ruth Company, events and transactions during 2012 included the following. The tax rate for all items is 30%.(1) Depreciation for 2010 was found to be understated by $60,000.(2) A strike by the employees of a supplier resulted in a loss of $50,000.(3) The inventory at December 31, 2010 was overstated by $80,000.(4) A flood destroyed a building that had a book value of $1,000,000. Floods are very uncommon in that area.The effect of these events and transactions on 2012 income from continuing operations net of tax would be Answer ($35,000). ($833,000). ($77,000). ($133,000). At Ruth Company, events and transactions during 2012 included the following. The tax rate for all items is 30%.(1) Depreciation for 2010 was found to be understated by $60,000.(2) A strike by the employees of a supplier resulted in a loss of $50,000.(3) The inventory at December 31, 2010 was overstated by $80,000.(4) A flood destroyed a building that had a book value of $1,000,000. Floods are very uncommon in that area.The effect of these events and transactions on 2012 net income net of tax would be Answer ($735,000). ($833,000). ($35,000). ($777,000). Arreaga Corp. has a tax rate of 40 percent and income before non operating items of $464,000. It also has the following items (gross amounts). Unusual loss $74,000 Extraordinary loss 202,000 Gain on disposal of equipment 16,000 Change in accounting principle increasing prior year’s income 106,000 What is the amount of income tax expense Arreaga would report on its income statement? Answer $162,400 $198,400 $185,600 $124,000 For the year ended December 31, 2012, Transformers Inc. reported the following: Net income $120,000 Preferred dividends declared 20,000 Common dividend declared 4,000 Unrealized holding loss, net of tax 2,000 Retained earnings 160,000 Common stock 80,000 Accumulated Other Comprehensive Income, Beginning Balance 10,000 What would Transformers report as total stockholders’ equity? Answer $336,000 $344,000 $240,000 $256,000 Dole Company, with an applicable income tax rate of 30%, reported net income of $350,000. Included in income for the period was an extraordinary loss from flood damage of $50,000 before deducting the related tax effect. The company’s income before income taxes and extraordinary items was Answer $500,000. $385,000. $400,000. $550,000. n 2012, Esther Corporation reported net income of $600,000. It declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. During 2012, Esther had a weighted average of 200,000 common shares outstanding. Compute Esther’s 2012 earnings per share. Answer $2.25 $3.75 $3.00 $1.95 An income statement shows “income before income taxes and extraordinary items” in the amount of $2,740,000. The income taxes payable for the year are $1,440,000, including $480,000 that is applicable to an extraordinary gain. Thus, the “income before extraordinary items” is Answer $900,000. $1,780,000. $820,000. $1,860,000.
For 2012, Othere Technology Company initiated a sales promotion campaign that included the expenditure of an additional $24,000 for advertising. At the end of the year, George Wallace, the president, is presented with the following condensed comparative income statement: Othere Technology Company Comparative Income Statement For the Years Ended December 31, 2012 and 2011 2012 2011 Sales $873,650 $766,320 Sales returns and allowances 8,650 22,320 Net sales $865,000 $744,000 Cost of goods sold 415,200 342,240 Gross profit $449,800 $401,760 Selling expenses $181,650 $133,920 Administrative expenses 77,850 89,280 Total operating expenses $259,500 $223,200 Income from operations $190,300 $178,560 Other income 34,600 44,640 Income before income tax $224,900 $223,200 Income tax expense 86,500 89,280 Net income $138,400 $133,920 Instructions: Hide 1. Prepare a comparative income statement for the two year period, presenting an analysis of each item in relationship to net sales for each of the years. Enter percentages as whole numbers. OTHERE TECHNOLOGY COMPANY Comparative Income Statement For the Years Ended December 31, 2012 and 2011 2012 Amount 2012 Percent 2011 Amount 2011 Percent Sales $ 873,650 % $ 766,320 % Sales returns and allowances 8,650 22,320 Net sales $ 865,000 % $ 744,000 % Cost of goods sold 415,200 342,240 Gross profit $ 449,800 % $ 401,760 % Selling expenses 181,650 % 133,920 % Administrative expenses 77,850 89,280 Total operating expenses $ 259,500 % $ 223,200 % Income from operations $ 190,300 % $ 178,560 % Other income 34,600 44,640 Income before income tax $ 224,900 % $ 223,200 % Income tax expense 86,500 89,280 Net income $ 138,400 % $ 133,920 %
3/1. issued 1,000 shares of $10 par value common stock at $52 per share for cash 3/15.purchased with cash 100 shares of Treasury stock at $25 per share 4/30.sold for cash 50 shares of Treasury stock that was purchased at $28 per share 6/1.delcared a dividend of $1.00 per share on the outstanding shares of common stock at 6/1 6/30 paid the dividend declared on 6/1 7/1 issued $1,000,000 of 5 year, 5% bonds at 97 7/1 purchased 2,500 shares of the 10,000 outstanding common shares of Fyer,inc. for $75,000(holdings over 20% represent significant influence over investee requiring the equity method of accounting) 10/1 received a cash dividend of $1 per share on the Fyer, inc, stock acquired on 7/1 12/31 semiannual payment of interest expense on $1,000,000 of 5% bonds issued 7/1 12/31 amortization of bond discount or premium using the straight line method of amortization (for 6 month period) 12/31 Fyer, inc. reported net income of $10,000 for the 6 month period just ended. Provide the entry to record the appropriate share of income as warranted accruing to Dryer and Bryer, inc.
3. Accounting for prepaid expenses and unearned revenues. Hawaii Blue began business on January 1 of the current year and offers deep sea fishing trips to tourists. Tourists pay $125 in advance for an all day outing off the coast of Maui. The company collected monies during January for 210 outings, with 30 of the tourists not planning to take their trips until early February. Hawaii Blue rents its fishing boat from Pacific Yacht Supply. An agreeA?¬ment was signed at the beginning of the year, and $72,000 was paid for the rights to use the boat for two full years. a. Prepare journal entries to record (1) the collection of monies from tourists and (2) the revenue generated during January. b. Calculate Hawaii Blue’s total obligation to tourists at the end of January. On what financial statement and in which section would this amount appear?
The management of your company, which is based in the UK, intend to pursue a globalisation agenda. They are unsure whether to license local companies, takeover an existing company or set up a completely new company in the USA.
Prepare a report explaining the inherent risks your company should consider before licensing, acquisition or Greenfield investment. Data is available on the websites listed below and you should identify relevant data and produce relevant graphs and tables to include in your report. You must explain the relevance of the data and graphs you have included in your report and provide an overall recommendation as to whether your company should license local companies, takeover an existing company or set up a completely new company in the USA.
You will need to provide information concerning:
The advantages and disadvantages of licensing local companies, taking over an existing company or setting up a completely new company.
Provide a discussion of the following and relate your discussion to each of the three strategies the company is considering:
An example of transaction exposure using historical exchange rates, but also explain the possible effects of translation and economic exposure.
The report should be 600 words long.
2
Music plc is a multinational company which produces musical instruments and exports them worldwide and has a number of licence agreements with various overseas companies allowing them to produce instruments under the Music plc brand name.
Didgeredoo Pty Ltd, an Australian company, has recently purchased equipment from Music plc for £5,000,000. The currency risk of this purchase is of particular concern to Didgeredoo Pty Ltd and the payment is due in 6 months time. The following data has been compiled:
Identify and calculate the costs of the alternative strategies available for hedging this risk and advise which strategy would have produced the best outcome for Didgeredoo Pty Ltd, assuming the actual spot rate in 3 months time is £0.68/AU$.
Explain why economic (operating) exposure might be of concern to Music plc even though they do not, at the moment, have any foreign direct investment (FDI).
Describe the additional operating exposures Music plc would be exposed to if they were to engage in FDI and describe the strategies the company might undertake to reduce its level of economic exposure.
Explain why translation exposure might be of concern to multinational organisations and briefly describe how a multinational organisation might reduce its exposure to translation risk.
3
Several of the companies which hold a licence from Music plc are based in Latin America but there is concern that Music plc might be losing customers due to a lack of a physical presence in Latin America. As the Latin American market is very important, Music plc is considering three possible strategies
A joint venture with a Brazilian company Music plc currently licenses.
An acquisition of a Brazilian company Music plc currently licenses.
Setting up new production facilities in Brazil.
Required:
Describe the advantages and disadvantages of the above strategies.
Explain the relevance of the following risks to Music plc potentially arising from foreign direct investment and explain how Music plc might reduce these risks:
Firm specific risk
Country specific risk
4
Music plc is considering the potential impact on its financial policy of acquiring a Brazilian company. Music plc’s capital structure is currently 50% equity, 50% debt but the Brazilian company’s capital structure is 30% equity, 70% debt. Music plc is considering paying for the acquisition with shares in Music plc rather than cash and would like to pay the Brazilian management partly in stock options.
Required
Describe the components of the weighted average cost of capital and discuss whether Music plc should retain their existing leverage ratio or move towards a localised leverage ratio.
Explain the potential benefits of borrowing in Brazil rather than the UK following the acquisition.
Explain the potential benefits to Music plc of listing their stock on the Brazilian stock exchange.
5
Music plc has estimated the potential cash flows from a joint venture with a Brazilian company which would last for three years. The estimated cash flows for the project are given below and management consider that a discount rate of 12% reflects the riskiness of the venture.
Year 0
Year 1
Year 2
Year 3
Total cash inflows (Brazilian real (m))
0
120
130
90
Total cash outflows (Brazilian real (m))
100
80
90
40
Additional £ cash inflows
0
30
30
30
Forecast exchange rate (£/R$)
0.36
0.36
0.37
0.37
Required
Calculate the net present value of the investment for Music plc.
An alternative to the joint venture would be to set up a subsidiary in Brazil to handle the project. Explain whether such a project undertaken by a subsidiary should be considered from the subsidiary’s perspective or Music plc’s perspective. Discuss the additional factors which need to be considered if Music plc’s perspective is taken.
As an alternative to setting up a subsidiary now, Music plc could choose to proceed with the joint venture and then decide whether to set up a subsidiary in three years’ time if the market is favourable. Discuss why the opportunity to defer investment might be valuable for a company and why real option analysis is superior to discounted cash flow techniques in such situations.
6
Music plc is concerned that the may be restrictions in repatriating funds from Brazil if a subsidiary is set up.
Required:
Describe and evaluate the different methods Music plc could use to repatriate funds to the UK.
Music plc is considering the price to charge for one of the components that it produces in the UK and will ship to Brazil for further processing. The UK tax rate is currently 25%, whereas the Brazilian tax rate for the subsidiary would be 20%. Using an exchange rate of R$0.36/£ calculate the total tax payable in £’s if the transfer price is either £3.00 per unit or £4.00 per unit. If Music plc wishes to minimise global taxes which transfer price should it use?
Explain what is meant by the arm’s length rule with respect to transfer pricing and why governments may insist that multinational organisations use it.
Music plc is considering the cash balance the subsidiary should hold in Brazil.
Briefly describe the transaction motive and the precautionary motive for holding cash.
Briefly explain what is meant by the cash conversion cycle.
7
Aveskot, a Japanese manufacturer of computer chips, exports chips to companies in both the Eurozone and the US.
Aveskot has just billed a major computer manufacturer in the US and the customer insisted that the invoice be in dollars rather than yen. The invoice is payable in 3 months time but Aveskot is concerned that the dollar to yen exchange rate might adversely change and has asked you to explain how Aveskot might hedge the risk. The invoice is for $20 million.
Currently, the spot exchange rate is ¥80/$ and the three month forward rate is ¥81/$.
The Japanese investment rate is 3 percent per annum and the Japanese borrowing rate is 5.2 percent per annum.
The US investment rate is 2.4 percent per annum and the US borrowing rate is 4.8 percent per annum.
The Put option, on dollars, exercise price is ¥84/$ and the premium is 1.5% of Yen, notional.
Required
Calculate the receipt, in Yen, if the spot rate in 3 months time is ¥83/$ and advise whether (i) choosing not to hedge; (ii) a forward contract; (iii) a money market hedge, or (iv) an option contract would have been the best choice, in retrospect.
Briefly discuss why some multinational companies may choose not to hedge.
Explain the differences between translation exposure and economic exposure and suggest strategies that a multinational company might adopt to reduce these types of exposure.
8
Aveskot is considering cross listing on the US stock market as part of its move towards a global company.
Required
Describe the potential costs and benefits that Aveskot might experience as a result of cross listing.
Define an American Depositary Receipt (ADRs) and explain the potential advantages of listing via ADRs rather than directly listing Aveskot’s shares on the US exchange.
Explain the potential impact sourcing new equity capital from foreign investors might have on Aveskot’s cost of capital.
9
Avescot is currently very successful in Japan, where it has a comparative advantage, and is currently considering foreign direct investment (FDI).
Required
Explain the key competitive advantages Aveskot would need to support a global strategy to originate and sustain foreign direct investment and explain the factors and forces which are likely to impact on Aveskot’s success.
An alternative to FDI might be licensing local companies to produce the chips. Discuss the advantages and disadvantages of licensing.
c. If Aveskot proceeds with FDI it intends to use a takeover strategy. Discuss the advantages and disadvantages of mergers and acquisitions as a method of FDI.
10
Aveskot has identified a factory in the US which it would like to purchase and modify to produce computer chips.
Required
The estimated cash flows for the factory project are given below and management consider that a discount rate of 10% reflects the riskiness of the venture. Aveskot intends to sell the factory at the end of 3 years for $200 million. Calculate the net present value of the project.
Year 0
Year 1
Year 2
Year 3
Total cash inflows $mill
0
210
230
290
Total cash outflows $mill
400
120
150
140
Additional $mill cash inflows
0
50
40
40
Forecast exchange rate ¥ /$
81
82
82
83
Compute the impact on the net present value if the US government required the earnings from the project to be reinvested in the US during the first two years of the project’s life. That is, cash flows could only be repatriated to Japan in year 3. Assume the cash flows can be reinvested in the US at a rate of 10% pa.
Briefly discuss, but do not compute, the impact on the net present value if the Aveskot could only reinvest in the US at a rate of 8% pa.
Discuss whether Aveskot should evaluate the purchase of the factory as a stand alone project or from Aveskot’s, as the parent firm’s, perspective?
Describe the differences in the capital budgeting analysis that will arise if the project is evaluated from the parent firm’s perspective as opposed to a stand alone project.
11
Aveskot is considering setting up a subsidiary in the Eurozone.
Required
Aveskot is aware that corporation tax rates differ from around 10% to 33% in the Eurozone. Explain why transfer pricing might have an impact on where the subsidiary is based.
Briefly discuss (1) what is meant by ‘arm’s length pricing’ in relation to transfer pricing and (2) why governments might insist on this to be the basis of the transfer price.
Explain how and why Aveskot might arrange for cash flows to be repatriated to the parent other than by a dividend.
Aveskot is concerned that the number of cash flows between its future subsidiaries and the parent company will grow and become increasingly complex. Discuss how the following might help the company manage its cash payments and receipts
Moffett, M. H, A. I Stonehill and D. K Eiteman (2012) Fundamentals of Multinational Finance, 3/E, Pearson Education. (MSE)
Additional reading
Eiteman, D. K., Stonehill, A. I., and Moffett, M. H. (2007 or 2010), Multinational Business Finance, 11th or 12thedition, Pearson Education.
Shapiro, A. C., (2010), Multinational Financial Management, 9th edition, John Wiley & Sons Inc.
Madura, J. and Fox, R. (2007), International Financial Management, 8th edition, Thomson South Western.
No plagiarism allowed.
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6. A bondholder that owns a $1,000, 10%, 10 year bond has: (a) Ownership rights (b) The right to receive $10 per year until maturity (c) The right to receive $1,000 at maturity (d) The right to receive $10,000 at maturity (e) The right to receive dividends of $1,000 per year 7. A company has net income of $850,000. It also has 125,000 weighted average common shares outstanding and a market value per share of $115. The company’s price earnings ratio is equal to: (a) 16.9 (b) 14.7 (c) 92.0 (d) 13.5 (e) 8.0 8. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called: (a) Coupon bonds (b) Callable bonds (c) Serial bonds (d) Convertible bonds 9. Amortizing a bond discount: (a) Allocates a part of the total discount to each interest period (b) Increases the market value of the Bonds Payable (c) Decreases the Bonds Payable account (d) Decreases interest expense each period (e) Increases cash flows from the bond 10. A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a: (a) Stock dividend (b) Stock subscription (c) Premium on stock (d) Discount on stock (e) Treasury stock I need these as soon as possible
The Sanford Company had the following balance sheet as of December 31, 20×2. The transactions for the first three months of 20×3 are also presented along with other information about specific accounts.
Sanford Company
Balance Sheet
December 31, 20×2
ASSETS
LIABILITIES
Cash
$ 57,000
Accounts Payable
$ 34,000
Marketable Securities
8,000
Wages Payable
11,200
Accounts Receivable
75,000
Taxes Payable
8,000
Uncollectible Accounts
2,000
Short Term Notes Payable
12,000
Inventory
84,000
Interest Payable
800
Supplies
7,000
Unearned Revenue
13,000
Prepaid Insurance
6,000
Total Current Assets
$235,000
Total Current Liabilities
$ 79,000
Land
$114,000
Long Term Notes Payable
$ 20,000
Equipment
227,000
Bonds Payable
100,000
Accumulated Depreciation
87,000
Mortgage Payable
320,000
Building
560,000
Total Long Term Liabilities
$440,000
Accumulated Depreciation
130,000
Intangible Assets
70,000
STOCKHOLDER EQUITY
Total Long Term Assets
$754,000
Capital Stock
$100,000
Paid in Capital
250,000
Retained Earnings
120,000
Total Stockholders Equity
$470,000
Total Assets
$989,000
Total Liabilities & Equity
$989,000
Additional Information
Accounts Receivable
The following table indicates the historical breakout of accounts receivable
Days
Current
30 to 60
60 to 90
Over 90
Percent of Balance
50%
30%
15%
5%
Percent Collectible
95%
90%
80%
60%
The company uses the gross method of recording all sales on accounts.
A)debits exceed the credits. B)credits exceed the debits. C)first transaction entered was a credit. D)last transaction entered was a credit.
10. Which of the following is incorrect as to category, normal balance, financial statement, to increase, to decrease A)Cash asset, debit, balance sheet, credit, debit B)Accounts Payable liabilities, debit, balance sheet, credit, debit C)Common Stock shareholders equity, debit, balance sheet, credit, debit D)Service Revenue revenue, credit, income statement, debit, credit E)Dividend expense, debit, retained earning, debit, credit F)All of these G)None of these
12.
The accounting equation for Eldorado Enterprises is:Assets $100,000 = Liabilities $40,000 + Stockholders’ equity Equity $60,000.
If Eldorado purchases equipment for $25,000 and signs a note payable for the same amount, the new accounting equation will be:
ABC Company began operations in June, 2007 by selling common stock to owners in exchange for $70,000 cash. During 2007, ABC Company entered into the following transactions: 1. On June 23, ABC Company purchased inventory for $40,000 cash 2. On July 1, ABC Company purchased supplies for $18,000 cash 3. On August 1, ABC Company received $40,000 cash from a customer for services to be performed over the next 20 months 4. On September 1, ABC Company sold one half of the inventory purchased on June 23 to a customer for $35,000 cash 5. A physical count revealed that supplies costing $5,000 were still on hand at December 31 Calculate the amount of net income that ABC Company would report in its 2007 income statement after all the above transactions are recorded and all necessary adjusting entries are made at December 31, 2007. Do not use decimals in your answer.
Accounting: Effects of Transactions on Ratios a. Sold merchandise on account Current ratio effect would be Increase, Decrease, or None b. Sold merchandise on account Inventory turnover would be Increase, Decrease, or None c. Collected on accounts receivable Quick ratio would be Increase, Decrease, or None d. Wrote off an uncollectible acct = Receivable turnover would be Increase, Decrease, or None e. Paid on accounts payable current ratio would be increase, decrease, or none f. Declared cash dividend return on equity would be increase, decrease or none g. Incurred advertising expense profit margin would be increase, decrease or none h. issued stock dividend = debt to equity ration would be increase, decrease or none i. Issued bonds payable/ asset turnover would be increase, decrease or none j. accrued interest expense/current ratio would be increase, decrease or none k. paid previously declared cash dividend would be increase, decrease or none l. purchased treasury stock/ return on assets would be increase, decrease or none m. recorded depreciation expense/ cash flow yield would be increase, decrease or none
Accounting Madison Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnets financial statements. In discussing the audit fee, Allnets management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thornes firm. Question Required 1. Identify the parties potentially affected by this audit and the fee plan proposed. 2. What are the ethical factors in this situation? Explain. 3. Would you recommend that Thorne accept this audit fee arrangement? Why or why not? 4. Describe some ethical considerations guiding your recommendation. Draw from your personal as well as professional experiences to answer the BTN 1 3 discussion question. Remember that this is a discussion, so keep your responses succinct and focused on the point.
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