Barnes Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:
Direct materials $35,000
Direct labor 15,000
Variable manufacturing overhead 10,000
Fixed manufacturing overhead 20,000
$80,000
Another company has offered to sell the same component part to the company for $12.00 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Barnes Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $16,000.
Instructions
Prepare an incremental analysis report for Barnes Company which can serve as informational input into this make or buy decision.
3. Sanders Company has two production departments: Fabricating and Finishing. Beginning inventories are: Work in Process”Fabricating, $6,030; Work in Process”Finishing, $4,100; and Finished Goods, $5,600. During the month the following transactions occurred:
1. Purchased $40,000 of raw materials on account.
2. Incurred $65,000 of factory labor. Wages are unpaid.
3. Incurred $35,000 of manufacturing overhead; $30,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000.
5. Used factory labor for Finishing, $52,000 and Fabricating, $13,000.
6. Applied $30,000 of overhead based on machine hours used in each department. The Finishing Department used twice as many machine hours as did Fabricating.
On May 31, 2010, James Logan Company had a cash balance per books of $6,781.50. The bank statement from Farmers State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the cash account revealed the following facts.
The statement included a debit memo of $40 for the printing of additional company checks.
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 Logan Company for the correct amount.
Outstanding checks at May 31 totaled $576.25. Deposits in transit were $1,916.15.
On May 18, the company issued check No. 1181 for $685 to Barry Trest, on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Logan Company for $658.
A $2,500 note receivable was collected by the bank for Logan Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.
Included with the cancelled checks was a check issued by Bridgetown Company to Tom Lujak for $800 that was incorrectly charged to Logan Company by the bank.
On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Logan Company on account.
Prepare the bank reconciliation at May 31, 2010. (List amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 2 decimal places, e.g. 10.50.)
JAMES LOGAN COMPANY
Bank Reconciliation
May 31, 2010 $
Add: $
$ $
Less: $
$
Adjusted cash balance per bank $
$
Add: $
Less: $
$
$
$ $
Adjusted cash balance per books $
Prepare the necessary adjusting entries for Logan Company at May 31, 2010. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 2 decimal places, e.g. 10.50.)
Date Description/Account Debit Credit
May 31 $
$
$
$
(To record collection of note receivable by bank.)
. A personal statement of financial condition dated December 31, 2008, is to be prepared for Wilhelm Holz. He provides the following information for your use in preparing the statements. All amounts are as of December 31, 2008.
1) Cash on hand and in bank is $4,000.
2) Investments costing $30,000 have a market value of $78,000.
3) His personal residence cost $150,000 ten years ago, and is currently worth $320,000.
4) The payoff balance of his home mortgage is $80,000.
5) The fair value of his 401(k) retirement account is $700,000. All withdrawals from the account will be fully taxable.
6) Amounts due on credit card debt total $5,000.
7) Estimated income taxes on his calendar 2008 earnings amount to $15,000. Taxes withheld in 2008 were $14,000.
8) Assume an income tax rate of 30 percent.
Required: Prepare a statement of financial condition for Mr. Holz as of December 31, 2008. Assume any gain on subsequent sale of the residence will not be tax-exempt.
4. Expected manufacturing costs for Robert’s Widgits are as follows:
Variable Costs Fixed Costs per month
Direct Materials $4.00/unit Supervisory salaries $100,000
Direct Labor $2.00/unit Factory overhead $350,000
Variable Overhead $1.50/unit
Estimate the manufacturing costs if Robert’s produces 100,000 widgits in January.
Estimate the manufacturing costs if Robert’s produces 120,000 widgits in February.
2. Rae’s Bakery makes apple pies. Rae’s Bakery plans to bake 2,000 pies in January and 2,500 pies in February. Each pie requires 2 pounds of baking apples. Baking apples cost $0.80 per pound. There will be 400 pounds of apples on hand on the first of January. The company wishes to have 500 pounds of baking apples on hand at the end of January and 300 pounds on hand at the end of February.
How many pounds of apples should Rae’s purchase in January?
What is the cost in dollars for the required January purchase of apples?
How many pounds of apples should Rae’s purchase in February?
4. Saferoad Corporation has completed it comparative balance sheet and income statement at year-end 2009.
‘ A payment of $7,500 was made on the loan principal during the year ‘ Just before year-end, a dividend was distributed to stockholders. ‘ A parcel of land was acquired early in the year. ‘ New shares of common stock were sold during the year.
Year 2009 Year 2008
Cash 1,090 4,000 Accounts receivable 2,910 6,150 Inventory 4,800 3,880 Prepaid advertising 700 1,775 Building and furnishings 40,000 40,000 Accumulated depreciation -10,000 -8,000 Land 27,000 15,000 TOTAL ASSETS 66,500 62,805 Rent payable 2,000 4,000 Taxes payable 1,900 1,500 Wages payable 3,300 2,200 Loan payable, long-term 19,600 26,805 Common stocks 31,000 25,000 Retained earnings 8,700 3,300 TOTAL LIABILITIES AND EQUITY 66,500 62,805 Income Statement for 2009 Sales Revenue 350,000 Cost of goods solD 250,600 Gross profit 99,400 Operating expenses: Advertising 9,500 Depreciation 2,000 Insurance 4,100 Rent payable 28,900 Wages 40,450 Operating income 14,450 Interest expense 1,600 Income before tax 12,850 Taxes 3,850 Net income 9,000
Prepare a statement of cash flows using the indirect method format, please left align all headings
5. Adjusting Entries are required at the end of the period to ensure that accrual accounting principles are applied. At the beginning of the month $350 of office supplies were purchased. There was not a beginning balance and the one purchase was the only one for the month. At the end of the month $100 of supplies remained. Develop the adjusting entry. Name the accounts impacted and how using the format account name/debit or credit/dollar amount and explain how the Accounting Equation is impacted.
4. Transaction analysis results in the development of a journal entry. In the start-up of a business, the owner contributes $50,000 of cash. Name the accounts impacted and how using the format account name/debit or credit/dollar amount and explain how the Accounting Equation is impacted.
3. The accounting profession follows a set of guidelines for measurement and disclosure of financial information called the Generally Accepted Accounting Principles (GAAP). (1) Explain what the Entity Assumption is (10 points) and (2) provide an example of its application. (10 points)
2. The financial statements present a company to the public in financial terms. Which financial statement identifies how much cash the company generated and spent during the year and identify the three major parts of this statement. b
5) Assuming that a company has $365 million in annual sales, and a gross margin of 20%. If the company now stocks 60 day’s worth of inventory, how much do they have to have invested (that is, tied up in) in inventory to support their operations? If the company were to stock 61 day’s worth of inventory instead of 60 days, how much additional investment in inventory would be needed to support their operations?
6) Assuming that a company has $365 million in annual sales, and a gross margin of 20%. If the company now takes 30 days, on average, to collect Accounts Receivable, how much does the company have invested in (that is, tied up in) Accounts Receivable? If the company were to take 31 days , on average, to collect Accounts Receivable , instead of 30 days, how much additional investment in Accounts Receivable would be required?
5. A degree program cost $50,000 in total expenses: $30,000 in tuition and $20,000 in housing and books. The US government provides a grant for $10,000 of the tuition. Moreover, the university pays $20,000 of the $30,000 tuition in salary to your instructors. Being in the program is so much fun; you would be willing to a net of $5,000 for the pleasure, relative to your alternatives. What is the net cost of the education to you?
6. A project costs $19,000 and promises the following cash flow:
Year 1 2 3
Cash Flow $12,500 $6,000 $3,000
The appropriate discount rate is 15% per annum. Should you invest in this project?
7. Which of the following are good candidates for ascertaining the value effects with an event study, and why?
An acquirer wants to buy the firm
The CEO dies
The CEO ages
Positive earnings surprise at the annual meeting
Purchase of a new machine
A law is passed to force the company to reduce its emissions
69. Abby’s home had a basis of $360,000( $160,000 attributable to the land) and a fair market value of $340,000 ($155,000 attributable to the land) when she converted 70% of it to business use by opening a bed and breakfast. Four years after the conversion, Abby sells the home for $500,000 ($165,000 attributable to the land).
a. Calculate Abby’s basis for gain, loss, and cost recovery for the portion of her personal residence that was converted to business use.
b. Calculate the cost recovery deducted by Abby during the four-year period of business use, assuming the bed and breakfast is opened on January 1 of year 1 and the house is sold on December 31 of year 4.
c. What is Abby’s recognized gain or loss on the sale of the business use portion
If we accept that the goal of the financial manager is to create value for the stockholder, it follows that the financial manager must have a means of evaluating a prospective investment in terms of its likelihood of enhancing shareholder value. Different decision criteria may be used to evaluate proposed investments and we have gone through a pretty thorough review of most of them (NPV, IRR, Payback Period (straight and discounted), AAR, MIRR, PI). Our review included learning how to calculate each one as well as come to an understanding of the advantages and disadvantages of each. “Conventional wisdom” tells us that only the NPV criterion can always tell us if a particular project is a good investment and, if we have more than one project from which to choose, which one we should take. If this is the case, then why do so many financial managers in the “real world” make extensive use of the payback approach and, typically, do not take a discounted approach to payback? If you were to counsel a financial manager who is committed to using a payback criterion to evaluate prospective investments, would you take the opportunity to discuss other decision criteria that might be used? What advice would you provide as to whether he/she should continue using payback or if he/she should consider another approach and why?
In addition to those accounts listed on the trial balance, the chart of accounts for Masasi Company also contains the following accounts and account numbers: No. 158 Accumulated Depreciation-Office Equipment, No. 212 Salaries Payable, No. 244 Utilities Payable, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense.
Other data:
Supplies on hand at June 30 are $600.
A utility bill for $150 has not been recorded and will not be paid until next month.
The insurance policy is for a year.
$2,500 of unearned service revenue has been earned at the end of the month.
Salaries of $2,000 are accrued at June 30.
The office equipment has a 5-year life with no salvage value. It is being depreciated at $250 per month for 60 months.
Invoices representing $1,000 of services performed during the month have not been recorded as of June 30.
Instructions
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)
nd it come with a adjusted trial balance help please
In addition to those accounts listed on the trial balance, the chart of accounts for Masasi Company also contains the following accounts and account numbers: No. 158 Accumulated Depreciation-Office Equipment, No. 212 Salaries Payable, No. 244 Utilities Payable, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense.
Other data:
Supplies on hand at June 30 are $600.
A utility bill for $150 has not been recorded and will not be paid until next month.
The insurance policy is for a year.
$2,500 of unearned service revenue has been earned at the end of the month.
Salaries of $2,000 are accrued at June 30.
The office equipment has a 5-year life with no salvage value. It is being depreciated at $250 per month for 60 months.
Invoices representing $1,000 of services performed during the month have not been recorded as of June 30.
Instructions
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number for your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)
nd it come with a adjusted trial balance help please
In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other data:
Insurance expires at the rate of $400 per month.
A count on August 31 shows $600 of supplies on hand.
Annual depreciation is $6,000 on cottages and $2,400 on furniture.
Unearned rent of $4,100 was earned prior to August 31.
Salaries of $400 were unpaid at August 31.
Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.)
The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1’August 31.
(b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)
Murphy Company’s overhead rate was based on estimates of $200,000 for overhead costs and 20,000 direct labor hours. Murphy’s standards allow 2 hours of direct labor per unit produced. Production in May was 900 units, and actual overhead incurred in May was $21,060. The overhead budgeted for 1,800 standard direct labor hours is $17,600 ($5,016 fixed and $12,584 variable).
Compute the total, controllable, and volume variances for overhead. (Round computation for fixed overhead rate to 2 decimal places, e.g. 10.50. Round computation for normal capacity and final answers to 0 decimal places, e.g. 125.)
Total overhead variance $
Overhead controllable variance $
Overhead volume variance $
Click here if you would like to Show Work for this question
Nichols Company makes three models of phasers. Information on the three products is given below. A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€A?€StunnerA?€A?€A?€A?€A?€A?€A?€A?€A?€A?€ Double-SetA?€A?€A?€A?€A?€A?€A?€A?€A?€ Mega-Power Sales ————————–$296,630———–$497,020 ———-$202,060 Variable expenses———– 154,290———– 197,130————- 143,040 Contribution margin——— 142,340———– 299,890 ————–59,020 Fixed expenses————— 121,342———- 229,516————— 92,081 Net income ——————-$20,998———– $70,374————– ($33,061)
Fixed expenses consist of $309,700 of common costs allocated to the three products based on relative sales, and additional fixed expenses of $29,080 (Stunner), $74,926 (Double-Set), and $29,233 (Mega-Power). The common costs will be incurred regardless of how many models are produced. The other fixed expenses would be eliminated if a model is phased out. Ralph Port, an executive with the company, feels the Mega-Power line should be discontinued to increase the company’s net income.
Incorrect.
Compute net income by product line and in total for Nichols Company if the company discontinues the Mega-Power product line. (Hint: Allocate the $309,700 common costs to the two remaining product lines based on their relative sales.) (Do not round intermediate calculations. Round answers to 0 decimal places, e.g. 125.)
Problem 6.41 Case on Process Costing, Operation Costing, Impact on Resource Allocation Decision Golding Manufacturing. a disision of Farnsworth Sporting. Inc., produces two different models of bows and eight models of knis es. The bow-manufacturing process involves the production of two major subassemblies: the limbs and the handle. The limbs pass through four sequential processes before reaching final assembly: lay-up. molding. fabricating, and finishing. In the us,. Up Department, limbs are created by laminating layers of wood. In Molding, the limbs are hut treated, under pressure. to form a strong resilient limb. In the Fabricating Department, any pro. truding glue or other processing residue is removal. Finally, in Finishing, the limbs are cleaned with acetone, dried. and sprayed with the final finishes. The handles pass through two processes before reaching final assembly: pattern and finish. ing. In the Pattern Department, blocks of wood are fed into a machine that is set to shape the handles. Different patterns are possible, depending on the machine’s setting. After coming out of the machine, the handles are cleaned and smoothed. They then pass to the Finishing Depart-ment where they arc sprayed with the final finishes. In Final Assembly, the limbs and handle) arc assembled into different models using purchased parts such as pulley assemblies, weight adjustment bolts, side plates, and siring. Golding. since its inception, has been using process costing to assign product costs. A prede- termined overhead rate is used based on direct labor dollars (80 percent of direct labor dollars). Recently, Golding has hired a new controller, Karen Jenkins. After reviewing the product cost-ing procedures. Karen requested a mooing with the divisional manager. Aaron Suhr. The fol• lowing is a transcript of their conversation:
Alice J. and Bruce M. Byrd are married taxpayers who file a joint return. Their Social Security numbers are 123-45-6789 and 111-11-1111, respectively. Alice’s birthday is September 21, 1963, and Bruce’s is June 27, 1962. They live at 473 Revere Avenue. Ames, MA 01850. Alice is the office manager for Ames Dental Clinic, 433 Broad Street, Ames, Ma 01850(employer identification number 98-765432). Bruce is the manager of a Super Burger fast-food outlet owned and operated by Plymouth Corporation, 1247 Central Avenue, Hauppauge, NY 11788 (employer identification number 11-1111111).
The following information is shown on their Wage and Tax Statements ( Form W-2) for 2010.
Line Description Alice Bruce
1 Wages, tips, other compensation $52,600 $61,500
2 Federal income tax withheld 4,180 5,990
3 Social Security wages 52,600 61,500
4 Social Security tax withheld 3,261 3,813
5 Medicare wages and tips 52,600 61,500
6 Medicare tax withheld 763 892
15 State Massachusetts Massachusetts
16 State wages, tips, etc. 52,600 61,500
17 State income tax withheld 2,280 2,990
The Byrds provide over half of the support of their two children, Cynthia (born January 25, 1986, Social Security number 123-45-6788) and John (born February 7, 1990, social Security number 123-45-6786. Both children are full-time students and live with the Byrds except when they are away at college. Cynthia earned $3,700 from a summer internship in 2010, and John earned $3,400 from a part-time job.
During 2010, the Byrds furnished 60% of the total support of Bruce’s widower father, Sam Byrds ( born March 6, 1934, Social Security number 123-45-6787). Sam lived alone and covered the rest of his support with Social Security benefits. Sam died in November, and Bruce, the beneficiary of a policy on Sam’s life, received life insurance proceeds of $600,000 on December 28.
The Byrds had the following expenses relating to their personal residence during 2010:
Property taxes $4,720
Qualified interest on home mortgage 9,130
Repairs of roof 4,780
Utilities 3,810
Fire and theft insurance 2,290
The following facts relate to medical expenses for 2010:
Medical insurance premiums $4,380
Doctor bill for Sam incurred in 2009 and not paid until 2010 7,760
Operation for Sam 7,310
Prescription medicines for Sam 860
Hospital expenses for Sam 2,850
Reimbursement from insurance company, received in 2010 3,000
The medical expenses for Sam represent most of the 60% Bruce contributed toward his father’s support.
Other relevant information follows:
‘ When they filed their 2009 state return in 2010, the Byrds paid additional state income tax of $950.
‘ During 2010, Alice and Bruce attended a dinner dance sponsored by the Ames police Disability Association ( a qualified charitable organization). The Byrds paid $400 for the tickets. The cost of comparable entertainment would normally be $160.
‘ The Byrds contributed $4,800 to Ames Presbyterian Church and gave used clothing (cost of $1,100 and fair market value of $450) to the Salvation Army. All donations are supported by receipts and are in very good condition.
‘ In 2010, the Byrds received interest income of $2,695, which was reported on a Form 1099-INT from Second National Bank.
‘ Alice’s employer requires that all employees wear uniforms to work. During 2010, Alice spent $482 on new uniforms and $211 on laundry charges.
‘ Bruce paid $320 for an annual subscription to the Journal of Franchise Management.
‘ Neither Alice’s nor Bruce’s employer reimburses for employee expenses.
‘ The Byrds do not keep the receipts for the sales taxes they paid and had no major purchases subject to sales tax.
‘ Alice and Bruce paid no estimated Federal income tax. Neither Alice nor Bruce wishes to designate $3 to the Presidential Election Campaign Fund.
In the interest of privacy and to protect against taxpayer identification misuse, Social Security numbers used throughout the textbook have been replaced with fictitious numbers.
Part 1 – Tax Computation
Compute net tax payable or refund due for Alice and Bruce Byrd for 2010. If they have overpaid, they want the amount to be refunded to them. If you use tax forms for your computations, you will need Forms 1040 and 2106 and Schedules A, B and M.
Amfac Company manufactures a single product. The company keeps careful records of manufacturing activities from which the following information has been extracted:
Level of Activity
March?Low June?High
Number of units produced 6,000 9,000
Cost of goods manufactured $168,000 $257,000
Work in process inventory, beginning $9,000 $32,000
Work in process inventory, ending $15,000 $21,000
Direct materials cost per unit $6 $6
Direct labor cost per unit $10 $10
Manufacturing overhead cost, total ? ?
The company’s manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per month.
Requirement 1:
For both March and June, estimate the amount of manufacturing overhead cost added to production. The company had no underapplied or overapplied overhead in either month. (Hint: A useful way to proceed might be to construct a schedule of cost of goods manufactured.
March June
Manufacturing overhead cost ? $ $
Requirement 2:
Using the high-low method, estimate a cost formula for manufacturing overhead where X represents the number of units produced
Zeller Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $12 and $25, respectively. Because of the intense competition Zeller faces, management budgets sales semiannually. Its projections for the first 2 quarters of 2010 are as follows.
Unit Sales
Product Quarter 1 Quarter 2
XQ- 103 20,000 25,000
XQ-104 12,000 15,000
No changes in selling prices are anticipated.
Complete the sales budget for the 2 quarters ending June 30, 2010. List the products and show for each quarter and for the 6 months, units, selling price, and total sales by product and in total.
a. Cardon’s winterized (cleaned and covered) three boats for customers at the end of November, but did not record the service for $2,700.
b. On October 1, 2012, Cardon’s paid $1,200 to the local newspaper for an advertisement to run every Thursday for 12 weeks. All ads have been run except for three Thursdays in December to complete the 12-week contract.
c. Cardon’s borrowed $250,000 at a 12 percent annual interest rate on April 1, 2012, to expand its boat storage facility. The load requires Cardon’s to pay the interest quarterly until the note is repaid in three years. Cardon’s paid quarterly interest on July 1 and October 1.
d. The Johnson family paid Cardon’s $4,500 on November 1, 2012, to store its sailboat for the winter until May 1, 2013. Cardon’s credited the full amount ot Unearned Storage Revenue on November 1.
e. Cardon’s used boat-lifting equipment that cost $220,000 was the estimated depreciation for 2012.
f. Boat repair supplies on hand at December 2, 1011, totaled $16,500. Repair supplies purchased and debited to Supplies during the year amounted to $46,000. The year-end showed $12,400 of the supplies on hand.
g. Wages earned by employees during November 2012, unpaid and unrecorded at November 30, 2012, amounted to $3,800. The next payroll date will be December 5, 2012.
Required:
1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or accrued expense.
2. Prepare the adjusting entries that should be recorded for the Cardon’s at November 30, 2012.
This is the last one. I need to pass this class with nothing less than an A. I am hoping I get some good answers from some of you out there. I have 2 weeks to finish these so please take your time. Thank you.
5. The partnership of Rachel, Adams, and Nixon has the following trial balance on September 30, 2009:
The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated.
Required:
Prepare a cash distribution plan as of September 30, 2009, showing how much cash each partner will receive if the offer to sell the assets is accepted.
1. The following information is available for completed Job No. 402: Direct materials, $80,000; direct labor, $120,000; manufacturing overhead applied, $60,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods on hand from this job is
a $40,000.
b $208,000.
c $52,000.
d $260,000.
2.Gulick Company developed the following data for the current year:
Beginning work in process inventory $120,000
Direct materials used 72,000
Actual overhead 144,000
Overhead applied 108,000
Cost of goods manufactured 132,000
Total manufacturing costs 360,000
Gulick Company’s ending work in process inventory is
a $108,000.
b $228,000.
c $348,000.
d $240,000.
3. Greer Company developed the following data for the current year:
Beginning work in process inventory $ 68,000
Direct materials used 104,000
Actual overhead 88,000
Overhead applied 92,000
Cost of goods manufactured 450,000
Total manufacturing costs 428,000
How much is Greer Company’s ending work in process inventory for the year?
a $242,000
b $42,000
c $186,000
d $46,000
4.Cost of goods manufactured equals $55,000 for 2011. Finished goods inventory is $2,000 at the beginning of the year and $5,500 at the end of the year. Beginning and ending work in process for 2011 are $4,000 and $5,000, respectively. How much is cost of goods sold for the year?
a $58,500
b $53,000
c $57,500
d $51,500
5. For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $300,000 of factory labor costs are incurred of which $80,000 is indirect labor. Actual overhead incurred was $160,000. The amount of overhead debited to Work in Process Inventory should be:
10-31 High-low method. Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine hours worked and maintenance costs for the past 12 quarters: Quarter Machine-Hours Maintenance Costs 1 1 00,000 $205,000 2 1 20,000 240,000 3 1 1 0,000 220,000 4 1 30,000 260,000 5 95,000 190,000 6 1 1 5,000 235,000 7 1 05,000 21 5,000 8 1 25,000 255,000 9 1 05,000 21 0,000 1 0 1 25,000 245,000 1 1 1 1 5,000 200,000 1 2 1 40,000 280,000 Required 1 . Estimate the cost function for the quarterly data using the high-low method. 2. Plot and comment on the estimated cost function. 3. Howard anticipates that KMW will operate machines for 1 00,000 hours in quarter 1 3. Calculate the redicted maintenance costs in quarter 1 3 using the cost function estimated in requirement 1 .
10. Determine the cost performance index (CPI) at the end of the third day in the following problem: ‘ Planned duration of task — 5 days ‘ Actual duration — 5 days ‘ Planned spending rate per day where data is at the end of the day — $900, $1200, $1100, $1000, $800 ‘ Actual spending rate per day where data is at the end of the day — $1000, $1000, $1000, $1000, $700 ‘ Amount of total job completed per day where data is at the end of the day — $600, $1200, $1300, $1200, $700.
a. 1.06 b. 1.03 c. 0.97 d. 1.00
(A). Determine the schedule performance index (SPI) at the end of the second day in the preceding problem. a. 1.02 b. 1.00 c. 0.90 d. 0.86
(B). Determine the estimate at completion (EAC) at the end of the third day in the preceding problem. a. $5200 b. $5000 c. $4900 d. $4700
On May 10 Ritz Company sold merchandise for $6,000 and accepted the customer’s First Business Bank MasterCard. At the end of the day, the First Business Bank MasterCard receipts were deposited in the company’s bank account. First Business Bank charges a 3.5% service charge for credit card sales.
Prepare the entry on Ritz Company’s books to record the sale of merchandise. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Date Account/Description Debit Credit
May 10 Notes receivableBad debts expenseCashSalesInterest receivableSales discountsAccounts receivableSales returns and allowancesService charge expenseInterest revenueAllowance for doubtful accounts
Bad debts expenseSales discountsAccounts receivableInterest revenueSales returns and allowancesSalesService charge expenseInterest receivableAllowance for doubtful accountsCashNotes receivable
Allowance for doubtful accountsInterest revenueCashSalesAccounts receivableInterest receivableNotes receivableSales discountsSales returns and allowancesBad debts expenseService charge expense
(Ignore income taxes in this problem.) Gillaspie, Inc., is considering the purchase of a machine that would cost $300,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $51,000. The machine would reduce labor and other costs by $86,000 per year. Additional working capital of $10,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 13% on all investment projects.
The net present value of the proposed project is closest to:
a. $30,155
b. $47,139
c. $2,462
d. $25,585
14.
(Ignore income taxes in this problem.) Mercredi, Inc., is considering investing in automated equipment with a ten-year useful life. Managers at Highpoint have estimated the cash flows associated with the tangible costs and benefits of automation, but have been unable to estimate the cash flows associated with the intangible benefits. Using the company’s 14% required rate of return, the net present value of the cash flows associated with just the tangible costs and benefits is a negative $182,560. How large would the annual net cash inflows from the intangible benefits have to be to make this a financially acceptable investment?
(15 pts) 2. Sandi Scott obtained a patent on a small electronic device and organized Scott Products, Inc., to produce and sell the device. During the first month of operations, the device was very well received on the market, so Ms. Scott looked forward to a healthy profit. For this reason, she was surprised to see a loss for the month on her income statement. This statement was prepared by her accounting service, which takes great pride in providing its clients with timely financial data. The statement follows:
Scott Products, Inc.
Income Statement
Sales (40,000 units) $200,000
Variable expenses:
Variable cost of goods sold* $80,000
Variable selling and administrative services 30,000 110,000
Contribution margin 90,000
Fixed expenses
Fixed manufacturing overhead 75,000
Fixed selling and administrative expenses 20,000 95,000
Net operating loss $ (5,000)
*Consists of direct materials, direct labor, and variable manufacturing overhead.
Ms. Scott is discouraged over the loss shown for the month, particularly since she had planned to use the statement to encourage investors to purchase stock in the new company. A friend, who is a CPA, insists that the company should be using absorption costing rather than variable costing. He argues that if absorption costing had been used, the company would probably have reported a profit for the month.
Select cost data relating to the product and to the first month of operations follow:
Units produced 50,000
Units sold 40,000
Variable costs per unit:
Direct materials $1.00
Direct labor $0.80
Variable manufacturing overhead $0.20
Variable selling and administrative $0.75
Required:
a) Complete the following:
* Compute the unit product cost under cost absorption costing.
* Redo the company’s income statement for the month using absorption costing.
* Reconcile the variable and absorption costing net operating income (loss) figures.
b) Was the CPA correct in suggesting that the company really earned a “profit” for the month?
1.Accounting ratios can be used to evaluate a company’s financial condition. Which ratio measures the ability of a company to pay its current liabilities with its current assets?
a)debit ratio
b)current ratio
c)accounting ratio
d)none of the above
2.Closing the accounts occures at the end of the period. It consists of journalizing and posting the closing entries in order to get the account
a)true
b)false
3.The closing process zeros out
a)all accounts
b)permanent accounts
c)temporary accounts
d)closing account
4.Assets are listed on the balance sheet in the order of:
a)purchased date
b)their balance
c)liquidity
d)none of the above
5.Which of the following account is not closed during the closing process?
a)revenue
b)salary expenses
c)supplies
d)withdrawals
6.Adjusting are needed to to properly measure(a)net income or net loss on the income statement and (b)assets and liabilities on the balance sheet.
a)true
b)false
7.which basis of account provides more complete and up-to-date accounting of business operation?
a)accural accounting
b)cash accounting
d)the general ladger
d)none of the above
8.Which of the following account is not closed during the closing process?
a)revenue
b)salary expense
c)supplies
d)withdrawals
9.The supplies account has an unadjustted balance of $550 on your trail balance. At the end of the period you count supplies of 375(on hand).What adjusting entry would be made for the period.
a)supplies debit 175 cedit
supplie expense 175
b)supplies expense 175
supplies 175
c)supplies expense 375
supplies 375
d)no adjusting entry
10.You purchased a copier in the amount $3,000 on January1,2011 with a useful life of 5years. At the end of January2012, you will need to record depreciation fot he copier. What adjusting entry would be made to record depreciation?
a)copier debit 3000 credit
Depreciation 3000
b)Accumulated depreciation 500
copier 500
c)Depreciation expense 500
Accumulated depreciation 500
d)Depreciation expense 50
Accumulated depreciation 50
11.Adjusted entries are made to update the assets and owners equity accounts
1.Used bottling equipment was acquired by Summit Brewing at a cost of $900,000 on August 1, 2010. Its estimated salvage value is $ -0- and its expected life is five years. Calculate the depreciation expense (round to the nearest dollar) by each of the following methods, showing all of your calculations. For the year of acquisition, use the mid-year convention. Why are we using the mid year convention?
A. Straight-line for the calendar years 2010 and 2011, and 2012. B. Double-declining-balance for the calendar years 2010 and 2011, and 2012.
2. A new building was acquired by Summit Brewing at a cost of $1,950,000 on February 9, 2011. The useful life is 39 years. Salvage value is zero. Compute depreciation for 2011 and 2012 (straight line method). For the year placed in service, use the mid-month convention. Why are we using the mid-month convention?
3. A new truck was acquired by Summit Brewing at a cost of $90,000 on April 1, 2011. The useful life is 5 years. Salvage value is zero. Additionally, brewing equipment was acquired on October 1, 2011 at a cost of 61,600. The useful life is 7 years and salvage value is zero. Compute depreciation for 2011 and 2012 using the double declining balance method. For the year placed in service, use the mid-quarter convention. Why is the mid-quarter convention necessary?.
Use the information provided below to prepare the Cost of Good Manufactured Schedule:Bravo had the following costs as of Dec 31, 2010. Enter the correct values in the Green shaded cells.
Vandall corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During April, the company budgeted for 7,300 units, but its actural level of activity was 7,340 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for April:
Data used in budgeting
Variable element per month Fixed element per month
$35.40 __________ Revenue
$3.30 0 Direct labor
15.90 0 Direct materials
1.20 49,200 Manufacturing overhead
0.10 $26,600 Selling & administrative expenses
$20.50 $75,800 Total expenses
Actual results for April:
Revenue $254,146
Direct labor $24,722
Direct materials $116,496
Manufacturing overhead $59,608
Selling and administrative expenses $26,494
The overall revenue and spending variance (i.e. the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for April would be closest to
Various costs associated with the operation of factories are given below. Classify each cost as either variable or fixed with respect to the number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or an indirect cost with respect to units of product. List each numbered item with either a “V” for variable or an “F” for fixed and either a “D” for direct cost or “I” for indirect cost so for example: 1. VD, 2. FI, etc.
1. Electricity to run production equipment
2. Rent on a factory building
3. Cloth used to make drapes
4. Production superintendent’s salary
5. Wages of laborers assembling a product
6. Depreciation of air purification equipment used to make furniture
7. Janitorial salaries
8. Peaches used in canning fruit
9. Lubricants for production equipment
10. Sugar used in soft-drink production
11. Property taxes on the factory
12. Wages of workers painting a product
13. Depreciation on cafeteria equipment
14. Insurance on a building used in producing helicopters
15. Cost of rotor blades used in producing helicopters
Various costs associated with the operation of factories are given below. Classify each cost as either variable or fixed with respect to the number of units produced and sold. Also indicate whether each cost would typically be treated as a direct cost or an indirect cost with respect to units of product. List each numbered item with either a “V” for variable or an “F” for fixed and either a “D” for direct cost or “I” for indirect cost so for example: 1. VD, 2. FI, etc.
1. Electricity to run production equipment
2. Rent on a factory building
3. Cloth used to make drapes
4. Production superintendent’s salary
5. Wages of laborers assembling a product
6. Depreciation of air purification equipment used to make furniture
7. Janitorial salaries
8. Peaches used in canning fruit
9. Lubricants for production equipment
10. Sugar used in soft-drink production
11. Property taxes on the factory
12. Wages of workers painting a product
13. Depreciation on cafeteria equipment
14. Insurance on a building used in producing helicopters
15. Cost of rotor blades used in producing helicopters
Viren Corporation has provided the following data from its activity-based costing system:
Activity cost Pool total Cost total activity
Assembly $387,000 250,000 machine-hours
Processing $68,510 1,700 orders
Inspection $129,117 1,930 inspection-hours
The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders, and 40 inspection hours per year. The product’s direct material cost is $16.98 per unit, and its direct labor cost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H is closest to ____ per unit.
Viren Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity
Assembly $387,000 25,000 machine-hours
Processing orders $68,510 1,700 orders
Inspection $129,117 1,930 inspection-hours
The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders, and 40 inspection hours per year. The product’s direct materials cost is $16.98 per unit, and its direct labor cost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H is closest to _______ per unit.
A. $75.70
B. $79.66
C. $90.81
D. $29.07
–>THE ANSWER IS ***NOT*** $75.70. Already tried that!
Vista Landscaping uses a job order costing system to track the costs of its landscaping projects. The company provides garden design and installation services for its clients. The table below provides data concerning the three landscaping projects that were in progress during April. There was no work in progress at the beginning of April.
Direct Materials Cost- $4500 (Harris), $3700 (Chan), $1400 (James)
Direct Labor Cost- $9600 (Harris), $8000 (Chan), $7200 (James)
Actual overhead costs were $30000 for April. Overhead costs are applied to projects on the basis of designer hours because most of the overhead is related to the cost of the garden design studio. The predetermined overhead rate is $90 per designer hour. The Harris and Chan projects were completed in April; the James project was not completed by the end of the month.
1. Compute the amount of overhead cost that would have been charged to each project during April.
2. Prepare a journal entry showing the completion of the Harris and Chan projects and the transfer of costs to the Completed Projects (i.e., Finished Goods) account.
3. What is the balance in the Work in Progress account at the end of the month
4. What is the balance in the Overhead account at the end of the month? What is the balance called?
Vorteck Inc. manufactures snowsuits. Vorteck is considering purchasing a new sewing machine at a cost of $2.5 million. Its existing machine was purchased five years ago at a price of $1.8 million six months ago; Vorteck spent $55,000 to keep it operational. The existing sewing machine can be sold today for $260,000. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7:
Year
1 $390,000
2 $400,000
3 $411,000
4 $426,000
5 $434,000
6 $435,000
7 $436,000
The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,000. This new equipment would require maintenance costs of $95,000 at the end of the fifth year. The cost of capital is 9%.
***Use the net present value method to determine whether Vorteck should purchase the new machine to replace the exiting machine, and state the reason for your conclusion.
Vorteck Inc. manufactures snowsuits. Vorteck is considering purchasing a new sewing machine at a cost of $2.5 million. Its existing machine was purchased five years ago at a price of $1.8 million six months ago; Vorteck spent $55,000 to keep it operational. The existing sewing machine can be sold today for $260,000. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7:
Year 1 $390,000
2 400,000
3 411,000
4 426,000
5 434,000
6 435,000
7 436,000
The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $380,000. This new equipment would require maintenance costs of $95,000 at the end of the fifth year. The cost of capital is 9%.
Use the net present value method to determine whether Vorteck should purchase the new machine to replace the exiting machine, and state the reason for your conclusion.
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
13. The activity variance for personnel expenses in January would be closest to
Werber Clinic uses client visits as its measure of activity. During January, the clinic budgeted for 2,700 client visits, but its actual level of activity was 2,730 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ___-___ $33.60
Personnel expenses $22,100 $8.70
Medical supplies 1,100 6.60
Occupancy expenses 5,600 1.60
Administrative expenses 3,700 0.40
Total expenses $32,500 $17.30
Actual results
for January:
Revenue $93,408
Personnel expenses $46,251
Medical supplies $19,348
Occupancy expenses $9,508
Administrative expenses $4,772
13. The activity variance for personnel expenses in January would be closest to
Two Wheels operates on a fiscal year beginning January 1. At the beginning of the year, the shop had 6 bicycles @$394 each (opening inventory). During the year the business made the following purchases:
Date Bicycle Cost
Jan.20 4 $399
Mar. 5 5 $415
Apr. 23 7 $419
Aug. 14 4 $423
Oct. 3 6 $430
Nov. 17 3 $435
There were seven bicycles in inventory at the end of the period. During the year, the bicycles were sold for $675 each.
Instructions:
Calculate the cost of the ending inventory using the FIFO, LIFO, and weighted average cost methods.
Prepare a partial income statement for each inventory costing method showing the sales and the calculation of gross profit on sales.
Assume that the sales and purchases are net amounts.
Windsor Advertising Company’s trial balance at December 31 shows Advertising Supplies $6,700 and Advertising Supplies Expense $0. On December 31, there are $2,700 of supplies on hand.
Using T accounts, enter the balances in the accounts listed below, post the adjusting entry as necessary, and indicate the adjusted balance in each account. (If there is no transaction, enter 0 for the amount.)
The next winner of America’s Idol will perform at the fraternity’s charity event for free at your school’s basketball arena (25,000-person capacity) om January 28, 2011. The school is charging your fraternity $37,500 for the facilities and 10 for each ticket sold. the fraternity ask you, their only numbers-astute member, to determine how much to charge for each ticket. The group wants to make a profit of $8 per ticket sold. You assume that 15,000 tickets will be sold.
a. What is the total cost incurred by the fraternity if 15,000 ticket are sold?
b. What price per ticket must be charged for the fraternity to earn its desire profit margin?
c. Suppose that on the morning of January 28, 2011. a major snowstorm, hit your area, bringing in 36 inches of snow and ice. Only 5,000 tickets are sold because most students were going to buy their tickets at the door. What is the total profit or loss to the fraternity?
d. What assumptions did you make about your calculations that should have been conveyed to the fraternity?
e. Suppose instead that fair weather prevails and, by show time. 20,000 concert tickets are sold. What is the total profit or loss to the fraternity?
Each year, Bixby Co. surveys 7,600 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to MLM Associates, who have offered to conduct the survey and summarize results for $50,000. Andy Bixby, the president of Bixby Co., believes that MLM will do a higher-quality job than his company has been doing, but is unwilling to spend more than $12,000 above current costs. The head of bookkeeping for Bixby has prepared the following summary of costs related to the survey in the prior year.
Mailing
$27,000
Printing (done by Jackson Print Shop)
9,000
Salary of Amy Smith, part-time employee who stuffed envelopes and summarized data when surveys were returned (130 x $16)
2,080
Share of depreciation of computer and software used to track survey responses and summarize results
1,200
Share of electricity/phone/etc. based on square feet of space occupied by Amy Smith vs. entire company
600
Total
$39,880
Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey as in the past. Will Bixby accept the MLM offer? Why or why not?
The year-end financial statements of Fighting Illini Financial Services are provided below.
FIGHTING ILLINI
Income Statement
Service revenue
$
84,700
Expenses:
Salaries
$
49,000
Supplies
9,100
Rent
7,500
Delivery
3,700
69,300
Net income
$
15,400
FIGHTING ILLINI
Statement of Stockholders’ Equity
Common Stock
Retained Earnings
Total S. Equity
Beg. bal., Jan. 1
$
60,000
$
32,300
$
92,300
Issue stock
15,000
15,000
Net income
15,400
15,400
Dividends
(6,000
)
(6,000
)
Ending bal., Dec. 31
$
75,000
$
41,700
$
116,700
FIGHTING ILLINI
Balance Sheet
Assets
Liabilities
Cash
$
6,600
Accounts payable
$
9,100
Accounts receivable
9,200
Stockholders’ Equity
Land
110,000
Common stock
$
75,000
Retained earnings
41,700
116,700
Total assets
$
125,800
Total liabs. and equities
$
125,800
Required:
1.
Record year-end closing entries. (Omit the “$” sign in your response.)
Date
General Journal
Debit
Credit
Dec. 31
2.
Prepare a post-closing trial balance. (Hint: The balance of retained earnings will be the amount shown in the balance sheet.) (The items in the Trial Balance should be grouped as follows: Assets and Liabilities (in order of their liquidity) and Equity. Omit the “$” sign in your response.)
Yellow Pty Ltd uses the percentage of completion method of accounting for construction contracts. In 2011 Yellow Pty Ltd entered into a contract to build a stadium with a contract price of $40,000,000 for Black Ltd. The details relating to the contract are as follows:
2011 2012 2013
$ $ $
Costs incurred during the year 10,000,000 21,000,000 15,000,000
Estimated costs to complete at 30 June 22,000,000 15,000,000 0
Billings during the year 8,000,000 20,000,000 12,000,000
Collections during the year 8,000,000 20,000,000 12,000,000
Yellow Pty Ltd has a financial year ending on 30 June.
Required:
(a) Calculate the amount of profit to be recognised by Yellow Pty Ltd for each of the three years.
(b) Prepare journal entries for all three years, assuming that the outcome of the contract can be reliably estimated.
Note: round all figures to the nearest dollar, and leave all percentages with two decimal places.
(TCO F) Miller Company manufactures a product for which materials are added at the beginning of the manufacturing process. A review of the company’s inventory and cost records for the most recently completed year revealed the following information:
work in process, Jan 1(80% complet units materials converstion
with respest to conversion cost ………….100,00 $100,000 157,500
units started into production……………. 5000,000
cost added during the year
materials….. $650,000
conversion…… $ 997,500
units completed during the yesr 450,000
The company uses the weighted-average cost method in its process costing system. The ending inventory is 50% complete with respect to conversion costs.
Required:
i. Compute the equivalent units of production and the cost per equivalent units for materials and for conversion costs.
ii. Determine the cost transferred to finished goods.
iii. Determine the amount of cost that should be assigned to the ending work in process inventory.
****The only thing I need help with is the bottling costs, equivilent units for cases of bottles! Please disregard the other stuff!****
Four the past four years, three companies have dominated the soft drink industry, holding a combined 85 percent of market share. Wonder Cola Inc., ranks second nationally in soft drinks sales. Its management is thinking about introducing a new low-caloric drink called Null Cola. Wonder soft drinks are processed in a single department. All ingredients are added at the beginning of the process. At the end of the process, the beverage is poured into bottles that cost $0.24 per case produced. Direct labor and overhead cost are applied uniformly throughout the process. Corporate controller Adam Daneen believes that costs foe the cola will be very much like those for the company’s Cola Plus drink. Last year, he collected the following data about Cola Plus:
Units* Costs Work in process inventory January 1 (!)————————- 2,200 Direct material costs————————————— $ 2,080 Concersion Costs—————————————— 620 December 31 (!!) ———————- 2,000 Direct material costs————————————— 1,880 Conversion costs—————————————— 600 Units started during year 458,500 Costs for year Liquid material added————————————– 430,990 Direct labor and overhead——————————— 229,400 Bottles————————————————— 110,068
Each unit is a 24-bottle case. (!)50% complete = January (!!)60%complete = December
The compamy’s variable general administration and selling costs are $1.10 per unit. Fixed administration and selling costs are assigned to products at the rate of $0.50 per unit. Each of Wonder Cola’s two manin competitors is already marketing a diet cola. Company A’s product sells for $4.10 per unit; Company B’s, for $4.05. All costs are expected to increase by 10 percent in the next three years. Wonder Cola tries to earn a profit of at least 15 percent on the total unit cost.
1. What factors should Wonder Cola, Inc., consider in setting a unit selling price for a case of Null Cola? 2. Using the FIFO costing method, compute (a) equivalent units for direct materials, cases of bottles, and conversion costs; (b) the total production cost per unit; and (c) the total cost per unit of Cola Plus for the year. 3. What is the expected unit cost per unit of Cola Plus for the year? 4. Recommend a unit selling price range for Null Cola, and give the reason (s) for your choice.
The Tippa Canoe Company makes fiberglass canoes. The fiberglass resin is initially molded to the shape of a canoe, then sanded and painted. Metal or wooden seats and frames are added for stability. The Tippa Canoe Company was started several years ago in the owner’s garage. The owner, Jeff George, did a lot of the initial manual labor with the help of a few friends. The company has since expanded into a large warehouse and new employees have been hired. Because of the expansion, Jeff is no longer directly involved with production and is concerned about his ability to plan for and control the company. He is considering the implementation of a standard cost system.a. Describe the procedures Jeff should use in setting standards for direct labor and direct materials.b. Describe how Jeff could use standards for planning purposes,c. Describe how Jeff could use standards for motivating employees and problems in using standards as performance measures.d. Why are some of Jeff’s friends who worked with from the beginning not very excited about a change to a standard cost system?
Titan Football Manufacturing had the following operating results for 2010: sales = $19,780; cost of goods sold = $13,980; depreciation expense = $2,370; interest expense = $345: dividends paid =$550. At the beginning of the year, net fixed assets were $13,800, current assets were $2,940, and current liabilities were $2,070. At the end of the year, net fixed assets were $16,340, current assets were $3,280, and current liabilities were $2,160. The Tax rate for 2010 was 35 percent.
a. What is net income for 2010?
b. What is the operating cash flow for 2010?
c. What is the cash flow from assets for 2010?
d. If no new debt was issued during the year, what is the cash flow to creditors? What is the cash flow to stockholders? Explain and interpret the positive and negative signs of your answers (a) through (d).
For each transaction, determine the amount of revenue or expense, if any, that is recorded under accrual-basis accounting and under cash-basis accounting. (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Accrual-Basis Cash-Basis
Transaction Revenue Expense Revenue Expense
1. Receive cash from customers at the time of service, $2,700. $ $ $ $
2. Issue common stock for cash, $5,000.
3. Receive cash from customers who were previously billed, $1,200.
4. Record depreciation of equipment, $500.
5. Pay workers’ salaries for the current month, $600.
6. Pay for rent one year in advance, $2,400.
7. Repay a long-term note to the bank, $2,000.
8. Pay workers’ salaries for the previous month, $750.
For each transaction, determine the amount of revenue or expense, if any, that is recorded under accrual-basis accounting and under cash-basis accounting. (Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Accrual-Basis
Cash-Basis
Transaction
Revenue
Expense
Revenue
Expense
1.
Receive cash from customers at the time of service, $2,700.
$
$
$
$
2.
Issue common stock for cash, $5,000.
3.
Receive cash from customers who were previously billed, $1,200.
4.
Record depreciation of equipment, $500.
5.
Pay workers’ salaries for the current month, $600.
6.
Pay for rent one year in advance, $2,400.
7.
Repay a long-term note to the bank, $2,000.
8.
Pay workers’ salaries for the previous month, $750.
The Transfer Supply Company sells maintenance contracts to the purchasers of the equipment they sell. The cost of the contract is $1,450, payable at the signing of the contract. The contract covers a three-year period with regularly scheduled inspection visits (every six months) plus any emergency visits. It is expected, on the average, on emergency visit per contract will be required each year. 2,200 contracts were sold on January 1, 2012 and two inspection visits are scheduled in 2012.
You have been asked by the management of Transfer to research the proper reporting of income from the contracts for GAAP, Federal Income Tax, and deferred tax accounting if there are differences between the GAAP and tax treatments.
Required: Prepare a research memorandum in good form.
FORMAT FOR MEMO:
FACTS:
ISSUES:
CONCLUSIONS: GAAP TREATMENT, FEDERAL INCOME TAX TREATMENT, DEFERRED TAX TREATMENT (if this is an issue)
SUPPORT:
-CITE AND EXPLAIN PRIMARY SOURCES IN GAAP THAT SUPPORT YOUR POSITION
-CITE AND EXPLAIN PRIMARY SOURCES IN FEDERAL INCOME TAX THAT SUPPORT YOUR POSITION
-CITE AND EXPLAIN PRIMARY SOURCES IN GAAP IF THERE ARE DEFERRED TAX ISSUES
appendix with calculations if you choose to not put these in the body of your memo
you may do your analysis on a single contract basis rathe than aggregate the 2,200 contracts
The trial balance of Bair Company includes the following balance sheet accounts. Identify the accounts that require adjustment. For each account that requires adjustment, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, and accrued expenses) and (b) the related account in the adjusting entry.
TriTech Company has been allocating overhead to individual product lines based on each line’s relative shares of direct labor hours. For the upcoming year, the company estimated that manufacturing overhead will be $1,800,000 and estimated direct labor hours will be 120,000. The company also has the following estimates:
Cost Pool————Cost Driver——–Total Amount———-Total Amount of Activity
Engineering costs—–# of design changes——600,000————–400
total————————————————$1,800,000
Among many other products, TriTech has two switches, Standard and Elite switches. Standard switches are a high-volume product that the company makes in large batches, while Elite switches are a specialty product that is fairly low in sales volume.
Information about Standard and Elite usage of the different activities follows:
—————————————-Standard———————-Elite
Direct labor hours——————-2,000————————–200
Number of setups———————-1——————————14
Number of design changes————1——————————21
Required
a.Calculate the predetermined overhead rate based on direct labor hours (traditional allocation). Use this predetermined overhead rate to calculate the amount of overhead to apply to Standard and Elite switches, based on their usage of direct labor hours.
b.Calculate the individual ABC pool rates by taking the total amount of overhead for each cost pool and dividing that total by the total amount of activity for that pool. Allocate overhead to each of the two products using these three activity rates.
c.Compare the overhead calculated in part a to that calculated in part b. Why are they different? Which allocation method (traditional or ABC) most likely results in a better estimate of product cost?
1. All controls available for the computerized accounting information system of a company should be implemented regardless of cost due to the high rate of computer crime.
2. One of the “fallback” procedures of a computing center is the “grandfather parent-child” file arrangement.
3. According to the text, data transcription would only be necessary for a computerized accounting information system.
4. Edit checks are very rarely used because they are not cost-effective controls.
5. Information processing personnel usually only use selective edit checks in data processing applications due to the cost of computer time necessary for editing.
6. Testing processing programs with test data is performed only when a system is first installed due to the high costs of such test runs.
7. The audit trail is easier to follow in an online computerized system as compared to a batch system.
8. No record of transactions is made in an online computerized system.
9. Most computer vandalism is performed by “professional” computer criminals who have no personal contact with the computer centers they disrupt.
10. The primary function of controls for a computerized accounting information system is to detect computer fraud.
11. Input controls attempt to assure the accuracy and completeness of the data fed into the CPU for processing.
12. It is more difficult to safeguard logical computer access than it is to safeguard physical computer access.
13. Output controls for the computerized accounting information system focus primarily on the security and distribution of print media prepared by the computer center.
14. Biometric identifications are irrelevant to computer network systems.
15. Consensus-based protocols contain an odd number of processors.
1. The first stage in the systems development life cycle is analyzing the company’s current system.
2. The first stage in the systems development life cycle is planning the systems study itself.
3. Most systems development life cycles consist of mutually exclusive activities, with little overlap between the stages.
4. Accountants do not have to worry much about systems studies”they are rarely affected by them.
5. The search for more efficient ways to serve customers is an important reason why business organizations perform systems studies.
6. One way to help ensure a systems study uses a “broad point of view” is to assemble an interdisciplinary study team.
7. A study team should approach a systems study with a narrow point of view in order to focus directly on the system and not be distracted by peripheral issues.
8. The members of a systems study team should be from the same discipline or area so that they can work together well.
9. An important first step in the systems analysis phase of a systems study is a preliminary investigation of the system under study.
10. Top management involvement is critical to the success of a systems study.
11. When a waitress delivers food late to a customer because the kitchen is backed up, the “late food” is an example of a symptom while the “kitchen being backed up” is the real cause of the problem.
12. “Analysis paralysis” means “analyzing a system to death” at the expense of reaching a conclusion.
13. The three major types of organizational goals discussed in the chapter are (1) general systems goals, (2) computer goals, and (3) salary goals.
14. It is not important to satisfy top management goals when creating a new information system because most such systems are used by operating employees, not top managers.
15. The information needs of top managers tend to be the most detailed, and focus on short range planning and budgeting.
16. The information needs of operating managers are normally easier to determine than those of top managers because their decision making tends to be better defined and narrower in scope.
17. Studies of AIS outputs should not be concerned with non-monetary figures”these are mostly irrelevant to accountants.
18. Employee behavioral problems are rarely important in systems analysis and design work because most systems are computer-based, not human-based.
19. Systems survey work might include gathering data on an existing information system or observing the current system in operation.
20. An important deliverable from the analysis portion of a systems study is the final systems analysis report, which should be sent to the company’s steering committee.
21. An example of “legal feasibility” is whether or not a proposed computer system can comply with state and federal statutes.
22. A “schedule feasibility” evaluation is not conducted by a study team if a company already has an automated system.
23. “Schedule feasibility” refers to whether or not computer vendors can provide bids in a timely manner.
24. Unless the human element of a systems change is considered, the best designed system “on paper” will often be an operational failure when it is implemented.
A TV company produces wall mounts for flat screen tv’s. The forecasted income statement for 2009 follows:
Sales ($48 per unit) $4,800,000
Cost of good sold ($32 per unit) (3,200,000)
Gross profit 1,600,000
Selling expenses ($4 per unit) (400,000)
Net income $1,200,000
More info:
a. of the production costs and selling expenses, $800,000 and $100,000 respectively are fixed. b. The tv company received a special order from a hospital company offering to buy 13,000 wall mounts for $30. If they accept the order, there will be no additional selling expenses and there is currently sufficient excess capacity to fill the order. The company’s sales manager wants to reject the order because “they’re not in the business to of paying $32 to make a product then sell it for $30.
Calculate the net benefit of accepting the special order.
Use the account-classification method of cost estimation to classify each of the following cost as variable, fixed or semivariable. Before classifying the costs, choose and appropriate measure for the schools costs. Explain your choice.
1. Fee charged by a local public accounting firm to audit the school’s accounting records. 2. Wages of the school’s part-time assistant recital instructors. They are hired on a temporary basis. For each student enrolled in the school’s music programs, four hours of assistant instructor time are needed per week. 3. Depreciation on the school’s musical instruments. 4. Rent for the building in which the school operates. 5. Electricity for the school. The school pays a fixed monthly charge plus $.11 per kilowat of electricity.
Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
The best estimate of the total monthly fixed cost is
A. $24,000.
B. $427,600.
C. $478,050.
D. $528,500.
I’d really like to know how to get the answer more than anything. I’m not really sure where to start on this, I saw where someone had added the cost of sales and selling & administrative costs together, but then that gives me 2 answers and I can only choose one. Please show me how to get this. Thanks in advance!
Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead
$255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Summer Ltd entered into an agreement on 1 July 2010 to lease a harvester to Field Ltd. The lease agreement details are as follows:
Length of lease: 5 years
Annual lease payment, payable on 30 June each year: $8 000
Estimated useful life of harvester: 8 years
Fair value of harvester at 1 July 2010: $34 747
Estimated residual at end of useful life: $2 000
Residual at end of lease term (50% guaranteed) by Field Ltd: $7 200
Interest rate implicit in the lease: 9%
Additional information:
The lease is cancellable, but a penalty equal to 50% of the total lease payments is payable on cancellation.
Field Ltd Ltd does not intend to buy the harvester at the end of the lease term.
Summer Ltd incurred costs of $1 000 to negotiate and execute the lease agreement.
Summer Ltd purchased the harvester for $34 797 just before the inception of the lease.
Required
Prepare a schedule of lease payments for Field Ltd, a schedule of lease receipts for Summer Ltd and journal entries to record the lease transactions for the year ended 30 June 2011 in the records of both companies
Swift Corp., a capital goods manufacturing business that started on January 4, 2010, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2010 and 2011 records.
2010 2011
Installment sales $480,000 $620,000 Gross profit as a percent of costs 25% 28% Cash collections on sales of 2010 $130,000 $240,000 Cash collections on sales of 2011 -0- $160,000
The amounts given for cash collections exclude amounts collected for interest charges. (If answer is zero, please enter 0, do not leave any fields blank.)
(a) Compute the amount of realized gross profit to be recognized on the 2011 income statement, prepared using the installment-sales method.
$
(c) Compute the amount of realized gross profit to be recognized on the income statement, prepared using the cost-recovery method.
Swobodaville is a hypothetical town that provides the context for this Application Assignment. What follows is a table that presents 5 years of data.
Evaluate Swobodaville’s financial condition based on the partial list of factors given. That is, consider any observable trends in the data and what they could potentially mean. To compare the data, in some cases it is best to convert dollar figures to percentages. The best approach to analyzing this table is to look at changes from year to year. Then explain what types of recommendations you would make to the city.
YEAR
FACTOR 1 2 3 4 5
Revenue per household $321 $318 $329 $329 $328
Sales tax as a percent of total revenue .938 .936 .935 .935 .933
Expenditures per household $321 $321 $333 $334 $334
Analyzing revenue structure will help identify the following types of problems.
‘ Deterioration of revenue base
‘ Internal procedures or legislative/board policies that may adversely affect revenue yields
‘ Over-dependence on obsolete or external revenue sources
‘ User fees that do not cover the cost of services
‘ Changes in tax burden
‘ Lack of cost controls and poor revenue estimating practices
‘ Inefficiency in the collection and administration of revenues
Analyzing an expenditure profile can reveal the following:
‘ Excessive growth of overall expenditures as compared to revenue growth or growth in wealth (personal and business income)
‘ Undesirable increases in fixed costs
‘ Ineffective budgetary controls
‘ A decline in personnel productivity
‘ Excessive growth in programs, which create future expenditures
Community needs and resources encompass economic and demographic characteristics, including population, employment, personal income property value, and business activity. An examination of demographic and economic characteristics can identify the following:
‘ A decline in the tax or revenue base
‘ A need to shift public or customer service priorities
‘ A need to shift policies because of a loss of competitive position
Swobodaville is a hypothetical town that provides the context for this Application Assignment. What follows is a table that presents 5 years of data.
Evaluate Swobodaville’s financial condition based on the partial list of factors given. That is, consider any observable trends in the data and what they could potentially mean. To compare the data, in some cases it is best to convert dollar figures to percentages. The best approach to analyzing this table is to look at changes from year to year. Then explain what types of recommendations you would make to the city.
YEAR
FACTOR 1 2 3 4 5
Revenue per household $321 $318 $329 $329 $328
Sales tax as a percent of total revenue .938 .936 .935 .935 .933
Expenditures per household $321 $321 $333 $334 $334
Low-income, sales tax-exempt households as a percent of population
.139
.139
.142
.155
.156
Consider the following:
Analyzing revenue structure will help identify the following types of problems.
‘ Deterioration of revenue base
‘ Internal procedures or legislative/board policies that may adversely affect revenue yields
‘ Over-dependence on obsolete or external revenue sources
‘ User fees that do not cover the cost of services
‘ Changes in tax burden
‘ Lack of cost controls and poor revenue estimating practices
‘ Inefficiency in the collection and administration of revenues
Analyzing an expenditure profile can reveal the following:
‘ Excessive growth of overall expenditures as compared to revenue growth or growth in wealth (personal and business income)
‘ Undesirable increases in fixed costs
‘ Ineffective budgetary controls
‘ A decline in personnel productivity
‘ Excessive growth in programs, which create future expenditures
Community needs and resources encompass economic and demographic characteristics, including population, employment, personal income property value, and business activity. An examination of demographic and economic characteristics can identify the following:
‘ A decline in the tax or revenue base
‘ A need to shift public or customer service priorities
‘ A need to shift policies because of a loss of competitive position
Taffei Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling Price
$ 175
Units in beginning Inventory
0
Units Produced
9500
Units sold
8000
Units in ending Inventory
1500
Variable Costs per unit:
Direct materials
$ 55
Direct labor
$ 38
Variable manufacturing overhead
$ 2
Variable selling and admin
$ 10
Fixed Costs:
Fixed manufacturing overhead
$ 300,000
Fixed selling and admin
$ 125,000
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing? c. Prepare an income statement for the month using the variable costing method. d. Prepare an income statement for the month using the absorption costing method.
TAGUCHI COMPANY Comparative Balance Sheets December 31 Assets 2011 2010 Cash $ 73,000 $ 22,000 Accounts receivable 85,000 76,000 Inventories 170,000 189,000 Land 75,000 100,000 Equipment 260,000 200,000 Accumulated depreciation (66,000) (32,000) Total $597,000 $555,000 Liabilities and Stockholders’ Equity Accounts payable $ 39,000 $ 47,000 Bonds payable 150,000 200,000 Common stock ($1 par) 216,000 174,000 Retained earnings 192,000 134,000 Total $597,000 $555,000 Additional information: 1. Net income for 2011 was $103,000. 2. Cash dividends of $45,000 were declared and paid. 3. Bonds payable amounting to $50,000 were redeemed for cash $50,000. 4. Common stock was issued for $42,000 cash. 5. No equipment was sold during 2011, but land was sold at cost.
Instructions Prepare a statement of cash flows for 2011 using the indirect method.
Target Corporation, a major U.S. retailer, reported the following amounts in the asset section of its balance sheets for the years ended January 31, 2009, and February 2, 2008:
31-Jan-09
2-Feb-08
Property and equipment, net
$25,756
$24,095
In addition, the statement of cash flows for the year ended January 31, 2009, included the following items ($ in millions):
Depreciation
$1,814
Additions to property and equipment
3,547
Proceeds from the sale of property and equipment
39
What was the gain or loss Target recognized in the year ended January 31, 2009, from the sale of property and equipment?
AirJet Best Parts, Inc. is concerned regarding recent changes in its stock prices for the company and would like to determine the stock prices for key competitors. Key competitors include Raytheon, Boeing, Lockheed Martin, and the Northrop Grumman Corporation.
1. Using the dividend growth model and assuming a dividend growth rate of 5%, what is the rate of return for one of three key competitors? Use Yahoo Finance to obtain the latest dividend amount and price for one selected company. (15 pts)
2. Using the rate of return above, what should be the current share price of AirJet Best Parts, Inc. if the company maintains a constant 1% growth rate in dividends and the most recent dividend per share paid on the stock was $1.50? Show your calculations. (10 pts)
3. Assume AirJet Best Parts has also a preferred stock issue. The most recent dividend per share paid on the stock was also $1.50, the same as the common stock. Which one would you think has a higher price, the preferred stock or the current stock? Explain your rationale. (5 pts)
4. What would happen with the price you computed above if AirJet Best Parts, Inc. announces that dividends at the end of the year will increase? What if the required rate of return increases? What changes in dividends will affect the stock price and how? (10 pts)
Task 3: Bond Evaluation
AirJet Best Parts, Inc. would like to issue 20-year bonds to obtain remaining funds for the new Mexico plant. The company currently has 7.5% semiannual coupon bonds in the market that sell for $1,062 and mature in 20 years.
1. What coupon rate should AirJet Best Parts set on its new bonds to sell them at par value? (10 pts)
2. What is the difference between the coupon rate and the YTM of bonds? (10 pts)
3. What factors will contribute to the riskiness of these bonds? Explain in detail your rationale. (20 pts)
4. What type of positive and negative covenants may AirJet Best Parts, Inc. use in future bond issues? (10 pts)
(TCO 1) Which one of the following actions best matches the primary goal of financial management? (Points : 3) increasing the net working capital while lowering the long-term asset requirements improving the operating efficiency, thereby increasing the market value of the stock increasing the firm’s market share reducing fixed costs and increasing variable costs increasing the liquidity of the firm by transferring short-term debt into long-term debt 2. (TCO 1) When analyzing alternative capital structures for a firm, a financial manager must consider which of the following? (Points : 3) type of loan amount of funds needed cost of funds mix of debt and equity all of the above 3. (TCO 1) Market value reflects which of the following: (Points : 3) The amount someone is willing to pay today for an asset. The value of the asset based on generally-accepted accounting principles. The asset’s historical cost. A and B only None of the above 4. (TCO 1) Which of the following is true regarding income statements? (Points : 3) It reveals the net cash flows of a firm over a stated period of time. It reflects the financial position of a firm as of a particular date. It records revenue only when cash is received for the product or service provided. It records expenses based on the recognition principle. None of the above is a true statement.
TCO F) Alake Company is a manufacturing firm that uses job-order costing. At the beginning of the year, the company’s inventory balances were as follows:
RAW MATEIALES $19,000
WORK IN PROCESS $82,000
FINISDED GOODS $32,000
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 36,000 machine-hours and incur $216,000 in manufacturing overhead cost. The following transactions were recorded for the year:
i. Raw materials were purchased, $443,000.
ii. Raw materials were requisitioned for use in production, $450,000 ($435,000 direct and $15,000 indirect).
iii. The following employee costs were incurred: direct labor, $229,000; indirect labor, $54,000; and administrative salaries, $117,000.
iv. Selling costs, $119,000.
v. Factory utility costs, $21,000.
vi. Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities.
vii. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 38,000 machine-hours.
viii. The cost of goods manufactured for the year was $910,000.
xiv. Sales for the year totaled $1,173,000 and the costs on the job cost sheets of the goods that were sold totaled $895,000.
xv. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required: Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 120,000 miles during a year, the average operating cost is 11.6 cents per mile. If a truck is driven only 80,000 miles during a year, the average operating cost increases to 13.6 cents per mile.
Required:
1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of truck operation. (Round the “Variable cost per mile” to 3 decimal places and the “Fixed cost” to the nearest dollar amount. Omit the “$” 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 100,000 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 $
check my workeBook Links (2)references
Worksheet Learning Objective: 02-03 Understand cost behavior patterns including variable costs, fixed costs, and mixed costs.
Difficulty: Easy Learning Objective: 02-04 Analyze a mixed cost using a scattergraph plot and the highlow method.
Speedy Parcel Service operates a fleet of delivery trucks in a large metropolitan area. A careful study by the company’s cost analyst has determined that if a truck is driven 126,000 miles during a year, the average operating cost is 13.3 cents per mile. If a truck is driven only 84,000 miles during a year, the average operating cost increases to 15.5 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 105,000 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.)
A sports nutrition company is examining whether a new high-performance sports drink should be added to its product line. A preliminary feasibility analysis indicated that the company would need to invest $17.5 million in a new manufacturing facility to produce and package the product. A financial analysis using sales and cost data supplied by marketing and production personnel indicated that the net cash flow (cash inflows minus cash outflows) would be $6.1 million in the first year of commercialization, $7.4 million in year two, $7.0 million in year three, and 5.5 million in year 4.
Senior company executives were undecided whether to move forward with the development of the new product. They requested that a discounted cash flow analysis be performed using two discount rates: 20 percent and 15 percent.
This assignment is based upon the Lab 4: Own Your Own Stock Portfolio Analysis assignment and consists of two parts”an Excel-based assignment and a paper.
You have been assigned to evaluate the stock market performance of firms who manufactures accounting software products. Your evaluation will be based upon large and medium market firms. The firms are as follows:
Large Market Stocks
Lawson Software (Lawson Software: NASDAQ)
Oracle Software (Oracle Corp: NASDAQ)
SAP (SAP AG: NYSE)
Medium Market Stocks
Microsoft Great Plains (Microsoft: NYSE)
QuickBooks (Intuit: NASDAQ)
Peachtree (Sage Grp: LSE)
Part 1: Excel Spreadsheet Assignment
Scenario 1
Using the start date of the previous quarter (i.e., if you are taking this class in January 2011, use October 1 as your date), purchase $100,000 of shares for each of stocks listed above. Track their performance each day for the next 90 days, noting gains and losses each day. At the end of the 90 day period, calculate your net gain (or loss) for each stock and your total investment.
Scenario 2
You will repeat the steps from Scenario 1, except that instead of investing $100,000 in each stock, you will invest $150,000 in four stocks, however, two must be from each market segment (large vs. medium). At the end of the 90 day period, calculate your net gain (or loss) for each stock and your total investment.
Scenario 3
You will repeat the steps from Scenario 1, except that instead of investing $100,000 in each stock, you will invest $300,000 in two stocks, however, one must be from each market segment (large vs. medium). At the end of the 90 day period, calculate your net gain (or loss) for each stock and your total investment.
Scenario 4
You will repeat the steps from Scenario 1, except that instead of investing $100,000 in each stock, you will invest $600,000 any which way, as long as you choose at least two stocks. At the end of the 90 day period, calculate your net gain (or loss) for each stock and your total investment.
Note
Do not worry about any commission fees.
Assignment
Determine how much money you earned or lost with each stock on a daily basis.
Instructions on how to complete
A?· Start your scenario using the opening day price for each stock as your purchase price and use the closing stock price to calculate how much money you earned or lost each day.
A?· Track the stock for 90 consecutive days that the market is open.
Submit
One Excel workbook that contains each of the four scenarios. You will need to use the appropriate Excel formulas and functions which will show the instructor how you derived your results.
Part II: Paper
Write a three to four (3-4) page paper that summarizes your findings from the four scenarios as well as how using Microsoft Excel helped your with this process, using the following outline:
Summarize the various accounting systems that each firm provides.
Explain the results from the four scenarios.
Analyze the four scenarios and develop a scenario that would have exceeded the results from your best scenario.
Explain how Excel helped you with this activity and what other activities you could have done in Excel with the data provided.
The format of the report is to be as follows:
Typed, double spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format.
Use headers for each of the subjects being covered, followed by your response.
In addition to the three to four (3-4) pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.
Riverside Engineering is a machine shop that uses job order costing. Overhead is applied to individual jobs at a predetermined rate based on direct labor costs. The job cost sheet for job no. 321 appears below.
JOB COST SHEET
JOB NUMBER: 321 DATE STARTED: May 10
PRODUCT: 2″ Brass Check Valves DATE COMPLETED: May 21
UNITS COMPLETED: 4000
Direct materials used $ 7,800
Direct labor 1,500
Manufacturing overhead applied 3,000
Total cost of job no. 321 $ 12,300
Unit cost ($12,300 Af· 4,000 units) $ 3.08
a. Summarize the manufacturing costs charged to job no. 321.
b. Record the completion of job no. 321.
c. Record the credit sale of 2,100 units from job no. 321 at a unit sales price of $5. Record in a separate entry the related cost of goods sold.
Prepare general journal entries to the above statements (Omit the “$” sign in your response):
Road Warrior Corporation began operations early in the current year, building luxury motor homes. During the year, the company started and completed 50 motor homes at a cost of $60,000 per unit. Of these, 48 were sold for $95,000 each and two remain in finished goods inventory. In addition, the company had six partially completed units in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows:
Direct materials used $ 794,000
Direct labor 895,000
Income tax expense 100,000
General and administrative expenses 500,000
Manufacturing overhead 1,530,000
Selling expenses 500,000
a.
Compute the total manufacturing costs charged to work in process for the current year: (Omit the “$” sign in your response.)
Total manufacturing costs $
b.
Compute the cost of finished goods manufactured for the current year: (Omit the “$” sign in your response.)
Cost of finished goods manufactured $
c.
Compute the cost of goods sold for the current year: (Omit the “$” sign in your response.)
Cost of goods sold $
d.
Compute the gross profit on sales for the current year: (Omit the “$” sign in your response.)
Gross profit on sales $
e.
Compute the ending inventories of (1) work in process and (2) finished goods for the current year: (Omit the “$” sign in your response.)
Rowan Company recently began production of a new product, C, which required the
investment of $500,000 in assets. Product C is produced in batch sizes of 100 units.
Each batch requires 50 machine hours. A total capacity of 12,500 machine hours is
available. During this current Rowan expects to sell all the units it can produce and the
costs were structured accordingly:
Variable costs per unit
Direct materials $5.00
Direct labor 3.25
Factory overhead 1.75
Selling and administrative expenses 2.00
Fixed costs
Factory overhead $70,000
Selling and administrative expenses 30,000
Requirement 1
Rowan is currently considering establishing a selling price for Product C. the president of Rowan has decided to use the product cost-plus approach to product pricing and has indicated that product C must earn a 16% rate of return on invested assets.
a) Determine the selling price of Product C.
b) Comment on any additional considerations that could influence the establishment of the selling price for Product C.
Assume that as of October 1, 22,000 units of Product C have been produced and sold during the current year. Analysis of the domestic market indicates that 1,500 additional units are expected to be sold during the remainder of the year at the price already set up by the company in (a) of Requirement 1.
On October 20, Rowan Company received an offer from Yu Inc., for 1,000 units of Product C at $12 each. Yu. Inc. will market the units in Japan under its own brand name, and no additional selling and administrative expenses associated with the sale will be incurred by Rowan Company. The additional business is not expected to affect the domestic sales of Product C.
Requirement 2
You received a memo from the president instructing you to prepare a recommendation whether to accept or reject the above proposal.
a) Prepare a checklist to help you gather the relevant information on the basis of which you are going to make your recommendation.
b) Draft a memo to the president informing him of your recommendation. Attach to your memo all relevant calculations to support your recommendation.
Royal Carpet Cleaning provided $90,000 of services during 2011, its first year of operations. All customers paid for the services with major credit cards. Royal submitted the credit card receipts to the credit card company immediately. The credit card company paid Royal cash in the amount of face value less a 3 percent service charge.
Remember:
On the Balance Sheet: Assets = Liability + Equity
On the Income Statement: Revenue – Expenses = Net Income
Sachs Brands’ defined benefit pension plan specifies annual retirement benefits equal to: 1.6% Af— service years Af— final year’s salary, payable at the end of each year. Angela Davenport was hired by Sachs at the beginning of 1997 and is expected to retire at the end of 2031 after 35 years’ service. Her retirement is expected to span 18 years. Davenport’s salary is $90,000 at the end of 2011 and the company’s actuary projects her salary to be $240,000 at retirement. The actuary’s discount rate is 7%.
Estimate by the accumulated benefits approach the amount of Davenport’s annual retirement payments earned as of the end of 2011
If no estimates are changed in the meantime, what will be the accumulated benefit obligation at the end of 2014 (three years later) when Davenport’s salary is $100,000?
Sanker Inc. has provided the following data for the month of August. There were no beginning inventories; consequently, the direct materials, direct labor, and manufacturing overhead applied listed below are all for the current month.
Work In
Process Finished
Goods Cost of
Goods Sold Total
Direct materials $2,790 $7,680 $18,240 $28,710
Direct labor 9,700 19,200 45,600 74,500
Manufacturing
overhead applied 5,440 8,000 18,560 32,000
Total $17,930 $34,880 $82,400 $135,210
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underapplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
12. The journal entry to record the allocation of any underapplied or overapplied overhead for August would include
Sanker Inc., has provided the folowing data for the month of August. There were no beginning inventories, consequently, the direct materials, direct labos, and manufacturing overhead applied listed below are all for the current month:
work in process finished goods cost of goods sold Total
Manufacturing overhead for the month was overapplied by $5,000. The company allocates any underaplied or overapplied overhead among work in process, finished goods, and cost of goods sold at the end of the month on the basis of the overhead applied during the month in those accounts.
The work-in-process inventory at the end of August after allocation of any underapplied or overapplied overhead for the month is closest to
A.$17,080
B.$18,593
C.$8,780
D.$17,267
Please show me how to actually get this answer. Thanks!
Scribners Corporation produces fine papers in three production departments”Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:
Percent Completed
Units Pulping Conversion
Work in process inventory, March 1 5,500 100% 17%
Work in process inventory, March 31 6,900 100% 17%
Pulping cost in work in process inventory, March 1 $3,000
Conversion cost in work in process inventory, March 1 $550
Units transferred to the next production department 156,400
Pulping cost added during March $800,150
Conversion cost added during March $29,800
No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.
Requirement 1:
Determine the equivalent units for March for pulping and conversion.
Pulping Conversion:
Equivalent units of production:
Requirement 2:
Compute the costs per equivalent unit for March for pulping and conversion. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
Pulping Conversion
Cost per equivalent unit $ $
Requirement 3:
(a) Determine the total cost of ending work in process inventory. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Pulping Conversion Total
Cost of ending work in process inventory $ $ $
(b) Determine the total cost of units transferred to the Finishing Department in March. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Scribners Corporation produces fine papers in three production departments”Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:
Percent Completed
Units Pulping Conversion
Work in process inventory, March 1 5,500 100% 17%
Work in process inventory, March 31 6,900 100% 17%
Pulping cost in work in process inventory, March 1 $3,000
Conversion cost in work in process inventory, March 1 $550
Units transferred to the next production department 156,400
Pulping cost added during March $800,150
Conversion cost added during March $29,800
No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.
Requirement 1:
Determine the equivalent units for March for pulping and conversion.
Equivalent units of production
Pulping:$
Conversion:$
Requirement 2:
Compute the costs per equivalent unit for March for pulping and conversion. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
Cost per equivalent unit
Pulping:$
Conversion:$
Requirement 3:
(a) Determine the total cost of ending work in process inventory. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Cost of ending work in process inventory
Pulping:$
Conversion:$
Total:$
(b) Determine the total cost of units transferred to the Finishing Department in March. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Scribners Corporation produces fine papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:
Percent Completed
Units
Pulping
Conversion
Work in process inventory, March 1
5,500
100%
17%
Work in process inventory, March 31
6,900
100%
17%
Pulping cost in work in process inventory, March 1
$3,000
Conversion cost in work in process inventory, March 1
$550
Units transferred to the next production department
156,400
Pulping cost added during March
$800,150
Conversion cost added during March
$29,800
No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.
Requirement 1:
Determine the equivalent units for March for pulping and conversion.
Compute the costs per equivalent unit for March for pulping and conversion. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)
Determine the total cost of ending work in process inventory. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Determine the total cost of units transferred to the Finishing Department in March. (Round your Cost per equivalent unit to 2 decimal places and the final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Selected transactions completed by Big Water Boating Corporation during the current fiscal year are as follows: Jan. 3. Split the common stock 3 for 1 and reduced the par from $90 to $30 per share. After the split, there were 750,000 common shares outstanding. Apr. 7. Purchased 50,000 shares of the corporation’s own common stock at $33, recording the stock at cost. May 1. Declared semiannual dividends of $1.40 on 35,000 shares of preferred stock and $0.09 on the common stock to stockholders of record on May 15, payable on June 1. June 1. Paid the cash dividends. July 29. Sold 36,000 shares of treasury stock at $40. receiving cash. Nov. 15. Declared semiannual dividends of $1.40, on the preferred stock and $0.15 on the common stock (before the stock dividend). In addition, a 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $41. Dec. 31. Paid the cash dividends and issued the certificates for the common stock dividend. Instructions: Journalize the transactions
1. One problem with internal auditing is that it is akin to self-regulation (i.e., the auditor cannot be impartial because both the auditor and the subsystem being audited work for the same company).
2. Both the internal audit and the external audit have the same primary objective (i.e., to verify that the financial records of the company have been prepared according to generally accepted accounting principles).
3. Many of the assurance services auditors offer today involve information technology.
4. The main objective of information technology auditing is to evaluate the computer’s role in achieving audit and control objectives.
5. If control procedures over a company’s computerized financial accounting system are particularly strong, auditors will not need to perform any substantive testing.
6. Computer assisted audit techniques are used primarily when auditing around the computer.
7. A career in information technology auditing requires both specialized skills and a broad-based set of technical knowledge.
8. Certified Information Systems Auditors must have an accounting degree.
9. The focus in an audit should be primarily on business risk rather than on internal control.
10. An information systems risk assessment is as concerned with errors and accidents as it is with fraud.
11. When the costs of protecting against a business risk exceed the cost of the risk multiplied by its probability, an auditor will generally recommend against installing the specific control.
12. Public companies are required to adopt the Control Objectives for Information and Related Technology framework under SOX.
13. The Electronic Systems Assurance and Control model provides a framework for evaluating controls over email systems.
14. An auditing around the computer approach pays little or no attention to the control procedures within an IT environment.
15. Normal transactions rather than exception transactions are of most interest to auditors.
16. Embedded audit modules and audit hooks are examples of continuous auditing techniques.
17. Use of test data is not recommended when evaluating integrated online systems.
18. The greatest advantage of an integrated test facility is that it enables an auditor to examine both manual and computerized steps companies use to process business transactions.
19. In auditing through the computer, auditors will want to review systems software documentation.
20. An ideal program change control process includes required documentation of every request for application program changes as well as the use of a test environment for development and implementation of program changes.
21. The most important skills needed by information technology auditors are people skills.
22. Test of program length is one approach to detecting the existence of a Trojan Horse.
23. Information Technology (IT) governance includes using IT responsibly and efficiently, but not necessarily strategically.
24. Auditors may use transaction tagging to verify how a system processes certain transactions.
25. It is relatively easy to prevent hackers from unauthorized access to data and programs.
26. The three conditions for fraud in the fraud triangle include pressure, rationalization, and opportunity.
27. SAS No. 99 ‘ Consideration of Fraud in a Financial Statement Audit guides auditors in being more proactive in detecting fraud than did the predecessor standard, SAS No. 82.
28. One purpose of generalized auditing packages is to enable an auditor to examine the contents of computer files of interest without having to write a computer program himself/herself.
29. The AICPA has decided to drop its WebTrust services and replace SysTrust with a general Trust assurance service.
30. Section 404 of SOX requires that the information technology auditor “sign off” that the financial statements are reliable.
Shawn Bates was working to establish a business enterprise with four of his wealthy friends.
Each of the five individuals would receive a 20 percent ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investors are taxed at the rate of 15% on dividend income and 30% on all other in-come and that the corporate tax rate is 30 percent. Also assume that the new company is expected to earn $ 400,000 of cash income before taxes during its first year of operation. All earnings are expected to be immediately distributed to the owners. Required
Calculate the amount of after- tax cash flow available to each investor if the business is established as a partnership versus a corporation.
Shynee Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Sarco, Barco, and Larco. Each of these products can be sold as is, or it can be processed further and sold for a higher price. The company incurs joint costs of $180,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product.
Sales Value at Split-off Point Allocated Joint Costs Cost to Process Further Sales Value of Processed Product
Sarco $200,000 $40,000 $120,000 $300,000
Barco 300,000 60,000 89,000 400,000
Larco 400,000 80,000 250,000 800,000
Determine whether each of the three joint products should be sold as is, or processed further
Simple plant manufactures DNA test strips. Manufacturing overhead is applied to unit produced using direct labor dollars at the allocation base. The overhead rate is calculated prior to the beginning of the fiscal year that runs January 1 to December 31. Simple plant has one manufacturing employee, J Kusic, and one overhead expense besides indirect labor, property taxes. J Kusic’s salary and fringe benefits for the next year are forecast to be $50,000. Kusic is expected to work 2000 at a cost of $25 per hour [$50,000/2000]. Eighty percent of Kusic’s time is budgeted to direct labor, and the remainder is budgeted to indirect labor. Property taxes are projected to be $110,000. There was no beginning balance of work in process on January 1.
Required:
a. Calculate Simple Plant’s overhead rate for next year.
b. On January 2, the first working day for the new fiscal year, Kusic works eight hours (five hours on manufacturing test strips and three hours waiting for raw materials to arrive). Each day simple plant posts all entries (transactions) to the accounts. What are the balances in the Overhead account and the Work-in Process account at the close of business on January 2?
c. At the end of the year, Kusic’s salary and benefits are $50,000, with $44,000 charged to test strips manufactured. Kusic worked 2,000 hours during the year. Property taxes paid during the year amounted to $103,000. What , if any , is the balance in the overhead account before adjusting entry is made to transfer the balance to other accounts?
The Ski Pro Corporation which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country skis.
After considerable research , a cross-country ski line has been developed. Because of the conservative nature of the company management, however, Minnetonka’s president has decided to introduce only one type of the new ski for this coming winter. If the product is a success, further expansion in future years will be initiated.
The ski selected is a mass-market ski with a special binding. It will be sold to wholesalers for $80.00 per pair. Because of availability capacity, no additional fixed charges will be incurred to produce the skis. A $100,000 fixed charge will be absorbed by the skis, however, to allocate a fair share of the company’s present fixed costs to the new product.
Using the estimated sales and priduction of 10,000 pairs of skis as the expected volume, the accounting department has developed the cost per pair of skis and bindings.
Direct Labor $35
Direct Material $30
Total Overhead $15
Total $80
Ski Pro has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase pric of the bindings from the sucontractor would be $5.25 per binding, or $10.50 per pair. If the Ski Pro Corporation accepts the purchase proposal, it is predicted that direct -labor and variable-overhead costs would be reduced by 10% and direct-material costs would be reduced by 20%
I really need help with the excell spreadsheet and showing calculations
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:
Products
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
Department D has recently purchased and installed new computerized equipment for Product X. This equipment will increase the overhead costs by $2,700 and decrease labor costs in Department D by $3.00 per case. Cindy believes that her department will be allocated some of Department D’s overhead if Smelly uses machine hours to allocate overhead. If Smelly uses departmental rates, what are the product costs per case for Product X assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases? (Points : 1)
A soft drink company has three bottling plants throughout the country. Bottling occurs at the regional level because of the high cost of transporting bottled soft drinks. The parent company supplies each plant with the syrup. The bottling plants combine the syrup with carbonated soda to make and bottle the soft drinks. The bottled soft drinks are then sent to regional grocery stores.The bottling plants are treated as costs centers. The managers of the bottling plants are evaluated based on minimizing the cost per soft drink bottled and delivered. Each bottling plant uses the same equipment, but some produce more bottles of soft drinks because of different demand. The costs and output for each bottling plant are: A B CUnits Produced 10,000,000 20,000,000 30,000,000Variable Costs $ 200,000 $ 450,000 $ 650,000Fixed Costs $1,000,000 $1,000,000 $1,000,000a. Estimate the average cost per unit for each plant.b. Why would the manager of plant A be unhappy with using the average cost as the performance measure?c. What is an alternative performance measure that would make the manager of plant A happier?d. Under what circumstances might the average cost be a better performance measure?
Soldatna Corporation’s controller frequently prepared T-accounts to analyze inventory. However, his penmanship was poor and he is no longer employed by the company. The following was reconstructed from a scratch pad left on his desk. The missing values (?) were illegible. Analyze the information and answer the requirements that follow.
Raw Materials Cost of Goods Sold
beg. bal. ? ? 491,000 ?
175,000 491,000 ?
175,000 ?
481,000
102,000
Work in Process Factory Overhead
beg. bal. 44,000 460,000 35,000 ?
113,000 40,000
? 75,000
? ?
477,000 ? ? ?
? ?
Finished Goods
beg. bal. 131,000 ?
?
? ?
100,000
(a) Overhead is applied at 100% of direct labor cost. How much was direct labor?
(b) Was overhead over- or underapplied, and by how much?
(c) Which inventory category increased?
(d) Other factory overhead, besides indirect material and indirect labor, was $75,000. Indirect labor was 25% of the direct labor. How much was indirect material?
35. PERT is an acronym for “Project Expert and Resource Technique.”
36. The purpose of PERT is to coordinate the activities in a project, such as a systems implementation project.
37. One thing that can go wrong during systems implementation is implementing a system that has not been completely tested.
38. A PERT network diagram reflects the logical sequence of systems implementation activities.
39. The “slack time” for a PERT activity represents the amount of time the activity can be delayed without delaying the entire project.
40. The critical path represents the most time-consuming path through a PERT network diagram.
41. Gantt charts are the same as PERT charts.
42. Project management software allows users to perform “what-if” analysis?for example, to determine how different work schedules might lower the time to install a new computer system.
43. Controls are rarely established during the implementation of a new computer system”this must wait for the first audit of the system.
44. During systems implementation, “converting computer files” is only necessary if the files are currently in manual formats.
45. A “turnkey” computer system is a complete set of computer hardware and software that allows the user to avoid technical decisions and to begin operating quickly.
46. Parallel conversion and direct conversion methods for testing a new system are quite similar.
47. As part of the systems follow up work, an implementation team can watch employees perform their work activities to ascertain whether the employees are executing their assigned job functions correctly.
48. At the conclusion of the initial follow-up study, a project leader will prepare a report called a post-implementation review report.
49. The tasks involved in “systems maintenance” are normally performed by external vendors, and rarely by a company’s internal information systems department.
50. When using outsourcing, a company needing data processing services hires an outside organization to handle all or part of these services.
51. A possible advantage of outsourcing is that it frees corporate assets for other projects.
52. Outsourcing can help a company avoid seasonal fluctuations in its business.
53. Outsourcing facilitates downsizing.
54. A disadvantage of outsourcing is that a company can lose control of its IT systems and data processing.
Question true or false with error correction In designing an AIS, system developers should design the outputs of the system first, not the inputs.
26. The term “cost/benefit” is most closely associated with the economic feasibility of a proposed accounting information system.
27. For a system to be totally feasible, all feasibility areas must be considered in the process.
28. Prototyping is an approach to systems design whereby a design team develops a simplified shell of working software for a proposed information system.
29. An advantage of prototyping is that models are usually developed without the aid of a computer.
30. When comparing computer vendor proposals, the reputations of these vendors should also be evaluated.
31. In selecting a vendor finalist, a steering committee can use a point-scoring analysis to evaluate the proposals of alternate computer vendors.
32. Systems study work ends when the follow up analysis shows that no further adjustments need to be made to the newly implemented system.
33. The implementation and initial operation phase of a systems study is also known as the “action” phase of a systems study.
34. One implementation problem is installing a new system that is not adequately documented or tested.
Assume that you are either (a) the president of a company that is very dependent on ongoing research and development, writing a memo to the FASB complaining about the current accounting standards regarding research and development, or (b) the FASB member defending the current standards regarding research and development. Your memo should address the questions shown below.
1.By requiring expensing of R&D, do you think companies will spend less on R&D? Why or why not? What are the possible implications for the competitiveness of U.S. companies?
2.If a company makes a commitment to spend money for R&D, it must believe it has future benefits. Shouldn’t these costs therefore be capitalized just like the purchase of any long-lived asset that you believe will have future benefits?
Question2
Leon Housten, president of Kosko, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bonds he might issue, and (3) explain the issuing procedures used in bond transactions.
Instructions
Write a memorandum to the president, answering his request.
1. What would be the best thing about owning your own business? What would be the worst? (This question requires an extensive explanation supported by examples).
2. For the following Sue’s business, define the unit of sale and calculate the economics of one unit (EOU). After understanding the meaning of EOU and reviewing different examples in your textbook, the exercise below will allow you to practice how to define and calculate an EOU. Your Course Business Plan (to be developed by you as your Final project) will require the definition of your EOU, in other words, what is going to be sold by you and how much it will cost.
Sue, of Sue’s Sandwich Shoppe, sells sandwiches and sodas from a sidewalk cart in a popular park near her house. She sets up her cart in the summers to earn money for college tuition. Last month she sold $1,240 worth of product (sandwiches and sodas) to 100 customers. She spent $210 on the sandwich ingredients and buying the sodas wholesale. Her unit is one sandwich ($4) plus one soda ($1).
4. Business Idea for your Business Plan:
After reading the chapter 1 and 2, you must think an idea to be developed as a business. Please, write a short paragraph explaining what your idea is all about.
Ralph forms a firm by investing 1,000 dollars. This cash is immediately paid for a machine with a useful life of 3 years. The net cash inflow from this machine will be 110 at the end of the first year, 0 at the end of the second year, and 1,197.90 at the end of the third year. Net cash inflow is paid as a dividend immediately upon receipt. Also the third year net cash flow of 1,197.90 consists of 1,000 from customers and 197.90 salvage value received when the machine is retired at that time. (The firm ceases to exist after the year 3 dividend is paid.)
(a) Assume Ralph’s accountant uses sum of the years’ digits depreciation. Tell Ralph’s history with end-of-year balance sheets, periodic income statements, and periodic cash flow statements. The initial balance sheet should show an asset (call it Equipment) of 1,000 and capital stock of 1,000.
(b) Assume the interest rate is r = 10%. Tell Ralph’s history, again with balance sheets, income statements, and cash flow statements, but in terms of economic income.
Berjaya Maju Bhd. has the total assets of RM5 million. The total assets are financed by RM4 million equity and RM 1 million debt.
RM
Operating Income (EBIT) 1,000,000
Interest Expense 100,000
Earnings before tax (EBT) 900,000
Taxes (40%) 360,000
Net Income 540,000
The company wants to increase its assets by RM1 million, and it plans to finance this increase by issuing RM1 million in new debt. This action will double the company’s interest expense, but its operating income will remain at 20 percent of its total assets, and its average tax rate will remain at 40 percent. If the company takes this action, State what will be the effect to the following:
a) The company’s net income
b) The company’s return on assets
c) The company’s return on equity
Note: State whether the effect is the increase or decrease and show the calculation to prove the answer.
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 36,000 machine-hours and incur $216,000 in manufacturing overhead cost. The following transactions were recorded for the year:
i. Raw materials were purchased, $443,000.
ii. Raw materials were requisitioned for use in production, $450,000 ($435,000 direct and $15,000 indirect).
iii. The following employee costs were incurred: direct labor, $229,000; indirect labor, $54,000; and administrative salaries, $117,000.
iv. Selling costs, $119,000.
v. Factory utility costs, $21,000.
vi. Depreciation for the year was $121,000 of which $114,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities.
vii. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 38,000 machine-hours.
viii. The cost of goods manufactured for the year was $910,000.
xiv. Sales for the year totaled $1,173,000 and the costs on the job cost sheets of the goods that were sold totaled $895,000.
xv. The balance in the Manufacturing Overhead account was closed out to Cost of Goods Sold.
Required: Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conducted in cash.
In recent months there have been many news stories in the press about executive compensation with stock options. This type of compensation occurs when an executive is granted the “option” to purchase the company’s stock at a certain price sometime in the future. The theory is if the executive is effective his management skills will lead to a higher stock price. As a reward the executive can purchase the stock at the earlier, lower price and lock in an automatic gain in his shares. However, certain companies have been falsifying the actual date when the stock options are granted to their executives. Research this situation on the internet or through the university library. Write a 400-word paper describing the situation and the implications of the practice including any legal or ethical ramifications.
BMW Group, headquartered in Munich, Germany, manufactures several automotive brands including BMW Group, MINI, and Rolls-Royce. Financial information is reported in the euro (Ac‚¬) monetary unit using International Financial Reporting Standards (IFRS) as applicable to the European Union. The following transactions were adapted from the annual report of the BMW Group; amounts are in millions of euros.
a. Declared Ac‚¬197 in dividends to be paid next month.
b. Ordered Ac‚¬1,255 of equipment.
c. Paid Ac‚¬694 in dividends declared in prior months.
d. Borrowed Ac‚¬2,655 in cash from banks.
e. Sold equipment at its cost of Ac‚¬285 for cash.
f. Received the equipment ordered in event (b), paying Ac‚¬970 in cash and signing a note for the balance.
g. Purchased investments for Ac‚¬2,220 cash.
Required:
Prepare journal entries for each transaction. Be sure to use good referencing and categorize each account as an asset (A), liability (L), or stockholders’ equity (SE). If a transaction does not require a journal entry, explain the reason.
Redundancy can be a major problem in the design and operation of relational databases. If a database uses only one relation to store data, several problems may subsequently occur. The problem of changes (or updates) to data values being incorrectly recorded is known as (Points : 2)
an update anomaly.
an insert anomaly.
a delete anomaly.
a memory anomaly
Why is computer fraud often more difficult to detect than other types of fraud? (Points : 2)
Rarely is cash stolen in computer fraud.
The fraud may leave little or no evidence it ever happened.
Computers provide more opportunities for fraud.
Computer fraud perpetrators are just cleverer than other types of criminals.
3. (TCO 7) Chelsana Washington is a medical equipment sales representative. Her company has provided her with a laptop computer that uses wireless connectivity to access the accounting information system from virtually anywhere in the country. She, and the other sales reps, have read access to customer and product information. They have write access that allows them to enter and cancel customer orders. These permissions define a(an) ______ in the company’s database management system. (Points : 2)
schema
subschema
data dictionary
physical view
4. (TCO 2) This control framework’s intent includes helping the organization to provide reasonable assurance that objectives are achieved and problems are minimized, and to avoid adverse publicity and damage to the organization’s reputation. (Points : 2)
ISACF’s control objectives for information and related technology
COSO’s internal control framework
COSO’s enterprise risk management framework
None of the above
5. (TCO 7) Which statement below is false regarding the basic requirements of the relational data model? (Points : 2)
“Every column in a row must be single-valued.”
“All non-key attributes in a table should describe a characteristic about the object identified by the primary key.”
“Foreign keys, if not null, must have values that correspond to the value of a primary key in another table.”
Refer to the adjusted trial balance of Wilderness Guide Service Inc., illustradeted in Excercise 5.3 (3E) to respond to the following items.
a. Prepare all necessary closing entries at December 31, 2007.
b. Prepare an after closing trial balance dated December 31, 3007.
c. Compare retained earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial balance has increased or decreased subsequent to the closing process.)
Refer to the adjusted trial balance of Wilderness Guide Service Inc., illustrated in Exercise 5.3 (3E) to respond to the following items.
a. Prepare all necessary closing entries at December 31, 2007. Prepare an after closing trial balance dated December 31, 3007. Compare retained earnings balance reported in the after-closing trial balance prepared in part b to the balance reported in the adjusted trial balance. Explain why the two balances are different. (Include in your explanation why the balance reported in the after-closing trial balance has increased or decreased subsequent to the closing process.)
Regional Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from Regional’s base airport to the major city in the state, Metropolis. Each month 40 round-trip flights are made. Shown on page 219 is a recent month’s activity in the form of a cost-volume-profit income statement.
Fare revenues (300 fares) $45,000
Variable costs
Fuel $14,000
Snacks and drinks 800
Landing fee 2,000
Supplies and forms 1,200 18,000
Contribution margin 27,000
Fixed cost
Depreciation 3,000
Salaries 15,000
Advertising 500
Airport hanger fees 1,750 20,250
Net income $ 6,750
Calculate the break-even point in (1) dollars and (2) number of fares.
Without calculations, determine the contribution margin at the break-even point.
If fares were decreased by 10%an additional 100 fares could be generated. However, variable costs would increase by 35%. Should the fare decrease be adopted?
Your review of the ledger reveals that each account has a normal balance. You also discover the following errors.
The totals of the debit sides of Prepaid Insurance, Accounts Payable, and Property Tax Expense were each understated $100.
Transposition errors were made in Accounts Receivable and Service Revenue. Based on postings made, the correct balances were $2,570 and $6,960, respectively.
A debit posting to Salaries Expense of $200 was omitted.
A $1,000 cash drawing by the owner was debited to M. Sterling, Capital for $1,000 and credited to Cash for $1,000.
A $520 purchase of supplies on account was debited to Equipment for $520 and credited to Cash for $520.
A cash payment of $450 for advertising was debited to Advertising Expense for $45 and credited to Cash for $45.
A collection from a customer for $210 was debited to Cash for $210 and credited to Accounts Payable for $210.
Instructions
Prepare a correct trial balance. Note that the chart of accounts includes the following: M. Sterling, Drawing, and Supplies. (Hint: It helps to prepare the correct journal entry for the transaction described and compare it to the mistake made.) (If answer is zero, please enter 0. Do not leave any fields blank.)
Ricardo Company’s balance sheet reported the following information as of January 1, 1998.
Accounts Receivable 75,800
Less: Allowance for Doubtful Accounts (6,500)
Net Realizable Value 69,300
The following transaction took place during January 1998:
Jan 3: Sold 40,000 of merchandise, plus 7% GST and 8% PST, on account
Jan 9: Wrote-off an uncollectible amount 500
Jan 15: Received a 5000, 90 day, 10% note, in settlement of an account balance
Jan 18: Collected 36,000 from credit customers
Jan 21: Sold 18,000 of merchandise, plus 7% GST, no PST, on account
Jan 30: Received 2,000 from an account that had been written-off as uncollectible last year.
Required:
1. Prepare journal entries for the January transactions?
2. Prepare the adjusting entry on January 31 to adjust the allowance account, assuming that uncollectible accounts are estimated at 2% of credit sales. [Income statement approach]?
3. Prepare the adjusting entry on January 31 to adjust the Allowance account, assuming that uncollectible accounts are estimated at 3% of total outstanding receivables [simplified balance sheet]?
4. Prepare the Accounts Receivable section of the balance sheet at January 31, 1998, assuming the simplified balance sheet approach?
Rita Arthurs, the sales manager is discussing the possible outcome of the forthcoming election with Paulo Farmer, the production manager. She noted that if one of the major political parties wins the election and forms government, there is a strong possibility that alternative energy sources such as wind-generated electricity may no longer be actively supported by the new government as is the case under the current government. Rita’s primary concern is that the current market for alternative power generation equipment is already volatile and subject to significant uncertainty. Paulo is also concerned about his plans to build the new highly automated manufacturing facility on the land to be purchased in February. This new manufacturing facility will enable him to manufacture, in-house, the major two parts he is now purchasing for assembly and to significantly automate the assembly process that is currently somewhat labour intensive. His projections for the new facility indicate a reduction in direct material and direct labour costs of 25% but that his fixed manufacturing overheads are likely to increase by 50% due to the increased investment in production capacity.
Required: Write a brief report addressing Rita’s concerns (approx. 500 words). Your report should also inclue a discussion of the impact of Paulo’s intended investment in new manufacturing capacity. Support your report with relevant calculations.
Riverside Engineering is a machine shop that uses job order costing. Overhead is applied to individual jobs at a predetermined rate based on direct labor costs. The job cost sheet for job no. 321 appears below.
JOB COST SHEET
JOB NUMBER: 321 DATE STARTED: May 10
PRODUCT: 2″ Brass Check Valves DATE COMPLETED: May 21
UNITS COMPLETED: 4000
Direct materials used $ 7,800
Direct labor 1,500
Manufacturing overhead applied 3,000
Total cost of job no. 321 $ 12,300
Unit cost ($12,300 Af· 4,000 units) $ 3.08
a. Summarize the manufacturing costs charged to job no. 321.
b. Record the completion of job no. 321.
c. Record the credit sale of 2,100 units from job no. 321 at a unit sales price of $5. Record in a separate entry the related cost of goods sold.
Prepare general journal entries to the above statements (Omit the “$” sign in your response):
Peter Saflund, a technology workforce researcher and a special advisor to the National Skills Standards Board (NSSB) on Information Technology, was the keynote speaker at the 2007 “Think Forward” conference in Las Vegas. In his address, Saflund warned educators that today’s college graduates will switch jobs nine times befoer the age of 40. Thus, IT project, security, and database management skills that transfer from one industry to the another may be more marketable than easily outsources programming skills. In addition, Saflund points to the necessity of honing in on skills outside of IT. Many colleges and universities have already reacted by offering students certificate programs that encompass IT management generalist skills, as students pursue a mastery of another discipline in their academic major. With rapid advances in technology enabling managers to implement smart changes, Saflund warns that technology education at the post secondary level is still a priority.
Read the story Article: Hot Skills, Cold Skill at these link below, then answer the following questions: http://www.uic.edu/cba/cba-depts/ids/Documents/hotcold.pdf 1. Which IT skills most interest you in your academic concentration? Why? 2. Do you think that IT generalist or specialist will dominate the market in 2010 and beyond? Why? 3. Select a large corporation and describe its most likely IT needs in 2010 and beyond. 4. Which skills will have the steepest decline? Why? 5. Why does Foote suggest that the competition will increase significantly in 2010 and beyond?
Pfeifer Clothiers is a small company that manufactures tall-men’s suits. The company has used a standard cost accounting system. In May 2011, 11,200 suits were produced. The following standard and actual cost data applied to the month of May when normal capacity was 14,000 direct labor hours. All materials purchased were used.
Cost Element
Standard (per unit)
Actual
Direct materials 8 yards at $4.30 per yard $371,050 for 90,500 yards
($4.10 per yard)
Direct labor 1.2 hours at $13.50 per hour $201,630 for 14,300 hours
($14.10 per hour)
Overhead 1.2 hours at $6.00 per hour $49,000 fixed overhead
Overhead is applied on the basis of direct labor hours. At normal capacity, budgeted fixed overhead costs were $49,000, and budgeted variable overhead was $35,000.
Compute the total, price, and quantity variances for (1) materials and (2) labor.
Plant acquisitions for selected companies are as follows.
1. Natchez Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Vivace Co., for a lump-sum price of $1,000,300. At the time of purchase, Vivace’s assets had the following book and appraisal values.
Book Values Appraisal Values
Land $285,800 $214,350
Buildings 357,250 500,150
Equipment 428,700 428,700
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land 214,350
Buildings 357,250
Equipment 428,700
Cash 1,000,300
2. Arawak Enterprises purchased store equipment by making a $2,858 cash down payment and signing a 1-year, $32,867, 10% note payable. The purchase was recorded as follows.
Store Equipment 39,012
Cash 2,858
Note Payable 32,867
Interest Payable 3,287
3. Ace Company purchased office equipment for $22,000, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Office Equipment 22,000
Cash 21,560
Purchase Discounts 440
4. Paunee Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $38,583. The company made no entry to record the land because it had no cost basis.
5. Mohegan Company built a warehouse for $857,400. It could have purchased the building for $1,057,460. The controller made the following entry.
Warehouse 1,057,460
Cash 857,400
Profit on Construction 200,060
Prepare the entry that should have been made at the date of each acquisition
Problem 1-5 Income Statement, Statement of Retained Earnings, and Balance Sheet
The following list, in alphabetical order, shows the various items that regularly appear on the financial statements of Maple Park Theatres Corp. The amounts shown for balance sheet items are balances as of September 30, 2010 (with the exception of retained earn- ings, which is the balance on September 1, 2010), and the amounts shown for income statement items are balances for the month ended September 30, 2010.
Accounts payable $17,600
accounts receivable 6,410
advertising expense 14,500
buildings 60,000
capital stock 50,000
cash 15,230
concessions revenue 60,300
cost of concessions sold 23,450
dividends paid during the month 8,400
furniture and fixtures $34,000
land 26,000
notes payable 20,000
projection equipment 25,000
rent expense-movies 50,600
retained earnings 73,780
salaries and wages expense 46,490
ticket sales 95,100
water, gas, and electricity 6,700
Required
1.Prepare an income statement for the month ended September 30, 2010.
2.Prepare a statement of retained earnings for the month ended September 30, 2010.
3.Prepare a balance sheet at September 30, 2010.
4.You have $1,000 to invest. On the basis of the statements you prepared, would
you use it to buy stock in Maple Park? Explain. What other information would you want before making a final decision?
Kean Dry Cleaners is owned and operated by Wally Lowman. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on March 1, 2012, are as follows: Cash, $15,000; Accounts Receivable, $31,000; Supplies, $3,000; Land, $36,000; Accounts payable, $13,000; Capital Stock, $25,000. Business transactions during March are summarized below.
a.Wally Lowman invested additional cash in the business with a deposit of $28,000 in exchange for capital stock.
b.Paid $14,000 for the purchase of land as a future building site.
c.Received cash from cash customers for dry cleaning revenue, $17,000.
d.Paid rent for the month, $5,000.
e.Purchased supplies on account, $2,500.
f.Paid creditors on account, $12,800.
g.Charged customers for dry cleaning revenue on account, $34,000.
h.Received monthly invoice for dry cleaning expense for March (to be paid on April 10), $13,500.
Problem 1: Bridger Enterprises has a 12/31/2011 year-end. The prior accountant for Bridger, Sammy Squirrel, retired at the end of 2011 before he prepared any adjusting entries for the company. The 2011 books are still open. Please prepare any entries necessary to issue correct financial statement for the year end 12/31/2011.
Atkins Advertising Agency began business on January 2, 2010. The transactions entered into by Atkins during its first month of operations are as follows:
a.Acquired its articles of incorporation from the state and issued 100,000 shares of capital stock in exchange for $200,000 in cash.
b.Purchased an office building for $150,000 in cash. The building is valued at $110,000, and the remainder of the value is assigned to the land.
c.Signed a three-year promissory note at the bank for $125,000.
d. Purchased office equipment at a cost of $50,000, paying $10,000 down and
agreeing to pay the remainder in ten days.
e.Paid wages and salaries of $13,000 for the first half of the month. Office employees are paid twice a month.
f.Paid the balance due on the office equipment.
g.Sold $24,000 of advertising during the first month. Customers have until the 15th
of the following month to pay their bills.
h.Paid wages and salaries of $15,000 for the second half of the month.
i.Recorded $3,500 in commissions earned by the salespeople during the month.
They will be paid on the fifth of the following month.
Required
Prepare in journal form the entry to record each transaction.
PROBLEM 4-5. Break-Even, “What If” [LO 3] Michael Bordellet is the owner/pilot of Bordellet Air Service. The company flies a daily round trip from Seattle’s Lake Union to a resort in Canada. In 2010, the company reported an annual income before taxes of $8,084 although that included a deduction of $70,000 reflecting Michael’s “salary.”
Revenue ($360 Af— 1,248 passengers)
$449,280
Less costs:
Pilot (owner’s salary)
$ 70,000
Fuel (35,657 gallons Af— $4.15)
147,977
Maintenance (variable)
127,920
Depreciation of plane
25,000
Depreciation of office equipment
2,800
Rent expense
40,000
Insurance
20,000
Miscellaneous (fixed)
7,500
= 441,197
Income before taxes
$ 8,083
Revenue of $449,280 reflects six round trips per week for 52 weeks with an average of four passengers paying $360 each per round trip (6 Af— 52 Af— 4 Af— $360 = $449,280). The flight to the resort is 400 miles one way. With 312 round trips (6 per week Af— 52 weeks), that amounts to 249,600 miles. The plane averages 7 miles per gallon.
Required (Round all monetary calculations to the nearest cent and all trips to the nearest whole trip.)
a.How many round trips is Michael currently flying, and how many round trips are needed to break even?
b.How many round trips are needed so that Michael can draw a salary of $110,000 and still not show a loss?
c.What is the average before-tax profit of a round trip flight in 2010?
d.What is the incremental profit associated with adding a round-trip flight?
FAST Computer Repair Shop started business in June of the current year and had the following transactions during the month as follows:
June 2-Mr. BB Que, the owner invests P100,000 cash in the business.
2-Paid taxes and licenses, P1,450.
3-Paid the current month’s rent, P4,000.
4-Purchased repair equipment, P35,000. Paid a down payment of P15,000 and the balance on account.
5-Purchased repair supplies for cash, P3,700.
6-Received cash from customers for repair services rendered to them, P25,000.
9-Rendered repair services on credit, P 18,000.
10-Purchased additional repair supplies on credit, P6,350.
11-Returned P1,250 worth of repair supplies purchased on June 10.
12-Received payment from customers for repairs completed, 20,000.
15-Received payment from customers on account, P10,000.
15-Paid employees’ salaries, P18,500.
20-Mr. Que, withdrew P7,000 cash from the business for his personal use.
25-Issud check in payment for the repair supplies purchased on account on June 10, less the return made on June 11.
31-Received electric bill for the month amounting to P8,790 to be paid next month.
31-Paid employees salaries, P18,500. The gross payroll amount to P20,500. The employees payroll deductions were: Withholding Tax, P1,200; SSS Contributions, P500; Philhealth Contributions, P300. Payroll deductions of the company are made every end of the month.
Required:
1. Prepare the journal entries to record the above transactions.
2. Post the entries from the journal to the ledger.
3. Prepare a trial balance for FAST Computer Repair Shop.
The accounts and their account number used by the company are:
Please provide instructions on solving this. The answer was $810,000 but I do not know how to get it.
Hardin company’s manufacturing overhead account showed a $20,000 underapplied overhead balance on December 31. Other data as of December 31 appear below:
Cost of goods sold………………………………………………………………………..$800,000
Overhead applied during the year included in cost of goods sold………..$200,000
Overhead applied during the year in the ending balances of:
….Work in process inventory…………………………………………………………..$80,000
If the company allocates the underapplied overhead among cost of goods sold and the appropriate inventory accounts based on the amount of overhead applied during the year in the accounts, cost of goods sold after allocation will be:
The purchase of office equipment on credit has what effect on the accounting equation?
a. Assets decrease and owners’ equity decreases
b. Assets increase and liabilities increase
c. Assets decrease and liabilities decrease
d. Liabilities increase and owners’ equity decreases
Question 2
The Kelly Company purchased a building for $75,000 in cash. What is the effect on current assets?
a. Decrease in current assets
b. No effect on current assets
c. Unable to determine
d. Increase in current assets
Question 3
The correct term for the process of transferring amounts from a book of original entry to specific assets, liabilities, revenues, expenses, and owners’ equity items is
a. Journalizing
b. Posting
c. Double-entry system
d. Debit
e. Credit
Question 4
The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is a(an).
a. Posting
b. Debit
c. Journalizing
d. Double-entry system
e. Credit
Question 5
A file or book which contains a record for all accounts used by a company, including the account balance, is called a
a. general ledger
b. chart of accounts
c. trial balance
d. general journal
Question 6
Debit entries are used to
a. increase liability accounts
b. increase revenue accounts
c. increase asset accounts
d. decrease expense accounts
Question 7
All of the following accounts have normal credit balances except
a. Common Stock (Capital Stock)
b. Investments
c. Service Revenue
d. Accounts Payable
Question 8
Which pair of accounts has the same set of rules for debit and credit entries?
a. Common Stock (Capital Stock) and Accounts Payable
b. Cash and Notes Payable
c. Salaries Expense and Retained Earnings
d. Sales Revenue and Accounts Receivable
Question 9 1 points Save
Minmier Rentals, Inc.
Use the five transactions for Minmier Rentals described below to answer the questions that follow.
Transactions
Oct 1 Minmier purchases two new saws on credit at $375 each. The saws are added to Minmier’s rental inventory. Payment is due in 30 days.
8 Minmier accepts advance deposits for tool rentals of $75.
15 Minmier receives a bill from Local Electric Company for $150. Payment is due in 30 days.
20 Customers are charged $750 by Minmier for tool rentals. Payment is due from the customers in 30 days.
31 Minmier receives $500 in payments from the customers that were billed for rentals on October 20.
Refer to Minmier Rentals, Inc. The journal entry to record the Oct. 20 transaction is
a. Tool Rental Revenue 750
Cash 750
b. Tool Rental Revenue 750
Accounts Payable 750
c. Accounts Receivable 750
Tool Rental Revenue 750
d. Cash 750
Accounts Receivable 750
Question 10 1 points Save
Minmier Rentals, Inc.
Use the five transactions for Minmier Rentals described below to answer the questions that follow.
Transactions
Oct 1 Minmier purchases two new saws on credit at $375 each. The saws are added to Minmier’s rental inventory. Payment is due in 30 days.
8 Minmier accepts advance deposits for tool rentals of $75.
15 Minmier receives a bill from Local Electric Company for $150. Payment is due in 30 days.
20 Customers are charged $750 by Minmier for tool rentals. Payment is due from the customers in 30 days.
31 Minmier receives $500 in payments from the customers that were billed for rentals on October 20.
Refer to Minmier Rentals, Inc. The journal entry to record the October 31 transaction is
a. Cash 500
Accounts Receivable 500
b. Accounts Receivable 500
Tool Rental Revenue 500
c. Tool Rental Revenue 500
Cash 500
d. Accounts Payable 500
Cash 500
Question 11
If the sum of the debits and credits in a trial balance is not equal, then
a. there is no concern because the two amounts are not meant to be equal.
b. it is safe to proceed with the preparation of financial statements.
c. most likely an error was made in posting journal entries to the general ledger or in preparing the trial balance.
Question 1. Affleck Company accumulates the following adjustment data at December 31.
1. Services provided but not recorded total $750.
2. Store supplies of $300 have been used.
3. Utility expenses of $225 are unpaid.
4. Unearned revenue of $260 has been earned.
5. Salaries of $900 are unpaid.
6. Prepaid insurance totaling $350 has expired.
Instructions: For each of the above items indicate the following.
A. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
B. The status of accounts before adjustment (overstatement or understatement).
Question 2. 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 Utility 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 July31.
3. Depreciation on equipment of $150 was omitted.
4. Accrued but unpaid wages at July 31 of $300 were not include.
5. Services provided but unrecorded totaled $500.
Instructions: Prepare a correct income statement for July2010.
Question 3. Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balances before adjustment on August 31 is as follows.
Neosho River Resort
Trial Balance
August 31, 2010
Account Number Debit Credit
101 Cash $19,600
126 Supplies 3,300
130 Prepaid Insurance 6,000
140 Land 25,000
143 Cottages 125,000
149 Furniture 26,000
201 Accounts Payable $6,500
209 Unearned Rent Revenue 7,400
275 Mortgage Payable 80,000
301 P. Harder, Capital 100,000
306 P. Harder, Drawing 5,000
429 Rent Revenue 80,000
622 Repair Expense 3,600
726 Salaries Expense 51,000
732 Utilities Expense 9,400
$273900 $273,900
In addition t those account listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Account Receivable, No. 144 Accumulated Deprecaion-Cottages, No. 150 Accumulated Depreciated-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, NO. 631 Supplies Expense, No 718 Interest Expense, and No. 722 Insurance Expense. Others data: 1. Insurance expires at the rate of $400 per month. 2. A count on August 31 shows $600 of supplies on hand. 3. Annual depreciation is $6,000 on cottage and $2,400 on furniture. 4. Unearned rent revenue of $4,100 was earned prior ot August 31. 5. Salaries of $400 were unpaid at August 31. 6. Rentals of $1,000 were due from tenants at August 31. (Use Account Receivable.) 7. The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Instructions: a. Journalize the adjusting entries on August 31 for the 3-Month period Jun 1-August 31.
B. Prepare a ledger using the three-column form on account. Enter the trial balance accounts and post the adjusting entries. (Use J1 as the posting reference.) c. Prepare an adjusting trial balance on August 31. D. Prepare and income statement and an owner’s equity statement for the 3 Months ending August 31 and a balance sheet as of August 31
Accounting information users need reports about the economic activities and condition of businesses.
True
False
10 points
Question 2
Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
True
False
10 points
Question 3
Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.
True
False
10 points
Question 4
Managerial accounting is primarily concerned with the recording and reporting of economic data and activities of an entity for use by owners, creditors, governmental agencies, and the public.
True
False
10 points
Question 5
The financial statements of a proprietorship should include the owner’s personal assets and liabilities.
True
False
10 points
Question 6
Drawings are an example of an expense.
True
False
10 points
Question 7
The double-entry accounting system records each transaction twice.
True
False
10 points
Question 8
The increase side of all accounts is the normal balance.
True
False
10 points
Question 9
The normal balance of an expense account is a credit.
True
False
10 points
Question 10
The process of transferring the data from the journal to the ledger accounts is posting.
Assume that you are either (a) the president of a company that is very dependent on ongoing research and development, writing a memo to the FASB complaining about the current accounting standards regarding research and development, or (b) the FASB member defending the current standards regarding research and development. Your memo should address the questions shown below.
i. By requiring expensing of R&D, do you think companies will spend less on R&D? Why or why not? What are the possible implications for the competitiveness of U.S. companies?
ii. If a company makes a commitment to spend money for R&D, it must believe it has future benefits. Shouldn’t these costs therefore be capitalized just like the purchase of any long-lived asset that you believe will have future benefits?
Question 2
Leon Housten, president of Kosko, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bonds he might issue, and (3) explain the issuing procedures used in bond transactions.
Instructions
Write a memorandum to the president, answering his request.
Bottomless Pit is a new all-you-can-eat buffet restaurant that target budget conscious buffet eaters. After two months, the average number of customers and the average cost of food was recorded and reproduced below.
Week Number of customers Cost of food ($)
1 4,892 59,380
2 3,675 45,350
3 3,250 41,260
4 3,375 43,260
5 4,285 47,950
6 4,328 48,500
7 4,684 51,200
8 4,484 49,200
9 4,062 46,600
In addition to the food costs listed, the following monthly costs are also incurred.
Variable Fixed
$ $
Other direct materials 1.00
Direct labour 3.00
Overhead costs 0.50
Selling costs 0.50 12,000
Administrative costs 25,000
The cost of the buffet is $29 per person.
Required
(a) Using the power cost formula in part (a) of Question 1, calculate the breakeven point for the restaurant in:
(i) number of customers; and
(ii) dollars
(b) Bottomless Pit is considering running a special where the 4th diner eats for free. If it is estimated that this will increase the number of customers by 20%, is this a good idea?
(c) Under what circumstances would the opposite for part (b) be true? (i.e. if it was a good idea, under what circumstances would it be a bad idea and vice versa)
Potential lenders and investors believe that an entrepreneur who lacks the discipline to develop a good business plan likely lacks the discipline to run a business. True False
5 points Question 2
The ideal strategic planning process for a small company should start with setting objectives. True False
5 points Question 3
Primary research data is less time consuming and less costly to gather than secondary research data. True False
5 points Question 4
The opportunity to reap impressive profits is the primary motivation for most entrepreneurs. True False
5 points Question 5
An important factor helping to drive the entrepreneurial trend in our economy is the favorable attitude Americans have towards entrepreneurs. True False
5 points Question 6
When an employee in a business treats a customer poorly, that customer usually does not complain; however, she does tell her “horror story” about that business to more than 10 other people. True False
5 points Question 7
Most dissatisfied customers complain about rude or discourteous service to the owner or the manager. True False
5 points Question 8
The specific group of customers at whom a company aims its goods and services is its target market. True False
5 points Question 9
Market research is a valuable tool for defining the firm’s target market, its needs, and its potential profitability. True False
5 points Question 10
The market need and the relatively low startup costs make service businesses popular with entrepreneurs. True False
5 points Question 11
A major advantage of launching a business part-time is the lower risk it offers in case the business fails. True False
5 points Question 12
The majority of new business owners work fewer than 40 hours per week. True False
5 points Question 13
A business plan is a written statement of what an entrepreneur plans to accomplish in both quantitative and qualitative terms and how she plans to accomplish it. True False
5 points Question 14
Small businesses actually create more jobs than do big businesses. True False
5 points Question 15
The most effective way for a small business to establish a competitive advantage is by offering lower prices. True False
5 points Question 16
The most effective way to communicate the values of a company to everyone it touches is to formulate an effective mission statement. True False
5 points Question 17
Large companies have a natural advantage over small firms when it comes to preparing a strategic plan. True False
5 points Question 18
A business plan is a written summary of an entrepreneur’s proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. True False
5 points Question 19
A marketing plan should identify a small company’s target customers and describe how the business will attract and keep them. True False
5 points Question 20
The primary purpose of building a business plan is to raise capital. True False
Spreading employee schedules over a longer day makes it easier for supervisors to manage their employees.
True
False
5 points
Question 2
Cultural diversity exists when two or more cultures exist within an organization
True
False
5 points
Question 3
When supervisors delegate duties, they are no longer accountable for how they are executed
True
False
5 points
Question 4
Six sigma approaches to quality improvement rely on statistical techniques, simulations, and experiments to decrease variation in output and eliminate waste.
True
False
5 points
Question 5
Decentralization empowers employees to act quickly to solve customers’ problems
True
False
5 points
Question 6
Improper timing can be a barrier to communication if the receiver is upset, agitated, or improperly prepared to communicate.
True
False
5 points
Question 7
Offshoring is primarily a trend in manufacturing because it is more difficult to find appropriate foreign workers in service functions such as computer programming, data entry, claims processing, and call center work.
True
False
5 points
Question 8
Homogeneous assignment is a control principle.
True
False
5 points
Question 9
Management is both a set of activities and a team of people.
True
False
5 points
Question 10
Accepting a delegated task makes you accountable for it.
True
False
5 points
Question 11
Where an MIS exists, supervisors have the primary responsibility to make certain that it serves their needs.
True
False
5 points
Question 12
Informational meetings promote cooperation among group members by conveying the reasons behind changes that will be necessary in the future.
True
False
5 points
Question 13
Programming a computer is an example of a technical skill.
True
False
5 points
Question 14
Management by exception is an organizing principle
True
False
5 points
Question 15
Assigning tasks to subordinates may be limited by their existing job description and links to pay scales.
True
False
5 points
Question 16
The first step in decision making is to list restraints
True
False
5 points
Question 17
The control process is completed when deviations are detected.
True
False
5 points
Question 18
The act of delegating a task creates a duality of both responsibility and accountability regarding its execution.
True
False
5 points
Question 19
One way to help you prepare written messages is to outline their content before you write them.
True
False
5 points
Question 20
Delicate subjects, such as reprimands, are best handled through written communication.
Fine Arts Company manufactures handcrafted wooden jewellery boxes. The company uses a job costing system, and manufacturing overhead is applied on the basis of direct labour hours. Estimated manufacturing overhead for the current year is $120,000. The company employs 5 carpenters, who are regarded as direct labour. Each of these employees is expected to work 2000 hours during the year.
At the beginning of September the inventory balances were as follows.
A?‚· Raw materials: 2500 metres of wood at $11 per metre, $27,500.
A?‚· Work in process: job number JB606, $1,850, consisting of direct material $250, direct labour $1,000, and manufacturing overhead, $600.
A?‚· Finished goods; job number JB1505, $6000.
The following events occurred during September:
(1) Company purchased 1,500 meters of wood at $11 per metre.
(2) Following raw materials were transferred to production:
A?‚· Job number JB606: 500 metres of wood.
A?‚· Job number JB707: 2,500 metres of wood.
(3) Five litres of glue were purchased in September and issued to production. The glue cost $10 per litre. Glue is treated as an indirect material.
(4) Depreciation on the factory equipment for September was $4,000.
(5) The month’s 4200 electricity bill for the manufacturing plant was paid in cash.
(6) Time sheets showed the following use of labour:
A?‚· Job number JB606: 50 hours of direct labour.
A?‚· Job number JB707: 350 hours of direct labour.
A?‚· The carpenters (direct labour) earn $20 per hour.
(7) The September council rates bill for the manufacturing plant of $455 was received but not yet paid in cash.
(8) The company employs labourers who perform various tasks such as material handling and shop clean-up. Their wages for September amounted to $1250.
(9) Job number JB606, which was started in July, was finished in September. Job number JB707 was incomplete at the end of September. Job number JB505 was sold in September for $7,500.
Required:
(a) Provide journal entries to record the event previously listed for September. (5 marks)
(b) Post journal entries to the following accounts and determine closing balances. (3 marks)
(i) Raw material, (ii) Work in process, and (iii) Finished goods
(c) Prepare job-order cost sheet for job number JB606 showing all costs through July – 30 September.
Yellow Pty Ltd uses the percentage of completion method of accounting for construction contracts. In 2011 Yellow Pty Ltd entered into a contract to build a stadium with a contract price of $40,000,000 for Black Ltd. The details relating to the contract are as follows:
2011 2012 2013
$ $ $
Costs incurred during the year 10,000,00 21,000,000 15,000,000
Estimated costs to complete at 30 June 22,000,000 15,000,000 0
Billings during the year 8,000,00 20,000,000 12,000,000
Collections during the year 8,000,000 20,000,000 12,000,000
Yellow Pty Ltd has a financial year ending on 30 June.
Required:
(a) Calculate the amount of profit to be recognised by Yellow Pty Ltd for each of the three years.
(b) Prepare journal entries for all three years, assuming that the outcome of the contract can be reliably estimated.
Note: round all figures to the nearest dollar, and leave all percentages with two decimal places.
What is the normal procedure for new customers or customers making a purchase that causes their credit limit to be exceeded? (Points : 2)
routine approval is granted without authorization
specific approval must be granted by the credit manager
reject the sale in either case without question
check the credit bureau for a credit rating on the customer
2. (TCO 4) A company uses an invoice method whereby customers typically pay according to each invoice. This is the __________ method. (Points : 2)
monthly statement
open-invoice
balance forward
cycle billing
3. (TCO 4) Sad Clown Pajamas is an Internet-based wholesaler. Customers enter their orders online. The manager of Callow Youth Clothing was entering and order when the following error message popped up: Please enter your email address. This message is the result of a (Points : 2)
validity check.
reasonableness test.
limit check.
completeness test.
4. (TCO 4) Which control would be best to prevent payments made to fictitious vendors? (Points : 2)
allow payments only to approved vendors
restrict access to any payment or approval documents
have an independent bank reconciliation
make sure all documents are in order before approving payments
5. (TCO 4) The receiving clerk at Folding Squid Technologies examines incoming shipments and checks their purchase order numbers. A receiving report is then sent to accounts payable, where it is reconciled with the relevant purchase orders and invoices and payment is authorized. Which of the following would correct control weaknesses, if any, related to these activities? (Points : 2)
Vendor invoices should be approved for payment by the shipping clerk after the purchase order and receiving report are reconciled.
Vendor invoices should be approved for payment by the purchasing manager.
Purchase orders and receiving reports should be reconciled by the purchasing manager.
Controls are adequate under the current system.
6. (TCO 4) How does a company avoid overbilling customers for items not yet shipped? (Points : 5)
7. (TCO 4) Name and describe the two common systems for approving vendor payments. (Points : 5)
Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. The hospital’s Radiology Department is considering replacing and old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-Ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital’s management to buy a new DNA analyzer.
For each of the items below, indicate whether it should be considered a differential cost (DC), an opportunity cost (OC) or a sunk cost (SC) in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, please put (NA) next to the number for “none apply”. Please list the number and the 2 digit abbreviation next to it. For example, 1.OC, 2. SC, etc.
1. Cost of the old X-ray machine
2. The salary of the head of the Radiology Department
3. The salary of the head of the Pediatrics Department
Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. For each cost incurrect at Northwest Hospital, indiciate whether it would most likely be a direct cost or an indirect cost of the specified cost object by listing the number and a “D” for direct or an “I” for indirect. For example: 1D, 2D, etc.
Cost / Cost Object
1 The wages of pediatric nurses / The pediatric department
2 Prescription drugs / A particular patient
3 Heating the hospital / The pediatric patient
4 The salary of the head of pediatrics / The pediatric patient
5 The salary of the head of pediatrics / The particular pediatric patient
6 Hospital chaplain’s salary / A particular patient
7 Lab tests by outside contractor / A particular patient
8 Lab tests by outside contractor / A particular department
Oakland College is considering outsourcing grounds maintenance. In this regard, Oakland has received a bid from Highline Grounds Maintenance for $295,000 per year. Highline states that its bid will cover all services and planting materials required to “keep Oakland’s grounds in a condition comparable to prior years.” Oakland’s cost for grounds maintenance in the preceding year were $302,000 as follows:
Salary of three full-time gardeners———————————————-$195,000
Plant materials————————————————————————80,000
Fertilizer———————————————————————————7,000
Fuel—————————————————————————————8,000
Depreciation of tractor, mowers, and other miscellaneous equipment——12,000
Total———————————————————————————–$302,000
If Oakland College outsources maintenance, it will be able to sell equipment for $30,000, and the three gardeners will be laid off.
Required
a.Analyze the one-year financial impact of outsourcing grounds maintenance.
b.How will savings in the second year differ from those in year 1?
c.Discuss qualitative factors that should be considered in the decision
Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company’s expected collection pattern and the budgeted sales for the period.
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted sales:
The estimated total cash collections during April from sales and accounts receivables would be:
Outram Corporation is presently making part I14 that is used in one of its products. A total of 8,000 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:
PER UNIT
Direct Materials……………………………….$5.00
Direct Labor…………………………………….$2.40
Variable Manufacturing Overhead…….$3.70
Supervisor’s Salary………………………….$1.80
Depreciation of special equipment….$6.10
Allocated general overhead……………..$2.40
An outside supplier has offered to make and sell the part to the company for $14.80 each. If this offer is accepted, the supervisor’s salary and all of the variable costs 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 I14 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 $15,200 per year.
B. Net operating income would increase by $15,200 per year.
C. Net operating income would increase by $52,800 per year.
D. Net operating income would decline by $52,800 per year.
The Oxford Company has budgeted sales revenues as follows:
July August September
Credit sales $30,000 $24,000 $18,000
Cash sales 18,000 51,000 39,000
Total sales $48,000 $75,000 $57,000
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.
Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are $65,000 in July, $45,000 in August, and $21,000 in September.
Other budgeted cash receipts: (a) sale of plant assets for $12,350 in August, and (b) sale of new common stock for $16,850 in September. Other budgeted cash disbursements: (a) operating expenses of $6,750 each month, (b) selling and administrative expenses of $12,500 each month, (c) dividends of $19,000 will be paid in August, and (d) purchase of equipment for $6,000 cash in September.
The company has a cash balance of $10,000 at the beginning of August and wishes to maintain a minimum cash balance of $10,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that there is no outstanding financing as of August 1.
Requirements:
1. What are the three sections of a Cash Budget, and what is included in each section?
2. Why is a Cash Budget so vital to a company?
3. What are the five basic principles of cash management that a company can follow in order to improve its chances of having adequate cash?
P 10-3) Spitfire Company was incorporated on January 2,1011, but was unable to begin manufacturing activities until July 1, 2011, because new factory facilities were not completed until that date.
The Land and Building account reported the following items during 2011.
January 31: Land and Building $160,000
February 28: Cost of removal of building $9,800
May 1: Partial payment of new construction $60,000
May 1: Legal fees paid $3,770
June 1: Second payment on new construction $40,000
June 1: Insurance premium $2,280
June 1: Special tax assessment $4,000
June 30: General expenses $36,300
July 1: Final payment on new construction $30,000
December 31: Asset write-up $53,800
Total: $399,950
December 31: Depreciation-2011 at 1% $4,000
December 31, 2011: Account balance $395,950
The following additional information is to be considered.
1. To acquire land and building the company paid $80,000 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair market value of the stock is $117 per share.
2. Cost of removal of old buildings amounted to $9,800 and the demolition company retained all materials of the building.
3. Legal fees covered by the following.
Cost of organization: $610
Examination of title covering purchase of land: $1,300
Legal work in connection with construction contract: $1,860
4. Insurance premiums covered the building for a 2-year term beginning May 1, 2011.
5. The special tax assessment covered street improvements that are permanent in nature.
6. General expenses covered the following for the period from January 2, 2011, to June 30, 2011.
President’s salary: $32,100
Plant superintendent’s salary-supervision of new building: $4,200
Total: $36,300
7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $53,800, believing that such an increase was justified to reflect the current market at the time the building was completed. Retained earnings was credited for this amount.
8. Estimated life of building- 50 years
Depreciation for 2011: 1% of asset value (1% of $400,000, or $4,000)
a) Prepare entries to reflect correct land, building, and depreciation accounts at December 31, 2011.
b) Show the proper presentation of land, building, and depreciation on the balance sheet at December 31, 2011.
P 5-1 (Preparation of a Classified Balance Sheet, Periodic Inventory) Presented below is a list of accounts in alphabetical order.
Accounts Receivable, Accumulated Depreciation-Building, Accumulated Depreciation-Equipment, Advances to Employee, Advertising Expense, Allowance for Doubtful Accounts, Bonds Sinking Fund, Bonds Payable, Buildings, Cash in Bank, Cash on Hand, Cash Surrender Value of Life Insurance, Commission Expense, Copyrights, Common Stock,Debt Investments (trading), Dividends Payable, Equipment, Gain on Sale of Equipment, Interest Receivable, Inventory- Beginning, Inventory-Ending, Land, Land for Future Plant Site, Loss from Flood, Notes Payable (due next year),Patents, Payroll Taxes Payable, Pension Obligations, Petty Cash, Preferred Stock, Premium on Bonds Payable, Paid- in capital in Excess of Par- Preferred Stock, Prepaid Rent, Purchases, Purchases Return and Allowances,Retained Earnings, Sales, Sales Discounts, Salaries and Wages Expense (sales), Salaries and Wages Payable, Transportation ‘ in, Treasury Stock (at cost), Unearned Subscriptions Revenue.
Instructions: Prepare a classified balance sheet in good form. (No monetary amounts are to be shown.)
Panarude Airfreight is an international air freight hauler with more than 45 jet aircraft operating in the United States and the Pacific Rim. The firm is headquartered in Melbourne, Australia, and is organized into five geographic areas: Australia, Japan, Taiwan, Korea, and the United States. Supporting these areas are several centralized corporate function services (cost centers): human resources, data processing, fleet acquisition and maintenance, and telecommunications. Each responsibility center has a budget, negotiated at the beginning of the year with the vice president of finance. Funds unspent at the end of the year do not carry over to the next fiscal year. The firm is on a January-to-December fiscal year.
After reviewing the month-to-month variances, President senior management became concerned about the increased spending occurring in the last three months of each fiscal year. In particular, in the first nine months of the year, expenditure accounts typically show favorable variances (actual spending is less than budget), but in the last three months, unfavorable variances are the norm. In an attempt to smooth out these spending patterns, each responsibility center is reviewed at the end of each calendar quarter and any unspent funds can be deleted from the budget for the remainder of the year. The accompanying table shows the budget and actual spending in the telecommunications department for the first quarter of this year.
PANARUDE AIRFREIGHT
Telecommunication Department: First Quarter
Budget and Actual Spending (Australian Dollar)
________________________________________
Monthly Cumulative Actual Cumulative Monthly Cumulative
Jan. $110,000 $110,000 $104,000 $104,000 $6,000 F $6,000 F
Feb. 95,000 205,000 97,000 201,000 2,000 U 4,000 F
Mar. 115,000 320,000 112,000 313,000 3,000 F 7,000 F________________________________________
*F = Favorable; U = Unfavorable.
At the end of the first quarter, telecommunications’ total annual budget for this year can be reduced by $7,000, the total budget underrun in the first quarter. In addition, the remaining nine monthly budgets for telecommunications are reduced by $778 (or $7,000 Af· 9). If, at the end of the second quarter, telecommunications’ budget shows an unfavorable variance of, day, $8,000 (after the original budget is reduced for the first-quarter underrun), management of telecommunications is held responsible for the entire $8,000 unfavorable variance. The first-quarter underrun is not restored. If the second-quarter budget variance is also favorable, the remaining six monthly budgets are each reduced further by one-sixth of the second-quarter favorable budget variance.
Required:
1. What behavior would this budgeting scheme engender in the responsibility center managers?
2. Compare the advantages and disadvantages of the previous budget regime, where any end-of-year budget surpluses do not carry over to the next fiscal year, with the system of quarterly budget adjustments just described.
P8-23 Shawn Bates was working to establish a business enterprise with our of is wealthy friends . Each f the five individuals would receive a 2- percent ownership interest in the company. A Primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investors are taxed at the rate of 15% on dividend income and 30% on all other income and that the corporate tax rate is 30 percent. Also assume that the new company is expected o earn $400,000 of cash income before taxes during the first tear of operation. All earnings are expected to be immediately distributed to the owners.
Required
Calculate the amount or after tax cash flow available to each investor If the business is established as a partnership versus a corporation. Write a memo explaining the advantages and disadvantages of these two forms of business organization. Explain what a limited liability company may be a better choice than either a partnership or a corporation
Panarude Airfreightis an international air freight hauler with more than 45 jet aircraft operating in the United States and the Pacific Rim. The firm is headquartered in Melbourne, Australia, and is organized into five geographic areas: Australia, Japan, Taiwan, Korea, and the United States. Supporting these areas are several centralized corporate function services (cost centers): human resources, data processing, fleet acquisition and maintenance, and telecommunications. Each responsibility center has a budget, negotiated at the beginning of the year with the vice president of finance. Funds unspent at the end of the year do not carry over to the next fiscal year. The firm is on a January-to-December fiscal year.
After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year. In particular, in the first nine months of the year, expenditure accounts typically show favorable variances (actual spending is less than budget), but in the last three months, unfavorable variances are the norm. In an attempt to smooth out these spending patterns, each responsibility center is reviewed at the end of each calendar quarter and any unspent funds can be deleted from the budget for the remainder of the year. The accompanying table shows the budget and actual spending in the telecommunications department for the first quarter of this year.
PANARUDE AIRFREIGHT
Telecommunications Department: First Quarter
Budget and Actual Spending (Australian Dollars)
Monthly Cumulative Actual Cumulative Monthly Cumulative
Jan $110,000 $110,000 $104,000 $104,000 $6,000F $6,000F
Feb 95,000 205,000 97,000 201,000 2,000U 4,000F
Mar 115,000 320,000 112,000 313,000 3,000F 7,000F
*F = Favorable; U = Unfavorable
At the end of the first quarter, telecommunications’ total annual budget for this year can be reduced by $7,000, the total budget underrun in the first quarter. In addition, the remaining nine monthly budgets for telecommunications are reduced by $778 (or $7,000 Af· 9). If, at the end of the second quarter, telecommunications’ budget shows an unfavorable variance of, say $8,000 (after the original budget is reduced for the first-quarter underrun), management of telecommunications is held responsible for the entire $8,000 unfavorable variance. The first-quarter underrun is not restored. If the second-quarter budget variance is also favorable, the remaining six monthly budgets are each reduced further by one-sixth of the second-quarter favorable budget variance.
Required:
a) What behavior would this budgeting scheme engender in the responsibility center managers?
b) Compare the advantages and disadvantages of the previous budget regime, where any end-of-year budget surpluses do not carry over to the next fiscal year, with the system of quarterly budget adjustments just described.
Parnell Industries buys securities to be available for sale when circumstances warrant, not to profit from short-term differences in price and not necessarily to hold debt securities to maturity. The following selected transactions relate to investment activities of Parnell Industries whose fiscal year ends on December 31. No investments were held by Parnell at the beginning of the year.
2009
March 1 Purchased 2 million Platinum Gems, Inc. common shares for $124 million, including brokerage fees and commissions.
April 13 Purchased $200 million of 10% bonds at face value from Oracle Wholesale Corporation.
July 20 Received cash dividends of $3 million on the investment in Platinum Gems, Inc. common shares.
October 13 Received semiannual interest of $10 million on the investment in Oracle bonds.
October 14 Sold the Oracle bonds for $205 million.
November 1 Purchased 500,000 SPI International preferred shares for $40 million, including brokerage fees and commissions.
December 31 Recorded the necessary adjusting entry(s) relating to the investments. The market prices of the investments are $64 per share for Platinum Gems, Inc. and $74 per share for SPI International preferred shares.
2010
January 25 Sold half the Platinum Gems, Inc. shares for $65 per share.
March 1 Sold the SPI International preferred shares for $78 per share.
December 31 Recorded the necessary adjusting entry(s) relating to the investments. The market price of the investments are $65 per share for Platinum Gems, Inc.
Required:
1. Prepare the appropriate journal entry for each transaction or event.
2. Show the amounts that would be reported on the company’s 2009 income statement relative to these investments.
Cash $23,800 as reported on December 31 bank statement
Supplies 300 based on count only $200 supplies still exist
Unearned revenue $1,500 of this amount, $500 received in December lessons and $1,000 for January
Lessons
Wages Payable 0 employee paid $500 for 10 days as of 12/28 not pd 12/29-12/30
Income tax payable 0 paid last year not this year yet
Interest payable 0 paid $100 interest owed on note payable for current period
Notes payable $12,000 one-year note taken out December 1
Contributed capital 1,000 contributed in prior years
Retained earnings 3,000 balance reported at the end of last year
Lesson revenue 25,500 cash when provided, but some customers paid in advance
Wage Expense 18,100 work through December 30, but didn’t work 12/31
Supplies Expense 800 cost of supplies used through November 30
Interest Expense 0 the company hasn’t paid $100 interest owed on the note payable for the current period
Income Tax expense 0
Totals $43,000 $43,000
REQUIRED
Calculate the (preliminary) unadjusted net income for the year ending December 31,2010
Prepare adjusting journal entries that are required at December 31,2010
Calculate the adjusted net income that the company should report for the year ending December 31,2010. By how much did the adjustments in requirement (4) cause net income to increase or decrease?
PE 1- 1A Cost concept On June 10, Easy Repair Service extended an offer of $ 95,000 for land that had been priced for sale at $ 118,500. On August 2, Easy Repair Service accepted the seller’s counteroffer of $ 105,000. On August 27, the land was assessed at a value of $ 80,000 for property tax purposes. On April 1, Easy Repair Service was offered $ 125,000 for the land by a national retail chain. At what value should the land be recorded in Easy Repair Service’s records?
EX 1- 3 Business entity concept Rocky Mountain Sports sells hunting and fishing equipment and provides guided hunt-ing and fishing trips. Rocky Mountain Sports is owned and operated by Mike Weber, a well- known sports enthusiast and hunter. Mike’s wife, Susan, owns and operates Madison Boutique, a women’s clothing store. Mike and Susan have established a trust fund to finance their children’s college education. The trust fund is maintained by National Bank in the name of the children, Kerri and Kyle. a. For each of the following transactions, identify which of the entities listed should record the transaction in its records.
Pender has prepared the following list of statements about decision making and incremental analysis.
Identify each statement as true or false.
1. The first step in management’s decision-making process is, “Determine and evaluate possible courses of action.”
2. The final step in management’s decision-making process is to actually make the decision.
3. Accounting’s contribution to management’s decision-making process occurs primarily in evaluating possible courses of action and in reviewing the results.
4. In making business decisions, management ordinarily considers only financial information because it is objectively determined.
5. Decisions involve a choice among alternative courses of action.
6. The process used to identify the financial data that change under alternative courses of action is called incremental analysis.
7. Costs that are the same under all alternative courses of action sometimes affect the decision.
8. When using incremental analysis, some costs will always change under alternative courses of action, but revenues will not.
9. Variable costs will change under alternative courses of action, but fixed costs will not.
Pender has prepared the following list of statements about decision making and incremental analysis.
Identify each statement as true or false.
1. The first step in management’s decision-making process is, “Determine and evaluate possible courses of action.”
2. The final step in management’s decision-making process is to actually make the decision.
3. Accounting’s contribution to management’s decision-making process occurs primarily in evaluating possible courses of action and in reviewing the results.
4. In making business decisions, management ordinarily considers only financial information because it is objectively determined.
5. Decisions involve a choice among alternative courses of action.
6. The process used to identify the financial data that change under alternative courses of action is called incremental analysis.
7. Costs that are the same under all alternative courses of action sometimes affect the decision.
8. When using incremental analysis, some costs will always change under alternative courses of action, but revenues will not.
For every false statement identified above indicate how to correct the statement.
Peter Catalano’s Verde Vineyards in Oakville, California produces three varieties of wine: Merlot, Viognier, and Pinot Noir. His winemaster, Kyle Ward, has identified the following activities as cost pools for accumulating overhead and assigning it to products. For each of Verde’s fifteen activity cost pools, identify a probable cost driver that might be used to assign overhead costs to its three wine varieties.
Possible answers:
Gallons of chemicals
Gallons of juice
Number of cartfuls or labor hours
Gallons of wine or months of aging
Number of bottles
Number of gallons processed
Labor hours
Number of cartfuls
Number of boxes
Number of shipments
Culling and replanting. Dead or overcrowded vines are culled, and new vines are planted or relocated. (Separate vineyards by variety.)
Tying. The posts and wires are reset, and vines are tied to the wires for the dormant season.
Trimming. At the end of the harvest the vines are cut and trimmed back in preparation for the next season.
Spraying. The vines are sprayed with chemicals for protection against insects and fungi.
Harvesting. The grapes are hand-picked, placed in carts, and transported to the crushers.
Stemming and crushing. Cartfuls of bunches of grapes of each variety are separately loaded into machines which remove stems and gently crush the grapes.
Pressing and filtering. The crushed grapes are transferred to presses which mechanically remove the juices and filter out bulk and impurities.
Fermentation. The grape juice, by variety, is fermented in either stainless-steel tanks or oak barrels.
Aging. The wines are aged in either stainless-steel tanks or oak barrels for one to three years depending on variety.
Bottling and corking. Bottles are machine-filled and corked.
Labeling and boxing. Each bottle is labeled, as is each nine-bottle case, with the name of the vintner, vintage, and variety.
Storing. Packaged and boxed bottles are stored awaiting shipment.
Shipping. The wine is shipped to distributors and private retailers.
Heating and air-conditioning of plant and offices.
Maintenance of buildings and equipment. Printing, repairs, replacements, and general maintenance are performed in the off-season.
Maria Gonzalez opened a veterinary business in Nashville, Tennessee, on August 1. On August 31, the balance sheet showed Cash $8,967, Accounts Receivable $1,623, Supplies $585, Office Equipment $5,926, Accounts Payable $3,646, and M. Gonzalez, Capital $13,455. During September the following transactions occurred.
Paid $2,901 cash on accounts payable.
Collected $1,268 of accounts receivable.
Purchased additional office equipment for $3,571, paying $825 in cash and the balance on account.
Earned revenue of $8,042 of which $2,530 is collected in cash and the balance is due in October.
Withdrew $1,060 in cash for personal use.
Paid salaries $1,621, rent for September $904, and advertising expenses $315.
Incurred utility expenses for month on account $110.
Received $10,497 from Capital Money Bank – money borrowed on a note payable.
Instructions
(a) Complete the table below. (If amount is a decrease, use either a negative sign preceding the number eg -45 or parentheses eg (45). For item 6. list amounts from largest to smallest eg 10, 5, 3, 2. If answer is zero, please enter 0. All blanks must be filled in. Note: Drawings and Expenses always decrease the account.)
(b) Complete the income statement for September, an owner’s equity statement for September, and a balance sheet at September 30. (List amounts from largest to smallest eg 10, 5, 3, 2. If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45). For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2.)
Marilyn, a business executive who lives and works in Cleveland, accepts a temporary out-of-town assignment in Atlanta for a period of ten months. Marilyn leaves her husband and children in Cleveland and rents an apartment in Atlanta during the ten month period. Marilyn incurs the following expenses, none of which are reimbursed by her employer:
Airfare to and from Atlanta $ 800 Airfare for weekend trips to visit her family 8,000 Apartment rent 10,000 Meals in Atlanta 8,500 Entertainment of customers 2,000 Total $29,300
a. Which of the expenditures listed above (if any) are deductible by Marilyn (before any limitations are applied)? b. Are each of these expenditures classified as for AGI or from AGI deductions? c. If Marilyn’s AGI is $120,000, what is the amount of the deduction for the expenditures? d. Do the tax consequences change if Marilyn’s assignment is for a period of more than one year and is for an indefinite period rather than a temporary period? e. Do the tax consequences in Parts a through c change if it was realistically expected that the work would be completed in ten months but after the ten-month period Marilyn is asked to continue for seven more months and if an additional $10,000 of travel expenses are incurred during the extended period?
Maxley Markets Company sells logo sports merchandise and does custom embroidery. They are trying to decide whether or not to continue embroidery. The following information is available for the segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if the embroidery were dropped.
Embroidery
Apparel Sales
Sales
$120,000
$420,000
Variable Costs
$90,000
$220,000
Contribution Margin
$30,000
$200,000
Direct Fixed Costs
$18,000
$70,000
Allocated Common Fixed Costs
$20,000
$70,000
Net Income
($ 8,000)
$ 60,000
(a) What would be the impact on profits if embroidery was dropped?
(b) Assume that if embroidery was dropped, apparel sales would increase 20%. What is the impact on contribution margin and net income?
(c) Give an example of a cost that is not relevant in this analysis.
Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products’ common-size statement, and the second column should show the industry averages.
2.
For the profitability analysis, compute McDonough Products’ (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Products’ profit performance better or worse than the average for the industry?
3.
For the analysis of financial position, compute McDonough Products’ (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Products’ financial position better or worse than the average for the industry?
Medusa Products uses a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that 86,000 machine-hours would be required for the period’s estimated level of production. The company also estimated $163,400 of fixed manufacturing overhead expenses for the coming period and variable manufacturing overhead of $0.75 per machine-hour.
Required:
1.
Compute the company’s predetermined overhead rate. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Predetermined overhead rate $ per MH
2.
Assume that during the year the company actually works only 62,900 machine-hours and incurs the following costs in the manufacturing overhead and work in process accounts. Compute the amount of overhead cost that would be applied to work in process for the year, and make the entry in your t-accounts given below: (Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
Manufacturing Overhead
(Utilities) 19,000
(Insurance) 11,000
(Maintenance) 39,000
(Indirect materials) 9,000
(Indirect labor) 68,000
(Depreciation) 45,000
Balance
Work in Process
(Direct materials) 531,000
(Direct labor) 86,000
(Overhead)
3-a.
Compute the amount of underapplied or overapplied overhead for the year, and show the balance in your manufacturing overhead T-account. (Input the amount as a positive value. Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
manufacturing overhead $
3-b.
Prepare a journal entry to close out the balance in this account to cost of goods sold. (Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)
Whitlow & Company is a brokerage firm registered under the Securities Exchange Act of 1934. The act requires such a brokerage firm to file audited financial statements with SEC annually. Mitchell & Moss, Whitlow’s CPA s, performed the annual audit report for the year ended December 31, 2009 and rendered an unqualified opinion (clean opinion), which was filed with SEC along with Whitlow’s financial statements. During 2009, Charles the president of Whitlow & Company was engaged in a huge embezzlement scheme that eventually bankrupted the firm. As a result, substantial losses were suffered by customers and shareholders of Whitlow & Company including Thaxton, who recently purchased several shares of stock of Whitlow & company after reviewing the Company’s 2009 audit report. Mitchell & Moss’s audit was deficient; if they had complied with GAAS, the embezzlement would have been discovered. However, Mitchell & Moss had no knowledge of the embezzlement, nor could their conduct be categorized as reckless You are appointed as the auditor of the company and in the given scenario you have to justify your role as an auditor
The creditors of an insolvent corporation relied on the audited financials and subsequently sued the accountants, alleging that they were guilty of negligence and fraudulent misrepresentations. The accounts receivable had been falsified by adding to approximately $650,000 in accounts receivable and another item of over $700,000. The creditors alleged that careful investigation would have shown the $700,000 to be fraudulent. The accounts payable contained similar discrepancies. The court held that the accountants had been negligent but ruled that accountants would not be liable to third parties for honest blunders. Draft an audit report for the given situation
The cashier of a company committed a fraud and absconded with the proceeds thereof. This happened during the course of the accounting year. The Chief Accountant of the company and the Internal Auditors failed to discover the fraud. Before the external audit was completed the fraud was discovered by the Chief Accountant. If you are appointed as the external auditor of the company identify the types of audit evidence which you will require as sufficient appropriate audit evidence and also assess the audit risk and associated risk factors.
Identify the audit risks associated with and draw the detailed audit plan to carry out the audit of :-
Mike Barton owns Barton Products, Inc. The corporation has 30 employees. Barton Corporation expects $800,000 of net income before taxes in 2011. Mike is married and files a joint return with his wife, Elaine, who has no earnings of her own. They have one dependent son, Robert, who is 16 years old. Mike and Elaine have no other income and do not itemize. Mike’s salary is $180,000 per year (already deducted in computing Barton Corporation’s $500,000 net income). Assume that variations in salaries will not affect the US production activities deduction already reflected in taxable income.
Tasks:
Should Mike increase his salary from Barton by $50,000 to reduce the overall tax burden to himself and Barton Products? Because of the social security cap, the corporation and Mike each would incur a 1.45% payroll tax with the corporate portion being deductible.
Should Barton employ Mike’s wife Elaine for $50,000 rather than increase Mike’s salary? Take into consideration employment taxes as well as federal income taxes. Note that Elaine’s salary would be well below the social security cap, so that she and the corporation each would incur the full amount of payroll taxes with the corporate portion being deductible. In 2011, Elaine’s portion is 5.65%, and the corporation’s is 7.65%. After 2011, Elaine’s portion is 7.65%.
Deliverables and Format:
Answer each problem in detail with reasons, conclusion and results.
Submit your answer in a Microsoft Word document in not more than 200 words.
Moorehouse clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formula used in its budgeted and its actual results for December:
Fixed element per month Variable element per client-visits
__________ $25.10 Revenue
$27,100 $7.10 Personal expenses
1,500 4.50 Medical supplies
6,000 1.00 Occupancy expenses
3,000 0.10 Administrative expenses
$37,600 $12.70 Total
Actual results for December:
Revenue $96,299
Personal expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
The activity variance for personnel expenses in December would be closest to
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
12. The spending variance for medical supplies in December would be closest to
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
16. The medical supplies in the flexible budget for December would be closest to
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
3. The revenue variance for December would be closest to
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
6. The activity variance for personnel expenses in December would be closest to
Moorhouse Clinic uses client visits as its measure of activity. During December, the clinic budgeted for 3,700 client visits, but its actual level of activity was 3,690 client visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for December:
Data used in budgeting:
Fixed element Variable element
per month per client-visit
Revenue ____-____ $25.10
Personnel expenses $27,100 $7.10
Medical supplies 1,500 4.50
Occupancy expenses 6,000 1.00
Administrative expenses 3,000 0.10
Total expenses $37,600 $12.70
Actual results
for December:
Revenue $96,299
Personnel expenses $51,009
Medical supplies $17,425
Occupancy expenses $9,240
Administrative expenses $3,239
12. The spending variance for medical supplies in December would be closest to
1) Whitlow & Company is a brokerage firm registered under the Securities Exchange Act of 1934. The act requires such a brokerage firm to file audited financial statements with SEC annually. Mitchell & Moss, Whitlow’s CPA s, performed the annual audit report for the year ended December 31, 2009 and rendered an unqualified opinion (clean opinion), which was filed with SEC along with Whitlow’s financial statements. During 2009, Charles the president of Whitlow & Company was engaged in a huge embezzlement scheme that eventually bankrupted the firm. As a result, substantial losses were suffered by customers and shareholders of Whitlow & Company including Thaxton, who recently purchased several shares of stock of Whitlow & company after reviewing the Company’s 2009 audit report. Mitchell & Moss’s audit was deficient; if they had complied with GAAS, the embezzlement would have been discovered. However, Mitchell & Moss had no knowledge of the embezzlement, nor could their conduct be categorized as reckless You are appointed as the auditor of the company and in the given scenario you have to justify your role as an auditor
2) The creditors of an insolvent corporation relied on the audited financials and subsequently sued the accountants, alleging that they were guilty of negligence and fraudulent misrepresentations. The accounts receivable had been falsified by adding to approximately $650,000 in accounts receivable and another item of over $700,000. The creditors alleged that careful investigation would have shown the $700,000 to be fraudulent. The accounts payable contained similar discrepancies. The court held that the accountants had been negligent but ruled that accountants would not be liable to third parties for honest blunders. Draft an audit report for the given situation
3) The cashier of a company committed a fraud and absconded with the proceeds thereof. This happened during the course of the accounting year. The Chief Accountant of the company and the Internal Auditors failed to discover the fraud. Before the external audit was completed the fraud was discovered by the Chief Accountant. If you are appointed as the external auditor of the company identify the types of audit evidence which you will require as sufficient appropriate audit evidence and also assess the audit risk and associated risk factors.
4) Identify the audit risks associated with and draw the detailed audit plan to carry out the audit of :-
National Supply’s shareholders’ equity included the following accounts at December 31, 2010:
Shareholders’ Equity
Common stock, 6 million shares at $1 par $ 6,000,000
Paid-in capital”excess of par 30,000,000
Retained earnings 86,500,000
Prepare the shareholders’ equity section of National Supply’s balance sheet at December 31, 2013, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $14 million in 2011, $15 million in 2012, and $16 million in 2013. No dividends were paid during the three-year period.
Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows.
NEOSHO RIVER RESORT
Trial Balance
August 31, 2010
Account Number
Debit
Credit
101 Cash $19,600
126 Supplies 3,300
130 Prepaid Insurance 6,000
140 Land 25,000
143 Cottages 125,000
149 Furniture 26,000
201 Accounts Payable $6,500
209 Unearned Rent 7,400
275 Mortgage Payable 80,000
301 P. Harder, Capital 100,000
306 P. Harder, Drawing 5,000
429 Rent Revenue 80,000
622 Repair Expense 3,600
726 Salaries Expense 51,000
732 Utilities Expense 9,400
$273,900
$273,900
In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation-Cottages, No. 150 Accumulated Depreciation-Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense-Cottages, No. 621 Depreciation Expense-Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other data:
Insurance expires at the rate of $400 per month.
A count on August 31 shows $600 of supplies on hand.
Annual depreciation is $6,000 on cottages and $2,400 on furniture.
Unearned rent of $4,100 was earned prior to August 31.
Salaries of $400 were unpaid at August 31.
Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.)
The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Instructions
(a) Journalize the adjusting entries on August 31 for the 3-month period June 1’August 31.
(b) Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.) (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)
Cash
No. 101
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Accounts Receivable
No. 112
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Supplies
No. 126
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
31 Adjusting J1
Prepaid Insurance
No. 130
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
31 Adjusting J1
Land
No. 140
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Cottages
No. 143
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Accumulated Depreciation”Cottages
No. 144
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Furniture
No. 149
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Accumulated Depreciation”Furniture
No. 150
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Accounts Payable
No. 201
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Unearned Rent
No. 208
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
31 Adjusting J1
Salaries Payable
No. 212
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Interest Payable
No. 230
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Mortgage Payable
No. 275
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
P. Harder, Capital
No. 301
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
P. Harder, Drawing
No. 306
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Rent Revenue
No. 429
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
31 Adjusting J1
31 Adjusting J1
Depreciation Expense”Cottages
No. 620
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Depreciation Expense”Furniture
No. 621
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Repair Expense
No. 622
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
Supplies Expense
No. 631
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Interest Expense
No. 718
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Insurance Expense
No. 722
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Adjusting J1
Salaries Expense
No. 726
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
31 Adjusting J1
Utilities Expense
No. 732
Date
Explanation
Ref.
Debit
Credit
Balance
Aug. 31 Balance P
(c) Prepare an adjusted trial balance on August 31. (If an amount should be blank, enter a zero. All boxes must be filled to be correct.)
NEOSHO RIVER RESORT
Adjusted Trial Balance
August 31, 2010
Debit
Credit
Cash $ $
Accounts Receivable
Supplies
Prepaid Insurance
Land
Cottages
Accumulated Depreciation”Cottages
Furniture
Accumulated Depreciation”Furniture
Accounts Payable
Unearned Rent
Salaries Payable
Interest Payable
Mortgage Payable
P. Harder, Capital
P. Harder, Drawing
Rent Revenue
Depreciation Expense”Cottages
Depreciation Expense”Furniture
Repair Expense
Supplies Expense
Interest Expense
Insurance Expense
Salaries Expense
Utilities Expense
$
$
(d) Prepare an income statement and an owner’s equity statement for the 3 months ending August 31 and a balance sheet as of August 31. (List multiple entries from largest to smallest eg 10, 5, 3, 2. If amounts are the same, list alphabetically. For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2, with accounts payable listed first.)
NEOSHO RIVER RESORT
Income Statement
August 31, 2010For the Three Months Ended August 31, 2010
Neosho River Resort opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows.
NEOSHO RIVER RESORT
Trial Balance
August 31, 2010
Account Number
Debit
Credit
101
Cash
$ 19,600
126
Supplies
3,300
130
Prepaid Insurance
6,000
140
Land
25,000
143
Cottages
125,000
149
Furniture
26,000
201
Accounts Payable
$ 6,500
209
Unearned Rent Revenue
7,400
275
Mortgage Payable
80,000
301
P. Harder, Capital
100,000
306
P. Harder, Drawing
5,000
429
Rent Revenue
80,000
622
Repair Expense
3,600
726
Salaries Expense
51,000
732
Utilities Expense
9,400
$273,900
$273,900
In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated Depreciation”Cottages, No. 150 Accumulated Depreciation”Furniture, No. 212 Salaries Payable, No. 230 Interest Payable, No. 620 Depreciation Expense”Cottages, No. 621 Depreciation Expense”Furniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense.
Other data:
1.
Insurance expires at the rate of $400 per month.
2.
A count on August 31 shows $600 of supplies on hand.
3.
Annual depreciation is $6,000 on cottages and $2,400 on furniture.
4.
Unearned rent revenue of $4,100 was earned prior to August 31.
5.
Salaries of $400 were unpaid at August 31.
6.
Rentals of $1,000 were due from tenants at August 31. (Use Accounts Receivable.)
7.
The mortgage interest rate is 9% per year. (The mortgage was taken out on August 1.)
Hint: Prepare adjusting entries, post, and prepare adjusted trial balance, and financial statements.
(SO 5, 6, 7)
Instructions
(a)
Journalize the adjusting entries on August 31 for the 3-month period June 1’August 31.
(b)
Prepare a ledger using the three-column form of account. Enter the trial balance amounts and post the adjusting entries. (Use J1 as the posting reference.)
(c)
Prepare an adjusted trial balance on August 31.
Adj. trial balance $278,000
(d)
Prepare an income statement and an owner’s equity statement for the 3 months ending August 31 and a balance sheet as of August 31.
(NOL Carryback and Carryforward, Valuation Account versus No Valuation Account)
Sondgeroth Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.)
Year Pretax Income (Loss) Tax Rate 2009 $110,000 34% 2010 90,000 34% 2011 (260,000) 38% 2012 220,000 38%
The tax rates listed were all enacted by the beginning of 2009.
(a) Prepare the journal entries for the years 2009-2012 to record income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2011 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
(b) Using the assumption in (a), prepare the income tax section of the 2011 income statement beginning with the line “Operating loss before income taxes.” (For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
(c) Prepare the journal entries for 2011 and 2012, assuming that based on the weight of available evidence, it is more likely than not that one-fourth of the benefits of the loss carryforward will not be realized. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
(d) Using the assumption in (c), prepare the income tax section of the 2011 income statement beginning with the line “Operating loss before income taxes.” (For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
Could you kindly provide me the solutions to P17-3 intermediate Accounting 13th Edition.
P17-3 Cardinal PazCorp carries an account in its general ledger called investments which contained debits for investments purchases and no credits with the following descriptions :
Feb 1,2010 Sharapova Company common stock, $100 par 200 shares ——>$37,000
April 1st US government bonds 11 % due April 1,2010 interest payable April 1 and October 1, 110 bonds of $1,000 par each——————–>110,000
July 1st, Mcgrath company,12% bonds, par $50,000 dated March 1,2010 purchased at 104 plus accrued interest, interest payable annually on March 1st due March 2030.
Questions:
(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that all the securities are classified as available for sale.
(b) Prepare the entry to record the accrued interests and amortization of premium on December 31,2010 using the straight line method
(c) The fair values of the securities on Dec 31 2010 were : Sharapova Company common Stock—> $ 31,800, US Governement bonds —> $124700, McGrath Company Bonds—> $ 58600 What entry or entries would recommend to be made?
(d) The US governement bonds were sold on July 1st 2011 fo $119,200 plus accrued interests. Give the proper entry
Kitchen Rite is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for $9.90. The chassis is manufactured in two steps. A stamping press punches out the part from sheet metal, bends the sides, and cuts holes in it, all in one operation. Then a welding machine welds the corners. Both the welding and stamping machines are used to produce only this one chassis model. The following job order cost sheet summarizes the cost of producing a single chassis.
Cost per Unit
Steel plate$4.75
Direct labor:
Stamping ($20/hour)1.60
Welding ($30/hour)2.50
Overhead:
Stamping (depreciation)3.60
Welding (leasing payment)2.15
General plant5.90
——
$20.50
The stamping machine is old and has little economic value. A used equipment dealer is willing to remove the machine and haul it away at no cost. The stamping machine was purchased 13 years ago for $1,728,000. For both tax and reporting purposes, it is being depreciated using a 20-year life, straight-line method, and it has zero salvage value. The welding machine is leased for $4,300 per month, and the lease can be canceled at any time and the machine returned. However, an early termination penalty of $1,800 per month for the next 42 months must be paid.
General plant overhead consists primarily of the allocated cost of depreciation on the plant, property taxes, and fire insurance on the plant. Kitchen Rite currently has excess plant spaces. The manufacturing space freed up if the consists primarily. Kitchen Rite currently has excess plant space. The manufacturing space freed up if the chassis is outsourced has no other use.
Employees are unionized and have a clause in their contract that prevents the firm from firing them if their jobs are eliminated due to outsourcing. The employees working on the stamping machine will be placed on the indefinite furlough at 75 percent of their current pay. The employees operating the welding machine can be reassigned to other positions in the firm as job openings occur. Given the high demand for welders, these reassignments will occur within a few weeks of outsourcing the chassis.
Kitchen Rite has a tax loss for the current and the previous two years.
Required:
Should Kitchen Rite outsourse the chassis? Support your recommendation with a clear financial analysis of the facts.
Kitchen Rite is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for $9.90. The chassis is manufactured in two steps. A stamping press punches out the part from sheet metal, bends the sides, and cuts holes in it, all in one operation. Then a welding machine welds the corners. Both the welding and stamping machines are used to produce only this one chassis model. The following job order cost sheet summarizes the cost of producing a single chassis.
Cost per Unit
Steel plate$4.75
Direct labor:
Stamping ($20/hour)1.60
Welding ($30/hour)2.50
Overhead:
Stamping (depreciation)3.60
Welding (leasing payment)2.15
General plant5.90
——
$20.50
The stamping machine is old and has little economic value. A used equipment dealer is willing to remove the machine and haul it away at no cost. The stamping machine was purchased 13 years ago for $1,728,000. For both tax and reporting purposes, it is being depreciated using a 20-year life, straight-line method, and it has zero salvage value. The welding machine is leased for $4,300 per month, and the lease can be canceled at any time and the machine returned. However, an early termination penalty of $1,800 per month for the next 42 months must be paid.
General plant overhead consists primarily of the allocated cost of depreciation on the plant, property taxes, and fire insurance on the plant. Kitchen Rite currently has excess plant spaces. The manufacturing space freed up if the consists primarily. Kitchen Rite currently has excess plant space. The manufacturing space freed up if the chassis is outsourced has no other use.
Employees are unionized and have a clause in their contract that prevents the firm from firing them if their jobs are eliminated due to outsourcing. The employees working on the stamping machine will be placed on the indefinite furlough at 75 percent of their current pay. The employees operating the welding machine can be reassigned to other positions in the firm as job openings occur. Given the high demand for welders, these reassignments will occur within a few weeks of outsourcing the chassis.
Kitchen Rite has a tax loss for the current and the previous two years.
Required:
Should Kitchen Rite outsourse the chassis? Support your recommendation with a clear financial analysis of the facts.
Kitchen Rite is considering outsourcing the production of a steel chassis that is used in a kitchen appliance. Two thousand chassis are produced per month. An outside vendor will supply an identical chassis for $9.90. The chassis is manufactured in two steps. A stamping press punches out the part from sheet metal, bends the sides, and cuts holes in it, all in one operation. Then a welding machine welds the corners. Both the welding and stamping machines are used to produce only this one chassis model. The following job order cost sheet summarizes the cost of producing a single chassis.
Cost per Unit
Steel plate$4.75
Direct labor:
Stamping ($20/hour)1.60
Welding ($30/hour)2.50
Overhead:
Stamping (depreciation)3.60
Welding (leasing payment)2.15
General plant5.90
_______________
$20.50
The stamping machine is old and has little economic value. A used equipment dealer is willing to remove the machine and haul it away at no cost. The stamping machine was purchased 13 years ago for $1,728,000. For both tax and reporting purposes, it is being depreciated using a 20-year life, straight-line method, and it has zero salvage value. The welding machine is leased for $4,300 per month, and the lease can be canceled at any time and the machine returned. However, an early termination penalty of $1,800 per month for the next 42 months must be paid.
General plant overhead consists primarily of the allocated cost of depreciation on the plant, property taxes, and fire insurance on the plant. Kitchen Rite currently has excess plant spaces. The manufacturing space freed up if the consists primarily. Kitchen Rite currently has excess plant space. The manufacturing space freed up if the chassis is outsourced has no other use.
Employees are unionized and have a clause in their contract that prevents the firm from firing them if their jobs are eliminated due to outsourcing. The employees working on the stamping machine will be placed on the indefinite furlough at 75 percent of their current pay. The employees operating the welding machine can be reassigned to other positions in the firm as job openings occur. Given the high demand for welders, these reassignments will occur within a few weeks of outsourcing the chassis.
Kitchen Rite has a tax loss for the current and the previous two years.
Required:
Should Kitchen Rite outsourse the chassis? Support your recommendation with a clear financial analysis of the facts.
Lenat’s contribution income statement utilizing variable costing appears below:
Lenat Company
Income Statement
For the year ended December 31, 2010
Sales ($28/unit) $1,120,000
Less variable costs:
Cost of goods sold 560,000
Selling & administrative costs 96,000 656,000
Contribution margin 464,000
Less fixed costs:
Manufacturing overhead 80,000
Selling & administrative costs 90,000 170,000
Profit $294,000
Lenat Company produced 50,000 units during the year. Variable costs per unit and fixed production costs have remained constant the entire year. There were no beginning inventories. How much is the dollar value of the ending inventory using full costing?
Lifesey wedding fantasy company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity cost pools Activity rate
size-related $0.94 per guest
complexity-related $31.62 per tier
order-related $55.70 per order
-The measure of activity for the size-related activity cost pool is the number f planned guests at the wedding reception. The greater the number of guests, the larger the cake.
-The measure of complexity is the number of tiers in the cake.
-The activity measures for the order-related cost pool is the number of orders (each wedding involves one order)
-Activity rates include cost of raw ingredients such as flour, sugar, eggs, and shortening. Activity-rates don’t include cost of purchased decorations such as miniature statues and wedding bells which are accounted separately.
Data concerning recent orders listed here
Pybum wedding Smith wedding
72 189 Number of reception guests
4 5 Number of tiers on cake
$29.92 $68.75 Cost of purchased decor for cake
Assuming that all cost listed above are avoidable costs in the event that an order is turned down, which amount would the company have to charge for the Pybum wedding cake to just break even?
LIFO versus FIFO”impact on ROI. Natco, Inc., uses the FIFO inventory cost-flow
assumption. In a year of rising costs and prices, the firm reported net income of $480,000 and average assets of $3,000,000. If Natco had used the LIFO cost-flow assumption in the
same year, its cost of goods sold would have been $80,000 more than under FIFO, and its
average assets would have been $80,000 less than under FIFO.
Required:
a. Calculate the firm’s ROI under each cost-flow assumption.
b. Suppose that two years later costs and prices were falling. Under FIFO, net
income and average assets were $576,000 and $3,600,000, respectively. If LIFO had
been used through the years, inventory values would have been $100,000 less than
under FIFO, and current year cost of goods sold would have been $400,000 less
than under FIFO. Calculate the firm’s ROI under each cost-flow assumption.
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
* The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
* The measure of complexity is the number of tiers in the cake.
* The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
* The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Pyburn Wedding Smith Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?
A. The cost of cakes for receptions with more than the average number of guests would go down.
B. The costs of all cakes would go down.
C. The costs of all cakes would go up.
D. The cost of cakes for receptions with fewer than the average number of guests would go down.
Here is the link for the financial statements for Oracle Corporation for the fiscal year ending 2011. First, select 2011 using the drop-down arrow labeled for Year on the right-hand side of the page, and then select Annual Reports using the drop-down arrow labeled Filing Type on the left-hand side of the page.
You should select the 10k dated 6/28/2011 and choose to download in PDF, Word, or Excel format.
Here is the link for the financial statements for Microsoft Corporation for the fiscal year ending 2011. You should select the 10k dated 7/28/2011 and choose to download in Word or Excel format.
18) Price/Earnings Ratio [For the purpose of this ratio, for Oracle, use the market price per share on May 30, 2011 and for Microsoft, use the market price per share on June 30, 2011]
LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The President wants to be aware of any new regulations required of his company if they go public so he met with a colleague of yours at a local restaurant. The President of the company explained the current system of internal controls to your colleague. Your colleague has since been promoted to a tax position so she has passed on the information below so you can generate recommendations for the partner at your accounting firm to share with the President of LJB Company.
Since LJB Company is a relatively lean organization, they have a lot of faith in their long-term employees. They have one accountant who serves as Treasurer and Controller which streamlines many of their processes. In this dual role, he purchases all of the supplies and pays for these purchases. He also receives the checks and completes the monthly bank reconciliation. The accountant is so busy that the company handles petty cash a bit differently. All employees have access to the petty cash in a desk drawer and are asked to only place a note if they use any of the cash.
The accountant has recently started using pre-numbered invoices and wants to buy an indelible ink machine to print their checks. The President is waiting to hear from you if this is a necessary purchase before authorizing.
On payday, the checks are picked up by the accountant and left in his office for pick-up. Before he leaves for the weekend, he will move the checks into a safe in his office.
The President is still quite embarrassed because he had to fire one of his employees for viewing pornography on a company computer. He later found out this individual was a convicted felon who served time for molesting children. The company had a hard time getting the employee to admit it was him because the company does not assign individual passwords. The President expressed his frustration because both he and the accountant both interview and approve all of the new hires.
Required:
Based on the above information, prepare a Word document to address the following:
1.Inform the President of any new internal control requirements if the company decides to go public. (7 points)
2.Advise the President of what the company is doing right (they are doing some things well) and also recommend to the President whether or not they should buy the indelible ink machine. When you advise the President, please be sure to reference the applicable internal control principle that applies. (13 points)
3.Advise the President of what the company is doing wrong (they are definitely doing some things poorly). Please be sure to include the internal control principle that is being violated along with a recommendation for improvement. (20 points)
You must prepare a formal report for the partner to distribute to the President so no abbreviations or short-hand answers.
How others found here:
indelible ink machine to print checks
indelible ink machine
LJB Company a local distributor has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future
LJB Company a local distributor has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future The President wants to be aware of any new regulations required of his company if they go pub
Inform the President of any new internal control requirements if the company decides to go public
what is an indelible ink machine
1 Inform the President of any new internal control requirements if the company decides to go public (7 points)
indelible ink machine for checks
2 advise the president of what the company is doing right (they are doing some things well) and also recommend to the president whether or not they should buy the indelible ink machine when you advise the president please be sure to reference the applicab
Lopez Corporation incurred the following costs while manufacturing its product.
Material used in a product – $120,000
Depreciation on plant ‘ 60,000
Dispatcher’s salary -5,000
Property taxes on store -7,500
Labor costs of assembly-line workers- 110,000
Factory supplies- 23,000
Advertising expense- 45,000
Property taxes on plant- 14,000
Delivery expense ‘ 21,000
Sales commissions ‘ 35,000
Salaries paid to sales clerks ‘ 50,000
Work in process inventory was $12,000 at January 1 and $15,000 at December 31. Finished goods inventory was $60,000 at January 1 and $45,600 at December 31.
MacGiver Brass is a brass plating firm with sales of $8 million and profits before taxes of $625,000. MacGiver has a loan outstanding at its local bank for working capital purposes. As the loan officer reviewing MacGiver’s loan application, you are charged with making a recommendation as to whether the $608,000 loan should be renewed for another year.
Upon reviewing MacGiver’s most recent annual report, you find the following footnote: Under-absorbed overhead of $462,000 was prorated to inventories (2/3) and cost of goods sold (1/3).
Required:
a. How should you evaluate MacGiver’s annual report in light of this footnote? In particular, how does this footnote affect your recommendation regarding the loan?
b. In preparing for your meeting with MacGiver’s president and chief financial officer, what questions do you want to ask regarding this footnote?
MacGiver Brass is a brass plating firm with sales of $8 million and profits before taxes of $625,000. MacGiver has a loan outstanding at its local bank for working capital purposes. As the loan officer reviewing MacGiver’s loan application, you are charged with making a recommendation as to whether the $608,000 loan should be renewed for another year.
Upon reviewing MacGiver’s most recent annual report, you find the following footnote: Under-absorbed overhead of $462,000 was prorated to inventories (2/3) and cost of goods sold (1/3).
Required:
a. How should you evaluate MacGiver’s annual report in light of this footnote? In particular, how does this footnote affect your recommendation regarding the loan?
b. In preparing for your meeting with MacGiver’s president and chief financial officer, what questions do you want to ask regarding this footnote?
Maggie Sharrer, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Poway Company’s six divisions. Maggie made the following presentation to Poway’s Board of Directors and suggested the Erie Division be eliminated. “If the Erie Division is eliminated,” she said, “our total profits would increase by $24,500.”
The Other Five Divisions Erie Division Total
Sales $1,664,200 $100,000 $1,764,200
Cost of goods sold 978,520 76,500 1,055,020
Gross profit 685,680 23,500 709,180
Operating expenses 527,940 48,000 575,940
Net income $ 157,740 $(24,500) $ 133,240
In the Erie Division, cost of goods sold is $60,000 variable and $16,500 fixed, and operating expenses are $25,000 variable and $23,000 fixed. None of the Erie Division’s fixed costs will be eliminated if the division is discontinued.
Is Maggie right about eliminating the Erie Division? Prepare a schedule to support your answer.
The main purpose of this module is to review the balance sheet in more detail.
Is there a difference in approach to valuation by US GAAP and IFRS? Discuss and note two or three specific differences. In addition, briefly
‘ Distinguish between an expense (expired cost) and an asset.
‘ Distinguish between current and long-term assets.
‘ Distinguish between current and long-term liabilities.
‘ Review Apple’s balance sheet and provide two examples of each of the above categories.
‘ Discuss retained earnings and how income or loss and dividends affect this account. Review Apple’s retained earnings account and explain how it changes between the two past years.
‘ Comment on at least three differences between Apple’s and Philips’ balance sheets.
‘ Does Apple or Philips have more debt?
‘ Which of the two companies is the bigger one? Explain your reasoning.
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?
Malaviya Corporation uses the FIFO method in its process-costing system. Operating data for the Casting Department for the month of September appear below:
Units Percent Complete
with Respect to
Conversion
Beginning work in process inventory 17,000 40%
Transferred in from the prior department
during September 72,000
Ending work in process inventory 18,000 30%
According to the company’s records, the conversion cost in the beginning work-in-process inventory was $63,104 at the beginning of September. Additional conversion costs of $654,240 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for September? (Round off to three decimal places.)
Malone Company estimates that 360,000 direct labor hours will be worked during the coming year, 2008, in the Packaging Department. On this basis, the following budgeted manufacturing overhead cost data are computed for the year.
for the year.
Fixed Overhead Costs
Variable Overhead Costs
Supervision
$ 90,000
Indirect labor
$126,000
Depreciation
60,000
Indirect materials
90,000
Insurance
30,000
Repairs
54,000
Rent
24,000
Utilities
72,000
Property taxes
18,000
Lubricants
18,000
$222,000
$360,000
It is estimated that direct labor hours worked each month will range from 27,000 to 36,000 hours.
During October, 27,000 direct labor hours were worked and the following overhead costs were incurred.
(a)Prepare a monthly manufacturing overhead flexible budget for each increment of 3,000 direct labor hours over the relevant range for the year ending December 31, 2008.
(b)Prepare a flexible budget report for October.
(c) Comment on management’s efficiency in controlling manufacturing overhead costs in October.
Maria Gonzalez opened a veterinary business in Nashville, Tennessee, on August 1. On August 31, the balance sheet showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, and M. Gonzalez, Capital $13,700. During September the following transactions occurred.
Paid $2,900 cash on accounts payable.
Collected $1,300 of accounts receivable.
Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account.
Earned revenue of $8,000 of which $2,500 is collected in cash and the balance is due in October.
Withdrew $1,000 in cash for personal use.
Paid salaries $1,700, rent for September $900, and advertising expenses $300.
Incurred utility expenses for month on account $170.
Received $10,000 from Capital Money Bank – money borrowed on a note payable.
Instructions
(a) Complete the table below. (If amount is a decrease, use either a negative sign preceding the number eg -45 or parentheses eg (45). For item 6. list amounts from largest to smallest eg 10, 5, 3, 2. If answer is zero, please enter 0. All blanks must be filled in. Note: Drawings and Expenses always decrease the account.)
MARIA GONZALEZ, VETERINARIAN
Maria Gonzalez Capital
Cash
+ Accounts
Receivable
+ Supplies
+ Office
Equipment
= Notes
Payable
+ Accounts
Payable
+ M. Gonzalez
Capital
– M. Gonzalez
Drawing
+ Revenues
– Expenses
Bal.
1.
2.
3.
4.
5.
6.
7.
8.
(b) Complete the income statement for September, an owner’s equity statement for September, and a balance sheet at September 30. (List amounts from largest to smallest eg 10, 5, 3, 2. If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45). For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2.)
Maria Gonzalez, Veterinarian
Income Statement
September 30, 2010For the Month Ended September 30, 2010
Jaguar Auto Company provides general car maintenance to customers. The company’s fiscal year-end is December 31. The December 31, 2012, trial balance (before any adjusting entries) appears below.
Accounts Debits Credits
Cash $ 17,000
Accounts receivable 14,000
Supplies 22,000
Prepaid insurance 18,000
Equipment 85,000
Accumulated depreciation $ 27,000
Accounts payable 11,000
Salaries payable 0
Utilities payable 0
Interest payable 0
Notes payable 30,000
Common stock 25,000
Retained earnings 9,000
Dividends 2,000
Service revenue 220,000
Salaries expense 153,000
Depreciation expense 0
Insurance expense 0
Supplies expense 0
Utilities expense 11,000
Interest expense 0
Totals $ 322,000 $ 322,000
Information necessary to prepare the year-end adjusting entries appears below.
a. Depreciation on the machines for the year is $9,000.
b.
Employee salaries are paid every two weeks. The last pay period ended on December 23. Salaries earned from December 24 through December 31, 2012, are $3,000.
c.
On September 1, 2012, Jaguar borrows $30,000 from a local bank and signs a note. The note requires interest to be paid annually on August 31 at 9%. The principal is due in five years.
d.
On March 1, 2012, the company purchases insurance for $18,000 for a one-year policy to cover possible injury to mechanics. The entire $18,000 is debited to Prepaid Insurance at the time of the purchase.
e. $4,000 of supplies remains on hand at December 31, 2012.
f.
On December 30, Jaguar receives a utility bill of $1,700 for the month. The bill will not be paid until early January 2013, and no entry is recorded when the bill is received.
Required:
Prepare the necessary adjusting entries on December 31, 2012. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
Jake Palermo has prepared the following list of statements about budgetary control. Identify each statement as true or false.
****If false, indicate how to correct the statement.
1. Budget reports compare actual results with planned objectives.
2. All budget reports are prepared on a weekly basis.
3. Management uses budget reports to analyze differences between actual and planned results and determine their causes.
4. As a result of analyzing budget reports, management may either take corrective action or modify future plans.
5. Budgetary control works best when a company has an informal reporting system.
6. The primary recipient of the scrap report is the production manager.
7. A static budget is a projection of budget data at one level of activity.
8. Top management’s reaction to unfavorable differences is not influenced by the materiality of the difference.
9. A static budget is not appropriate in evaluating a manager’s effectiveness in controlling costs unless the actual activity level approximates the static budget activity level or the behavior of the costs is fixed.
Jake Palermo has prepared the following list of statements about budgetary control. Identify each statement as true or false. If false, indicate how to correct the statement.
1. Budget reports compare actual results with planned objectives.
2. All budget reports are prepared on a weekly basis.
3. Management uses budget reports to analyze differences between actual and planned results and determine their causes.
4. As a result of analyzing budget reports, management may either take corrective action or modify future plans.
5. Budgetary control works best when a company has an informal reporting system.
6. The primary recipient of the scrap report is the production manager.
7. A static budget is a projection of budget data at one level of activity.
8. Top management’s reaction to unfavorable differences is not influenced by the materiality of the difference.
9. A static budget is not appropriate in evaluating a manager’s effectiveness in controlling costs unless the actual activity level approximates the static budget activity level or the behavior of the costs is fixed.
Jan Nab is the sole owner of Deer Park, a public camping ground near the Lake Mead National Recreation Area. Jan has compiled the following financial information as of December 31, 2010.
Revenues during 2010″camping fees $140,000 Market value of equipment $140,000
Revenues during 2010″general store 50,000 Notes payable 60,000
Accounts payable 11,000 Expenses during 2010 150,000
Cash on hand 23,000 Supplies on hand 2,500
Original cost of equipment 105,500
Jan Nab began business on January 1, 2010, with an investment of $20,000.
Instructions
(a) Determine Jan Nab’s net income from Deer Park for 2010.
$
(b) Complete the balance sheet for Deer Park as of December 31, 2010. (List assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2.)
Deer PARK
Balance Sheet
December 31, 2010For the year ended December 31, 2010
On January 1, 2010, Blair Corporation purchased for $500,000 a tract of land (site number 101) with a building. Blair paid a real estate broker’s commission of $36,000, legal fees of $6,000, and title guarantee insurance of $18,000. The closing statement indicated that the land value was $500,000 and the building value was $100,000. Shortly after acquisition, the building was razed at a cost of $54,000.
Blair entered into a $3,000,000 fixed-price contract with Slatkin Builders, Inc. on March 1, 2010, for the construction of an office building on land site number 101. The building was completed and occupied on September 30, 2011. Additional construction costs were incurred as follows.
Plans, specifications, and blueprints $21,000
Architects’ fees for design and supervision 82,000
The building is estimated to have a 40-year life from date of completion and will be depreciated using the 150% declining balance method.
To finance construction costs, Blair borrowed $3,000,000 on March 1, 2010. The loan is payable in 10 annual installments of $300,000 plus interest at the rate of 10%. Blair’s weighted-average amounts of accumulated building construction expenditures were as follows.
For the period March 1 to December 31, 2010 $1,300,000
For the period January 1 to September 30, 2011 1,700,000
Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site number 101 as of September 30, 2011.
Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2011
On January 1, 2011, Essence Communications issued $800,000 of its 6-year, 7% bonds for $727,048. The bonds were priced to yield 9%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2011, the market interest rate for bonds of similar risk and maturity was 8%. The bonds are not traded on an active exchange.
1)Using the information provided, estimate the fair value of the bonds at December 31, 2011.
2)Prepare the journal entry to record interest on June 30, 2011 (the first interest payment.
3)Prepare the journal entry to record interest on December 31, 2011 (the second interest payment.
4)Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2011, balance sheet.
On January 1, 2011, Pearce Company purchased an 80% interest in the capital stock of Searl Company for $2,460,000. At that time, Searl Company had capital stock of $1,500,000 and retained earnings of $300,000. The difference between book of value Searl equity and the value implied by the purchase price was attributed to specific assets of Searl Company as follows: $375,000 to equipment of Searl Company with 5 year remaining life. $187,500 to land held by Searl Company. $112,500 to inventory of Searl Company. Searl uses the FIFO assumption in pricing its inventory. $600,000 that could not be assigned to specific assets or liabilities of Searl Company. Total of these = $1,275,000 At year-end 2011 and 2012, Searl had in its inventory merchandise that it had purchased from Pearce at a 25% markup on cost during each year in the following amounts: 2011 $90,000 2012 $105,000 During 2011, Pearce reported net income from independent operations (including sales to affiliates) of $1,500,000, while Searl reported net income of $600,000. In 2012, Pearce’s net income from independent operations (including sales to affiliates) was $1,800,000 and Searl’s was $750,000. Calculate the controlling interest in consolidated net income for 2011 and 2012.
Now assume that the merchandise mentioned was included in Pearce’s inventory, having been purchased from Searl. Calculate the controlling interest in consolidated net income for 2011 and 2012.
On January 1, 2012, Legoria Co. grants options that permit key executives to acquire 10 million of the company’s $1 par common stock within the next eight years, but not before December 31, 2015 [the vesting date]. The exercise price is the market price of the shares on the date of the grant, $35 per share. The fair value of the options, estimated by an appropriate option pricing model, is $8 per option.
1. Prepare the journal entry at the Grant Date, 1/1/2012.
2. Prepare the journal entries that would be recorded over the service period by Legoria Co.
3. On July 11, 2016, 8 million of the options are exercised when the market price of Legoria Co’s stock is $50 per share. Prepare the journal entry for the exercise of these options.
4. On January 1, 2020, 2 million options expired. Prepare the entry for the 2 million options that expired without being exercised.
On January 20,2011, the accountant for a corporation, is feeling pressure to complete the financial statements. The company president has said he needs current financial statements to share with the bank on January 21 at a meeting to discuss the corporation obtaining loan financing for a special building project. The accountant knows that she will not be able to gather all the needed information in the next 24 hours to prepare the entire set of adjusting entries. Those entries must be posted before the financial statements accurately portray the company’s performance and financial position for the fiscal period ended Dec. 31, 2010. The accountant decides to estimate several expense accruals at the last minute. She used low estimates because she does not want to make the financial statements look worse than they are. She finishes the statements before the deadline and gives them to the president without mentioning that several account balances are estimates that she provided.
Required: Identify several courses of action that Tamira could have taken instead of the one she took.
In January 2011, a Keona Company pays $2,800,000 for a tract of land with two buildings on it. It plans to demolish Building 1 and build a new store in its place. Building 2 will be a company office; it is appraised at $641,300 with a useful life of 20 years and $80,000 salvage value. A lighted parking lot near building 1 has improvements (Land Improvements) valued at $408,100 that are expected to last another 14 years with no salvage value. Without the buildings and improvements, the tract of land is valued at $1,865,600. The company also incurs the following additional costs:
Cost to demolish building 1 $422,600
Cost of additional land grading $167,200
Cost to construct a new building (building3), having a useful life of 25 years and a $390,000 salvage value $2,019,000
Cost of new land improvements (Land Improvements 2) near building 2 having a 20-year useful life and no salvage value $158,000
Required
1. Prepare a table with the following column headings: Land, Building 2, Building 3, Land Improvements 1, and Land Improvements 2. Allocate the costs incurred by Keona to the appropriate columns and total each column (round percents to the nearest 1%)
2. Prepare a single journal entry to record all the incurred costs assuming they are paid in cash on January 1, 2011
3. Using the straight line method prepare the December 31st adjusting entries to record depreciation for the 12 months of 2011 when these assets were in use.
Journalize the selected transactions by the Gampfer Company During its fiscal year ending Dec 31 were as follows
January 2: Issued a check to establish a petty cash fund of $3,200.
March 14: Replenished the petty cash fund, based on the following summary of petty cash receipts: office supplies, $1200; miscellaneous selling expense, $410; miscellaneous administrative expense, $620.
April 21: Purchased $22,400 of merchandise on account, terms 1/10, n/30. The perpetual inventory system is used to account for inventory.
May 20: Paid the invoice of April 21 after the discount period had passed.
May 23: Received cash from daily cash sales for $15,120. The amount indicated by the cash register was $9,545.
June 15: Received a 60-day, 10% note for $127,500 on the Cady’s account
August 14: Received amount owed on June 15 note, plus interest at the maturity date.
August 18: Received $5,400 on the Yoder account and wrote off the remainder owed on a $6,400 accounts receivable balance. (The allowance method is used in accounting for uncollectible receivables
Sept 9: Reinstated the Yoder account written off on August 18 and received $960 cash in full payment.
September 15: Purchased land by issuing a $480,000, 90-day note to Ace Development Co., which discounted it at 8%.
October 17: Sold office equipment in exchange for $96,000 cash plus receipt of a $64,000 90-day, 6% note. The equipment had cost $224,000 and had accumulated depreciation of $44,800 as of October 17
Nov 30. Journalized the payroll for November, based on the following data
Salaries Deductions Sales salaries $96,640 Income tax $28,00 Office Salaries $55,200 Social Security 9,110 Medicare $2,278 151,840
Unemployment tax rates: State unemployment 4.0% Federal Unemployment 0.8%
Amount subject to unemployment tax: State unemployment $5,000 Federal Unemployment $5,000
30. Journalize the employer payroll taxes on payroll
Dec14 Journalize the payment of Sept 15 note at maturity
Dec 31 the pension cost the year $136,00 of which $99,840 was paid to the pension plan trustee.
Joyce is a single, cash-method taxpayer. On April 11, 2009, Joyce paid $120 with her 2008 state income tax return.During 2009, Joyce had $1,600 in state income taxes withheld. On April 13, 2010, Joyce paid $200 with her 2009 state tax return. During 2010, she had $2,100 in state income taxes withheld from her paycheck. Upon filing her 2010 tax return on April 15, 2011, she received a refund of $450 for excess state income taxes withheld. Joyce had total AGI in 2010 and 2011 of $51,000 and $53,500, respectively. In 2010, Joyce also paid $3,500 in qualified residence interest.
a. What is the amount of state income taxes Joyce may include as an itemized deduction
for 2009?
b. What is the allowed itemized deduction for state income taxes for 2010?
On July 1, 2010, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. Prepare the journal entry on July 1 and the adjusting entry on December 31 for Randle Insurance Co.
Date Account/Description Debit Credit July 1 Unearned Insurance RevenuePrepaid InsuranceCashInsurance RevenueAccounts PayableInsurance ExpenseAccounts ReceivableAccrued Insurance
Using T accounts, enter the balances in the accounts below, post the adjusting entry as necessary, and indicate the adjusted balance in each account. (If there is no transaction, enter NA as the date and 0 for the amount. Do not leave any fields blank.)
************IF YOU COULD JUST TELL ME THE FORMULAS I NEED FOR EACH ONE THAT WOULD BE GREAT!!!*********************
The Divine Cheesecake Shoppe is a national bakery that is known for its strawberry cheesecake. It also makes 12 different kinds of cheesecake as well as many other types of bakery items. It has recently adopted an activity-based costing system to assign manufacturing overhead to products. The following data relate to its strawberry cheesecake and the ABC cost pools:
Strawberry Cheesecake:
Annual production——————-17,500 units
Direct materials per unit————-$6
Direct labor per unit——————-$2
Cost Pool———————–Cost————————Cost Driver
Materials ordering———-$ 72,000—————Number of purchase orders
Materials inspection———75,000—————-Number of receiving reports
Equipment setup————-105,000—————Number of setups
Quality control—————-69,000—————-Number of inspections
Other—————————100,000—————-Direct labor cost
Total manufacturing overhead—-$421,000
Annual activity information related to cost drivers:
a.Calculate the overhead rate per unit of activity for each of the five cost pools.
b.Calculate the total overhead assigned to the production of the strawberry cheesecake.
c.Calculate the overhead cost per unit for the strawberry cheesecake. Round to three decimal places.
d.Calculate the total unit cost for the strawberry cheesecake. Round to three decimal places.
e.Suppose that the Divine Cheesecake Shoppe allocates overhead by a traditional production volume-based method using direct labor dollars as the allocation base and one cost pool. Determine the overhead rate per direct labor dollar and the per unit overhead assigned to the strawberry cheesecake. Discuss the difference in cost allocations between the traditional method and the activity-based costing approach. Round to three decimal places.
Kava Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as K65. Data concerning this product are given below:
Per Unit
Selling price
$180
Direct materials
$29
Direct labor
$5
Variable manufacturing overhead
$4
Fixed manufacturing overhead
$21
Variable selling expense
$2
Fixed selling and administrative expense
$17
The above per unit data are based on annual production of 4,000 units of the component. Direct labor can be considered to be a variable cost. (Source: CMA, adapted)
The company has received a special, one-time-only order for 500 units of component K65. There would be no variable selling expense on this special order, and the total fixed manufacturing overhead and fixed selling and administrative expenses of the company wouldn’t be affected by the order. Assuming that Kava has excess capacity and can fill the order without cutting back on the production of any product, what is the minimum price per unit on the special order below which the company shouldn’t go?
Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
KAZAAM COMPANY
Comparative Balance Sheets
December 31, 2011 and 2010
2011 2010
Assets
Cash $ 53,875 $ 76,625
Accounts receivable 65,000 49,625
Merchandise inventory 273,750 252,500
Prepaid expenses 5,375 6,250
Equipment 159,500 110,000
Accum. depreciation”Equipment (34,625) (44,000)
Total assets $ 522,875 $ 451,000
Liabilities and Equity
Accounts payable $ 88,125 $ 116,625
Short-term notes payable 10,000 6,250
Long-term notes payable 93,750 53,750
Common stock, $5 par value 168,750 156,250
Paid-in capital in excess of par, common stock 32,500 0
Retained earnings 129,750 118,125
Total liabilities and equity $ 522,875 $ 451,000
KAZAAM COMPANY
Income Statement
For Year Ended December 31, 2011
Sales $ 496,250
Cost of goods sold 250,000
Gross profit 246,250
Operating expenses
Depreciation expense $ 18,750
Other expenses 136,500 155,250
Other gains (losses)
Loss on sale of equipment 5,125
Income before taxes 85,875
Income taxes expense 12,125
Net income $ 73,750
Additional Information on Year 2011 Transactions
a.
The loss on the cash sale of equipment was $5,125 (details in b).
b.
Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash.
c.
Purchased equipment costing $96,375 by paying $25,000 cash and signing a long-term note payable for the balance.
d.
Borrowed $3,750 cash by signing a short-term note payable.
e.
Paid $31,375 cash to reduce the long-term notes payable.
f.
Issued 2,500 shares of common stock for $18 cash per share.
g. Declared and paid cash dividends of $62,125.
Required:
Prepare a complete statement of cash flows; report its operating activities according to the direct method. (Amounts to be deducted should be indicated with a minus sign. Omit the “$” sign in your response.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Less: Cost of goods sold…………………………………………………….300,000
Gross profit……………………………………………………………………….200,000
Operating expenses (includes $20,000 of Depreciation)…………120,000
Net Income………………………………………………………………………..$80,000
Christy is developing the 2012 budget. In 2012 the company would like to increase selling prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold as a percentage of sales is expected to increase to 62%. Other than depreciation, all operating costs are variable.
Icon.com sells software and provides consulting services to companies that conduct business over the internet .The companies is organized into two lines of business (software and consulting),and profit statement are prepared are as follows: software consulting sales $12,000,000 $7,000,000 less direct cost 6,000,000 4,000,000 less allocated costs 4,000,000 2,000,000
income before taxes $2,000,000 $1,000,000 direct cost include costs that are easily associated with each line of business.For software ,this include the salary of programmers ,the cost of computer used by programmers ,and the cost of CD’s sold to customer .For consulting,direct cost include consultants salaries ,computer cost and travel cost.Allocated cost include cost that are not directly traced to the business units.These cost include employee benefits ,rent telecommunication costs,and general and administrative costs such as the salary of the CEO of Icon.com. At the start of 2011,allocated cost were estimated are as follows: Employee benefits $2,000,000 Rent $700,000 Telecommunications $300,000 general and administrative costs $3,000,000
TOTAL $6,000,000
In the past,allocation have been based on headcount (the number of employees in each business unit).Software had 375 employees and consulting had 125 employees.The new controller of Icon.com believes that the key driver of employee benefits and telecommunication cost is headcount .However,rent is driven by relatives sales .Icon.com rents 40,000 square feet;approximately 20,000 is occupied by software employees and 20,000by consulting personnel. REQUIRED a)Prepare profit reports for software and consulting assuming the company allocates costs using headcount ,space occupied ,and sales as allocation bases.Compare the new levels of profit to the levels that result using a single allocation base(headcount).Round to six decimal places. b)Which provides the best information on profitability-a single overhead cost pool with headcount as the allocation base ,or multiple cost pools using headcount ,sales,and space occupied?
Identifying Investing and Financing Activities Affecting Cash Flows
Foot Locker, Inc., is a large global retailer of athletic footwear and apparel selling directly to customers and through the Internet. It includes the Foot Locker family of stores, Champs Sports, and Eastbay. The following are several of Foot Locker’s investing and financing activities as reflected in a recent annual statement of cash flows.
a. Reduction of long-term debt.
b. Sale of short-term investments.
c. Issuance of common stock.
d. Capital expenditures (for property, plant, and equipment).
e. Dividends paid on common stock.
Required:
For each of these, indicate whether the activity is investing (I) or financing (F) and the direction of the effect on cash flows ( for increases cash; ? for decreases cash).
Imagine that you are a manager at a delivery service and you are creating a report to project the effects on your company of rising gas prices in the next ten years. Using the preceding statistical analysis as your basis and outside scholarly resources to support your claims, write a 3 to 5 page paper interpreting the results from this perspective. Include the following considerations:
1. Introduce the project and its significance to the company.
2. Explain the statistical analysis that you completed in Part I. Be sure to explain where the data came from, what analysis was done, and what the results were.
3. Give conclusions that you have drawn from the data. Consider the effects of your gas price predictions on the delivery business. Also consider whether or not you believe your predicted gas prices are accurate. What could occur in the future that would change your linear regression line and therefore your prediction?
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.
Insurance expired during July of $400 was omitted. Supplies expense includes $200 of supplies that are still on hand at July 31. Depreciation on equipment of $150 was omitted. Accrued but unpaid wages at July 31 of $300 were not included. 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.)
Indicate whether each of the following items is a variable (V),fixed (F), or mixed (M) cost and whether it is product/service (PT)or period (PD) cost. If some items have alternative answers,indicate the alternatives and the reasons for them.
a. Wages of factory maintenance workers.
b. Wages of forklift operators who move finished goods from acentral warehouse to the loading dock
c. Insurance premiums paid on the headquarters of amanufacturing company
d. Cost of labels attached to shirt made by a company
e. Property taxes on a manufacturing plant
f. Paper towels used in factory restrooms
g. Salaries of office assistants in a law firm
h. Freight costs of acquiring raw material from suppliers
i. Computer paper used in an accounting firm
j. Cost of wax to make candles
k. Freight-in on a truckload of furniture purchased for resale
The information necessary for preparing the 2012 year-end adjusting entries for Bearcat Personal Training Academy appears below. Bearcat’s fiscal year-end is December 31.
a.
Depreciation on the equipment for the year is $6,000.
b.
Salaries earned (but not paid) from December 16 through December 31, 2012, are $3,000.
c.
On March 1, 2012, Bearcat lends an employee $15,000. The employee signs a note requiring principal and interest at 8% to be paid on February 28, 2013.
d.
On April 1, 2012, Bearcat pays an insurance company $12,000 for a two-year fire insurance policy. The entire $12,000 is debited to Prepaid Insurance at the time of the purchase.
e.
Bearcat uses $1,200 of supplies in 2012.
f.
A customer pays Bearcat $2,400 on October 31, 2012, for three months of personal training to begin November 1, 2012. Bearcat credits Unearned Revenue at the time of cash receipt.
g.
On December 1, 2012, Bearcat pays $4,500 rent to the owner of the building. The payment represents rent for December 2012 through February 2013, at $1,500 per month. Prepaid Rent is debited at the time of the payment.
Required:
Record the necessary adjusting entries at December 31, 2012. No prior adjustments have been made during 2012. (Do not round your intermediate calculations. Omit the “$” sign in your response.)
You inherited a house in San Diego from a rich uncle. You need money now, so you are considering three options: * option A: sell the house for $250,000 * option B: spend $75,000 on improving the house, after that sell it for $320,000. * option C: burn the house for insurance money. The house is insured for $209,000. Not selling the house is not a viable option. If you sell the house (options A and B), you will have to pay realtor’s fees and taxes, which amount to 7% of the selling price. (For example, if you sold the house for $100,000, the total cost of fees and taxes will be $100,000*0.07=$7,000). If you burn the house, you’ll have to hire a good lawyer to prove it was an accident. The lawyer will cost you $20,000 (you do not have to pay realtor’s fees and taxes in this case).
Required: a) What is the value of each option? A= B= C=
b) Which option should you choose? (enter 1 for A, 2 for B, 3 for C)
c) What is the opportunity cost of options A and B? A= B=
d) Suppose you bought the house for $500,000 in 2007, instead of getting it from a rich uncle for free (the rest of the numbers do not change). Should you choose option A, B or C in this case? (enter 1 for A, 2 for B, 3 for C)
e) If you got different answers in (b) and (d), explain why they are different. If you got the same answers in (b) and (d), explain why they should be the same.
Instructions: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
1. Why are an increase in accounts payable and a decrease in prepaid expenses both added to net income?
2. The net income reported on the income statement of Hunter, Inc. for the current year was $150,000. Depreciation recorded on the building and equipment amounted to $45,000 for the year. Balances of the current assets and current liability accounts at the beginning and end of the year are as follows:
Cash End of year $42,875 Beginning of year $36,250
Accounts Receivables End of year 147,500 Beginning of year 137,500
Inventories End of year 109,375 Beginning of year 93,750
Prepaid Expenses End of year 9,250 Beginning of year 11,875
Accounts Payable End of year 57,000 Beginning of year 40,000
Salaries Payable End of year 7,625 Beginning of year 10,625
At January 1, 2011, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due December 31, 2013. Interest was paid last on December 31, 2009. Brainard was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to:
a.
Forgive the interest accrued for the year just ended.
b.
Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2012.
c.
Reduce the unpaid principal amount to $11 million.
Required:
Prepare the journal entries by Brainard Industries, Inc., necessitated by the restructuring of the debt at(1) January 1, 2011; (2) December 31, 2012; and (3) December 31, 2013. (Enter your answers in dollars
You will assume that you still work as a financial analyst for AirJet Best Parts, Inc. The company is considering a capital investment in a new machine and you are in charge of making a recommendation on the purchase based on (1) a given rate of return of 15% (Task 4) and (2) the firm’s cost of capital (Task 5).
Task 4. Capital Budgeting for a New Machine
A few months have now passed and AirJet Best Parts, Inc. is considering the purchase on a new machine that will increase the production of a special component significantly. The anticipated cash flows for the project are as follows:
Year 1 $1,100,000
Year 2 $1,450,000
Year 3 $1,300,000
Year 4 $950,000
You have now been tasked with providing a recommendation for the project based on the results of a Net Present Value Analysis. Assuming that the required rate of return is 15% and the initial cost of the machine is $3,000,000.
1. What is the project’s IRR? (10 pts)
2. What is the project’s NPV? (15 pts)
3. Should the company accept this project and why (or why not)? (5 pts)
4. Explain how depreciation will affect the present value of the project. (10 pts)
5. Provide examples of at least one of the following as it relates to the project: (5 pts each)
a. Sunk Cost
b. Opportunity cost
c. Erosion
6. Explain how you would conduct a scenario and sensitivity analysis of the project. What would be some project-specific risks and market risks related to this project? (20 pts)
Task 5: Cost of Capital
AirJet Best Parts Inc. is now considering that the appropriate discount rate for the new machine should be the cost of capital and would like to determine it. You will assist in the process of obtaining this rate.
1. Compute the cost of debt. Assume AirJet Best Parts Inc. is considering issuing new bonds. Select current bonds from one of the main competitors as a benchmark. Key competitors include Raytheon, Boeing, Lockheed Martin, and the Northrop Grumman Corporation.
a. What is the YTM of the competitor’s bond? You may use a number of sources, but we recommend Morningstar. Find the YTM of one 15 or 20 year bond with the highest possible creditworthiness. You may assume that new bonds issued by AirJet Best Parts, Inc. are of similar risk and will require the same return. (5 pts)
b. What is the after-tax cost of debt if the tax rate is 34%? (5 pts)
c. Explain what other methods you could have used to find the cost of debt for AirJet Best Parts Inc.(10 pts)
d. Explain why you should use the YTM and not the coupon rate as the required return for debt. (5 pts)
2. Compute the cost of common equity using the CAPM model. For beta, use the average beta of three selected competitors. You may obtain the betas from Yahoo Finance. Assume the risk free rate to be 3% and the market risk premium to be 4%.
a. What is the cost of common equity? (5 pts)
b. Explain the advantages and disadvantages to use the CAPM model as the method to compute the cost of common equity. Compare and contrast this method with the dividend growth model approach. (10 pts)
3. Compute the cost of preferred equity assuming the dividend paid for preferred stock is $2.93 and the current value of the stock is $50 per share.
a. What is the cost of preferred equity? (5 pts)
b. Is there any other method to compute this cost? Explain. (5 pts)
4. Assuming that the market value weights of these capital sources are 30% bonds, 60% common equity and 10% preferred equity, what is the weighted cost of capital of the firm? (10 pts)
5. Should the firm use this WACC for all projects? Explain and provide examples as appropriate. (10 pts)
6. Recompute the net present value of the project based on the cost of capital you found. Do you still believe that your earlier recommendation for accepting or rejecting the project was adequate? Why or why not? (5 pts)
The items 1 through 6 below represent various commitments and contingencies of Martin Inc. at December 31, 2011 and events subsequent to December 31, 2011, but prior to the issuance of the 2011 financial statements. Martin Inc. is preparing its financial statements for the year ended December 31, 2011.
1. On December 1, 2011, Martin was awarded damages of $75,000 in a patent infringement suit it brought against a competitor. The defendant did not appeal the verdict, and payment was received in January 2012.
2. A former employee of Martin has brought a wrongful-dismissal suit against Martin. Martin’s lawyers believe the suit to be without merit.
3. At December 31, 2011 Martin had outstanding purchase orders in the ordinary course of business for purchase of a raw material to be used in its manufacturing process. The market price is currently higher than the purchase price and is not anticipated to change within the next year.
4. A government contract completed during 2011 is subject to renegotiation. Although Martin estimates that it is reasonably possible that a refund of approximately $200,000-$300,000 may be required by the government, it does not wish to publicize this possibility.
5. Martin has been notified by a governmental agency that it will be held responsible for the cleanup of toxic materials at site where Martin formerly conducted operations. Martin estimates that it is probable that its share of remedial action will be approximately $500,000.
6. On January 5, 2012, Martin redeemed its outstanding bonds and issued new bonds with a lower rate of interest. The reacquisition price was in excess of the carrying amount of the bonds.
You have been asked by Martin Inc. to advice on the treatment of the above items for financial accounting and reporting purpose. Prepare a detailed report discussing the relevant FASB codifications how the above six items should be accrued, accrued and disclosed, disclosed only Or should neither be accrued nor disclosed.
I am having trouble, I need to provide my memo with a horzontal analysis but I only have one year of statements can that be done and if so how? here is the information Kudler Fine Foods Balance Sheet December 31, 2003 Assets Current Assets: Cash Accounts Receivable Less: Reserve for Bad Debts Merchandise Inventory Prepaid Expenses Notes Receivable $86,000 $0 $1,430,000
$86,000 $429,000 $26,000 $0 Total Current Assets $1,971,000 Fixed Assets: Vehicles Less: Accumulated Depreciation
Furniture and Fixtures Less: Accumulated Depreciation
Total Fixed Assets $704,250 Other Assets: Goodwill $0 Total Other Assets $0 TOTAL ASSETS $2,675,250 Liabilities and Capital Current Liabilities: Accounts Payable Sales Tax Payable Payroll Taxes Payable Accrued Wages Payable Unearned Revenues Short-Term Notes Payable Short-Term ank Loan Payable
$96,500 $3,950 $15,840 $0 $0 $0 $0 Total Current Liabilities $116,290 Long-Term Liabilities: Long-Term Notes Payable $630,000 Total Long-Term Liabilities $630,000 TOTAL LIABILITIES $746,290 Capital: Owner’s Equity Net Profit $746,290 $1,182,670 TOTAL CAPITAL $1,928,960 TOTAL LIABILITIES AND CAPITAL $2,675,250 Kudler Fine Foods Income Statement For the Year Ended December 31, 2003 Revenue: Gross Sales Less: Sales Returns and Allowances $10,804,000 $7,800 Net Sales $10,796,200 Cost of Goods Sold: Beginning Inventory Add: Purchases Freight-in Direct Labor Indirect Expenses
I’m trying to do this income statement, but can’t even seem to get started. I have several other problems that are like this one, but would really like to see an end product. It wasn’t discussed much in class and I’ve been searching all day
Presented below is financial information of the Mickey Corporation for 2008
Beginning Retained Earnings, 1/1/08 $950,000
Gain on the Sale of Investments (normal recurring) $110,000
Sales for the Year $30,000,000
Loss Due to Flood Damage (unusual & infrequent) $125,000*
Cost of Goods Sold $21,000,000
Loss on Disposal of Retail Division $450,000
Interest Revenue $70,000
Loss on Operations of Retail Division $460,000
Selling and Administrative Expenses 5,500,000
Dividends Declared on Common Stock $230,000
Write-Off of Goodwill $520,000
Dividends Declared on Preferred Stock $80,000
Federal Income Tax on Operations for 2008 1,600,000
*net of tax
Mickey Corporation decided to discontinue its retail operations and to retain its manufacturing operations. On August 15, Mickey sold the retail operations to Schoen Company. During 2008, there were 250,000 shares of common stock outstanding all year.
Prepare a multiple-step income statement for the year 2008 on a separate Excel spreadsheet as directed in the Problem Set 1 directions.
Select a movie or TV show that effectively communicates the cultural, values and norms of a society that is different from your own culture. Ideally, this movie or TV show would be a foreign film with subtitles. The movie or TV show you select should provide you with a glimpse of what life is like in another culture. The process of watching this movie or TV show should provide you with a unique, cultural experience.
Watch the movie/TV show that you selected, and use your reactions as part of your response to the following topic: Define ethnocentrism and how it affects individuals, societies, and multinational corporations.
Your paper should provide a comprehensive overview of the concept of ethnocentrism. You should use your cultural experience of watching the selected movie or TV show to discuss the effect of ethnocentrism on individuals, societies, and multinational corporations. Please feel free to use any personal experiences you may have had visiting different countries around the world as part of this paper; however, do not let your personal experiences with other cultures be the focal point of this paper. The focal point of the paper is your cultural experience watching the selected movie or TV show and your comprehensive overview of the concept of ethnocentrism. Please note that this paper is not intended to be a summary of the movie or TV show. Your paper should focus on the cultural observations that you are able to make based on this experience. Your response should be 2’3 pages.
Please submit your assignment.
The following rubric will be used for grading:
Grading Rubric
IP assignment response
30%
Evidenced critical thinking and connection to real-world and assignment scenario applicability
40%
Justified ideas and responses by using appropriate examples and references from texts, Web sites, and other references or personal experience
20%
Adherence to assignment deadlines, length requirement, correct spelling/proper grammar, and properly formatted
The management of Rathburn Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-ours and the estimated amount of the allocation base for the upcoming year is 43,000 machine-hours. In addition, capacity is 47,000 machine-hours and the actual activity for the year is 42,600 machine-hours. All of the manufacturing overhead is fixed and is $848,820 per year. For simplicity, it is assumed that this is the the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job F31I, which required 310 machine-hours, is one of the jobs worked on during the year.
Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
The management of Rathburn Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-ours and the estimated amount of the allocation base for the upcoming year is 43,000 machine-hours. In addition, capacity is 47,000 machine-hours and the actual activity for the year is 42,600 machine-hours. All of the manufacturing overhead is fixed and is $848,820 per year. For simplicity, it is assumed that this is the the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job F31I, which required 310 machine-hours, is one of the jobs worked on during the year.
Determine how much overhead would be applied to Job F31I if the predetermined overhead rate is based on the estimated amount of the allocation base.
Timothy is a 35 percent partner in the Total Partnership, a calendar-year-end entity. Timothy has an outside basis in his interest in Total of $198,000, which includes his share of the $45,000 of partnership liabilities. On December 31, Total makes a proportionate distribution of the following assets to Timothy:
Basis
FMV
Cash
$50,000
$50,000
Inventory
65,000
75,000
Land
50,000
65,000
Totals
$165,000
$180,000
For an operating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.
For a liquidating distribution, outline the tax consequences (amount and character of recognized gain or loss, basis in distributed assets) of the distribution to Timothy.
Discuss the similarities and differences between the tax consequences of the operating distribution and the tax consequences of the liquidation distribution.
The management of Rathburn Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-ours and the estimated amount of the allocation base for the upcoming year is 43,000 machine-hours. In addition, capacity is 47,000 machine-hours and the actual activity for the year is 42,600 machine-hours. All of the manufacturing overhead is fixed and is $848,820 per year. For simplicity, it is assumed that this is the the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job F31I, which required 310 machine-hours, is one of the jobs worked on during the year.
Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
The management of Rathburn Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-ours and the estimated amount of the allocation base for the upcoming year is 43,000 machine-hours. In addition, capacity is 47,000 machine-hours and the actual activity for the year is 42,600 machine-hours. All of the manufacturing overhead is fixed and is $848,820 per year. For simplicity, it is assumed that this is the the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Job F31I, which required 310 machine-hours, is one of the jobs worked on during the year.
Determine the predetermined overhead rate if the predetermined overhead rate is based on the amont of the allocation base at capacity.
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
How many units were started into production during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
What was the cost per equivalent unit for conversion during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
How much cost, in total, was assigned to the units transferred out to the next department during the month?
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Shull Corporation Income statement For the Year Ended December 31, Year 2 (dollars in thousands)
Sales (all on account)Ac€¦Ac€¦Ac€¦………..Ac€¦Ac€¦.$1,130
Less Cost of goods sold………………… 700
Equals Gross Margin………………………..430
Less Selling and administrative expenses..244
Equals Net operating incomeAc€¦Ac€¦Ac€¦…Ac€¦Ac€¦Ac€¦…186
Less Interest expenseAc€¦Ac€¦……..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦. 29
Equals Net income before taxesAc€¦Ac€¦Ac€¦Ac€¦….Ac€¦157
Less Income taxes(30%)Ac€¦…….Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦.Ac€¦47
Equals Net incomeAc€¦Ac€¦Ac€¦Ac€¦…..Ac€¦Ac€¦Ac€¦Ac€¦Ac€¦……$110
Dividends on common stock during year 2 totaled $40 thousand. Dividends on preferred stock totaled $10 thousand. The market price of common stock at the end of year 2 was $9.80 per share.
Granger Service Company Inc was organized by Ted Granger and five other investors. The following activities occurred during the year:
a: Received $63,000 cash from the investors; each was issued 1,400 shares of capital stock.
b. Purchased equipment for use in the business at a cost of $20,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
c. Signed an agreement with a cleaning service to pay $120 per week for cleaning the corporate offices
d. Received an additional contribution from investors who provided $4,000 in cash and land valued at $13,00 in exchange for stock in the company.
e. Lent $2,500 to one of the investors who signed a note due in six months.
f. Ted Granger borrowed $10,000 for personal use from a local bank, signing a one year note.
Required:
1. Create T-accounts for the following accounts: Cash, Note Receivable, Equipment, Land, Note Payable, and Contributed Capital. Beginning balances are $0. For each of the preceding transactions record the effects of the transaction in the appropriate T-accounts. Include good referencing and totals for each T-account.
2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation:
Greenville Products Inc. is a manufacturing firm. The company’s inventory balances were as follows at the beginning and end of the year:
The following transactions were recorded for the year:
‘ Raw materials were purchased, $300,000.
‘ Raw materials were requisitioned for use in production, $297,000 $(281,000 direct and $16,000 indirect).
‘ The following employee costs were incurred: direct labor, $399,000; indirect labor, $62,000; and administrative salaries, $176,000.
‘ Selling costs, $165,000.
‘ Factory utility costs, $19,000.
‘ Depreciation for the year was $143,000 of which $137,000 is related to factory operations and $6,000 is related to selling, general, and administrative activities.
‘ Sales for the year totaled $1,293,000.
Required:
a. Prepare a schedule of cost of goods manufactured in good form.
b. Prepare an income statement for the year in good form.
I just started my accounting class and I do not have any accounting experience of knowledge (my first acct class). Could you please help me out. I will give you all the possible Karma points if you answer my question. I just need the traditional and ABC direct, indirect, and unallocated cost answer for the two accounting systems.
You have been selected to complete the following table by indicating for each activity whether the related cost is direct, indirect, or unallocated. For each indirect cost, indicate one appropriate cost-allocation base (more than one cost allocation base may be appropriate).
Setting up for a production run–related cost is mechanic wages: Traditional answer: ABC answer:
Purchasing materials and parts to be used in products–related cost is materials and parts cost: Traditional answer: ABC answer:
Shipping sold products to customers (distributors)–related cost is fuel on company’s fleet of trucks: Traditional answer: ABC answer:
Market research study conducted by marketing staff to assess demand for potential new product–related cost is salaries of market research staff: Traditional answer: ABC answer:
Production scheduling–related cost is salaries of production scheduling managers: Traditional answer: ABC answer:
Purchasing materials and parts to be used in products–related cost is salaries of purchasing agents: Traditional answer: ABC answer:
Order processing of customer orders–related cost is salaries of order staff: Traditional answer: ABC answer:
Preparing cost analyses–related cost is cost acct salary: Traditional answer: ABC answer:
Designing a new product–related cost is salaries of design engineers that are fully dedicated to the new product: Traditional answer: ABC answer:
Managing overall operations–related cost is salary of executive of company: Traditional answer: ABC answer:
I need to know whether the following are direct, indirect, or unallocated using a traditional and ABC cost system. If the answer is indirect cost I need to know one appropriate cost allocation.
Market research study conducted by marketing staff to assess demand for potential new product / related cost is salaries of market research staff: Traditional: ABC:
Production scheduling / related cost is salaries of production scheduling managers: Traditional: ABC:
Purchasing materials and parts to be used in products / related cost is salaries of purchasing agents: Traditional: ABC:
Order processing of customer orders / related cost is salaries of order staff: Traditional: ABC:
Preparing cost analyses / related cost is cost acct salary: Traditional: ABC:
Designing a new product / related cost is salaries of design engineers that are fully dedicated to the new product: Traditional: ABC:
Managing overall operations / related cost is salary of executive of company: Traditional: ABC:
Setting up for a production run / related cost is mechanic wages: Traditional: ABC:
Purchasing materials and parts to be used in products / related cost is materials and parts cost: Traditional: ABC:
Shipping sold products to customers / related cost is fuel on company’s fleet of trucks: Traditional: ABC:
Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:
Direct materials $3.60
Direct labor 10.00
Variable manufacturing overhead 2.40
Fixed manufacturing overhead 9.00
Total cost per part
$25.00
An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $80,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.
Required:
(a)
What is the total amount of avoidable costs if Han buys the units from an outside supplier?
Total cost $
(b) How much will profits increase or decrease if the outside supplier’s offer is accepted?
Hannon Company expects to produce 1,200,000 units of Product XX in 2010. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Complete the flexible manufacturing budget for the relevant range value using 20,000 unit increments.
Hannon Company expects to produce 1,200,000 units of Product XX in 2010. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Complete the flexible manufacturing budget for the relevant range value using 20,000 unit increments.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead
$255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under absorption costing.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead
$255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under absorption costing.
“Hawthorn Corporation manufactures custom all terrain vehicles (ATVs) and uses a job costing system to assign and track costs. March’s beginning inventory consisted of the following components: “ Raw materials $65,000 Work in process 27,000 Finished goods 80,000 “The above beginning work in process consisted only of Job # 02.778. The finished goods inventory consisted of Job # 01.987 ($42,500) and Job # 02.665 ($37,500). “ “The following descriptions summarize the various transactions that occurred during March: “ Purchased $112,000 of raw materials. Used $117,000 of raw materials in the production process. $95,000 of this amount consisted of parts and other materials “directly” incorporated into ATVs. The remainder was “indirect” material for shop supplies and small dollar items that are not otherwise traceable to specific ATVs. Total wages and salaries were $225,000. This total was 60% attributable to direct labor, 10% to indirect labor, 5% to sales commissions, and 25% to general and administrative activities. Depreciation for the period totaled $28,000. 75% of this amount related to factory and factory related equipment, and is contemplated in the factory overhead rates. The other 25% is related to general and administrative activities. Other general and administrative costs, excluding wages and depreciation, totaled $15,000. Other factory overhead costs, excluding indirect materials, wages, and depreciation, totaled $35,500. Hawthorn applies factory overhead at 75% of direct labor costs. “The ending work in process consisted of two jobs: Job # 03.004 ($25,500) and Job # 03.772 ($21,500). All completed units had been delivered to customers, and there was no ending finished goods inventory. Sales for the month amounted to $625,000. All sales are for cash at time of shipment. “ (a) Prepare T-accounts showing how the above costs flow through the accounting system. For simplicity, you may assume that all expenditures and receipts settle in cash, and you will only need the following T-accounts: Raw Materials Selling Expenses Work in Process General & Administrative Expenses Finished Goods Cash Cost of Goods Sold Accumulated Depreciation Factory Overhead
Can someone please help me with the solution to this problem? I am enrolled in this course and just not understanding what I am to do. I know for a portion of the problem I use T accounts, but not sure what goes where. Also, I am not sure about the journal postings or the trial balance sheet. Any help you can provide would be great! I just want to try to understand this information and do well in the course. Thank you.
Problem reads:
Recording transactions, using four-column ledger accounts, and preparing a trial balance
The following transactions occurred during the month for Teresa Parker, CPA:
a. Parker opened an accounting firm by investing $14,100 cash and office furniture valued at $5,200. The business issued $19,300 of capital to Parker.
b. Paid monthly rent of $1,500.
c. Purchased office supplies on account, $900.
d. Paid employee’s salary, $1,700.
e. Paid $700 of the account payable created in transaction
(c).
f. Performed accounting service on account, $5,900.
g. Owner withdrew cash of $6,700.
Requirements
1. Open the following four-column accounts of Teresa Parker, CPA: Cash; Accounts receivable; Office supplies; Office furniture; Accounts payable; Parker, capital; Parker, drawing; Service revenue; Salary expense; Rent expense.
2. Journalize the transactions and then post to the four-column accounts, use the letters to identify the transactions. Keep a running balance in each account.
3. Prepare the trial balance at December 31, 2012.
Can someone please help me with the solution to this problem? I am enrolled in this course and just not understanding what I am to do. I know for a portion of the problem I use T accounts, but not sure what goes where. Also, I am not sure about the journal postings or the trial balance sheet. Any help you can provide would be great! I just want to try to understand this information and do well in the course. Thank you.
Problem reads:
Recording transactions, using four-column ledger accounts, and preparing a trial balance
The following transactions occurred during the month for Teresa Parker, CPA:
a. Parker opened an accounting firm by investing $14,100 cash and office furniture valued at $5,200. The business issued $19,300 of capital to Parker.
b. Paid monthly rent of $1,500.
c. Purchased office supplies on account, $900.
d. Paid employee’s salary, $1,700.
e. Paid $700 of the account payable created in transaction
(c).
f. Performed accounting service on account, $5,900.
g. Owner withdrew cash of $6,700.
Requirements
1. Open the following four-column accounts of Teresa Parker, CPA: Cash; Accounts receivable; Office supplies; Office furniture; Accounts payable; Parker, capital; Parker, drawing; Service revenue; Salary expense; Rent expense.
2. Journalize the transactions and then post to the four-column accounts, use the letters to identify the transactions. Keep a running balance in each account.
3. Prepare the trial balance at December 31, 2012.
So here is what I came up with thus far. Any guidance would be great and most appreciated.
Hello, I keep getting the wrong answer. Please help. I get 8,048,290. What am I doing wrong?
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:
Velcro Metal Nylon
Normal annual sales volume 100,000 200,000 400,000
Unit selling price $1.65 $1.50 $0.85
Variable cost per unit $1.25 $0.70 $0.25
——————————————————————————–
Total fixed expenses are $400,000 per year.
All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers.
The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.
Requirement 1:
What is the company’s over-all break-even point in total sales dollars? (Round your CM ratio to 4 decimal places e.g., .12343 as .1234 or 12.34% and final answer to the nearest dollar amount. Omit the “$” sign in your response.)
Travel Expenses. Marilyn, a business executive who lives and works in Cleveland, accepts a temporary out-of-town assignment in Atlanta for a period of ten months. Marilyn leaves her husband and children in Cleveland and rents an apartment in Atlanta during the ten-month period. Marilyn incurs the following expenses, none of which are reimbursed by her employer:
Airfare to and from Atlanta $800
Airfare for weekend trips to visit her family 8,000
Apartment rent 10,000
Meals in Atlanta 8,500
Entertainment of customers 2,000
Total $29,300
a. Which of the expenditures listed above (if any) are deductible by Marilyn
(Before any limitations are applied)?
All are deductible, except meals and entertainment are at 50%
29,300 ‘ 5,250 = 24,050
b. Are each of these expenditures classified as for AGI or from AGI deductions?
Deductions from AGI
c. If Marilyn’s AGI is $120,000, what is the amount of the deduction for the expenditures?
2% of 120,000 = 2,400
d. Do the tax consequences change if Marilyn’s assignment is for a period of more than one year and is for an indefinite period rather than a temporary period?
Please help me figure this tax return? I am stuck at the Federal tax and if they can claim the EIC. Please tell me what the PAYMENTS section should have enterd and the REFUND section should be on lines 71 – 76. I think I have the rest of it. THANK YOU!!!
Following is a list of information for Peter and Amy Jones for the current tax year. Peter
and Amy are married and have three children, Aubrynne, Bryson, and Caden. They live at
1846 Joplin Way, Lakeville, MN 55022. Peter is a lawyer working for a Native American
law firm. Amy works part-time in a genetic research lab. The Jones’ Social Security numbers
and ages are as follows:
Peter 215-60-1989 32
Amy 301-60-2828 28
Aubrynne 713-84-5555 5
Bryson 714-87-2222 3
Caden 714-89-1684 1
Peter’s salary $70,000
Amy’s salary 32,000
Interest income on municipal bonds 2,400
Interest income on certificate of deposit (Universal Savings) 3,100
Dividends on GM stock 1,600
Eyeglasses and exam for Aubrynne $ 600
Orthodontic work for Bryson to correct a congenital defect 2,500
Medical insurance premiums 1,800
Withholding for state income taxes 7,200
Withholding for federal income taxes 16,000
State income taxes paid with last year’s tax return
(paid when the return was filed in the current year) 500
Property taxes on home 1,100
Property taxes on automobile 300
Interest on home 9,700
Interest on credit cards 200
Cash contribution to church 3,900
In addition to the above, on September 17, Peter and Amy donate some Beta Trader, Inc.
stock to Lakeville Community College. Beta Trader, Inc. is publicly traded. The FMV of
the stock on the date of the contribution is $700. Peter and Amy had purchased the stock
on November 7, 2003 for $300.
Compute Peter and Amy’s income tax liability for the current year using Form 1040,
I:9-55 Travel Expenses. Marilyn, a business executive who lives and works in Cleveland, accepts a temporary out-of-town assignment in Atlanta for a period of ten months. Marilyn leaves her husband and children in Cleveland and rents an apartment in Atlanta during the ten-month period. Marilyn incurs the following expenses, none of which are reimbursed by her employer:
Airfare to and from Atlanta $800
Airfare for weekend trips to visit her family 8,000
Apartment rent 10,000
Meals in Atlanta 8,500
Entertainment of customers 2,000
Total $29,300
a. Which of the expenditures listed above (if any) are deductible by Marilyn
(before any limitations are applied)?
b. Are each of these expenditures classified as for AGI or from AGI deductions?
Deductions from AGI
c. If Marilyn’s AGI is $120,000, what is the amount of the deduction for the expenditures?
2% of 120,000 = 2,400
d. Do the tax consequences change if Marilyn’s assignment is for a period of more than one year and is for an indefinite period rather than a temporary period?
e. Do the tax consequences in Parts a through c change if it was realistically expected that the work would be completed in ten months but after the ten-month period Marilyn is asked to continue for seven more months and if an additional $10,000 of travel expenses are incurred during the extended period?
Please help me, I am new to accounting and do not know what this question is asking for. I will give all my karma points available for help to this question. Thank you.
Nike’s contract manufacturers make the vast majority of Nike’s footwear. Assume these costs are variable to Nike. Nike’s largest fixed costs are associated with its distribution system. Consider one of Nike’s three distribution and customer service facilities in the United States. List several examples of step-fixed costs and mixed costs at these centers. For each of the following activities at a distribution center, list one plausible cost driver:
Receiving activity
Unpacking incoming cases of footwear
Picking and packing case of footwear for shipment to retail accounts
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. Hurst’s 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 Hurst’s union are aggressive and are seeking additional work-related job guarantees. Hurst management would like to reduce its dependence on unionized labor.
Hurst’s manufacturing process is overhead-driven; most of the overhead arises from the common machinery that produces the Plush and Deluxe floor mats. Non-unionized 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 than through the amount of machine time required to produce each batch of mats. The following table summarizes the operating data for each mat style:
Overhead is allocated to the two mat styles using a predetermined overhead rate estimated from a flexible budget at the beginning of the year. Fixed overhead is estimated to be $680,000, and variable overhead is estimated to be $ 1.50 per machine minute. Management is debating whether to use machine minutes or direct labor cost as the overhead allocation base to allocate overhead to the two mat styles.
Required:
a. Calculate two overhead rates. The first uses machine minutes as the allocation base, and the second overhead rate uses direct labor cost as the allocation base. Round both overhead rates to two decimals.
b. Calculate the total product cost per batch of Plush and Deluxe mats using the two overhead rates calculated in (a).
c. Discuss the advantages and disadvantages of using machine minutes or direct labor cost as the allocation base for assigning overhead to the two mat styles.
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. Hurst’s 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 Hurst’s union are aggressive and are seeking additional work-related job guarantees. Hurst management would like to reduce its dependence on unionized labor.
Hurst’s manufacturing process is overhead-driven; most of the overhead arises from the common machinery that produces the Plush and Deluxe floor mats. Non-unionized 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 than through the amount of machine time required to produce each batch of mats. The following table summarizes the operating data for each mat style:
Plush Deluxe
Machine minutes per batch of 10 mats 12 9
Direct labor per batch of 10 mats$4$6
Direct material per batch of mats $7 $5
Number of batches per year 14,000 9,000
Overhead is allocated to the two mat styles using a predetermined overhead rate estimated from a flexible budget at the beginning of the year. Fixed overhead is estimated to be $680,000, and variable overhead is estimated to be $ 1.50 per machine minute. Management is debating whether to use machine minutes or direct labor cost as the overhead allocation base to allocate overhead to the two mat styles. Machine minutes per batch of 10 mats
Required:
a. Calculate two overhead rates. The first uses machine minutes as the allocation base, and the second overhead rate uses direct labor cost as the allocation base. Round both overhead rates to two decimals.
b. Calculate the total product cost per batch of Plush and Deluxe mats using the two overhead rates calculated in (a).
c. Discuss the advantages and disadvantages of using machine minutes or direct labor cost as the allocation base for assigning overhead to the two mat styles.
The following facts relate to Alschuler Corporation.
1.Deferred tax liability, January 1, 2010, $40,000.
2.Deferred tax asset, January 1, 2010, $0.
3.Taxable income for 2010, $167,900.
4.Pretax financial income for 2010, $330,700.
5.Cumulative temporary difference at December 31, 2010, giving rise to future taxable amounts, $321,200.
6.Cumulative temporary difference at December 31, 2010, giving rise to future deductible amounts, $58,400.
7.Tax rate for all years, 40%.
8.The company is expected to operate profitably in the future.
(a) Compute income taxes payable for 2010.
(b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2010. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
(c) Prepare the income tax expense section of the income statement for 2010, beginning with the line “Income before income taxes.”
The following financial data were adapted from the annual report of Best Buy Inc. for the period ending February 28, 2009:
In Millions
Accounts payable $4,997
Capital stock 442
Cash 498
Cost of goods sold 34,017
Income tax expense 674
Interest expense 94
Inventories 4,573
Investments 406
Goodwill and other intangible assets 2,698
Other assets 1,429
Other expenses 250
Other liabilities 5,673
Other revenue (net) 7
Property, plant, and equipment 4,174
Receivables 1,868
Sales 45,015
Selling, general, and administrative expenses 8,984
1. Prepare Best Buy’s retained earnings statement for the year ending February 28, 2009. (Note: the retained earnings at March 1, 2008 were $3,933. During the year, Best Buy paid dividends of $222.)
2. Prepare a balance sheet as of February 28, 2009 for Best Buy.
The following information is available for the first month of operations of Korv Inc., a manufacturer of art and craft items:
Sales
$775,000
Gross profit
$ 265,000
Indirect labor
63,000
Indirect materials
32,000
Other factory overhead
17,500
Materials purchased
303,000
Total Manufacturing costs for the period
620,000
Materials inventory, end of period
35,000
Using the above information, determine the following missing amounts: A. cost of goods sold B. Direct materials cost C. Direct labor cost D. Factory Overhead Chart Enter the labels and amounts required to complete the following three schedules
The following information, based on the 12/31/09 Annual Report to Shareholders of Krafty Foods ($ in millions):
Accounts payable 1897 Accounts receivable (net) 3131 Accrues liabilities and taxes 4105 Cash and cash equivalents 162 Cost of Sales 17531 Current payables to parent and affiliates 1652 Deferred income taxes and oth liabilities 10311 Current portion of longterm debt 540 Earnings retained in business 12/31/09 2391 Goodwill and other intangible assets -net 35957 Income tax expense 1565 Interest and other debt 1437 Inventories 3026 Long term debt 8134 Long term notes payable to affiliates 5000 Marketing, general and admin expenses 11460 Operating revenues 33875 Other current assets 687 Other noncurrent assets 3726 Other stockholders equity (2568) Paid-in capital for common and pref stock 23655 Property, plant and equipment 9109 Short-term borrowings 681
Based on the info presented here prepare the 2009 Income Statement for Krafty Foods
The following information relates to Jorgensen Manufacturing Products for calendar year 2011, the company’s first year of operation:
Units produced 8,050
Units sold 7,300
Selling price per unit $4,800
Direct material per unit $2,030
Direct labor per unit $1,250
Variable manufacturing overhead per unit $990
Variable selling cost per unit $225
Annual fixed manufacturing overhead $829,150
Annual fixed selling and administrative expense $401,600
Prepare an income statement using full costing. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
Jorgensen Manufacturing
Income Statement
For the Year End December 31, 2011
$
Less
Gross margin
Less:
Net income $
Prepare an income statement using variable costing. (List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
Jorgensen Manufacturing
Income Statement
For the Year End December 31, 2011
$
Less:
Contribution margin
Less:
Net income $
Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing.
$
What is the difference between income computed under variable costing and income computed under full costing?
$
Suppose that the company sold 8,050 units during the year. What would the variable costing net income have been?
Following is a list of information for Peter and Amy Jones for the current tax year. Peter and Amy are married and have three children, Aubrynne, Bryson, and Caden. They live at 1846 Joplin Way, Lakeville, MN 55022. Peter is a lawyer working for a Native American law firm. Amy works part-time in a genetic research lab. The Jones’ Social Security numbers and ages are as follows:
NAME S.S. NO. AGE
Peter 215-60-1989 32
Amy 301-60-2828 28
Aubrynne 713-84-5555 5
Bryson 714-87-2222 3
Caden 714-89-1684 1
RECIEPTS
Peter’s salary $70,000
Amy’s salary 32,000
DISBURSEMENTS
Eyeglasses and exam for Aubrynne $ 600
Orthodontic work for Bryson to correct a congenital defect 2,500
Medical insurance premiums 1,800
Withholding for state income taxes 7,200
Withholding for federal income taxes 16,000
State income taxes paid with last year’s tax return
(paid when the return was filed in the current year) 500
Property taxes on home 1,100
Property taxes on automobile 300
Interest on home 9,700
Interest on credit cards 200
Compute Peter and Amy’s income tax liability for the current year of 2009 using Form 1040, Schedule A.
The following selected transactions relate to liabilities of Odyssey Travel Corporation. Odyssey’s fiscal year ends on December 31.
Required: Prepare the appropriate journal entries through the maturity of each liability.
2009 Jan. 22 Negotiated a revolving credit agreement with Massey Bank which can be renewed annually upon bank approval. The amount available under the line of credit is $16 million at the bank’s prime rate. Mar. 1 Arranged a 3-month bank loan of $7 million with Massey Bank under the line of credit agreement. Interest at the prime rate of 10% was payable at maturity. June 1 Paid the 10% note at maturity. Nov. 1 Supported by the credit line, issued $6 million of commercial paper on a nine-month note. Interest was discounted at issuance at a 8% discount rate. Dec. 31 Recorded any necessary adjusting entry(s). 2010 Aug. 1 Paid the commercial paper at maturity.
The following transactions were incurred by Dimasi Industries during January 2010:
1. Issued $800,000 of direct material to production
2. Paid 40,000 hours of direct labor at $18 per hour
3. Accrued 15,500 hours of indirect labor cost at $15 per hour
4. Recorded $102,100 of depreciation on factory assets
5. Accrued $32,800 of supervisors’ salaries
6. Issued $25,400 of indirect material to production
7. Completed goods costing $1,749,300 and transferred them to finished goods.
A. Prepare journal entries for these transactions using a single overhead account for both variable and fixed overhead. The Raw Material Inventory account contains only direct material; indirect material costs are recorded in Supplies Inventory.
B. If Work in Process Inventory had a beginning balance of $18,900 and an ending balance of $59,600, what amount of manufacturing overhead was included in Work in Process Inventory during January 2010?
Formation of a Partnership. On May 31, six brothers decided to form the Grimm Brothers Partnership to publish and print children’s stories. The contributions of the brothers and their partnership interests are listed below. They share the economic risk of loss from liabilities according to their partnership interests.
Individual Asset Basis FMV Partnership
to Partner Interest
Al Cash $15,000 $15,000 15%
Bob accounts Receiv. 0 20,000 20%
Clay Office equip. 13,000 15,000 15%
Dave Land 50,000 15,000 15%
Ed Building 15,000 150,000 20%
Fred Services ? 15,000 15%
The following other information about the contributions may be of interest:
1. Bob contributes accounts receivable from this proprietorship, which uses the cash method of accounting.
2. Clay uses the office equipment in a small business he owns. When he joins the partnership, he sells the remaining business assets to an outsider. He has claimed $8,000 of MACRS depreciation on the office equipment.
3. The partnership assumes a $130,000 mortgage on the building Ed contributes. Ed claimed $100,000 of straight-line MACRS depreciation on the commercial property.
4. Fred, an attorney, drew up all the partnership agreements and filed the neccessary paperwork. He receives a full 15% capital and profits interest for his services.
a. How much gain, loss or income must each partner recognize as a result of the formation?
b. How much gain, loss, or income must the partnership recognize as a result of the formation?
c. What is each partner’s basis in the partnership interest?
d. What is the partnership’s basis in its assets?
e. What is the partnership’s initial book value of each asset?
f. What effects do the depreciation recapture provisions have on the property contributions?
g. How would your answer to Part a change if Fred received only a profits interest?
h. What are the tax consequences to the partners and the partnership when the partnership sells for $9,000 the land contributed by Dave? Prior to the sale, the partnership held the land as an investment for two years.
Franco Corporation was organized on January 1, 2012. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 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 5,000 shares of preferred stock for cash at $105 per share.
Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000.The fair market value of the land was $85,000.
May 1 Issued 80,000 shares of common stock for cash at $4.50 per share.
Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $30,000 for services provided in helping the company organize.
Sept. 1 Issued 10,000 shares of common stock for cash at $5 per share.
Nov. 1 Issued 1,000 shares of preferred stock for cash at $109 per share.
There is a general practitioner whose offices are located in the South Falls Professional Building. In the past, the Dr. has operated his practice with a nurse, a receptionist/secretary, and a part-time bookkeeper. The Dr. like many small-town physicians, has billed his patients and their insurance companies from his own office. The part-time bookkeeper, who works 10 hours per week, is employed exclusively for this purpose.
A Physician’s Service Center has offered to take over all of the Dr. billings and collections for an annual fee of $8,000. If the Dr. accepts this offer, he will no longer need the bookkeeper. The bookkeeper’s wages and fringe benefits amount to $14 per hour, and the bookkeeper works 50 weeks per year. With all the billings and collections done elsewhere, the Dr. will have two additional hours available per week to see patients. He sees an average of four patients per hour at an average fee of $35 per visit. The Dr’s practice is expanding, and new patients often have to wait several weeks for an appointment. He has resisted expanding his office hours or working more than 50 weeks per year. Finally, if the Dr. signs on with the center, he will no longer need to rent a records storage facility for $100 per month.
(a) Calculate the net benefit (cost) of outsourcing the bookkeeping.
Gordon Company sponsors a defined benefit pension plan. The following information related to the pension plan is available for 2010 and 2011.
2010 2011
Plan assets (fair value), December 31 $699,000 $849,000
Projected benefit obligation, January 1 700,000 800,000
Pension asset/Liability, January 1 140,000 Cr. ?
Prior service cost, January 1 250,000 240,000
Service cost 60,000 90,000
Actual and expected return on plan assets 24,000 30,000
Amortization of prior service cost 10,000 12,000
Contributions (funding) 115,000 120,000
Accumulated benefit obligation, December 31 500,000 550,000
Interest/settlement rate 9% 9%
Incorrect.
Compute pension expense for 2010 and 2011.
Pension Expense 2010 $
Pension Expense 2011 $
Incorrect.
Prepare the journal entries to record the pension expense and the company’s funding of the pension plan for both years. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2. If amounts are the same, list alphabetically.)
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
Larkins Company’s dividend payout ratio for Year 2 was closest to:
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
Larkins Company’s dividend yield ratio on December 31, Year 2 was closest to:
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
5. Larkins Company’s return on total assets for Year 2 was closest to:
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
Larkins Company’s return on common stockholders’ equity for Year 2 was closest to:
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
14. Larkins Company’s earnings per share of common stock for Year 2 was closest to:
Flower City Cartridges (FCC) manufactures replacement cartridges for desktop printers. FCC uses standard costs within a job order cost system. In June, FCC purchased 18 gallons of blue ink for $385.20 and produced the following four different cartridge jobs using the blue ink (and other inks, materials, and direct labor):
Jobs Blue Ink, Gallons used
CJ120 4.2
HP9X2 3.9
CN417 3.8
XRX776 4.4
All four labor jobs have a blue ink materials standard that calls for four gallons of blue ink per job. Blue ink has a standard cost of $20.00 per gallon. These were the only jobs calling for blue ink in June. There was no beginning blue ink inventory on June 1.
Prepare a table that indicates the financial disposition of the historical cost of the blue ink purchased in June. (That is, account for the $385.20 blue ink purchase.)
For each of the following (1) identify the type of account as an asset, liability, equity, revenue, or expense, (2) identify the normal balance of the account, and (3) select debit (Dr.) or credit (Cr.) to identify the kind of entry that would increase the account balance
Account Type of
Account
Normal
Balance Increase
(Dr. or Cr.)
a. Fees Earned (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
b. Equipment (Click to select)AssetRevenueLiabilityExpenseEquity (Click to select)DebitCredit (Click to select)DebitCredit
c. Notes Payable (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
d. Owner Capital (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
e. Cash (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
f. Legal Expense (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)CreditDebit
g. Prepaid Insurance (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
h. Land (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
i. Accounts Receivable (Click to select)RevenueExpenseLiabilityAssetEquity (Click to select)DebitCredit (Click to select)CreditDebit
j. Owner Withdrawals (Click to select)RevenueExpenseAssetLiabilityEquity (Click to select)DebitCredit (Click to select)CreditDebit
k. License Fee Revenue (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
l. Unearned Revenue (Click to select)AssetLiabilityEquityRevenueExpense (Click to select)DebitCredit (Click to select)DebitCredit
Which one of the following actions best matches the primary goal of financial management? (Points : 3)
increasing the net working capital while lowering the long-term asset requirements
improving the operating efficiency, thereby increasing the market value of the stock
increasing the firm’s market share
reducing fixed costs and increasing variable costs
increasing the liquidity of the firm by transferring short-term debt into long-term debt
2. (TCO 1) When analyzing alternative capital structures for a firm, a financial manager must consider which of the following? (Points : 3)
type of loan
amount of funds needed
cost of funds
mix of debt and equity
all of the above
3. (TCO 1) Market value reflects which of the following: (Points : 3)
The amount someone is willing to pay today for an asset.
The value of the asset based on generally-accepted accounting principles.
The asset’s historical cost.
A and B only
None of the above
4. (TCO 1) Which of the following is true regarding income statements? (Points : 3)
It reveals the net cash flows of a firm over a stated period of time.
It reflects the financial position of a firm as of a particular date.
It records revenue only when cash is received for the product or service provided.
It records expenses based on the recognition principle.
None of the above is a true statement.
5. (TCO 1) Tato’s Pizza has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Tato’s Pizza net income?
(Points : 3)
$157,950
$322,000
$243,000
$200,000
6. (TCO 1) Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what are the company’s income taxes? (Points : 3)
$122,850
$106,100
$94,500
None of the above
7. (TCO 1) Pizza A had earnings after taxes of $390,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased by 20 percent to $468,000 and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2009? (Points : 3)
$1.30
$1.44
$0.77
$0.69
8. (TCO 1) The financial statement that summarizes a firm’s operations over a period of time is called a(n): (Points : 3)
income statement.
cash flow statement.
production report.
balance sheet.
periodic operating statement.
9. (TCO 1) Best Electronics has EBIT of $450,000, interest of $30,000, taxes of $50,000, and depreciation of $80,000. What is the company’s operating cash flow? (Points : 3)
$497,200
$480,000
$530,000
$470,000
$450,000
10. (TCO 3) You opened a new certificate of feposit with $13,000. Your broker indicated that this investment pays five percent interest, compounded quarterly. Which one of the following statements is correct concerning this investment? (Points : 3)
You will receive equal interest payments every three months over the life of the investment.
You could earn more interest by investing in an account paying five percent simple interest.
You would have earned more interest if you had invested in an account paying annual interest.
You will earn less and less interest each year over the life of the investment.
You will earn more interest in year 3, than you will in year 2.
11. (TCO 3) Mr. Smith will receive $7,500 a year for the next 14 years from his trust. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments? (Points : 3)
$61,800
$53,500
$113,400
$97,200
12. (TCO 3) Paper Pro recently purchased a printing machine costing $97,000. The company financed this purchase at 8.25 percent interest, with monthly payments of $2,379.45. How many years will it take the firm to pay off this debt? (Points : 3)
3.0 years
4.0 years
4.25 years
4.5 years
5.0 years
(TCO 1) In a general partnership, each partner is personally liable for: (Points : 3)
the partnership debts that he or she personally obtained for the firm.
his or her proportionate share of all partnership debts, regardless of which partner incurred that debt.
the total debts of the partnership, even if he or she was unaware of those debts.
the debts of the partnership, up to the amount he or she invested in the firm.
all personal and partnership debts incurred by any partner, even if he or she was unaware of those debts.
2. (TCO 1) Which one of the following is classified as a current asset? (Points : 3)
land
accounts payable
equipment
inventory
note payable
3. (TCO 1) Explain agency theory. Provide an example of a potential agency problem for a corporation, and identify means by which the firm can help reduce or eliminate that problem. (Points : 8)
4. (TCO 3) What are some real-life scenarios where you can apply the time value of money? Present two or three scenarios. Briefly explain your rationale. (Points : 8)
5. (TCO 8) Explain some of the key risks associated with bonds. (Points : 8)
6. (TCO 6) What are some of the benefits of issuing bonds with call and put provisions? Explain your rationale.
the following balance sheet items, listed in Alphabetical order, are available from the records of Ruth Corporation at December 31,2010:
accounts payable $18,255 accounts receivable 23,450 accumulated depreciation-automobiles 22,500 accumulated depreciation- buildings 40,000 automobiles 112,500 bonds payable, due December 31, 2014 160,000 buildings 200,000 capital stock,$10 par value 150,00 cash 13,230
income taxes payable $6,200 interest payable 1,500 inventory 45,730 land 250,000 long-term investments 85,000 notes payable, due June 30, 2011 10,000 paid-in capital in excess of par value 50,000 patents 40,000 prepaid rent 1,500 retained earnings 311,095 salaries and wages payable 4,200
required: 1.Prepare in good form a classified balance sheet as of December 31, 2010. 2.Compute Ruth’s current ratio. 3.On the basis of your answer to (2), does Ruth appear to be liquid? What other information do you need to fully answer that question?
Following are Butler Realty Corporation’s accounts, identified by number. The company has been in the real estate business for ten years and prepares financial statements monthly. Following the list of accounts is a series of transactions entered into by Butler. For each transaction, enter the number(s) of the account(s) to be debited and credited.
Accounts:
1.Cash
2.Accounts receivable
3.Prepaid rent
4.Office supplies
5.Automobiles
6.Accumulated depreciation
7.Land
8.Accounts payable
9.Salaries and wages payable
10.Income tax payable
11.Notes payable
12.Capital stock $10 par
13.Paid-in capital in excess of par
14.Commissions revenue
15.Office supply expense
16.Rent expense
17.Salaries and wages expense
18.Depreciation expense
19.Interest expense
20.Income tax expense
Transactions: Debit Credit
Example:Issued additional shares of stock to owners at amount in excess of par 1 12,13
b.Purchased automobiles for cash
c.Purchased land; made cash down payment and signed a promissory note for balance
d.Paid cash to landlord for rent for next 12 months
e.Purchased office supplies on account
f. Collected cash for commissions from clients for properties sold during the month
g.Collected cash for commissions from clients for properties sold the prior month
h.During the month, sold properties for which cash for commissions will be collected
from clients the next month
i.Paid for office supplies purchased on account in an earlier month
j.Recorded an adjustment to recognize wages and salaries incurred but not yet paid
k.Recorded an adjustment for office supplies used during the month
l. Recorded an adjusting entry for the portion of prepaid rent that expired during the
month
m.Made required month end payment on note taken out (c); payment is part interest
and part principal
n.Recorded adjusting entry for monthly depreciation on the autos
The following cost data pertain to the operations of Lefthand Department Stores, Inc., for the month of December.
Corporate legal office salaries $75,800
Shoe Department cost of sales, Brentwood Store $36,600
Corporate headquarters building lease $79,900
Store manager’s salary–Brentwood Store $12,200
Shoe Department sales commissions, Brentwood Store $4,900
Store utilities–Brentwood Store $13,600
Shoe Department manager’s salary, Brentwood Store $1,100
Central warehouse lease cost $9,600
Janitorial costs, Brentwood Store $7,900
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores.
What is the total amount of the costs listed above that are NOT direct costs of the Brentwood Store?
The following cost data pertain to the questions of lefthand department stores, Inc., for the month of December.
Corporate Legal Office Salaries $74,000
Shoe Department cost of sales, Brentwood store $35,000
Corporate Headquarters Building Base $78,000
Store Manager’s salary-Brentwood store $14,000
Shoe Department sales commissions-Brentwood store $5,000
Store Utilities-Brentwood Store $14,000
Shoe Department Manager’s salary-Brentwood store $3,000
Central Warehouse lease cost $10,000
Janitorial Costs-Brentwood Store $8,000
The Brentwood store is just one of many stores owned and operated by the company. The Show Department is one of many departments at the Brentwood Store. The Central Warehouse serves all of the company’s stores.
What is the total amount of the costs listed above that are not direct costs of the Brentwood store?
A. $43,000
B. $36,000
C. $162,000
D. $78,000
I’m getting C because I added The corporate legal office salaries, corporate headquarters building base, and central warehouse lease cost because those costs really don’t apply to the Brentwood store which means they are not direct costs of the Brentwood store, right? If it doesn’t deal directly with this store’s cost, then it’s not a direct cost, right? Help please! Just want to make sure this is right. Thanks in advance!
The following cost data pertain to the questions of lefthand department stores, Inc., for the month of December.
Corporate Legal Office Salaries $74,000
Shoe Department cost of sales, Brentwood store $35,000
Corporate Headquarters Building Base $78,000
Store Manager’s salary-Brentwood store $14,000
Shoe Department sales commissions-Brentwood store $5,000
Store Utilities-Brentwood Store $14,000
Shoe Department Manager’s salary-Brentwood store $3,000
Central Warehouse lease cost $10,000
Janitorial Costs-Brentwood Store $8,000
The Brentwood store is just one of many stores owned and operated by the company. The Show Department is one of many departments at the Brentwood Store. The Central Warehouse serves all of the company’s stores.
What is the total amount of the costs listed above that are *NOT* direct costs of the Brentwood store?
A. $43,000
B. $36,000
C. $162,000
D. $78,000
I’m getting C because I added The corporate legal office salaries, corporate headquarters building base, and central warehouse lease cost because those costs really don’t apply to the Brentwood store which means they are NOT direct costs of the Brentwood store, right? Just want to make sure this is right. Thanks in advance!
From the following data, determine for the current year the (a) rate earned on total assets, (b) rate earned on stockholders’ equity, (c) rate earned on common stockholders’ equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on common stock. Assume that the current market price per share of common stock is $25. (Present key figures used in your computations.)
Current year Preceding Year
Current assets $ 745,000 $ 820,000
Property, plant, and equipment 1,510,000 1,400,000
From the following data, determine for the current year the (a) rate earned on total assets, (b) rate earned on stockholders’ equity, (c) rate earned on common stockholders’ equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on common stock. Assume that the current market price per share of common stock is $25. (Present key figures used in your computations.)
Current Year Preceding Year Current assets $ 745,000 $ 820,000 Property, plant, and equipment 1,510,000 1,400,000 Current liabilities (non-interest-bearing) 160,000 140,000 Long-term liabilities, 12% 400,000 400,000 Preferred 10% stock 250,000 250,000 Common stock, $25 par 1,200,000 1,200,000 Retained earnings: Beginning of year 240,000 160,000 Net income for year 95,000 155,000 Preferred dividends declared (25,000) (25,000) Common dividends declared (70,000) (60,000)
From the following data, determine for the current year the (a) rate earned on total assets, (b) rate earned on stockholders’ equity, (c) rate earned on common stockholders’ equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on common stock. Assume that the current market price per share of common stock is $25. (Present key figures used in your computations.)
Current Year Preceding Year
Current assets $ 745,000 $ 820,000
Property, plant, and equipment 1,510,000 1,400,000
EX 2- 1 Chart of accounts The following accounts appeared in recent financial statements of Continental Airlines:
Accounts Payable
Flight Equipment
Air Traffic Liability
Landing Fees ( Expense)
Aircraft Fuel Expense
Passenger Revenue
Cargo and Mail Revenue
Purchase Deposits for Flight Equipment
Commissions ( Expense)
Spare Parts and Supplies
Identify each account as either a balance sheet account or an income statement account. For each balance sheet account, identify it as an asset, a liability, or owner’s equity. For each income statement account, identify it as a revenue or an expense.
EX 1- 24 Statement of cash flows A summary of cash flows for Absolute Consulting Group for the year ended July 31, 2012, is shown below.
Cash receipts:
Cash received from customers $ 187,500
Cash received from additional investment of owner 40,000
Cash payments:
Cash paid for operating expenses 127,350 Cash paid for land 30,000
Cash paid to owner for personal use 5,000
The cash balance as of August 1, 2011, was $ 27,100. Prepare a statement of cash flows for Absolute Consulting Group for the year ended July 31, 2012.
Carrico Advertising Inc. performs advertising services for several fortune 500 companies. The following information describes Carrico’s activities during 2011.
A. 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.
B. 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 credit. Carrico had $2,230 of supplies on hand at the end of 2011.
C. Carrico’s 2011 operating and interest expenses were $437,600 and $133,400, respectively.
Required:
1. Calculate Carrico’s 2011 income before taxes.
2. Calculate the amount of Carrico’s accounts receivable, supplies, and accounts payable at December 31, 2011.
3. Explain the underlying principles behind why the three accounts computed in part 2 exist.
For this exercise, you will discuss the issues below in the context of Costco Wholesale Corporation. You should go to the web page Costco Wholesale Investor Relations and click on the 2011 Annual Report. In the table of contents you should at a minimum read/review the following sections: Financial Highlights; Letter to Shareholders; Business Overview; Managements’ Discussion and Analysis of Financial Condition and Results of Operations; and, the Consolidated Income Statement.
Cite evidence that Costco provides, which indicates that it may or may not be incorporating a balanced scorecard approach in its management philosophy.
Given the information provided discuss evidence of critical success factors for Costco. Make sure that your answer is in the context of our class discussion of critical success factors.
In reviewing Costco’s Consolidated Income Statement identify one example for each of the following: Direct manufacturing labor Direct manufacturing materials cost Manufacturing overhead Selling expense Administrative expense
For this exercise you will use the web pages for Costco.com. Suppose you have decided to start a small business selling snacks from vending machines. Lynn University has allowed you to place a vending machine in the Ritter Building. Rental for the space will cost $300 per month. You will purchase the vending machine and the snack products at Costco.
Assume the following for this machine at the Ritter Building:
You will purchase the cheaper of the two vending machines offered by Costco. This machine will be depreciated over three years on a straight line basis.
Delivery costs will be $100 per month.
You will sell Oreo Cookies, Cheese and Peanut Butter Crackers, Famous Amos Chocolate Chip Cookies, and Cheez-It Cracker Snacks. On average the costs of these snacks will be $.53 per unit.
The vending machine price for these snacks will be $1.00.
Other monthly costs are $150.
Your tax rate is 35 percent.
How much revenue each month does the machine need to produce for you to earn $300 after taxes each month? After making your computations does this seem like a good business venture for you?
Assume that instead of placing a machine at the Ritter Building, you will place a machine in the Library. For the purpose of this analysis assume the following:
You will purchase the more expensive vending machine, also depreciated over three years.
Delivery costs will be $150 per month.
Other monthly costs will be $200 per month.
In addition to selling the above snack items, you will also sell water and soft drinks, which on average will cost you $.60 per unit.
The vending machine price for the beverages will be $1.50. You expect to sell three beverages for each snack product.
The rental cost will remain at $300 per month.
The tax rate is still 35 percent.
How much revenue each month does the machine need to produce for you to earn $450 after taxes each month? After making your computations does this seem like a good business venture for you?
Express versus Implied Contracts. Suppose that a local businessperson, McDougal, is a good friend of Krunch, the owner of a local candy store. Every day on his lunch hour McDougal goes into Krunch’s candy store and spends about five minutes looking at the candy. After examining Krunch’s candy and talking with Krunch, McDougal usually buys one or two candy bars. One afternoon, McDougal goes into Krunch’s candy shop, looks at the candy, and picks up a $1 candy bar. Seeing that Krunch is very busy, he catches Krunch’s eye, waves the candy bar at Krunch without saying a word, and walks out.
Is there a contract? If so, classify it within the categories listed in this chapter. In responding to the question be sure to:
in our feature story about super bakery inc, we described a virtual corporation as one that consists of a core unit that is supported by a network of outsourced activities. a virtual corporation minimizes investment in human resource, fixed assets, and working capita. tha application of ABC to super bakery inc is described in an actricle tittled ABC in a virtual corporation by tom davis and bruce darling in the october 1996 isse of mamagement accounting
instuction
assume you are the owner of a virtual corporation. using the article as a basis for your communication, write a summary that answers the following questions
1 what unique strategies and tactics did super bakery’s management implement that caused sales to take off and continue to grow an average rate of 20%?
2 why did super bakery’s management feel that it was necessary to install an ABC system?
3 what is the main difference between super bakery’s ABC system and other manufacturers’ ABC system?
These financial statement items are for Whitnall Corporation at year-end, July 31, 2012.
Salaries and wages payable $ 2,080
Salaries and wages expense 57,500
Supplies expense 15,600
Equipment $18,500
Accounts payable 4,100
Service revenue 66,100
Rent revenue 8,500
Notes payable (due in 2015) 1,800
Common stock 16,000
Cash 29,200
Accounts receivable 9,780
Accumulated depreciation”equipment 6,000
Dividends 4,000
Depreciation expense 4,000
Retained earnings (beginning of the year) 34,000
Instructions
(a) Prepare an income statement and a retained earnings statement for the year. Whitnall Corporation did not issue any new stock during the year.
(b) Prepare a classified balance sheet at July 31.
(c) Compute the current ratio and debt to total assets ratio.
(d) Suppose that you are the president of Crescent Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Whitnall. He would like to provide a loan to Whitnall in the form of a 10%, 5-year note payable. Evaluate how this loan would change Whitnall’s current ratio and debt to total assets ratio, and discuss whether you would make the sale.
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
5. Larkins Company’s return on total assets for Year 2 was closest to:
Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2 Year 1
Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net
$180
210
130
50
570
1,540
$180
180
120
50
530
1,480
Total assets $2,110 $2,010
Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity
$100
60
90
250
480
730
120
180
240
840
1,380
$2,110
$130
60
120
310
500
810
120
180
240
660
1,200
$2,010
Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income $2,760
1,930
830
330
500
50
450
135
$315
Dividends during Year 2 totaled $135 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $150.
Larkins Company’s return on common stockholders’ equity for Year 2 was closest to:
Drew Carey Company has the following balances in selected accounts on December 31,2010. Accounts Receivable $ 0
Accumulated Depreciation – Equipment 0
Equipment 7000
Interest Payable 0
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries Payable 0
Supplies 2,450
Unearned Consulting Revenue 40,000
All the accounts have normal balances. The information below has been gathered at December31,2010. 1. Drew Carey Company borrowed $10,000 by signing a 12%, one year note on September 1, 2010. 2. A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand. 3. Depreciation on the equipment for 2010 is $1,000. 4. Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2010. 5. On December 1, 2010, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2010.
6. Drew Carey performed consulting services for a client in December 2010. The client will be billed $4,200. 7. Drew Carey 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 2010.
Instructions: Prepare adjusting entries for the seven items described above.
Drew Carey Company has the following balances in selected accounts on December 31, 2010.
Accounts Receivable $ -0-
Accumulated Depreciation-Equipment -0-
Equipment 7,000
Interest Payable -0-
Notes Payable 10,000
Prepaid Insurance 2,100
Salaries Payable -0-
Supplies 2,450
Unearned Consulting Revenue 40,000
All the accounts have normal balances. The information below has been gathered at December 31, 2010.
Instructions
Prepare adjusting entries for the seven items described below.
Drew Carey Company borrowed $10,000 by signing a 12%, one-year note on September 1, 2010.
A count of supplies on December 31, 2010, indicates that supplies of $800 are on hand.
Depreciation on the equipment for 2010 is $1,000.
Drew Carey Company paid $2,100 for 12 months of insurance coverage on June 1, 2010.
On December 1, 2010, Drew Carey collected $40,000 for consulting services to be performed from December 1, 2010, through March 31, 2011.
Drew Carey performed consulting services for a client in December 2010. The client will be billed $4,200.
Drew Carey 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 2010.
DVDS Manufactures and sells DVD players in two countries. It manufactures two models- Basic an Custom_ in the same plant. The Basic DVD has fewre options and provides lower-quality output than the Custom DVD. The basic model is sold only in a developing country and while the custom model is sold only in a developed country. DVDS pays income taxes to the country where the final sale of the DVD player takes place. The following table summarizes DVDS operations.
DVDS
Summary of Operatios
Current Year
Basic Custom
Quality produced and sold 60,000 70,000
Price $75 $140
Direct labor/unit $15 $30
Direct materials/unit $40 $80
Income tax rate 15% 35%
Besides direct materials and direct labor, manufacturing overhead amounts to $2 milloin and is currently assigned to products based on direct labor dollars. Manufacturing overhead is a fixed cost (does not vary with the number of units produced).
Required:
a. Calculate the unit manufacturing cost of the Basic and Custom DVD models using traditional absorption costiong. Manufacturing overhead is allocated based on direct labor dollars.
b. DVDS hires a consulting firm to analyz its costing methods. After performing an extensive review, the consultants determine that the vast majority of the $2 million of overhead varies with the number of different parts in the two DVD models. The number of parts drives purchasing department activities. More engineering time is spent on the more complex Custom DVD models. More accounting depreciation of assembly and testing equipment is incurred producing the Custom DVD model than the Basic DVD model. The Basic DVD has 140 different parts and the Custom DVD model has 160 different parts. Calculate the unit manufacturing cost of the Basic and Custom DVD models using activity-based costing.
c. Should DVDS change its costing methodology from its traditional absorption costing to ABC? Explain why it should or should not.
Lily began business on January 1, 2009, with an investment of $100,000.
Instructions
From an analysis of the change in owner’s equity during the year, compute the net income (or loss) for the following situations. (If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45).)
(a) 2009, assuming Lily’s drawings were $15,000 for the year.
$
(b) 2010, assuming Lily made an additional investment of 50,000 and had no drawings in 2010.
$
(c) 2011, assuming Lily made an additional investment of $15,000 and had drawings of $30,000 in 2011.
Suzaki manufacturing company is considering three new projects,each requiring an equipment investment of $22,000. Eachproject will last for 3 years and produce the following
Year AA BB CC
1 $7,000 $9,500 $13,000
2 9,000 9,500 10,000
3 15,000 9,500 9,000
Total $31,000 $28,500 $32,000
The equipment’s salvage value is zero. Suzuki usesstraight ‘line depreciation. Suzaki will not accept anyproject with a payback period over 2 years. Suzaki’s minimumrequired rate of return is 12%.
A. Compute each projects payback period, indicating the mostdesirable project and the least desirable project using thismethod. (Round to two decimals)
B. Compute the net present value of each project, Dose yourevaluation change? (Round to nearest dollar.)
E5-13 (Statement of Cash flows- Classifications) The major classifications of activities reported in the statements of cash flows are operating, investing, and financing. Classify each of the transactions listed below as:
1. Operating activity-add to net income
2. Operating activity-deduct from net income
3. Investing activity
4. Financing activity
5. Reporting as significant noncash activity
The transactions are as follows.
(a) Issuance of capital stock
(b) Purchase of land and building
(c) Redemption of bonds
(d) Sale of equipment
(e) Depreciation of machinery
(f) Amortization of patent
(g) Issuance of bonds for plant assets
(h) Payment of cash dividends
(i) Exchange of furniture for office equipment
(j) Purchase of treasury stock
(k) Loss on sale of equipment
(l) Increase in accounts receivable during the year
Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains. Hotel purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled. Koehler sends a site supervisor and a small crew of employees to the hotel. The site supervisor first hires additional local employees to help assemble the furniture and then trains them. The locally hired employees along with the small crew of Great Southern Employees assemble the furniture at the hotel. This significantly reduces the shipping charges and damage to the furniture. Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture.
The 500 room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets. He establishes that 4.5 hours are required to assemble one complete room and the estimated costs per our is $22. Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.
Write a report evaluating the performance of the crew at the Hyatt in Tampa.
The equity of Webster Corporation’s balance sheet shows the following
Preferred stock– 5% Cumulative, $10 par value, $15 call price 10,000 shares issued and outstanding ……………………………………..$100,000 Common Stock– $10 par value, 55,000 shares issued and outstanding …………………………………………………………………$550,000 Retained Earnings …………………………………………………………. $267,500
Total stockholders’ equity ………………………………………………… $917,500
Determine the book value per share of the preferred and common stock under two separate situations. 1. No preferred dividends are in arrears. 2. Three years of preferred dividends are in arrears. Please don’t post simple answers, I need the solutions so I can understand where the answers are coming from.
Statement of owner’s equity Financial information related to Lost Trail Company, a proprietorship, for the month ended June 30, 2012, is as follows: Net income for June $ 125,000 Penny Beall’s withdrawals during June 18,000 Penny Beall’s capital, June 1, 2012 375,000
a. Prepare a statement of owner’s equity for the month ended June 30, 2012.
b. Why is the statement of owner’s equity prepared before the June 30, 2012, balance sheet?
EX 1- 19
Income statement Universal Services was organized on October 1, 2012. A summary of the revenue and expense transactions for October follows:
Fees earned $ 800,000
Wages expense 270,000
Rent expense 60,000
Supplies expense 9,000 Miscellaneous
expense 12,000
Prepare an income statement for the month ended October 31.
PR 1- 5A Transactions; financial statements Kean Dry Cleaners is owned and operated by Wally Lowman. A building and equipment are currently being rented, pending expansion to new facilities. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on March 1, 2012, are as follows: Cash, $ 15,000; Accounts Receivable, $ 31,000; Supplies, $ 3,000; Land, $ 36,000; Accounts Payable, $ 13,000. Business transactions during March are summarized as follows:
a. Wally Lowman invested additional cash in the business with a deposit of $ 28,000 in the business bank account.
b. Paid $ 14,000 for the purchase of land as a future building site.
c. Received cash from cash customers for dry cleaning revenue, $ 17,000.
d. Paid rent for the month, $ 5,000.
e. Purchased supplies on account, $ 2,500.
f. Paid creditors on account, $ 12,800.
g. Charged customers for dry cleaning revenue on account, $ 34,000.
h. Received monthly invoice for dry cleaning expense for March ( to be paid on April 10), $ 13,500.
i. Paid the following: wages expense, $ 7,500; truck expense, $ 2,500; utilities expense, $ 1,300; miscellaneous expense, $ 2,700.
j. Received cash from customers on account, $ 28,000.
k. Determined that the cost of supplies on hand was $ 1,900; therefore, the cost of sup-plies used during the month was $ 3,600.
l. Withdrew $ 8,000 cash for personal use.
Instructions 1. Determine the amount of Wally Lowman’s capital as of March 1 of the current year.
2. State the assets, liabilities, and owner’s equity as of March 1 in equation form similar to that shown in this chapter. In tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. Prepare an income statement for March, a statement of owner’s equity for March, and a balance sheet as of March 31. 4. ( Optional). Prepare a statement of cash flows for March.
EX 2- 9
Transactions and T accounts The following selected transactions were completed during August of the current year:
1. Billed customers for fees earned, $ 35,700.
2. Purchased supplies on account, $ 2,000.
3. Received cash from customers on account, $ 26,150.
4. Paid creditors on account, $ 800.
a. Journalize the above transactions in a two- column journal, using the appropriate num-ber to identify the transactions. Journal entry explanations may be omitted.
b. Post the entries prepared in ( a) to the following T accounts: Cash, Supplies, Accounts Receivable, Accounts Payable, Fees Earned. To the left of each amount posted in the accounts, place the appropriate number to identify the transactions.
c. Assume that the unadjusted trial balance on August 31 shows a credit balance for Accounts Receivable. Does this credit balance mean an error has occurred?
PR 2- 3A Journal entries and trial balance On April 1, 2012, Kathleen Alvarez established an interior decorating business, Intrex Designs. During the month, Kathleen completed the following transactions related to the business: Apr.
1. Kathleen transferred cash from a personal bank account to an account to be used for the business, $ 17,000.
2. Paid rent for period of April 2 to end of month, $ 3,400.
6. Purchased offi ce equipment on account, $ 10,000.
8. Purchased a used truck for $ 21,000, paying $ 2,000 cash and giving a note payable for the remainder.
To complete the following assignment, go to this week’s Final Project link in the left navigation.
Focus of the Final Project
To complete this project, use the “Final Project Data Set” found in your eCollege classroom in the Final Project description.
PART I:
Calculate the mean yearly value using the average gas prices by month found in the “Final Project Data Set.”
Using the years as your x-axis and the annual mean as your y-axis, create a scatterplot and a linear regression line.
Answer the following questions using your scatterplot and linear regression line:
What is the slope of the linear regression line?
What is the Y-intercept of the linear regression line?
What is the equation of the linear regression line in slope-intercept form?
Based on the linear regression line, what would be an estimated cost of gas in the year 2020?
What are the residuals of each year?
Select a current price that you have seen or paid recently for gas. Is that price within the range of the linear regression line or is it an outlier? Is it within the confidence interval of 5% or either end?
PART II:
Imagine that you are a manager at a delivery service and you are creating a report to project the effects on your company of rising gas prices in the next ten years. Using the preceding statistical analysis as your basis and outside scholarly resources to support your claims, write a 3 to 5 page paper interpreting the results from this perspective. Include the following considerations:
Introduce the project and its significance to the company.
Explain the statistical analysis that you completed in Part I. Be sure to explain where the data came from, what analysis was done, and what the results were.
Give conclusions that you have drawn from the data. Consider the effects of your gas price predictions on the delivery business. Also consider whether or not you believe your predicted gas prices are accurate. What could occur in the future that would change your linear regression line and therefore your prediction?
Writing the Final Project
The Final Project:
Part I must be provided as an Excel spreadsheet. It must be complete and show all work, not just a final amount or answer
Part II must be 3 to 5 double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center
Must include a title page with the following:
a. Title of paper
b. Student’s name
c. Course name and number
d. Instructor’s name
e. Date submitted
Must include an introductory paragraph with a succinct thesis statement
Must address the topic of the paper with critical thought
Must conclude with a restatement of the thesis and a conclusion paragraph
Must use at least 3 scholarly resources, including a minimum of 2 from the Ashford Online Library
Must document all sources in APA style, as outlined in the Ashford Writing Center
Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center
To complete this project, use the “Final Project Data Set” found in your eCollege classroom in the Final Project description. (this information is listed below)
PART I:
1. Calculate the mean yearly value using the average gas prices by month found in the “Final Project Data Set.”
2. Using the years as your x-axis and the annual mean as your y-axis, create a scatterplot and a linear regression line.
3. Answer the following questions using your scatterplot and linear regression line:
? What is the slope of the linear regression line?
? What is the Y-intercept of the linear regression line?
? What is the equation of the linear regression line in slope-intercept form?
? Based on the linear regression line, what would be an estimated cost of gas in the year 2020?
? What are the residuals of each year?
? Select a current price that you have seen or paid recently for gas. Is that price within the range of the linear regression line or is it an outlier? Is it within the confidence interval of 5% or either end?
PART II:
Imagine that you are a manager at a delivery service and you are creating a report to project the effects on your company of rising gas prices in the next ten years. Using the preceding statistical analysis as your basis and outside scholarly resources to support your claims, write a 3 to 5 page paper interpreting the results from this perspective. Include the following considerations:
1. Introduce the project and its significance to the company.
2. Explain the statistical analysis that you completed in Part I. Be sure to explain where the data came from, what analysis was done, and what the results were.
3. Give conclusions that you have drawn from the data. Consider the effects of your gas price predictions on the delivery business. Also consider whether or not you believe your predicted gas prices are accurate. What could occur in the future that would change your linear regression line and therefore your prediction?
Writing the Final Project??The Final Project:
1. Part I must be provided as an Excel spreadsheet. It must be complete and show all work, not just a final amount or answer
2. Part II must be 3 to 5 double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center
3. Must include a title page with the following:?a. Title of paper?b. Student’s name?c. Course name and number?d. Instructor’s name?e. Date submitted
4. Must include an introductory paragraph with a succinct thesis statement
5. Must address the topic of the paper with critical thought
6. Must conclude with a restatement of the thesis and a conclusion paragraph
7. Must use at least 3 scholarly resources, including a minimum of 2 from the Ashford Online Library
8. Must document all sources in APA style, as outlined in the Ashford Writing Center
9. Must include a separate reference page, formatted according to APA style as outlined in the Ashford Writing Center
Consumer Price Index – Average Price Data
Original Data Value
Series Id: APU000074714
Area: U.S. city average
Item: Gasoline, unleaded regular, per gallon/3.785 liters
Years: 1982 to 2011
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Mean
Condensed balance sheet and income statement data for Sievert Corporation are presented here and on the next page.
SIEVERT CORPORATION
Balance Sheets
December 31
Assets 2012 2011
Cash $ 28,000 $ 20,000
Receivables (net) 70,000 62,000
Other current assets 90,000 73,000
Long-term investments 62,000 60,000
Plant and equipment (net) 510,000 470,000
Total assets $760,000 $685,000
Liabilities and Stockholders’ Equity
Current liabilities $ 75,000 $ 70,000
Long-term debt 80,000 90,000
Common stock 330,000 300,000
Retained earnings 275,000 225,000
Total liabilities and stockholders’ equity $760,000 $685,000
SIEVERT CORPORATION
Income Statements
For the Years Ended December 31
2012 2011
Sales $750,000 $680,000
Cost of goods sold 440,000 400,000
Operating expenses (including income taxes) 240,000 220,000
Net income $ 70,000 $ 60,000
Additional information:
Cash from operating activities $82,000 $56,000
Cash used for capital expenditures $45,000 $38,000
Dividends paid $20,000 $15,000
Average number of shares outstanding 33,000 30,000
Instructions
Compute these values and ratios for 2011 and 2012.
(a) Earnings per share.
(b) Working capital.
(c) Current ratio.
(d) Debt to total assets ratio.
(e) Free cash flow.
(f) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2011 to 2012 of Sievert Corporation.
Consider a single product firm with the following LLAs, where q denotes units manufactured and selling and administrative is, of course,a period cost.
direct labor DL = 10q direct material DM = 10q overhead OV = 90, 000 + 2DL selling and administrative SA = 120, 000
The product sells for 100 per unit. Initially no inventory is present. Production and sales quantities for five consecutive years are noted below. At no time is there any ending work-in-process inventory.
Assume the various LLAs are completely accurate. Determine the income and ending finished goods inventory for each period, using normal, full costing and using normal, variable costing. Assume a normal volume of q = 4,500 units.
Consider a situation in which you or someone you know engaged in a written or oral contract containing specific performance requirements from the contractor providing business services. In the situation, the contractor breached one or more of the contract performance requirements.
Using the six essential elements of an enforceable contract, provide a thorough analysis of the situation. Discuss the options under the contact while considering the potential of “substantial performance” and “inferior performance.” Also, consider potential remedies for the non-breaching party.
Use the following guidelines to format your paper:
Introduction
Describe the issue/topic area.
Define and describe any specific position(s) taken in this paper.
Provide an overview of the scope of what will be addressed in the paper.
Consider a situation in which you or someone you know engaged in a written or oral contract containing specific performance requirements from the contractor providing business services. In the situation, the contractor breached one or more of the contract performance requirements.
Using the six essential elements of an enforceable contract, provide a thorough analysis of the situation. Discuss the options under the contact while considering the potential of “substantial performance” and “inferior performance.” Also, consider potential remedies for the non-breaching party.
Use the following guidelines to format your paper:
Analysis
Discuss the differences between “Substantial Performance” and “Inferior Performance” breach.
Consider the rights of the non-breaching party.
Explain the options the non-breaching party may have (deduct cost of remedy, recover costs, rescind contract, consequential damages, etc.)
At what point in the process would one be best advised to seek legal counsel?
This section must reflect an analysis and understanding of contract law.
Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Product
CoolDay LiteMist
Grape processing Cart of grapes $ 145,860 6,600 6,000 600
Aging Total months 396,000 6,600,000 3,000,000 3,600,000
Bottling and corking Number of bottles 270,000 900,000 600,000 300,000
Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000
Maintain and inspect equipment Number of inspections 240,800 800 350 450
$1,241,660
Answer each of the following questions. (Round all calculations to three decimal places.)
1. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products.
(a) Cost/liter”C.D. $1.078
Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver).
Prepare a schedule assigning each activity’s overhead cost pool to each product, based on the use of cost drivers. Include a computation of overhead cost per liter.
(c) Cost/liter”C.D. $.241
Compute the total manufacturing cost per liter for both products under ABC.
Below are cost and measures of activity in a variety of organizations. Classify each cost as variable or fixed with respect to the indicated measure of activity by listing out the numbered item and a “V” for variable or an “F” for fixed cost. For exampel: 1F, 2F, etc.
Cost / Measure of Activity
1. The cost of Xray film used in the radiology lab at Virginia Mason Hospital / Number of Xrays taken
2. Cost of advertising a rock concert in NYC / Number of rock concert tickets sold
3. Cost of renting retail space for McDonalds restaurant in Hong Kong / Total sales at the restaurant
4. Electrical cost of running a roller coaster at Magic Mt. / Number of times the roller coaster is run
5. Property taxes paid by yoru local cinema theater / Number of tickets sold
6. Cost of sales commissions paid to salespersons at Nordtrom store / Total sales at the store
7. Property insurance on a Coca-Cola bottling plant / Number of cases of bottles produced
8. Costs of synthetic materials used to make a particular model of running shoe / Number of shoes of that model produced
9. Costs of shipping Panasonic TVs to retail stores / The number of TVs sold
10. Cost of leasing an ultrascan diagnostic machine a hospital in Paris / The number of patients how are scanned with the machine
In the current year, Emily, a widow, engages in the following transactions. Determine the amount of the completed gift, if any, arising from each of the following occurrences. (show work please)
1.
a. Emily names Lauren the beneficiary of a $100,000 life insurance policy on Emily’s life. The beneficiary designation is not irrevocable.
b. Emily deposits $50,000 into a checking account in the joint names of herself and Matt, who deposits nothing to the account. Later that year, Matt withdraws $15,000 from the account.
c. Emily pays $22,000 of nephew Noah’s medical expenses directly to County Hospital.
d. Emily transfers the title to land calues at $60,000 to OLive.
2. Refer to the facts above and assume the current year is 2011. Emily prior gifts are as follows:
Year: 1974 Amount of taxable gifts: $500,000
Year: 1998 Amount of taxable gifts: $1,000,000
What is the gift tax liability with respect to Emily’s 2011 gifts?
Daniel receives 400 shares of A&M Corporation stock from his aunt on May 20, 2011 as a gift when the stock has a $60,000 FMV. His aunt purchased the stock in 2004 for $42,000. The taxable gift is $60,000 because she made earlier gifts to Daniel during 2011 and used the annual exclusion. She paid a gift tax of $9,300 on the gift of A&M stock to Daniel. Daniel also inherited 300 shares of Longhorn Corporation preferred stock when his uncle died on November 12, 2010, when the stock’s FMV was $30,000. His uncle purchased the stock in 1991 for $27,600. Determine the gain or loss on the sale of A&M and Longhorn stock on December 15, 2011, under each alternative situation below. A&M stock was sold for $62,600, and Longhorn stock was sold for $30,750. A&M stock was sold for $58,200, and Longhorn stock was sold for $28,650. Assume the same as in Part a, except that his aunt purchased A&M stock for $71,000 and his uncle purchased Longhorn stock for $31,200. Answer each problem in detail with conclusion and results. Answer each problem in detail with conclusion and results.
Danielle Corporation uses an activity-based costing system with the following three activity cost pools:
Activity cost pool Total activity
Fabrication 50,000 machine hours
Order processing 500 orders
Other Not applicable
The other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs:
Cost data
Wages and salaries $280,000
Depreciation $200,000
Occupancy $140,000
Total $620,000
Activity Cost Pools
Wages and salaries 60% 30% 10% 100%
Depreciation 20% 35% 45% 100%
Occupancy 10% 50% 40% 100%
Fabrication Processing Other Total
The activity rate for the fabrication activity cost pool is closest to _____ per machine hour.
On December 21, a company borrowed $100,000 from its bank. The loan has an annual interest rate of 10%. The first payment on the loam will be due on January 21. The company’s accounting year ends on December 31.
Q1. The December 31 adjusting entry will include a debit to interest _______________.
Q2. The December 31 adjusting entry will include a credit to interest _______________.
Q3. The amount of the December 31 adjusting entry is $__________.
Q4. If the December 31 adjusting entry is not made, will the company’s net income be too high or too low?
Q5. If the December 31 adjusting entry is not made, will the amount of the company’s liabilities reported on the balance sheet be too low, or okay?
Q6. Is the type of adjusting entry in questions 1 through 5 accrual or deferral?
At December 31, 2009, the general ledger of Main Street Marketing had the following account balances. All adjusting entries (except for income taxes at 40%) have been made. The company had 9,000 shares of common stock outstanding during the year.
Accounts payable $7,340
Accounts receivable $12,980
Accrued liabilities $22,500
Accumulated depreciation $14,980
Advertising expense $8,777
Cash $7,980
Common stock $28,000
Cost of goods sold $118,922
Depreciation expense $11,254
Equipment $78,700
Loss of sale of land $7,900
Interest expense $1,980
Merchandise $22,990
Land $50,000
Retained earnings $37,091
Sales revenue $311,200
Utilities expense $6,350
Wages expense $71,245
a. What is the amount of gross profit? (show computations)
b. What is the amount of operating income? (Show computations)
c. What is the amount of pretax income? (show computations)
d. What is the amount of net income? (show computations)
e. What are the earnings per share? (show computations)
The Densain Water plant pottles purified and favored waters in a variety of sizes (20, 36, 48, and 64 ounces) for sale thru vending machines and retail stores. Volume is measured as bottled ounces. The plant’s annual budgeted fixed manufacturing overhead amounts to $1.8 million and variable manufacturing overhead is projected at $0.005 per bottled ounce . Projected volume in the plant next yeat is 200 million ounces. Actual volume for the year accumulated to 210 million ounces and total manufacturing overhead incurrec (both fixed and variable) was $2.85 million.
A) Calculate the Densian Naples plant overhead rate.
B) How much overhead was absorbed to products in the Naples plant?
C) Calculate the Densian Naples plant’s over-or underabsorbed overhead.
D) Describe the effect on income when the over-or underabsorbed overhead calculated in (c) is written off to cost of goods sold.
On March 10, 2014, No Doubt Company sells equipment that it purchased for $240,000 on August 20, 2007. It was originally estimated that the equipment would have a life of 12 years and a salvage value of $21,000 at the end of that time, and depreciation has been computed on that basis. The company uses the straight-line method of depreciation.
Compute the depreciation charge on this equipment for 2007, for 2014, and the total charge for the period from 2008 to 2013, inclusive, under each of the six following assumptions with respect to partial periods. (Round all answers to 0 decimal places, i.e. 2,250. If answer is zero, please enter 0, do not leave any fields blank.)
Depreciation is computed for the exact period of time during which the asset is owned. (Use 365 days for base.)
Depreciation is computed for the full year on the January 1 balance in the asset account.
Depreciation is computed for the full year on the December 31 balance in the asset account.
Depreciation for one-half year is charged on plant assets acquired or disposed of during the year.
Depreciation is computed on additions from the beginning of the month following acquisition and on disposals to the beginning of the month following disposal.
Depreciation is computed for a full period on all assets in use for over one-half year, and no depreciation is charged on assets in use for less than one-half year. (Use 365 days for base.)
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.
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. How do i go about solving this?
The Devon Motor Company produces motorcycles. During April,the company purchased 8,000 batteries at a cost of $10 per battery.Devon withdrew 7,600 batteries from the storeroom during the month.Of these, 100 were used to replace batteries in motorcycles beingused by the company’s traveling sales staff. The remaining7,500 batteries withdrawn from the storeroom were placed inmotorcycles being produced by the company. Of the motorcycles inproduction during April, 90% were completed and transferred fromwork in process to finished goods. Of the motorcycles completedduring the month, 30% were unsold at April 30. (There were noinventories of any type on April 1).
1. Determine the cost of batteries that would appear in eachof the following accounts at April 30.
Cost of finished goods inventory at year-end 115,000
Indirect labor: wages 140,000
Production supervisor’s salary 47,000
Service department costs* 100,000
Direct labor: fringe benefits 95,000
Indirect labor: fringe benefits 31,000
Fringe benefits for production supervisor 10,000
Total overtime premiums paid 55,000
Cost of idle time: production employeesA?§ 40,000
Administrative costs 150,000
Rental of office space for sales personnelAc€ 15,000
Sales commissions 5,000
Product promotion costs $ 10,000
*All services are provided to manufacturing departments.
A?§Cost of idle time is an overhead item; it is not included in the direct-labor wages given above.
Ac€ The rental of sales space was made necessary when the sales offices were converted to storage space for raw material.
1.
Requirement 1:
Compute each of the following costs for the year just ended: (a) total prime costs, (b) total manufacturing overhead costs, (c) total conversion costs, (d) total product costs, and (e) total period costs. (Omit the “$” sign in your response.)
Double Eagle Corporation produces the prestigious “Double Eagle” golf ball in one department using a process costing system. At the beginning of January, 10,000 golf balls were in work-in-process. During January, 20,000 more golf balls were started. The ending work-in-process included 6,000 balls which were 100 percent completed for direct materials, 75 percent completed for direct labor, and 75 percent completed for overhead.
The following table lists the cost information for Department A.
Materials Labor Overhead
Beginning Work-in-Process $10,000 $2,000 $3,200
Costs Added During January 20,000 5,125 8,200
Calculate the answers to the following questions.
1. How many golf balls were completed during January?
2. Calculate the equivalent units for materials in the ending work-in-process.
3. Calculate the equivalent units for labor in the ending work-in-process.
4. Calculate the equivalent units for overhead in the ending-in-process.
5. Using the formula on page 94, calculate the cost per equivalent unit for materials.
6. Using the formula on page 94, calculate the cost per equivalent unit for labor.
7. Using the formula on page 94, calculate the cost per equivalent unit for overhead.
8. What is the total equivalent cost of one golf ball in the month of January?
9. What is the cost of the golf balls completed during January?
(Hint: Number of golf balls completed times the equivalent cost per golf ball.)
10. What is the cost of the ending work-in-process inventory?
(Hint: Equivalent units for materials in ending WIP times the cost per equivalent unit for materials
+ Equivalent units for labor in ending WIP times the cost per equivalent unit for labor
+ Equivalent units for overhead in ending WIP times the cost per equivalent unit for overhead
Check Figure: The sum of your answers to questions 9 and 10 should equal $48,525 (the total costs that must be accounted for in either the work-in-process and completed goods inventories.
Double Eagle Corporation produces the prestigious “Double Eagle” golf ball in one department using a process costing system. At the beginning of January, 10,000 golf balls were in work-in-process. During January, 20,000 more golf balls were started. The ending work-in-process included 6,000 balls which were 100 percent completed for direct materials, 75 percent completed for direct labor, and 75 percent completed for overhead.
The following table lists the cost information for Department A.
Materials Labor Overhead
Beginning Work-in-Process $10,000 $2,000 $3,200
Costs Added During January 20,000 5,125 8,200
Calculate the answers to the following questions.
1. How many golf balls were completed during January?
2. Calculate the equivalent units for materials in the ending work-in-process.
3. Calculate the equivalent units for labor in the ending work-in-process.
4. Calculate the equivalent units for overhead in the ending-in-process.
5. Using the formula on page 94, calculate the cost per equivalent unit for materials.
6. Using the formula on page 94, calculate the cost per equivalent unit for labor.
7. Using the formula on page 94, calculate the cost per equivalent unit for overhead.
8. What is the total equivalent cost of one golf ball in the month of January?
9. What is the cost of the golf balls completed during January?
(Hint: Number of golf balls completed times the equivalent cost per golf ball.)
10. What is the cost of the ending work-in-process inventory?
(Hint: Equivalent units for materials in ending WIP times the cost per equivalent unit for materials
+ Equivalent units for labor in ending WIP times the cost per equivalent unit for labor
+ Equivalent units for overhead in ending WIP times the cost per equivalent unit for overhead
Case 1. Ballston Company uses the fifo method of costing its merchandise inventory. The manager is considering a change to the lifo method. Costs have increased steadily over the past three years. What effect will the change have on the following items (1) The amount of net income on the income statement. (2) The amount of income taxes to be paid. (3) The quantity of each item of merchandise that must be kept in stock. Why?
Case 2. The Pet Center stocks many kinds of merchandise. The store has always taken a periodic inventory at the end of a fiscal year. The store has not kept a perpetual inventory because of the cost. However, the manager wants a reasonably accurate cost of merchandise inventory at the end of each month, The manager needs the amount to prepare monthly income statements and to help in making decisions about the business. What would you recommend?
Noting that the plant was established in 01/01/2004 and no depreciation is calculated and the recommended depreciation rate for the plant equipments is 10%.
Requirements:
Close the ended fiscal year and issue the financial statement according to the existing data.
Garcia Manufacturing uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2008, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $22,000, direct labor $13,200, and manufacturing overhead $17,600. As of January 1, Job No. 49 had been completed at a cost of $99,000 and was part of finished goods inventory. There was a $16,500 balance in the Raw Materials Inventory account.
During the month of January, Garcia Manufacturing began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $134,200 and $173,800, respectively. The following additional events occurred during the month.
1. Purchased additional raw materials of $99,000 on account.
2. Incurred factory labor costs of $71,500. Of this amount $17,600 related to employer payroll taxes.
3. Incurred manufacturing overhead costs as follows: indirect materials $18,700; indirect labor $16,500; depreciation expense $20,900, and various other manufacturing overhead costs on account $22,000.
4. Assigned direct materials and direct labor to jobs as follows.
Job No. Direct Materials Direct Labor
50 $11,000 $ 5,500
51 42,900 27,500
52 33,000 22,000
a) Calculate the predetermined overhead rate for 2008, assuming Garcia Manufacturing estimates total manufacturing overhead costs of $1,155,000, direct labor costs of $770,000, and direct labor hours of 22,000 for the year.
b) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January.
c) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing overhead costs, use the overhead rate calculated in first part of question.
d) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job No. 50. Post all costs to the job cost sheets as necessary. Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.
e) Prepare the journal entry (or entries) to record the sale of any job(s) during the month.
f) What is the balance in Finished Goods Inventory at the end of the month and what does that balance consist of?
g) What is the amount of under or over-applied overhead?
31. On November 4, 2009, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2009 and 2010, respectively, Blue took $642 and $5128 of cost recovery. These amounts were incorrect because Blue applied wrong percentage (i.e. those for 39-year rather than 27.5-year). Blue should have taken $910 and $7272 cost recovery in 2009 and 2010. On January 1, 2011, the asset was sold for $180000. Calculate the gain or loss on the sale of the asset in 2011.
34. Western acquires used office machine (seven-tear class asset) on November 2, 2011, for $75000. This is the only asset acquired by western during the year. He does not elect immediate expensing under ss179. On September 15, 2012, western sells the machine.
a. determine Weston’s cost recovery for 2011
b. determine Weston’s cost recovery for 2012
38. On April 3, 2011, Terry purchased and placed in service a building. The building cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32000. The other floors of the building are rental apts. With the annual rent of $160000. Determine Terry’s cost recovery for 2011.
39. On May 5, 2011, Christy purchased and placed in service a hotel. The hotel cost$1.8 million. Calculate Christy’s cost recovery for 2011. For 2021.
41. on April 20, 2011, Ralph purchased new equipment to be used in his farming business. The cost of the equipment is $150000. Ralph does not elect immediate expensing under ss 179; nor does he elect to not have the uniform capitalization rules apply. Compute Ralph’s cost recovery for 2011.
46. Olga is proprietor of small business. In 2011, the business income, before consideration of any cost recovery or ss 179 deduction, is $750000. Olga spends $2,050,000 on new seven-year class assets and elects to take the ss 179 deduction on them. She elects not to take additional first year depreciation. Olga’s cost recovery deduction for 2011, except for the cost recovery with respect to the new seven-year assets is $95000. Determine Olga’s total cost recovery for 2011 with respect to the seven-year assets and the amount of any ss 179 carry forward.
49. On October 15, 2011, John purchased and placed in service a used car. The purchase price was $25000. This was the only business use asset john acquired in 2011. He used the car 80% of the time for business and 20% for personal use. John used the statutory percentage method of cost recovery. He elects not to take additional first-year depreciation. Calculate the total deduction John may take for 2011 with respect to the car.
52. on may 28, 2011, Mary purchased and placed in service a new $20000 car. The car was used 60% for business, 20% for production of income, and 20% for personal use in 2011. In 2012, the usage changed to 40% for business, 30% for production of income, and 30% for personal use. Mary did not elect immediate expensing under ss 179. She elects not to take additional first-year depreciation. Compute the cost recovery and any cost recovery recapture in 2012.
54. Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $35000. If Dennis leased the car for five years , the lease payments would be $375 per month. Dennis will acquire the car on January 1, 2011. The inclusion dollar amounts from the IRS table for the next five years are $40, $87, $130, $156, and $179. Dennis desires to know the effect on his adjusted gross income of purchasing versus leasing the car for the next five years. He elects not to take additional first-year depreciation. Write a letter to Dennis and present your calculations. Also, prepare a memo for the tax files. His address is 150 Avenue I, Memphis, TN 38112.
57. Mike Saxon is negotiating the purchase of a business. The final purchase price has been agreed upon, but the allocation of the purchase price to the assets is still being discussed. Appraisals on a warehouse range from $1.2 million to $1.5 million. If a value of $1.2 million is used for a warehouse, the remainder of the purchase price, $800,000 , will be allocated to goodwill. If $1.5 million is allocated to the warehouse, goodwill be $500,000. Mike wants to know what affect each alternative will have on cost recovery and amortization during the first year. Under the agreement, Mike will take over the business on January 1 of next year. Write a letter to Mike in which you present your calculations and recommendation. Also, prepare a memo for the tax files. Mikes address is 200 Rolling Hills Drive, Shavertown, PA 18708.
Charlie Driver has $35,000 saves and has decided to attend college, taking courses in marketing and retailing. To help pay his tuition and living expenses, he contracted with a mobile catering company as an independent driver. Charlie will run his mobile catering business on a cash basis; he named his business Charlie' s Convenient Catering or The 3C Company for short. He opened a company bank account with $35,000. He bought a used, fully equipped mobile catering truck for $29,000, and operated from January 4 to December 31,2005. At the end of the year, Charlie had $28,110 in the bank and $208 in a cash drawer. Invoices show he purchased food, beverages, and supplies inventories for $48,222; ending inventory remaining on the truck was $280. His invoices for truck operating expenses paid in cash total $3,288, and he has one unpaid truck repair invoice for $188. Charlie withdrew $2,400 a month for personal expenses. The truck has a five-year life and a residual value of $4,000, and straight-line depreciation is to be used. Charlie asks you to help him put together his business information and reconstruct his cash sales. He recorded his daily cash sales in a notebook that can not be found . Calculate 3C Company sales revenue and prepare an accrual income statement. Charlie is concerned that he has less cash now than he had when he started. Explain why.
Chris Guthrie was recently hired by S&S Air, Inc., to assist the company with its financial planning and to evaluate the company’s performance. Chris graduated from college five years ago with a finance degree. He has been employed in the finance department of a Fortune 500 company since then.
S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has manufactured and sold light airplanes over this period, and the company’s products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their-own airplanes. The company has two models; the Birdie, which sells for $53,000, and the Eagle, which sells for $78,000.
While the company manufactures aircraft, its operations are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company can complete the manufacture of an airplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete. In contrast, a commercial airplane may take one and one-half to two years to manufacture once the order is placed.
Mark and Todd have provided the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.
S& S Air, INC. 2009 Income Statement
Sales
$20,077,000
Cost of goods sold
$14,985,000
Other expenses
$2,399,000
Depreciation
$655,000
EBIT
$2,038,000
Interest
$362,000
Taxable Income
$1,676,000
Taxes (40%)
$670,400
Net income
$1,005,600
Dividends
$205,000
Add. To retained earnings
$800,600
S&S Air, INC 2009 Balance Sheet
Assets
Liabilites & Equity
Current assets
Current Liabilities
Cash
$365,040
Accounts payable
$715,680
Acconts receivable
$1,534,680
Notes payable
$1,446,400
Inventory
$1,238,500
Total Current liabilites
$2,162,080
Total Current assets
$3,138,220
Fixedassets
Lont Term Debt
$3,825,000
Net Plant and equipment
$12,315,680
Shareholder equity
Common Stock
$150,000
Total Assests
$15,453,900
Retained Earnings
$9,316,820
Total Equity
$9,466,820
Total Liabilities & Equity
$15,453,900
Light Airplane Industry Ratios
Lower Quartile
Median
Upper Quartile
Current ratio
0.50
1.43
1.89
Quick Ratio
0.64
0.84
1.05
Cash Ratio
0.08
0.21
0.39
Total Asset Turnover
0.68
0.85
1.28
Iventory Turnover
4.89
6.15
10.89
Receivables Turnover
6.27
9.82
11.51
Total Debt Ratio
0.31
0.52
0.61
Debt-Equity Ratio
0.58
1.08
1.56
Equity Multiplier
1.58
2.08
2.56
Time Inerest earned
5.18
8.06
9.83
Cash coverage ratio
5.84
8.43
10.27
Profit margin
4.05%
5.15%
6.47%
Return on assets
6.05%
10.53%
13.21%
Return on equity
9.93%
16.54%
26.15%
A. Calculate the ratios for S&S Air that are shown for the industry.
B. Mark and Todd agree that a ratio analysis can provide a measure of a companys performance. They have chosen Boeing as an aspirant company. Would you choose Boeing as an aspirant company? Why or Why not?
C. Compare the performance of S & S Air to the industry. For each Ratio comment why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you think S & S Airs ratio would compare to the industry average?
D. Calculate the internal growth rate and sustainable growth rate for S&S Air. What do these numbers mean?
Classic Irons, Inc. purchased Manufacturing Equipment with an expected useful life of five years or 5,000 hours of usage. The equipment was purchased on January 1, 2008, for $460,000. It is expected to have a salvage value of $60,000 at the end of five years. During 2008, the equipment was used for 1,200 hours. Assume that usage for the next four years will be 1,100 hours, 900 hours, 1,300 hours, and 500 hours respectively.
a. What is the amount of depreciation expense for each of the five years using the straight-line method?
b. What is the amount of depreciation expense for each of the five years using the double declining balance method?
c. What is the amount of depreciation expense for each of the five years using the units of production method? (Hours are production units in this example.)
The Clemson Company reported the following results last year for the manufacture and sale of one of its products known as a Tam.
Sales (6,500 Tams at $130 each)
$845,000
Variable cost of sales
390,000
Variable distribution costs
65,000
Fixed advertising expense
275,000
Salary of product line manager
25,000
Fixed manufacturing overhead
145,000
Net operating loss
$(55,000)
Clemson Company is trying to determine whether to discontinue the manufacture and sale of Tams. The operating results reported above for last year are expected to continue in the foreseeable future if the product isn’t dropped. The fixed manufacturing overhead represents the costs of production facilities and equipment that the Tam product shares with other products produced by Clemson. If the Tam product were dropped, there would be no change in the fixed manufacturing costs of the company.
Assume that discontinuing the manufacture and sale of Tams will have no effect on the sale of other product lines. If the company discontinues the Tam product line, the change in annual operating income (or loss) should be a
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
‘ Production of Fastgro: 4,000 bags
‘ Direct materials purchased: 85,000 pounds at a cost of $32,300
‘ Direct-labor worked: 390 hours at a cost of $4,875
‘ Variable overhead incurred: $1,475
‘ Inventory of direct materials on January 31: 3,000 pounds
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
‘ Production of Fastgro: 4,000 bags
‘ Direct materials purchased: 85,000 pounds at a cost of $32,300
‘ Direct-labor worked: 390 hours at a cost of $4,875
‘ Variable overhead incurred: $1,475
‘ Inventory of direct materials on January 31: 3,000 pounds
Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:
Standard Standard Cost
Quantity per bag
Direct material 20 pounds $8.00
Direct labor 0.1 hours $1.10
Variable overhead 0.1 hours $0.40
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct-labor hours. During January, the company recorded the following activity:
‘ Production of Fastgro: 4,000 bags
‘ Direct materials purchased: 85,000 pounds at a cost of $32,300
‘ Direct-labor worked: 390 hours at a cost of $4,875
‘ Variable overhead incurred: $1,475
‘ Inventory of direct materials on January 31: 3,000 pounds
15. The materials quantity variance for January is
Cole laboratories makes and sells a lawn fertilizer called fastgrol The company has developed standard costs for one bag of fastgro as follows
Standard cost per bag Standard quality
$8.00 20 pounds Direct material
$1.10 0.1 hours Direct labor
$0.40 0.1 hours Variable overhead
The company had no beginning inventories of any kind on January 1. Variable overhead is applied to production on the basis of standard direct labor hours. During January, the company recorded the following activity:
-production of fastgro: 4,000 bags
-direct materials purchased: 85,000 pounds at a cost of $32,000
-direct-labor worked: 390 hours at a cost of $4,875
-variable overhead incurred: $1,475
-inventory of direct materials on January 31: 3,000 pounds
Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2009.
Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2008 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 150,000 units.
At the end of 2008, Colt has 40,000 units of inventory on hand. If Plan A is accepted, the 2009 ending inventory should be equal to 5% of the 2009 sales. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $1.25 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2009 should be $1,895,000.
How do I prepare a sales budget for 2009 under each plan?
A company called Hands Up located in Texas manufactures latex gloves used in the medical industry. Hands Up purchased a new machine that will enable them to make gloves in various colors. It was purchased on April 1, 2004 for $210,000.
Even though the machine was assembled in Chicago, Hands Up was required by the state of Texas to pay Texas sales tax of $14,220 because the Chicago company also had operations in Texas.
Hands Up was required to pay $7,200 to have the machine transported to Texas.
Upon arrival a specialized crew had to install the new machine at a cost of $4,440.
The machine was fully operational by April 12, 2004.
The machine’s technology is actually two years old, and the market value in 2002 was $225,000.
Hands Up estimates the useful life of the asset to be 10 years. The estimated value of the machine at its replacement time is determined by Hands Up to be $54,000.
Hands Up uses the straight-line method for depreciation of machinery. It is company policy to prepare adjusting entries only at the end of the fiscal year, which is December 31.
What is the book value of the machine when it was first placed into operation?
Company’s cost analysis has concluded that utilities cost is a mixed cost, and they are attempting to find a base which the cost might be closely correlated.
Quarter: Tons Mixed Direct Labor Hours Utilities Cost
Year 1:
First 15,000 5,000 $50,000
Second 11,000 3,000 $45,000
Third 21,000 4,000 $60,000
Fourth 12,000 6,000 $75,000
YEar 2:
First 18,000 10,000 $100,000
Second 25,000 9,000 $105,000
Third 30,000 8,000 $85,000
Fourth 28,000 11,000 $120,000
Using tons mined as the independent x variable:
1.Determine a cost formula for utilities cost using the least squares regression method.
2. Prepare a scattergraph and plot the tons mined and utilities cost. (place cost on the vertical axis and tons mined on the horizontal axis) Fit a straight line to the plotted points using the cost formula determined by (1)
3. Using the direct labor hours as the independent (x) variable, repeat the computations in (1) and (2) above
4.WOuld you recommend that the company use tons mined or direct labor hours as a base for planning utilities cost?
the company uses job order costing system in which overhead is applied to jobs on yhe basis of direct labor cost. at the beginning of the year it was estimated that the total direct labor cost for the year would be Rmb200,000 and the total manufacturing overhead cost would be Rmb330,000. at the beginning of the year the inventory balances were as follows:
raw materials…………….Rmb25,000
WIP………………………Rmb10,000
FG……………………….Rmb40,000
during the year the following transactions were completed:
a.raw material purchased for cash Rmb275,000
b.raw materials requesitioned for use in productions, Rmb280,000(materials costing Rmb220,000 were charged directly to job;the remaining materials were indirect)
c.cost for employee services were incurred as follows:
direct labor………………..Rmb180,000
indirect labor……………..Rmb72,000
sales commisions…………Rmb63,000
administrative salaries…..Rmb90,000
d.rent for the year was Rmb18,000
e.utility cost incurred in the factory Rmb57,000
f.manufacturing overhead cost was applied to jobs,Rmb_____________?
g.goods that had cost Rmb675,000 to manufacture according to their job cost sheet were completed
h.sales for the year totaled Rmb250,000.the total cost to manufacture these goods according to the job cost sheets was Rmb700,000
prepare jounal entries to record the transactions for the year!
Instructions: 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 format(s) did these companies use to present their balance sheets?
(b) How much working capital did each of these companies have at the end of 2009? Speculate as to their rationale for the amount of working capital they maintain.
(c) What is the most significant difference in the asset structure of the two companies? What causes this difference?
(d) What are the companies’ annual and 5-years (2005-2009) growth rates in total assets and long-term debt?
(e) What was these two companies’ trends in net cash provided by operating activities over the period 2007 to 2009?
(f) Compute both companies’ (1) current cash debt coverage ratio. (2) cash debt coverage ratio, and (3) free cash flow. What do these ratios indicate about the financial condition of the two companies?
Instructions: 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 format(s) did these companies use to present their balance sheets?
(b) How much working capital did each of these companies have at the end of 2009? Speculate as to their rationale for the amount of working capital they maintain.
(c) What is the most significant difference in the asset structure of the two companies? What causes this difference?
(d) What are the companies’ annual and 5-years (2005-2009) growth rates in total assets and long-term debt?
(e) What was these two companies’ trends in net cash provided by operating activities over the period 2007 to 2009?
(f) Compute both companies’ (1) current cash debt coverage ratio. (2) cash debt coverage ratio, and (3) free cash flow. What do these ratios indicate about the financial condition of the two companies?
Ayres Services acquired an asset for $80 million in 2011. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2011, 2012, 2013, and 2014 are as follows:
($ in millions)
2011 2012 2013 2014
Pretax accounting income $330 $350 $365 $400
Depreciation on the income statement 20 20 20 20
Depreciation on the tax return (25) (33) (15) (7)
Taxable income $325 $337 $370 $413
Required:
Determine (a) the temporary book’tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Enter your answers in millions. Negative amounts should be indicated with a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Round your answers to 1 decimal place. Omit the “$” sign in your response.)
Beginning of End of End of End of End of End 2011 2011 2012 2013 2014
The balance sheet for Borglum Company at the end of the current fiscal year indicated the following:
Bonds payable, 10% (issued in 2000, due in 2020)
$5,000,000
Preferred 10% stock, $100 par
1,000,000
Common stock, $10 par
2,000,000
Income before income tax was $1,500,000 and income taxes were $200,000, for the current year. Cash dividends paid on common stock during the current year totaled $150,000. The common stock was selling for $70 per share at the end of the year.
Required:
Determine each of the following:
(1) Number of times interest charges are earned;
(2) Earnings per share on common stock;
(3) Price-earnings ratio;
(4) Dividends per share of common stock; and
(5) Dividend yield.
Round to one decimal place except earnings per share, which should be rounded to two decimal places.
The bank account as a control device helps to protect cash. One of the requirements is to conduct periodic bank statement reconciliations. Using the following data, complete the bank statement reconciliation. (Use the format shown on page 255 of your textbook) (25 points)
Prepare a bank reconciliation using B & B’s Restaurant Supply Inc.’s information for August 31.
‘????????A NSF check from Johnny Jones for $3,164.
‘????????Two deposits made on August 31 were not on the bank statement, totaling $2,897.
‘????????The bank collected an EFT payment for Rent for $2,600.
‘????????August 31 balance in Cash was $1,905.
‘????????The owner had written check # 1598 for $500 and recorded this check as $5,000.
‘????????The balance on the bank statement as of August 31 was $5,216.
‘????????Bank service charge of $28 was shown on the bank statement.
‘????????Checks #1572, 1606, 1116, and 1242 for $419, $126, $650, and $1,105, respectively, were not shown on the bank statement, even though the company had sent the checks
On the basis of the following data for Branch Co. for the year ended December 31, 2011 and the preceding year, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities.
Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were net income of $56,000 and cash dividends declared and paid of $18,000.
Beach Corporation, an accrual basis taxpayer, reports the following results for the current year:
**Show work please**
Income: Gross profit from manufacturing operations ____________________$250,000 Dividends received from %25 -owned domes. corp. ______________ 20,000 Interst Income: Corporate bonds ______________________________ 10,000 Municiple bonds ____________________________________________ 12,000 Proceeds from life insurance policy on key _____________________ 100,000 employee Section 1231 gain on sale of land ______________________________ 8,000 Expenses: Administrative expenses ____________________________________ 110,000 Bad Debts ________________________________________________ 5,000 Depreciation: Financial accounting__________________________________________68,000 Taxable income _____________________________________________ 86,000 Alternative depreciation system (for E&P) _______________________ 42,000 NOL carryover ______________________________________________ 40,000 Charitable contributions: Current year __________________________ 8,000 Carryover from last year _____________________________________ 3,500 Capital loss on sale of stock __________________________________ 1,200 US production activities deduction ____________________________ 1,500 Penalty on late payment of federal taxes _______________________ 450
a. What is Beach’s taxable income and current E&P?
Beach Corporation, an accrual basis taxpayer, reports the following results for the current year:
**Show work please**
Income: Gross profit from manufacturing operations ____________________$250,000 Dividends received from %25 -owned domes. corp. ______________ 20,000 Interst Income: Corporate bonds ______________________________ 10,000 Municiple bonds ____________________________________________ 12,000 Proceeds from life insurance policy on key _____________________ 100,000 employee Section 1231 gain on sale of land ______________________________ 8,000 Expenses: Administrative expenses ____________________________________ 110,000 Bad Debts ________________________________________________ 5,000 Depreciation: Financial accounting__________________________________________68,000 Taxable income _____________________________________________ 86,000 Alternative depreciation system (for E&P) _______________________ 42,000 NOL carryover ______________________________________________ 40,000 Charitable contributions: Current year __________________________ 8,000 Carryover from last year _____________________________________ 3,500 Capital loss on sale of stock __________________________________ 1,200 US production activities deduction ____________________________ 1,500 Penalty on late payment of federal taxes _______________________ 450
a. What is Beach’s taxable income and current E&P?
Beach Corporation, an accrual basis taxpayer, reports the following results for the current year:
**Show work please**
Income: Gross profit from manufacturing operations ____________________$250,000 Dividends received from %25 -owned domes. corp. ______________ 20,000 Interst Income: Corporate bonds ______________________________ 10,000 Municiple bonds ____________________________________________ 12,000 Proceeds from life insurance policy on key _____________________ 100,000 employee Section 1231 gain on sale of land ______________________________ 8,000 Expenses: Administrative expenses ____________________________________ 110,000 Bad Debts ________________________________________________ 5,000 Depreciation: Financial accounting__________________________________________68,000 Taxable income _____________________________________________ 86,000 Alternative depreciation system (for E&P) _______________________ 42,000 NOL carryover ______________________________________________ 40,000 Charitable contributions: Current year __________________________ 8,000 Carryover from last year _____________________________________ 3,500 Capital loss on sale of stock __________________________________ 1,200 US production activities deduction ____________________________ 1,500 Penalty on late payment of federal taxes _______________________ 450
a. What is Beach’s taxable income and current E&P?
Becky works on the assembly line of a manufacturing company where she installs a component part for one of the company’s products. She’s pain $16 per hour for regular time, and time and a half for all work in excess of 40 hours per week. Becky’s employer offers fringe benefits that costs the company $3 for each hour of employee time (both regular and overtime.) During a given week, Becky works 42 hours but is idle for 3 hours due to material shortages. The company treats all fringe benefits relating to direct labor as added direct labor cost and the remainder as part of manufacturing overhead. The allocation of Becky’s wages and fringe benefits for the week between direct labor cost and manufacturing overhead would be which of the following
A)Direct labor:$688/Manufacturing overhead:$126
B)Direct labor:$741/Manufacturing overhead:$73
C)Direct labor:$672/Manufacturing overhead:$142
D)Direct labor:$624/Manufacturing overhead:$190
You don’t really have to tell me the answer, I really want to know how to solve the problem. Thanks!
I understand a lot of how to do this, but Im still new with it and need a little help with this journal entry. It is just more of a practice question, but I keep getting confused on how to put it all in the journal. During its first month of operation, the Trumans Repair Co., which specializes in engine repairs completed the following transactions: Feb. 1 began business by making a deposit in a company bank account of $12,000, in exchange for 1,200 shares of $10 par value common stock Feb. 3 Purchased repair equipment from Asters Company, $4,400. Paid $600 down and the balance was placed on account. Payments will be $200.00 per month for nineteen months. The first payment is due 11/1. Feb. 8 purchased repair supplies from Kelly Company on credit, $390. Feb. 16 Cash engine repair revenue for the first half of October, $1,362. Feb. 19 Made payment to Kelly Company, $200. Feb. 31 Cash engine repair revenue for the last half of October, $1,310 Feb. 31 Declared and paid cash dividend of $800.
Bjerg Corporation incurred several costs. Prepare entries for manufacturing costs. Journalize the following transactions.
1. Purchased raw materials on account $46,300
2. Raw Materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicates that $6,800 was classified as indirect materials.
3. Factory labor costs incurred were $53,900, of which $49,000 pertained to factory wages payable and $4,900 pertained to employer payroll taxes payable.
4. Time tickets indicated that $48,000 was direct labor and $5,900 was indirect labor.
5. Overhead costs incurred on account were $80,500.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $88,000 were completed and transferred to finished goods.
8. Finished goods costing $75,000 to manufacture were sold on account for $103,000.
Bonddiscount, entries for bonds payable transactions, interest method of amortizing bond discount
On July 1, 2010, Linux Corporation, a wholesaler of electronics equipment, issued $45,000,000 of 10-year, 10% bonds at an effective interest rate of 14%, receiving cash of $35,465,423. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Instructions
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the effective interest rate method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2011, and the amortization of the bond discount, using the effective interest rate method. (Round to the nearest dollar.)
The bookkeeper for Biggio Corporation made these errors in journalizing and posting.
1. A credit posting of $400 to Accounts Receivable was omitted.
2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.
3. A collection on account of $100 was journalized and posted as a debit to Cash $100 and a credit to Accounts Payable $100.
4. A credit posting of $300 to Property Taxes Payable was made twice.
5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25 and a credit to Cash $25.
6. A debit of $395 to Advertising Expense was posted as $359.
For each error, indicate (a) whether the trial balance will balance; if the trial balance will not balance, indicate (b) the amount of the difference, and (c) the trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1 is given as an example
Boswell Plumbing Products produces a variety of valves, connectors, and fixtures used in commercial and residential plumbing applications. Recently a senior manager walked into the cost accounting department and asked Nick Somner to tell her the cost of the D45 valve. Nick quickly replied, “Why do you want to know?” Noticing that the manager appeared somewhat startled by this question, he explained, “The cost information you need depends on the decision you’re going to make. You might be thinking of increasing a scheduled production run of 3,000 D45s by 100 units or sheduling an additional production run, or you might even be thinking of dropping the product. For each of these decisions, the cost information that you need is different.”
Using the concept of incremental analysis, expand on Nick’s response of “Why do you want to know?”
What cost information would be relevant to a decision to drop the product that would not be relevant to a decision to increase a production run by 100 units?
Boswell Plumbing Products produces a variety of valves, connectors, and fixtures used in commercial and residential plumbing applications. Recently a senior manager walked into the cost accounting department and asked Nick Somner to tell her the cost of the D45 valve. Nick quickly replied, “Why do you want to know?” Noticing that the manager appeared somewhat startled by this question, he explained, “The cost information you need depends on the decision you’re going to make. You might be thinking of increasing a scheduled production run of 3,000 D45s by 100 units or sheduling an additional production run, or you might even be thinking of dropping the product. For each of these decisions, the cost information that you need is different.”
Using the concept of incremental analysis, expand on Nick’s response of “Why do you want to know?”
What cost information would be relevant to a decision to drop the product that would not be relevant to a decision to increase a production run by 100 units?
The budget director of Dollie Inc., with the help of the finance department, has compiled the following information for use in creating the budgeted income statement for January 20xx:
a. Estimated sales for January
Luxury dollhouse: 2,000 units at $200 per unit
Standard dollhouse: 3,500 units at $150 per unit
b. Estimated inventories at January 1
Direct materials
Finished products
Plastic: 400 pounds
Luxury dollhouse: 200 units at $98 per unit
Wood: 1,000 pounds
Standard dollhouse: 300 units at $70 per unit
c. Desired inventories at January 31
Direct materials
Finished products
Plastic: 740 pounds
Luxury dollhouse: 170 units at $100 per unit
Wood: 980 pounds
Standard dollhouse: 260 units at $73 per unit
d. Direct materials used in production
To manufacture Luxury dollhouse:
Plastic: 0.8 pounds per unit of product
Wood: 2 pounds per unit of product
To manufacture Standard dollhouse:
Plastic: 0.6 pounds per unit of product
Wood: 1.5 pounds per unit of product
e. Anticipated cost of purchases and beginning and ending inventory of direct materials
Calibri Company produces three products: F, G, and H. The selling price, variable costs, and contribution margin for one unit of each product follow:
Additional Details
Calibri Company produces three products: F, G, and H. The selling price, variable costs, and contribution margin for one unit of each product follow:
Product
F G H
Selling price $40 $110 $50
Variable costs:
Direct materials $16 $25 $20
Direct labor $11 $20 $12
Variable manufacturing $10 $10 $8
overhead
Total variable costs $37 $55 $40
Contribution margin $3 $55 $10
Contribution margin ratio 7.5% 50% 20%
One of two major machines used to produce these products has broken down and a new one is on backorder, so the company is down to one machine. Product F takes 0.20 machine hours to produce one unit, Product G takes 11 machine hours to produce one unit, and Product H takes 2.5 machine hours. There are 1,000 machine hours available on the new machine.
a. What is the amount of contribution margin that will be obtained per machine hour on each product?
b. Which product would you recommend that the company work on next week ‘ the orders for product F, product G or product H? Show your computation
AFN Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2005, the first year of operations, AFN produced 4,000 tons of plastic and sold 3,000 tons,In 2006, the production and sales results were exactly reversed. In each year, the selling price per ton was $2,000, variable manufacturing costs were 15% of the sales price of units produced,variable selling expenses were 10% of the selling price of units sold, fixed manufacturing costs were $2,400,000, and fixed administrative expenses were $600,000.
income statements for each year using variable costing
2005 NI $1,500,000
Prepare income statements for each year using absorption costing.
2005 NI $2,100,000
Reconcile the differences each year in net income under the two costing approaches.
Comment on the effects of production and sales on net income under the two costing approaches.
You ahve been given a summer job as an Intern at Utah Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth.
The bank requires financial statements before approving such a loan. You have been asked to help prepare classification of the following list of costs:
1. Depreciation on salespersons’ cars
2. Rent on equipment used in the factory
3. Lubricants used for machine maintenance
4. Salaries of personnel who work in the finished goods warehouse
5. Soap and paper towels used by factory workers at the end of a shift
6. Factory supervisors’ salaries
7. Heat, water, and power consumed in the factory
8. Materials used for boxing products for shipment overseas (units are not normally boxed)
9. Advertising costs
10. Workers’ compensation insurance for factory employees
11. Depreciation on chairs and tables in the factory lunchroom
12. The wages of the receptionist in the administrative offices
13. Cost of leasing the corporate jet used by the company’s executives
14. The cost of renting rooms at a Florida resourt for the annual sales conference
15. The cost of packaging the company’s product
Classify the above costs as either product costs or period costs.
Allen Labinski has prepared the following list of statements about process cost accounting. Identify each statement as true or false. If false, indicate how to correct the statement.
1. Process cost systems are used to apply costs to similar products that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit is indistinguishable from another.
3. Companies that produce soft drinks, motion pictures, and computers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individual jobs.
5. Job order costing and process costing track different manufacturing costs elements.
6. Both job order costing and process costing account for direct materials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for both job order costing and process costing.
8. In a process cost system, only one work in process account is used.
9. In a process cost system, costs are summarized in a job cost sheet.
10. In a process cost system, the unit cost is total manufacturing costs for the period divided by the units produced during the period.
An analysis of the accounts of Chamberlin Manufacturing reveals the following manufacturing cost data for the month ended June 30, 2008.
Inventories
Beginning
Ending
Raw materials
$9,000
$13,100
Work in process
5,000
7,000
Finished goods
9,000
6,000
Costs incurred: Raw materials purchases $54,000, direct labor $57,000, manufacturing overhead $19,900. The specific overhead costs were: indirect labor $5,500, factory insurance $4,000, machinery depreciation $4,000, machinery repairs $1,800, factory utilities $3,100, miscellaneous factory costs $1,500. Assume that all raw materials used were direct materials. Instructions (a)Prepare the cost of goods manufactured schedule for the month ended June 30, 2008. (b)Show the presentation of the ending inventories on the June 30, 2008, balance sheet.
An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholder’s equity is explained.
Cash + Accounts
Receivable + Supplies + Office
Equipment = Accounts
Payable + Stockholder’s Equity
1. +$15,000 +$15,000 Investment
2. -2,000 +$5,000 +$3,000
3. -750 +$750
4. +4,600 +$3,700 +8,300 Service Revenue
5. -1,500 -1,500
6. -2,000 -2,000 Dividends
7. -650 -650 Rent Expense
8. +450 -450
9. -4,900 -4,900 Salaries Expense
10. +500 -500 Utilities Expense
Instructions
(a) How much did stockholder’s equity increase for the month?
$
(b) Compute the amount of net income for the month. (If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45).)
$
Click here if you would like to Show Work for this question
Analyze the following scenario: The Unified Path is an umbrella organization that solicits donations to support its many charitable suborganizations. One of these is the Millbridge Family Service (MFS). All transactions for MFS are handled through the MFS special purpose fund. For both the United Path general operating fund and MFS special purpose fund, show the impact of the fundamental equation of accounting of each of the following events.
* Unified Path transfers cash to the MFS bank account for $50,000 for the MFS family counseling program. This is a direct subsidy to MFS. No repayment is required. * Unified Path has a bookkeeping department which assists the suborganizations with their purchase of insurance, supplies, payroll, and other items. This centralized approach is less expensive than if each part of the larger organization had its own bookkeeping staff. Unified * Path charges MFS $400 for bookkeeping services for the month. No payment is made at this time. MFS borrows $20,000 from Unified Path’s general fund to meet a current operating shortfall. MFS will repay this loan from money received from charges to its clients within six months.
analyze each of the transactions. For each decide what accounts are affected and set up T accounts. Record the effects of the transaction in the T accounts. Use plus and minus signs before the amounts to show the increases and decreases.
1. James Walker, an owner, made an additional investment of $16,000 in cash.
2. A firm purchased equipment for $9,000 in cash.
3. A firm sold some surplus office furniture for $1,200 in cash.
4. A firm purchased a computer for $2,700, to be paid in 60 days.
5. A firm purchased office equipment for $10,200 on credit. The amount is due in 60 days.
6. Carol Rose, owner of Rose Travel Agency, withdrew $5,000 of her original cash investment.
7. A firm bought a delivery truck for $32,000 on credit; payment is due in 90 days.
8. A firm issued a check for $2,500 to a supplier in partial payment of an open account balance.
anny’s dry cleaners is owned and operated by Anny Brum. A building and equipment are currently being rented, pending expansion to new facilities. the actual work of dry cleaning is done by another company at wholesale rate. the assets and the liabilities of the business on june 1, 2012 are as follows: cash, $25,000; Accounts Receivable, $30,000; Supplies, $5,000; Land $50,000; Accounts Payable, $18,000. Business transaction during June are summarized as follow:
a. Anny Brum invested additional cash in the business with a deposit of $15,000 in the business bank account.
b. Purchased land for use as a parking lot, paying cash of $20,000
C. Paid rent for the month, $3,000
D. charged customers for dry cleaning revenue on account, $22,000
E. Paid creditors on account, $13,000
F. Purchased supplies on account, $1,000
G. Received cash from cash customers for dry cleaning revenue, $28,000
H. Received cash from customers on account, $27,000
I. Received monthly invoice for dry cleaning expense for June( to be paid on July 10), $21,500
J. Paid the following: wages expense, $14,000 ; truck expense, $2,100; utilities expense, $1,800; miscellaneous expense, $1,300
K. determined that the cost of supplies on hand was $3,400; therefore, the cost of supplies used during the month was $2,600
L. withdrew $1,000 for personal use.
Instructions
1. determine the amount of Anny Brum’s capital as of June1
2. state the assets, liabilities, and owner’s equity as of june1 in equation form similar to that shown in this chapter. in tabular form below the equation, indicate increases and decreases resulting from each transaction and the new balances after each transaction.
3. prepare an income statement for june, a statement of owner’s equity for June, and a balance sheet as of June 30.
ABC Inc. began a very lucrative consulting operation on October 1, 2011. It is authorized to issue 100,000 shares of $0.50 cumulative preferred shares and 500,000 common shares.
Oct. 1 Issued for cash, 1000 shares of the preferred shares at $4.00 each
Oct. 10 Issued for cash, 50,000 shares of the common stock at $3.00 per share.
Oct. 15 ABC Inc. purchased land for $155,000, paying cash of $55,000 and borrowing the balance from the bank (to be repaid in two years).
Oct. 20 15,000 preferred shares were issued today for total cash preceeds of $70,500.
Oct. 24 In addition to the delcaration of the annual dividend on the preferred shares, dividends of $22,400 were declared on the common shares today, payable November 15, 2011.
Oct. 31 Revenues of $750,000 were earned during the month; all cash. Expenses, all cash, totalling $250,000 were incurred in October. Close the Income SUmmary and dividend accounts
1. Prepare journal entries for each of the transactions listed.
2. Based on the transactions in Part A, prepare the balance sheet as at October 31, 2011.
Glanville Distribution markets CDs of the performing artist Harrilyn Clooney. At the beginning of March, Glanville had in beginning inventory 1,620 Clooney CDs with a unit cost of $7.80. During March Glanville made the following purchases of Clooney CDs.
March 5 3,120 @ $8.80 March 21 4,120 @ $10.80
March 13 5,620 @ $9.80 March 26 2,120 @ $11.80
During March 12,500 units were sold. Glanville uses a periodic inventory system.
Determine the cost of goods available for sale.
$
Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). Prove the accuracy of the cost of goods sold under the FIFO and LIFO methods. (Round the unit cost in the average cost method to 3 decimal places, e.g. 2.250. Round final answers to 0 decimal places, e.g. 125.)
FIFO LIFO Average Cost
Ending Inventory $ $ $
Cost of Goods Sold $ $ $
Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?
Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the direct costs of one unit of product. Quantity Price Cost Direct materials 8 pounds $1.80 per pound $14.40Direct labor 0.25 hour $8.00 per hour ___2.00_ $16.40During May, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for May were $42,000, 90 percent of which were for direct labor. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours.a. Calculate the direct materials price variance for May.b. Calculate the direct materials quantity variance for May.c. Calculate the direct labor wage rate variance for May.d. Calculate the direct labor efficiency variance for May.
Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the direct costs of one unit of product. Quantity Price Cost Direct materials 8 pounds $1.80 per pound $14.40Direct labor 0.25 hour $8.00 per hour ___2.00_ $16.40During May, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for May were $42,000, 90 percent of which were for direct labor. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours.a. Calculate the direct materials price variance for May.b. Calculate the direct materials quantity variance for May.c. Calculate the direct labor wage rate variance for May.d. Calculate the direct labor efficiency variance for May.
Assignment Requirement: Prepare a brief report to assist the production manager to determine what might have caused the differences between the original budget and the final actual outcomes. Speculations of the causes are sufficient. Restrict your discussion to the changes related to direct materials and direct labour.
The following is the data provided in the assignment:
Actual Sales Volume for the quarter.
The actual volume of direct materials used during the quarter.
The actual cost of the direct materials used during the quarter.
The actual direct labour hours used during the quarter.
The actual cost of direct lavour used during the quarter.
Could someone please help me out with carrying out variance analysis pertaining to direct materials and direct labour as required in this question? Are there any calculations I need to do and templates I need to prepare? Please advise.
Assume that on February 1, Brown and Smith paid $723,600 in advance for 2 years’ insurance coverage. Prepare Brown and Smith February 1 journal entry and the annual adjusting entry on June 30
LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $2,838 received in advance. Prepare LaBouche’s November 1 journal entry and the December 31 annual adjusting entry. (Round answers to zero decimal places, e.g. 3,510.)
Correct?
Debit- Cash 2838 Credit- Unearned Rev. 2838
Debit- Rent Rev. 1892 Credit- Unearned Rev. 1892
When a corporation pays a note payable and interest,
the account Notes Payable will be increased.
the account Cash will be debited.
the account Interest Expense will be decreased.
the accounts Notes Payable and Interest Expense will be debited.
Aussie Yarn Co. is a U.S. producer of woolen yarn made from wool imported from Australia. Raw wool is processed, spun, and finished before being shipped out to knitting and weaving companies. Material is added in the beginning of processing, and conversion costs are added evenly throughout processing.
Aussie began the month of August with 6,500 units in process that were 100 percent complete as to materials and 70 percent complete as to labor and overhead. It started 29,700 units into production during the month of August of which 5,400 remained in ending Work in Process inventory and were 50 percent complete as to conversion costs. The cost data are as follows:
Beginning Work in Process:
Direct materials $5,400
Direct labor 1,400
Manufacturing overhead 2,260
Costs added during August:
Direct materials $28,266
Direct labor 14,680
Manufacturing overhead 16,500
Prepare a production cost report for the month of August
Aussie Yarn Co. is a U.S. producer of woolen yarn made from wool imported from Australia. Raw wool is processed, spun, and finished before being shipped out to knitting and weaving companies. Material is added in the beginning of processing, and conversion costs are added evenly throughout processing.
Aussie began the month of August with 6,500 units in process that were 100 percent complete as to materials and 70 percent complete as to labor and overhead. It started 29,700 units into production during the month of August of which 5,400 remained in ending Work in Process inventory and were 50 percent complete as to conversion costs. The cost data are as follows:
Beginning Work in Process:
Direct materials $5,400
Direct labor 1,400
Manufacturing overhead 2,260
Costs added during August:
Direct materials $28,266
Direct labor 14,680
Manufacturing overhead 16,500
Prepare a production cost report for the month of August. (Round cost per equivalent unit to 2 decimal places, e.g. 5.25 and all other answers to 0 decimal places, e.g. 125.)
Avant Designs and manufactures polished-nickle fashion bracelets. It offers two bracelets: Aztec and Mayan. The following data summarized budgeted operations for the current year:
AVANT DESIGNS
Summary of Budgeted Operations
Current Year
Aztec Mayan
Sales price/unit $12 $15
Variable cost/unit $4 $5
Units sold 30,000 20,000
Machine minutes/units 2 3
Beginning inventory 0 0
Ending inventory 3,000 1,000
Budgeted fixed manufacturing overhead for the year was $258,000.
Required:
a. Prepare the budgeted income statement for the year using variable costing.
b. Prepare the budgeted income statement for the year using absorbtion costing. budgeted fixed manufacturing overhead is allocated to the bracelets using machine minutes.
c. Explain the difference in earnings and explain why it occurs.
6. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
6. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
7-2. PROBLEM 7-2. Incremental Analysis of Outsourcing Decision
Oakland College is considering outsourcing grounds maintenance. In this regard, Oakland has received a bid from Highline Grounds Maintenance for $295,000 per year. Highline states that its bid will cover all services and planting materials required to ‘keep Oakland’s grounds in a condition comparable to prior years’. Oakland’s cost for grounds maintenance in the preceding year were $302,000 as follows:
Salary of three full-time gardeners $195,000
Plant materials 80,000
Fertilizer 7,000
Fuel 8,000
Depreciation of tractor,mowers, and other
miscellaneous equipment 12,000
Total $302,000
If Oakland College outsources maintenance, it will be able to sell equipment for $30,000, and the three gardeners will be laid off.
Required
a. Analyze the one-year financial impact of outsourcing grounds maintenance.
b. How will savings in the second year differ from those in year 1?
c. Discuss qualitative factors that should be considered in the decision.
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 80 units. The costs and percentage completion of these units in beginning inventory were:
Cost Percent Complete
Material Costs $6,000 50%
Conversion costs $9,900 30%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material Costs $113,900
Conversion Costs $322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
Note: Your answere may differ from those offered below due to rounding error. In all cases, select the answer that’s the closest to the answer you computed. To reduce rounding error, carry out all computations to at least 3 decimal places.
The cost per equivalent unit for materials for the month in the first processing department is closest to
A.$11.82
B.$12.44
C.$11.99
D.$11.39
Please help with showing how to get the answer! Thanks in advance!
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 80 units. The costs and percentage completion of these units in beginning inventory were:
Cost Percent Complete
Material Costs $6,000 50%
Conversion costs $9,900 30%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material Costs $113,900
Conversion Costs $322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
Note: Your answere may differ from those offered below due to rounding error. In all cases, select the answer that’s the closest to the answer you computed. To reduce rounding error, carry out all computations to at least 3 decimal places.
What are the equivalent units of conversion costs for the month in the first processing department?
A.10,000
B.8,200
C.360
D.8,560
Please show me HOW to get this answer, please! Thanks!
Abis Corporation uses the weighted-average method in its process-costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were
Cost Percent Complete
Material costs $6,000 50%
Conversion costs $9,900 30%
A total of 9,200 units were started, and 8,200 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
Cost
Material costs $113,900
Conversion costs $322,500
The ending inventory was 80% complete with respect to materials and 20% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that’s the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
9. The cost per equivalent unit for conversion costs for the first department for the month is closest to
Berstler Construction Company began operations in 2010. Construction activity for the first year is shown below. All contracts are with different customers, and any work remaining at December 31, 2010, is expected to be completed in 2011.
Project
Total Contract Price
Billings through 12/31/10
Cash Collections through 12/31/10
Contract Costs Incurred through 12/31/10
Estimated Additional Costs to Complete
1 $560,000 $360,000 $340,000 $450,000 $130,000
2 670,000 220,000 210,000 126,000 504,000
3
520,000
500,000
440,000
330,000
-0-
$1,750,000
$1,080,000
$990,000
$906,000
$634,000
Prepare a partial income statement and balance sheet to indicate how the above information would be reported for financial statement purposes. Berstler Construction Company uses the completed-contract method. (For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
BERSTLER CONSTRUCTION COMPANY
Partial Income Statement
Year Ended December 31, 2010
$
Loss recognized in 2010
BERSTLER CONSTRUCTION COMPANY
Partial Balance Sheet
December 31, 2010
Current assets:
$
$
Less:
Current liabilities:
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Which accounting principle or concept specifically states that we should record transactions at the amount that can be verified?
Answer a. Going-concern concept
b. Entity concept
c. Cost principle
d. Reliability principle
Question 2
The balance sheet reports
Answer a. Results of operations for a specific period
b. Financial position on a specific date
c. Results of operations on a specific period
d. Financial position for a specific period
Question 3
Assume that Fossil sold watches to a department store on account for $43,000. How would this transaction affect Fossil’s accounting equation?
Answer a. Increase both liabilities and equity by $43,000
b. Increase both assets and liabilities by $43,000
c. Increase both assets and equity by $43,000
d. No effect on the accounting equation because the effects cancel out
Question 4
Which type of business organization is owned by stockholders?
Answer a. Corporation
b. Partnership
c. Proprietorship
d. All of the above are owned by stockholders
Question 5
Assume that Fossil paid expenses totaling $40,000. How does this transaction affect Fossil’s accounting equation?
Answer a. Increases assets and decreases liabilities
b. Decreases assets and increases liabilities
c. Decreases both assets and equity
d. Increases both assets and equity
Question 6
Fossil is famous for fashion wristwatches and leather goods. At the end of the recent, year, Fossil’s assets added up to $345 million, and owner’s equity was $240 million. How much were Fossil’s liabilities?
Answer a. Cannot be determined from the data given
b. $345 million
c. $105 million
d. $240 million
Question 7
What are revenues and expenses?
Answer a. Revenues are decreases in capital from delivering goods or services to customers and expenses are increases in earnings from the result of operations.
b. Revenues are increases in capital from delivering goods or services to customers and expenses are decreases in earnings from the result of operations.
c. Revenues are decreases in capital from delivering goods or services to customers and expenses are decreases in earnings from the result of operations.
d. Revenues are increases in capital from delivering goods or services to customers and expenses are increases in earnings from the result of operations.
Question 8
Generally accepted accounting principles (GAAP) are formulated by the
Answer a. Securities and Exchange Commission (SEC)
b. Institute of Management Accountants (IMA)
c. Financial Accounting Standards Board (FASB)
d. American Institute of Certified Public Accountants (AICPA)
Question 9
The income statement reports
Answer a. Financial position on a specific date
b. Results of operations on a specific date
c. Results of operations for a specific period
d. Financial position for a specific period
Question 10
Consider the overall effects of Fossil of selling watches on account for $53,000 and paying expenses totaling $37,000. What is Fossil’s net income or net loss?
a.borrowed $12,000 in cash on a 5 year, 10 percent notes payable, dated March 1, 2012
c. Earned $208,000 in revenues for 2012, including $52,000 on credit and the rest in cash.
d. Sold 4,000 additional shares of capital stock for cash at $1 market value per share on Jan 1, 2012
e.incurred $111,000 in remaining expense for 2012 including $20,000 on credit and the rest paid in cash.
i. Purchased supplies on account for future use, $23,000.
j. Signed a three year $33,000 service contract to start february 1, 2013.
k. Declared and paid cash dividend, $22,000.
MY UNSURE ANSWERS
a. Dr cash $12,000
Dr interest expense $1200
Cr longterm not payable $12,000
Cr interest payable $1200
c. Dr cash $156,000
Dr account receivable $52,000
Cr service revenue $208,000
d. Dr cash $4000
Cr contributed capital $4000
e. Cr account payable $111,000
Dr remaining expense $111,000
i. Dr supplies $23,000
Cr account payable $23,000
j. No transaction
k. Cr cash $22,000
Dr retained earnings $22,000
I have been working on this very hard but now that i attempted to do the income statement, my net income did not meet the checkpoint my teacher gave us. Please help.
Bravo Baking Co has expanded its product line to include several other specialty breads. The operating results for the last quarter are provided below.
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department ofWooden Figurines Incorporated had developed the following static budget for the third quarter. Duck Decoy is in theprocess of preparing the flexible budget and understanding the results.Actual Flexible StaticResults Budget BudgetSales volume (in units) 13,000 ______12,000Sales revenues $257,500 _______ $250,000Variable costs 154,000 ________ 175,000Contribution margin 103,500 ________ 75,000Fixed costs 50,500 $ ________ 49,500Operating profit $ 53,000 $_________ $ 25,500
9) The flexible budget will report ________ for variable costs.A) $154,000
B) $175,000
C) $13,583
D) $189,58310) The flexible budget will report ________ for the fixed costs.A) $49,500 Favorable
1. Oak Township issued the following bonds during the year: Bonds to acquire equipment for a vehicle repair service accounted for in an internal service fund $ 3,000,000 Bonds to construct a new city hall $ 8,000,000 Bonds to improve its water utility, which is accounted for in a enterprise fund $9,000,000 The amount of debt to be reported in the general fund is
b. $3,000,000
2. Oak Township should report depreciation in which of the following funds:
d. capital projects fund
3. Assuming that Bevo County receives all of its revenues from unrestricted property taxes, it is most likely to account for the activities of its police department in its
d. general fund
4. The city of Alpine incurred the following costs during the year in its property tax collection department: Purchase of computer equipment Salaries and wages Purchase of electricity from the city-owned electric utility Purchase of supplies, all of which were used during the year
$ 10,000
$400,000
$ 40,000
$ 10,000
As a consequence of these transactions, the amount that Alpine should report as expenditures n its general fund is
c. 450,000
5. Grove City received the following resources during the year: Property taxes A federal grant to acquire police cars Hotel taxes, which must be used to promote tourism Proceeds of bonds issued to improve the city’s electric utility
$50,000,000
400,000
3,000,000
12,000,000
The amount that the city should most likely report as revenue in its special revenue fund
e. $65,400,000
6. A city issues $20 million of general obligation bonds to improve its streets and roads. In accordance with the bond covenants, it sets aside $1 million to help ensure that it is able to meet its first payment of principal and $0.1 million for its first payment of interest. The amount of liability that the city should report in its debt service fund is
b. $18.9 million
7. During the year, Brian County collects $12 million of property taxes on behalf of Urton Township. Of this amount, it remits $10 million to the township, expecting to remit the balance shortly after the end of its fiscal year. The amount of revenue that the County should report is
d. $10 million
8. The City of Round Lake receives a contribution of $20 million. The donor stipulates that the money is to be invested. The principal is to remain intact, and the investment proceeds are to be used to support a city-owned nature center. The city should report the contribution in a
a. special revenue fund
b. permanent fund
c. fiduciary fund
d. agency fund
9. A city receives a $30 million contribution. The donor stipulates that the money is to be invested. The principal is to remain intact, and the investment proceeds are to be used to provide scholarships for the children of city employees. The contribution should be reported as revenue of a
c. fiduciary fund
10. The Summerville Preparatory School (a private school) receives a donation of $14 million. The donor stipulates that the entire amount must be used to construct a new athletic field house. The School should classify the donation as
b. temporarily restricted
2-3
A special district’s balance sheet may not capture its economic resources and obligations. A special district accounts for its general fund (its only fund) on a modified accrual basis. In a particular period, it engaged in the following transactions.
a. It issued $20 million in long-term bonds.
b. It acquired several tracts of land, at a total cost of $4 million, paying the entire amount in cash.
c. It sold a portion of the land for $1 million, receiving cash for the entire amount. The tract sold had cost $0.8 million.
d. It repaid $2 million of the bonds.
e. It lost a lawsuit and was ordered to pay $9 million over three years. It made its first cash payment of $3 million.
1. Prepare journal entries to record the transactions in the general fund.
2. Based on your journal entries, prepare a balance sheet and a statement of revenues, expenditures, and other changes in fund balance.
3. Comment on the extent to which the balance sheet captures the district’s economic resources and obligations. How can you justify such a balance sheet?
4. Comment on the extent to which the statement of revenues, expenditures, and other changes in fund balance captures the district’s cost of services. How can you justify such a financial statement?
2-4
Funds are separate fiscal and accounting entities, each with its own self-balancing set of accounts. The newly established Society for Ethical Teachings maintains two funds”a general fund for operations and a building fund to accumulate resources for a new building. In its first year, it engaged in the following transactions.
a. It received cash contributions of $200,000, of which $40,000 was restricted for the acquisition of the new building.
b. It incurred operating costs of $130,000, of which it paid $120,000 in cash.
c. It earned $3,000 of interest (the entire amount received in cash) on resources restricted for the acquisition of the new building.
d. It transferred $17,000 from the operating fund to the new building fund.
e. It paid $12,000 in fees (accounted for as expenses) to an architect to draw up plans for the new building.
1. Prepare journal entries to record the transactions. Be certain to indicate the fund in which they would be made.
2. Prepare a statement of revenues, expenditures, and other changes in fund balances and a balance sheet. Use a two-column format, one column for each of the funds.
2-5
Typical transactions can often be identified with specific types of funds. Boxer City maintains the following funds: Genera Special revenue Capital projects Debt service Enterprise Internal service Permanent Agency
For each of the following transactions, indicate the fund in which it would most likely be recorded:
a.The city collects $3 million of taxes on behalf of the county in which it is located.
b. It spends $4 million to pave city streets, busing the proceeds of a city gasoline tax that is dedicated for road and highway improvements.
c. It receives a contribution of $5 million. Per the stipulation of the donor, the money is to be invested in marketable securities, and the interest from the securities is to be used to maintain a city park.
d. It collects $800,000 in landing fees at the city-owned airport.
e. It earns $200,000 on investments that have been set aside to make principal payments on the city’s outstanding bonds. The bonds were issued to finance improvements to the city’s tunnels and bridges.
f. It pays $4 million to a contractor for work on one of these bridges.
g. It pays $80,000 in wages and salaries to police officers.
h. It purchases, from an outside supplier, $40,000 of stationery to ”sell” to its various operating departments.
2-6
Each fund must account for interfund activity as if it were a separate accounting entity. The newly formed Buffalo School District engaged in the following transactions and other events during the year:
a. It levied and collected property taxes of $110 million.
b. It issued $30 million in long-term bonds to construct a building. It placed the cash received in a special fund that was set aside to account for the bond proceeds.
c. During the year, it constructed the building at a cost of $25 million. It expects to spend the $5 million balance in the following year. The building has an estimated useful life of 25 years.
d. It incurred $70 million in general operating costs, of which it paid $63 million. It expects to pay the balance early the following year. e. It transferred $12 million from its general fund to a fund established to account for resources that were set aside to service the debt. Of this amount, $10 million was for repayment of the debt; $2 million was for interest.
f. From the special fund established to service the debt, it paid $2 million in interest and $6 million in principal.
g. It collected $4 million in hotel taxes restricted to promoting tourism. Because the resources were restricted, they were accounted for in a special restricted fund. During the year, the district spent $3 million on promoting tourism.
h. The district established a supplies store, to provide supplies to the district’s various departments, by transferring $4 million from the general fund. It accounted for the store in a proprietary fund. During the year, the store purchased (and paid for) $2 million in supplies. Of these, it ”sold” $1 million, at cost (for cash), to departments accounted for in the general fund. During the year, these departments used all of the supplies that they had purchased.
1. Prepare journal entries to record the transactions and other events in appropriate funds. Assume that governmental funds are accounted for on a modified accrual basis, and focus only on current financial resources (and, therefore, do not give balance sheet recognition to either capital assets or longterm debt). Proprietary funds are accounted for on a full accrual basis.
2. Prepare a combined balance sheet”one that has a separate column for each of the funds that you established.
3. Prepare a combined statement of revenues, expenditures, and changes in fund balances for all governmental funds”one column for each fund. Prepare a separate statement of revenues, expenses, and changes in fund balances for any proprietary funds that you established.
2-7
Long-term assets and liabilities are denied recognition on funds statements. Entrepreneurs Consultants, a state agency, was established to provide consulting services to small businesses. It maintains only a single general fund and accounts for its activities on a modified accrual basis. During its first month of operations, the association engaged in, or was affected by, the following transactions and events:
a. It received an unrestricted grant of $100,000.
b. It purchased five computers at $2,000 each.
c. It paid wages and salaries of $6,000.
d. It borrowed $24,000 from a bank, to enable it to purchase an automobile.
e. It purchased the automobile for $24,000.
f. It made its first payment on the note” interest of $200.
g. It destroyed one of its computers in an accident. The computer was not insured.
1. Prepare journal entries in the general fund to record each of the transactions or other events.
2. Prepare a balance sheet and a statement of revenues, expenditures, and changes in fund balance for the general fund.
2-8
The more complete presentation is not always the easier to understand. Bertram County maintains a fund accounting system. Nevertheless, its comptroller (who recently retired from a position in private industry) prepared the following balance sheet (in millions):
Assets:
Cash $ 600
Investments $ 1,800
Construction in progress $ 500
Fixed assets $ 1,200
Total assets $ 4,100
Liabilities and fund balance:
Bonds payable $1,700
Fund balance
Restricted for capital projects $ 600
Restricted for debt service 200
Unrestricted 1,600 2,400
Total liabilities and fund Balance $4,100
The fund balance restricted for debt service represents entirely principal (not interest) on the bonds payable.
1. Recast the balance sheet, as best you can, into separate balance sheets for each of the funds that are apparently maintained by the county. Assume that the county uses a modified accrual basis of accounting that excludes recognition in its funds of both capital (fixed) assets and long-term debt. Assume also that cash and investments are divided among the funds in proportion to their fund balances.
2. In your opinion, which of the two presentations gives the reader a more complete picture of the county’s financial status? Why? Which presentation is easier to understand
2-8 These financial statement items are for Barone Corporation at year-end, July 31, 2010.
Salaries Payable 2,080
Salaries Expense 51,700
Utilities expense 22,600
Equipment 18,500
Accounts Payable 4,000
Commission revenue 66,100
Rent revenue 8,500
Long-term note payable 1,800
Common Stock 16,000
Cash 29,200
Accounts Receivable 9,780
Accumulated depreciation 6,000
Dividends 4,000
Depreciation expense 4,000
Retained earnings 35,200
Suppose that you are the president of Allied Equipment. Your sales manager has approached you with a proposal to sell $20,000 of equipment to Barone. He would like to provide a loan to Barone in the form of 10%, 5-year note payable. Evaluate how this loan would change Barrone’s current ratio and debt to total assets ratio and discuss whether you would make the sale.
In 2010, Dangerous Dragon, Inc. (a retail clothing company) sold 558,231 units of its product at an average price of $20 per unit. The company reported estimated Returns and allowances in 2010 of 3 percent of gross revenue. Dangerous Dragon actually purchased 550,000 units of its product from its manufacturer in 2010 at an average cost of $9 per unit. Dangerous Dragon began 2010 with 85,000 units of its product in inventory (carried at an average cost of $9 per unit). Operating expenses (excluding depreciation) for Dangerous Dragon, Inc. in 2010 were $2,259,780 and depreciation expense was $116,957. Dangerous Dragon had $10,000,000 in debt outstanding throughout all of 2010. This debt carried an average interest rate of 6 percent. Finally, Dangerous Dragon’s tax rate was 40 percent. Dangerous Dragon’s fiscal year runs from January 1 through December 31. Given this information, construct Dangerous Dragon’s 2010 multi-step income statement. What did Dangerous Dragon, Inc. record as NET INCOME on its 2010 income statement?
During 2010, Jester Corporation had the following transactions and events.
Declared a cash dividend.
Issued par value common stock for cash at par value.
Completed a 2-for-1 stock split in which $10 par value stock was changed to $5 par value stock.
Declared a small stock dividend when the market value was higher than par value.
Made a prior period adjustment for overstatement of net income.
Issued the shares of common stock required by the stock dividend declaration in item no. 4 above.
Paid the cash dividend in item no. 1 above.
Issued par value common stock for cash above par value.
Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’ equity. Present your answer in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect. Item no. 1 is given as an example.
Item Capital Stock Additional Retained earnings
1.
2.
3.
4.
5.
6.
7.
8.
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During 2010, Jester Corporation had the following transactions and events.
Declared a cash dividend.
Issued par value common stock for cash at par value.
Completed a 2-for-1 stock split in which $10 par value stock was changed to $5 par value stock.
Declared a small stock dividend when the market value was higher than par value.
Made a prior period adjustment for overstatement of net income.
Issued the shares of common stock required by the stock dividend declaration in item no. 4 above.
Paid the cash dividend in item no. 1 above.
Issued par value common stock for cash above par value.
Instructions
Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’ equity. Present your answer in tabular form with the following columns. Use (I) for increase, (D) for decrease, and (NE) for no effect. Item no. 1 is given as an example.
Item Capital Stock / Additional Retained / earnings
In 2011, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures:
Basic research to develop the technology
$2,000,000
Engineering design work
680,000
Development of a prototype device
300,000
Acquisition of equipment
60,000
Testing and modification of the prototype
200,000
Legal and other fees for patent application on the new communication system
40,000
Legal fees for successful defense of the new patent
20,000
Total
$3,300,000
The equipment will be used on this and other research projects. Depreciation on the equipment for 2011 is $10,000.
During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized.
Required:
Prepare correcting entries that reflect the appropriate treatment of the expenditures.
In 2011, Space Technology Company modified its model Z2 satellite to incorporate a new communication device. The company made the following expenditures:
Basic research to develop the technology
$2,000,000
Engineering design work
680,000
Development of a prototype device
300,000
Acquisition of equipment
60,000
Testing and modification of the prototype
200,000
Legal and other fees for patent application on the new communication system
40,000
Legal fees for successful defense of the new patent
20,000
Total
$3,300,000
The equipment will be used on this and other research projects. Depreciation on the equipment for 2011 is $10,000.
During your year-end review of the accounts related to intangibles, you discover that the company has capitalized all of the above as costs of the patent. Management contends that the device simply represents an improvement of the existing communication system of the satellite and, therefore, should be capitalized.
Required:
Prepare correcting entries that reflect the appropriate treatment of the expenditures.
At 30 June 2009, Reacher Ltd reported the following assets:
$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
All assets are measured using the cost model.
At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.
For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.
At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.
Required:
Prepare the journal entries relating to impairment at 30 June 2009 and 2010.
At 30 June 2009, Reacher Ltd reported the following assets:
$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
All assets are measured using the cost model.
At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.
For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.
At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.
Required:
Prepare the journal entries relating to impairment at 30 June 2009 and 2010.
At 30 June 2009, Reacher Ltd reported the following assets:
$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
All assets are measured using the cost model.
At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.
For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.
At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.
Required:
Prepare the journal entries relating to impairment at 30 June 2009 and 2010.
At 30 June 2009, Reacher Ltd reported the following assets:
$
Land 50,000
Plant 250,000
Accumulated depreciation (50,000)
Goodwill 8,000
Inventory 40,000
Cash 2,000
All assets are measured using the cost model.
At 30 June 2009, the recoverable amount of the entity, considered to be a single cash-generating unit, was $272,000.
For the period ending 30 June 2010, the depreciation charge on plant was $18,400. If the plant had not been impaired the charge would have been $25,000.
At 30 June 2010, the recoverable amount of the entity was calculated to be $13,000 greater than the carrying amount of the assets of the entity. As a result, Reacher Ltd recognised a reversal of the previous year’s impairment loss.
Required:
(a) When reversing an impairment loss for a cash generating unit, how must the reversal be allocated?
(b) Prepare the journal entries relating to impairment at 30 June 2009 and 2010. Show all workings.
31. On November 4, 2009, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2009 and 2010, respectively, Blue took $642 and $5128 of cost recovery. These amounts were incorrect because Blue applied wrong percentage (i.e. those for 39-year rather than 27.5-year). Blue should have taken $910 and $7272 cost recovery in 2009 and 2010. On January 1, 2011, the asset was sold for $180000. Calculate the gain or loss on the sale of the asset in 2011.
34. Western acquires used office machine (seven-tear class asset) on November 2, 2011, for $75000. This is the only asset acquired by western during the year. He does not elect immediate expensing under ss179. On September 15, 2012, western sells the machine.
a. determine Weston’s cost recovery for 2011
b. determine Weston’s cost recovery for 2012
38. On April 3, 2011, Terry purchased and placed in service a building. The building cost $2 million. An appraisal determined that 25% of the total cost was attributed to the value of the land. The bottom floor of the building is leased to a retail business for $32000. The other floors of the building are rental apts. With the annual rent of $160000. Determine Terry’s cost recovery for 2011.
39. On May 5, 2011, Christy purchased and placed in service a hotel. The hotel cost$1.8 million. Calculate Christy’s cost recovery for 2011. For 2021.
41. on April 20, 2011, Ralph purchased new equipment to be used in his farming business. The cost of the equipment is $150000. Ralph does not elect immediate expensing under ss 179; nor does he elect to not have the uniform capitalization rules apply. Compute Ralph’s cost recovery for 2011.
46. Olga is proprietor of small business. In 2011, the business income, before consideration of any cost recovery or ss 179 deduction, is $750000. Olga spends $2,050,000 on new seven-year class assets and elects to take the ss 179 deduction on them. She elects not to take additional first year depreciation. Olga’s cost recovery deduction for 2011, except for the cost recovery with respect to the new seven-year assets is $95000. Determine Olga’s total cost recovery for 2011 with respect to the seven-year assets and the amount of any ss 179 carry forward.
49. On October 15, 2011, John purchased and placed in service a used car. The purchase price was $25000. This was the only business use asset john acquired in 2011. He used the car 80% of the time for business and 20% for personal use. John used the statutory percentage method of cost recovery. He elects not to take additional first-year depreciation. Calculate the total deduction John may take for 2011 with respect to the car.
52. on may 28, 2011, Mary purchased and placed in service a new $20000 car. The car was used 60% for business, 20% for production of income, and 20% for personal use in 2011. In 2012, the usage changed to 40% for business, 30% for production of income, and 30% for personal use. Mary did not elect immediate expensing under ss 179. She elects not to take additional first-year depreciation. Compute the cost recovery and any cost recovery recapture in 2012.
54. Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $35000. If Dennis leased the car for five years , the lease payments would be $375 per month. Dennis will acquire the car on January 1, 2011. The inclusion dollar amounts from the IRS table for the next five years are $40, $87, $130, $156, and $179. Dennis desires to know the effect on his adjusted gross income of purchasing versus leasing the car for the next five years. He elects not to take additional first-year depreciation. Write a letter to Dennis and present your calculations. Also, prepare a memo for the tax files. His address is 150 Avenue I, Memphis, TN 38112.
57. Mike Saxon is negotiating the purchase of a business. The final purchase price has been agreed upon, but the allocation of the purchase price to the assets is still being discussed. Appraisals on a warehouse range from $1.2 million to $1.5 million. If a value of $1.2 million is used for a warehouse, the remainder of the purchase price, $800,000 , will be allocated to goodwill. If $1.5 million is allocated to the warehouse, goodwill be $500,000. Mike wants to know what affect each alternative will have on cost recovery and amortization during the first year. Under the agreement, Mike will take over the business on January 1 of next year. Write a letter to Mike in which you present your calculations and recommendation. Also, prepare a memo for the tax files. Mikes address is 200 Rolling Hills Drive, Shavertown, PA 18708.
4. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under absorption costing.
4. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under absorption costing.
57. Mike Saxon is negotiating the purchase of a business. The final purchase price has been agreed upon, but the allocation of the purchase price to the assets is still being discussed. Appraisals on a warehouse range from $1.2 million to $1.5 million. If a value of $1.2 million is used for a warehouse, the remainder of the purchase price, $800,000 , will be allocated to goodwill. If $1.5 million is allocated to the warehouse, goodwill be $500,000. Mike wants to know what affect each alternative will have on cost recovery and amortization during the first year. Under the agreement, Mike will take over the business on January 1 of next year. Write a letter to Mike in which you present your calculations and recommendation. Also, prepare a memo for the tax files. Mikes address is 200 Rolling Hills Drive, Shavertown, PA 18708.
1.Rule 203 of the AICPA’s Code of Professional Conduct pertains to a. CPAs’ independence b. authorities designated to establish accounting standards c. standards of competency d. solicitation of new clients by a CPA
2. Which of the following rule-making authorities would establish accounting standards for Stanford University (a private university)? a. the AICPA b. the FASB c. the FASAB d. the GASB
3. Which of the following rule-making authorities would establish accounting standards for the University of Texas (a public university)? a. the AICPA b. the FASB c. the FASAB d. the GASB
4. If the GASB has not issued a pronouncement on a specific issue, which of the following is true with respect to FASB pronouncements? a. they would automatically govern b. they could be taken into account but would have no higher standing than other accounting literature c. they are irrelevant d. they could be taken into account by the reporting entity, but only if disclosure is made in notes to the financial statements
5. The FASB is to the GASB as a. a brother is to a sister b. a father is to a son c. a son is to a father d. a daughter is to a friend
6. Standards promulgated by the FASB are most likely to be adhered to by which of the following governmental units? a. a police department b. a public school c. an electric utility d. a department of highways
7. Which of the following practices is most likely to undermine interperiod equity? a. paying for a new school building out of current operating funds b. paying the administrative staff of a school out of current operating funds c. issuing 20-year bonds to finance construction of a new highway d. recognizing gains and losses on marketable securities as prices increase and decrease
8. The term ”independent sector” refers to a. states that have opted not to receive federal funds b. not-for-profit organizations c. churches that are unaffiliated with a particular denomination d. universities that are not affiliated with a particular athletic conference
9. Which of the following is not an objective of external financial reporting by either the GASB or the FASB? a. to enable the statement user to detect fraud b. to disclose legal or contractual restrictions on the use of resources c. to provide information about how the organizations meet their cash requirements d. to provide information that would enable a user to assess the service potential of longlived assets
10. Which of the following is the least appropriate use of the external financial statements of a government? a. to assess the entity’s financial position b. to assess whether the compensation of management is reasonable in relation to that in comparable entities c. to compare actual results with the budget d. to evaluate the efficiency and effectiveness of the entity in achieving its objectives
Problem 1-3
Budgeting practices that satisfy cash requirements may not promote interperiod equity. The Burnet County Road Authority was established as a separate government to maintain county highways. The road authority was granted statutory power to impose property taxes on county residents to cover its costs, but it is required to balance its budget, which must be prepared on a cash basis. In its first year of operations it engaged in the following transactions, all of which were consistent with its legally adopted, cash-based budget: _
Purchased $10 million of equipment, all of which had an anticipated useful life of 10 years. To finance the acquisition, the authority issued $10 million in 10-year term bonds (i.e., bonds that mature in 10 years)
_ Incurred wages, salaries, and other operating costs, all paid in cash, of $6 million _ Paid interest of $0.5 million on the bonds
_ Purchased $0.9 million of additional equipment, paying for it in cash. This equipment had a useful life of only three years
1. The authority’s governing board levies property taxes at rates that are just sufficient to balance the authority’s budget. What is the amount of tax revenue that it is required to collect?
2. Assume that in the authority’s second year of operations, it incurs the same costs, except that it purchases no new equipment. What amount of tax revenue is it required to collect?
3. Make the same assumption as to the tenth year, when it has to repay the bonds. What amount of tax revenue is it required to collect?
4. Comment on the extent to which the authority’s budgeting and taxing policies promote interperiod equity. What changes would you recommend?
Problem 1-4
The dual objectives of assessing interperiod equity and ensuring budgetary compliance may necessitate different accounting practices. A city engages in the transactions that follow. For each transaction, indicate the amount of revenue or expenditure that it should report in 2012. Assume first that the main objective of the financial statements is to enable users to assess budgetary compliance. Then assume alternatively that the main objective is to assess interperiod equity. The city prepares its budget on a ”modified” cash basis (that is, it expands the definition of cash to include short-term marketable securities), and its fiscal year ends on December 31.
1. Employees earned $128,000 in salaries and wages for the last five days in December 2012. They were paid on January 8, 2013.
2. A consulting actuary calculated that, per an accepted actuarial cost method, the city should contribute $225,000 to its firefighters’ pension fund for 2012. However, the city contributed only $170,000, which is the amount budgeted at the start of the year.
3. The city acquired three police cars for $35,000 cash each. The vehicles are expected to last for three years.
4. OnDecember 1, 2012, the city invested $99,000 in short-term commercial paper (promissory notes). The notes matured January 1, 2013. The city received $100,000. The $1,000 difference between the two amounts represents the city’s return (interest) on the investment.
5. On January 2, 2012, the city acquired a new $10 million office building, financing it with 25-year serial bonds. The bonds are to be repaid evenly over the period during which they are outstanding”that is, $400,000 per year. The useful life of the building is 25 years.
6. On January 1, 2012, the city acquired another $10 million office building, financing this facility with 25-year term bonds. These bonds will be repaid entirely when they mature January 1, 2037. The useful life of this building is also 25 years.
7. City restaurants are required to pay a $1,200 annual license fee, the proceeds of which the city uses to fund its restaurant inspection program. The license covers the period July 1 through June 30. In 2012 the city collected $120,000 in fees for the license period beginning July 1, 2012.
8. The city borrowed $300,000 in November 2012 to cover a temporary shortage of cash. It expects to repay the loan in February 2013.
Problem 1-5
Year-end financial accounting and reporting can reveal the economic substance of government actions that have been taken mainly to balance the budget. Public officials, it is often charged, promote measures intended to make the government ”look good” in the short-term, but that may be deleterious in the long term. Assume that a city’s budget is on a cash or near-cash basis. Further assume that the following actions, designed to increase a reported surplus, were approved by the city council and did indeed reduce budgetary expenditures or increase budgetary revenues:
a. The city reduced its contributions to the employee defined benefit pension plan from the $10 million recommended by the city’s actuary to $5 million. Under a defined benefit plan, the employer promises employees specified benefits upon their retirement, and the level of benefits is independent of when and how much the employer contributes to the plan over the employees’ years of service.
b. It reduced by $1 million the city’s cash transfer to a rainy-day reserve that is maintained to cover possible future reductions in tax collections attributable to a downturn in the region’s economy.
c. It sold securities that had been held as an investment. The securities had been purchased five years earlier at a cost of $2 million. Market value at the time of sale was $5 million. d. It delayed until the following year $10 million of maintenance on city highways.
1. Suppose that you were asked to propose accounting principles for external reporting that would capture the true economic nature of these measures”actions that, in substance, did not improve the city’s financial performance or position. For each measure, indicate how you would require that it be accounted for and reported.
2. Can you see any disadvantages to the principles that you propose?
Problem 1-6
Choice of accounting principles may have significant economic consequences. In preparing its budget proposals, a city’s budget committee initially estimated that total revenues would be $120 million and total expenditures would be $123 million. In light of the balanced budget requirements that the city has to meet, the committee proposed several measures to either increase revenues or decrease expenditures. They included the following:
a. Delay the payment of $0.4 million of city bills from the last week of the fiscal year covered by the budget to the first week of the next fiscal year.
b. Change the way property taxes are accounted for in the budget. Currently, property taxes are counted as revenues only if they are expected to be collected during the budget year. New budgetary principles would permit the city to include as revenues all taxes expected to be collected within 60 days of the following fiscal year, in addition to those collected during the year. The committee estimates that the change would have a net impact of $1.2 million.
c. Change the way that supplies are accounted for in the budget. Currently, supplies are recognized as expenditures at the time they are ordered. The proposal would delay recognition of the expenditure until the supplies are actually received. The committee estimates a net effect of $0.8 million.
d. Defer indefinitely $1.5 million of maintenance on city roads. Except as just noted with respect to supplies, the city currently prepares its budget on a cash basis, even though other bases are also legally permissible. It prepares its year-end financial statements, however, on an accrual basis.
1. Indicate the impact of each of the proposals on the city’s (1) budget, (2) annual year-end financial statements, (3) ”substantive” economic well-being. Be sure to distinguish between direct and indirect consequences.
2. It is sometimes said that choice of accounting principles doesn’t matter in that the principles affect only the way in which the entity’s fiscal ”story” is told; they have no impact on the entity’s actual financial history or current status. Do you agree? Explain.
Present value Rate Time Compounding Frequency Table Factor Future Value
$5,000 12% 2yrs Annual ? ?
$5,000 12% 2yrs Semiannual ? ?
$5,000 12% 2yrs Quarterly ? ?
$5,000 12% 2yrs Monthly ? ?
2. Cindy has decided to retire in 24 yrs. She has $30,000 available today and wants to invest the money to supplement her pension plan.
a. assume Cindy wants to accumulate $150,000 by her retirement date. Will she achieve her goal if she invests $30,000 today and earns 6%? Please show calculations to support your yes/no answer.
b. If cindy invests a total of $30,000 through a series of 24 equal annual installments at the end of the year instead of a single amount, would Cindy accumulate the desired $100,000 at the 6% annual interest? The first investment would be one year from today. Please show calculations to support answer.
3. Smith plans to choose one of 3 investments. Investment A pays $2,500 at the end of each year for 3 years. Investment B pays $8,500 at the end of 5 years. Investment C pays $1,000 at the end of each year for 4 years and pays $4,000 at the end of the 5th yr. Smith requires a rate of return of 7% on each of these investments.
1. Which one of the following actions best matches the primary goal of financial management?
increasing the net working capital while lowering the long-term asset requirements
improving the operating efficiency, thereby increasing the market value of the stock
increasing the firm’s market share
reducing fixed costs and increasing variable costs
increasing the liquidity of the firm by transferring short-term debt into long-term debt
2. When analyzing alternative capital structures for a firm, a financial manager must consider which of the following?
type of loan
amount of funds needed
cost of funds
mix of debt and equity
all of the above
3. Market value reflects which of the following:
The amount someone is willing to pay today for an asset.
The value of the asset based on generally-accepted accounting principles.
The asset’s historical cost.
A and B only
None of the above
4. Which of the following is true regarding income statements?
It shows the revenue and expenses, based upon selected accounting methods.
It reveals the net cash flows of a firm over a stated period of time.
It reflects the financial position of a firm as of a particular date.
It records revenue only when cash is received for the product or service provided.
It records expenses based on the recognition principle.
5. Tato’s Pizza has sales of $625,000. They paid $43,000 in interest during the year and depreciation was $79,000. Administrative costs were $100,000 and other costs were $160,000. Assuming a tax rate of 35 percent, what is Tato’s Pizza net income?
$157,950
$322,000
$243,000
$200,000
6. Home Best Hardware had $315,000 in taxable income last year. Using the tax rates provided in Table 2.3, what is the marginal tax rate?
35%
39%
34%
32%
7. Pizza A had earnings after taxes of $600,000 in the year 2008, and 300,000 shares outstanding. In year 2009, earnings after taxes increased to $750,000, and 25,000 new shares were issued for a total of 325,000 shares. What is the EPS figure for 2008?
$2.0
$2.21
$0.50
$0.47
8. The income statement reflects:
income and expenses at the time when those items affect the cash flows of a firm.
income and expenses in accordance with GAAP.
the cash flows in accordance with GAAP.
the flow of cash into and out of a firm during a stated period of time.
the flow of cash into and out of a firm as of a particular date.
9. Print Imaging has EBIT of $150,000, interest of $30,000, taxes of $50,000, and depreciation of $50,000. What is the company’s operating cash flow?
$120,000
$180,000
$170,000
$150,000
$120,000
10. You opened a new certificate of feposit with $13,000. Your broker indicated that this investment pays five percent interest, compounded quarterly. Which one of the following statements is correct concerning this investment?
You will receive equal interest payments every three months over the life of the investment.
You could earn more interest by investing in an account paying five percent simple interest.
You would have earned more interest if you had invested in an account paying annual interest.
You will earn less and less interest each year over the life of the investment.
You will earn more interest in year 3, than you will in year 2.
11. Mr. Smith will receive $8,500 a year for the next 14 years from a contract. If the interest rate on this investment is eight percent, what is the approximate current value of these future payments?
$70,070
$53,500
$110,200
$96,700
12. Paper Pro recently purchased a printing machine costing $97,000. The company financed this purchase at 8.25 percent interest, with monthly payments of $2,379.45. How many years will it take the firm to pay off this debt?
4.0 years
4.25 years
4.5 years
5.0 years
13. Fine Oak Woodworks is considering a project that has cash flows of $6,000, $4,000, and $3,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is false?
The current value of the project’s inflows is $13,000
The approximate current value of the project’s inflows is $11,000
The project’s inflows are higher than zero
The project should be accepted because its present value is positive
1.The following data relate to a $200,000,000, 5% bond issued for a selected semiannual interest period:
Bond carrying amount at beginning of period $216,221,792
Interest paid during the period 5,000,000
Interest expense allocable to the period 4,864,990
(a) Were the bonds issued at a discount or a premium?
(b) What is the unamortized amount of the discount or premium account at the beginning of the period?
(c) What account was debited to amortize the discount or premium?
2. Bonds Payable has a balance of $3,500,000 and Discount on Bonds Payable has a balance of $125,000. If the issuing corporation redeems the bonds before the maturity date at 97, is there a gain or a loss on the bond redeemption? How much of a gain or a loss?
1. A goal of managerial accounting is to provide information for planning, controlling and decision making for management. A) True B) False
2. Performance reports, like other managerial accounting reports, must follow GAAP. A) True B) False
3. Opportunity costs are the value of benefits foregone when one alternative is selected over another. A) True B) False
4. Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for internal users of accounting information. A) True B) False
5. Variable cost per unit remains the same even though there is a change in the number of units produced. A) True B) False
6. Which of the following is likely to be a noncontrollable cost of a department supervisor? A) labor in the department B) materials used in the department C) insurance on the plant D) overtime premium pay earned by those working in the department
7. Calculating the difference in revenue and the difference in cost between decision alternatives is called A) budgeting production. B) incremental analysis. C) profit planning. D) systems development.
8. A manager should be evaluated based on A) noncontrollable costs. B) opportunity costs. C) controllable costs. D) sunk costs.
9. Costs incurred in the past which are not relevant to present decisions are A) fixed costs. B) sunk costs. C) opportunity costs. D) indirect costs.
10. A cost which is directly traceable to a product, activity, or department is a A) fixed cost. B) managerial cost. C) opportunity cost. D) direct cost.
11. Which of the following is not likely to be a fixed cost? A) direct materials used in production B) rent C) depreciation D) salary of the human resources director
12. The principle that managers follow when they only investigate departures from the plan that appear to be significant is commonly known as A) small amounts don’t matter. B) management by exception. C) only labor and materials deserve attention. D) exceptional costs yield exceptional results.
13. Depreciation of factory equipment is part of manufacturing overhead. A) True B) False
14. Manufacturing costs include direct material, direct labor, and manufacturing overhead. A) True B) False
15. A company that builds custom homes would be likely to use a process costing system. A) True B) False
16. Period costs are identified with accounting periods rather than goods produced. A) True B) False
17. The wages of a factory assembly line worker would be classified as direct labor. A) True B) False
18. Sales commissions are considered a product cost. A) True B) False
19. Which of the following costs is not part of manufacturing overhead? A) Electricity for the factory B) Depreciation of factory equipment C) Salaries for the production supervisors D) Health insurance for sales staff
20. If the amount of underapplied overhead or overapplied overhead is not large, the Manufacturing Overhead account is closed to A) Raw Materials Inventory. B) Work in Process Inventory. C) Finished Goods Inventory. D) Cost of Goods Sold.
Essays/Problems
21. Classify each of the following costs as a product cost or a period cost. ‘ 5 points (1/2 point each)
______ a. Depreciation of production equipment
______ b. Sales commissions
______ c. Insurance on corporate office building
______ d. Direct materials
______ e. Rent for company headquarters building
______ f. Company president’s salary
______ g. Wages for production workers
______ h. Advertising expenses
______ i. Cost of shipping finished goods inventory to a customer
______ j. Plant managers Salary
30. The Seattle Company allocates overhead based on a predetermined overhead rate of $8.00 per direct labor hour. Job b 689 required 6 tons of direct material at a cost of $900.00 per ton and took employees who earn $15.00 per hour a total of 90 hours to complete. What is the total cost of Job b 689? Show all work. 10 points
31. A Krogers grocery store manager is being evaluated. Explain the difference between controllable costs and noncontrollable costs as they should be used in this evaluation. Provide examples of costs which are controllable and those which are noncontrollable. 5 points
1. Hansen Company uses the periodic inventory method and had the following inventory information available:
Units Unit Cost Total Cost
1/1 Beginning Inventory 100 $3 $ 300
1/20 Purchase 500 $4 2,000
7/25 Purchase 100 $5 500
10/20 Purchase 300 $6 1,800
1,000 $4,600
A physical count of inventory on December 31 revealed that there were 375 units on hand. Assume that the company uses the LIFO method. The value of the ending inventory on December 31 is __?
2. Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
Select one:
a. Bad Debts Expense 10,000 Allowance for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000
c. Bad Debts Expense 8,000 Accounts Receivable 8,000
d. Bad Debts Expense 8,000 Accounts Receivable 8,000
3. The financial statements of the Melton Manufacturing Company reports net sales of $500,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days?
Select one:
a. 52.1
b. 29.2
c. 21.9
d. 36.5
4. The First-in, First-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.
True
False
5. The financial statements of the Belfry Manufacturing Company reports net sales of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days?
Select one:
a. 40 times
b. 80 times
c. 54.7 times
d. 50 times
6. Assume Grammar Company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000, purchases of $75,000, and sales of $125,000. Grammar closes its records once a year on December 31. In the accounting records, the merchandise inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was
Select one:
a. equal to $5,000.
b. more than $5,000.
c. less than $5,000.
d. less than $5,000.
7. The factor which determines whether or not goods should be included in a physical count of inventory is
Select one:
a. physical possession.
b. legal title.
c. management’s judgment.
d. whether or not the purchase price has been paid.
8. Nilson Company gathered the following reconciling information in preparing its August bank reconciliation:
Cash balance per books, 8/31 $7,000
Deposits in transit 300
Notes receivable and interest collected by bank 1,700
Bank charge for check printing 40
Outstanding checks 4,000
NSF check 340
The adjusted cash balance per books on August 31 is
Select one:
a. $8,320
b. $8,020
c. $4,620
d. $4,920
9. Merchandising companies that sell to retailers are known as
Select one:
a. brokers.
b. corporations.
c. wholesalers.
d. service firms.
10. Alpha First Company just began business and made the following four inventory purchases in June:
June 1 150 units $ 780
June 10 200 units 1,170
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is
Select one:
a. $1,040.00
b. $1,072.50
c. $1,305.00
d. $1,320.00
11. At April 30, Kessler Company has the following bank information:
Cash balance per bank $4,600
Outstanding checks $280
Deposits in transit $550
Credit memo for interest $10
Bank service charge $20
What is Kessler’s adjusted cash balance on April 30?
Select one:
a. $4,860
b. $4,880
c. $4,330
d. $4,870
12. Financial information is presented below:
Operating Expenses $ 45,000
Sales Returns and Allowances 13,000
Sales Discount 6,000
Sales 150,000
Cost of Goods Sold 67,000
The profit margin ratio would be
Select one:
a. .127
b. .132
c. .139
d. .145
13. ogan Industries had the following inventory transactions occur during 2010:
Units Cost/unit
Feb. 1, 2010 Purchase 18 $45
Mar. 14, 2010 Purchase 31 $47
May 1, 2010 Purchase 22 $49
The company sold 51 units at $63. Assuming that a periodic inventory system is used, what is the company’s gross profit using FIFO? (rounded to whole dollars)
Select one:
a. $2,441
b. $2,365
c. $848
d. $772
14. Use the following information regarding Black Company and Red Company to answer the question “Which amount is equal to Black Company’s “days in inventory” for 2010 (to the closest decimal place)?”
Year
Inventory Turnover Ratio
Ending Inventory
Black Company
2008
$26,340
2009
10.7
$29,890
2010
10.2
$30,100
Red Company
2008
$25,860
2009
8.8
$24,750
2010
9.5
$22,530
Select one:
a. 35.8 days
b. 34.1 days
c. 82.5 days
d. 29.5 days
15. M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett’s total trade receivables?
Income tax refund due $ 500
Advance due to the company from the company president 300
3-month note due from M. Cornett’s main customer 2,000
Interest due this month on the above note 100
Due and unpaid from this month’s sales 3,000
Due and unpaid from last month’s sales 1,000
Select one:
a. $4,000
b. $6,000
c. $5,000
d. $6,900
16. A 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
$3,970
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is
Select one:
a. $1,418
b. $1,475
c. $1,425
d. $1,400
17. Assume that Mitchell Company uses a periodic inventory system and has these account balances: Purchases $500,000; Purchase Returns and Allowances $14,000; Purchases Discounts $9,000; and Freight-in $15,000. Determine net purchases.
18. Assume that Mitchell Company uses a periodic inventory system and has these account balances: Purchases $500,000; Purchase Returns and Allowances $14,000; Purchases Discounts $9,000; and Freight-in $15,000. Determine cost of goods purchased.
19. Under the periodic inventory system, acquisitions of merchandise are not recorded in the Merchandise Inventory account.
1. Identify and discuss the controls for the sales and for the cash receipts.
2. Identify and discuss some possible deficiencies in the internal controls that you have described.
3. Make some recommendations as to how the deficiencies could be rectified.
The Cotton Company
The Cotton Company is a retail store dealing in expensive linens and clothing and has a staff of about 20 sales clerks. The sales are done in cash or credit, using the store’s own billing rather than credit cards. Most of the larger sales are on credit.
Each sales clerk has his own sales book with pre-numbered, three-copy, multicolored sales slips attached, but perforated. Only a central cash register is used, run by the store manager. He has been working for Zafir Diab, the store owner, for over 15 years. The cash register is physically positioned to monitor the entire store and the front door.
All sales transactions are recorded in the salesclerk’s sales books. The original and second copy for each sale is given to the cashier. The third copy is retained by the salesclerk in the sales book. When the sale is for cash, the customer pays the salesclerk, who marks all three copies “paid” and takes the money to the supervisor. The supervisor compares the clothing to the description on the invoice and the price on the sales tag. He also rechecks the clerk’s calculations. Any corrections are approved by the salesclerk. The clerk changes his sales book at that time, and the items are packaged and given to the customer.
A credit sale must be approved by the supervisor from an approved credit list after the salesclerk prepares the three part invoice. Next, the supervisor enters the sale in his cash register as a credit or cash sale. The second copy of the invoice, which has been validated by the cash register, is given to the customer. Diab must approve any credit sales that exceed $500.
At the end of the day, the salesclerks give their books to the supervisor and the supervisor compares the totals to the cash register tape. He then creates a summary of the day’s transactions. The cash is deposited in the bank the next morning by Diab, and he receives a deposit slip which he gives to the accounts receivable clerk. If Diab is unable to deposit the money, the supervisor goes instead. The cashier’s copies of the invoices are also given to the accounts receivable clerk along with a summary of the day’s receipts.
Khalid, the accounts receivable clerk, reviews the sales books and the cash register tape. He inputs all sales invoice information into the firm’s computer, which provides a complete printout of all input and summaries. The accounting summary includes sales by the salesclerk, cash sales, credit sales and total sales. Khalid compares this output with the summary and reconciles all differences.
The computer updates accounts receivable, inventory, and general ledger master files. After the update procedure has been run on the computer, Khalid’s assistant files all sales included in the sales printout. Khalid uses these files to create bills that are mailed to the customers.
The mail is opened each morning by Diab’s secretary. She gives all correspondence to Diab and all payments to the supervisor. The supervisor totals the amounts and adds this to the register for later deposit. He gives the total to Khalid to update customer accounts on the computer. Khalid uses this list and all the remittances to record cash receipts and update the accounts receivable, again on the computer. He reconciles the total receipts on the pre-list to the deposit slip and to her printout. At the same time he compares the deposit slip received from the bank for cash sales to the cash receipts journal. He has online access to the store’s bank account, which he accesses monthly to pay the store’s bills online.
The computer generates a weekly aged trial balance of accounts receivable. A separate listing of all unpaid bills is also automatically prepared, and both are given to Mr. Diab. He approves all write-offs of uncollectible items and forwards the list to Khalid, who writes them off.
Each month Khalid mails computer generated statements to customers. Complaints and disagreements are resolved by Mr. Diab, who then informs Khalid in writing of any write-down or misstatements that require correction.
The computer system also automatically totals the journals and posts the totals to the general ledger. A general ledger trial balance is printed out, from which Khalid prepares the financial statements. Khalid also prepares monthly bank reconciliations and reconciles the general ledger to the accounts receivable trial balance.
Because of the importance of inventory control, Khalid prints out the inventory perpetual totals monthly, on the last day of each month. Salesclerks count the entire inventory after store hours on the last day of each month for comparison with the perpetual records. An inventory shortage report is provided to Mr. Diab. The perpetual records are adjusted by Khalid after Mr. Diab has approved the adjustments.
Define current assets. What basis is used for ordering individual items within the current assets section?
3.
Distinguish between long-term investments and property, plant, and equipment.
4.
How do current liabilities differ from long-term liabilities?
5.
Identify the two parts of stockholders’ equity in a corporation and indicate the purpose of each.
6.
(a) Julia Alter believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Julia correct? Explain.
(b)Are short-term creditors, long-term creditors, and stockholders primarily interested in the same characteristics of a company? Explain.
1) Michael Smith, your uncle, is an inventor who has decided to incorporate. Uncle Michael knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question, “I’m filling out a state incorporation application. Can you tell me the difference among the following terms: (1) authorized stock, (2) issued stock, (3) outstanding stock, and (4) preferred stock?”
In a brief note, differentiate for Uncle Michael the four different stock terms. Write the letter to be friendly, yet professional.
2) Rudolph, president of Ap, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over common stock financing, (2) indicate the types of bonds he might issue, and (3) explain the issuing procedures used in bond transactions.
Write a memorandum to the president, answering his request.
1) Patrick Corporation is authorized to issue 1,000,000 shares of $1 par value common stock. During 2010, the company has the following stock transactions.
Jan. 15 Issued 500,000 shares of stock at $7 per share.
Sept. 5 Purchased 20,000 shares of common stock for the treasury at $8 per share.
Dec. 6 Declared a $0.50 per share dividend to stockholders of record on December 20, payable January 3, 2011.
Instructions
Journalize the transactions for Patrick Corporation.
2) Harrell Company reported net income of $320,000 for the current year. Depreciation recorded on buildings and equipment amounted to $75,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:
End of Year Beginning of Year
Cash $22,000 $15,000
Accounts receivable 17,000 32,000
Inventories 55,000 65,000
Prepaid expenses 7,500 5,000
Accounts payable 14,000 18,000
Income taxes payable 600 1,200
Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.
3) Indicate whether each of the following expenditures should be classified as: land, land improvements, buildings, equipment, or none of these.
Parking lots
Electricity used by a machine
Excavation costs
Interest on building construction loan
Cost of trial runs for machinery
Drainage costs
Cost to install a machine
Fences
Unpaid (past) property taxes assumed
Cost of tearing down a building when land and a building on it are purchased
4) Kw Company reports the following information (in millions) during a recent year: net sales, $12,408.5; net earnings, $294.9; total assets, ending, $4,312.6; and total assets, beginning, $4,254.3.
a) Calculate the: return on assets (to one decimal place)
b) Calculate the: profit margin ratios (to one decimal place)
c) Calculate the: profit margin ratios (to one decimal place)
1- The payment for the monthly rent will require the following entry
Answer
Debit Cash and Debit Rent Expense
Credit Cash and Credit Rent Expense
Debit Rent Expense and Credit Cash
Credit Rent Expense and Debit Cash
2- A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is
Answer
$970
$650
$300
$620
3- After all of the account balances have been extended to the Income Statement columns of the work sheet, the totals of the debit and credit columns are $77,500 and $85,300, respectively. What is the amount of the net income or net loss for the period?
Answer
$7,800 net income
$7,800 net loss
$85,300 net income
$77,500 net loss
4- A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing
Involves the use of two or more basic authentication methods.
Is a table specifying which portions of the systems users are permitted to access.
Provides weaker authentication than the use of effective passwords.
Requires the use of more than one effective password.
3.
(TCO 3) The Trust Services Framework reliability principle that states that users must be able to enter, update, and retrieve data during agreed-upon times is known as
(Points : 2)
availability.
security.
maintainability.
integrity.
4. (TCO 3) Which of the following is not one of the 10 internationally recognized best practices for protecting the privacy of customers’ personal information? (Points : 2)
Access.
Monitoring and enforcement.
Registration.
Security.
5. (TCO 3) With which stage in the auditing process are the consideration of risk factors and materiality most associated? (Points : 2)
12. Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
The best estimate of the total variable cost per unit is
A. $105.70.
B. $100.90.
C. $106.90.
D. $84.50.
12. Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
The best estimate of the total variable cost per unit is
13. (TCO 3) Fine Oak Woodworks is considering a project that has cash flows of $5,000, $3,000, and $8,000 for the next three years. If the appropriate discount rate of this project is 10 percent, which of the following statements is true? (Points : 3)
The current value of the project’s inflows is $16,000
The approximate current value of the project’s inflows is $13,000
The current value of the project’s inflows is somewhere in between $14,000 and $16,000
The project should be rejected because its present value is negative
14. (TCO 4) You are considering two investments. Investment I, is in a software company and Investment II, is an engineering company. The investments offer the following cash flows:
Year Software Company Engineering Company
1 $5,000 $15,000
2 $3,000 $8,000
3 $4,000 $9,000
4 $3,600 $11,000
If the appropriate discount rate is 10 percent, what is the approximate present value of the Software Company investment? (Points : 3)
$15,600
$12,500
$12,750
$15,000
15. (TCO 3) North Bank offers you an APR of 9.76 percent compounded semiannually, and South Bank offers you an effective rate of 9 percent on a business loan. Which bank should you choose and why? (Points : 3)
South Bank because its effective rate is higher.
North Bank because the APR is lower.
South Bank because its effective rate is lower.
North Bank because its effective rate is lower.
1. (TCO 3) Given an interest rate of zero percent, the future value of a lump sum invested today will always: (Points : 3)
remain constant, regardless of the investment time period.
decrease if the investment time period is shortened.
decrease if the investment time period is lengthened.
be equal to $0.
be greater than the initial investment amount.
2. (TCO 3) Which one of the following best exemplifies a perpetuity? (Points : 3)
a mortgage of $860 a month for 30 years
$2,000 annual payments from a trust fund indefinitely
social security payments of $2,500 a month for life
student loan payments of $600 a month for three years
$250 a month over the life of a lease
3. (TCO 3) Fanta Cola has $1,000 par value bonds outstanding at 12 percent interest. The bonds mature in 25 years. What is the current price of the bond if the YTM is 11 percent? Assume annual payments. (Points : 3)
$1080
$1085
$925
$1000
4. (TCO 6 and 8) A bond’s debenture will include which of the following? (Points : 3)
description of any loan collateral
call provisions
total amount of the bond issue
protective covenants
all of the above
none of the above
5. (TCO 3) Bonds issued by Blue Sky Airlines have a face value of $1,000 and currently sell for $1,080. The annual coupon payments are $125. If the bonds have 20 years until maturity, what is the approximate YTM of the bonds? (Points : 3)
10.50%
11.50%
11.75%
12%
6. (TCO 3) Bean Coffee issued preferred stock many years ago. It carries a dividend of $8 per share, fixed. As time has passed, yields have decreased from the original eight percent (at the time of issuance) to six percent. What was the current price of the stock? Hint: Yield is the same as required rate of return. (Points : 3)
$100
$133
$102
$86.40
None of the above
7. (TCO 3) Intelligence Research, Inc. will pay a common stock dividend of $1.60 at the end of the year. The required rate of return by common stockholders is 13 percent. The firm has a constant growth rate of 7.5 percent. What is the current price of the stock? (Points : 3)
$23
$32
$27
$29
8. (TCO 3) Royal Electric paid a $2 dividend last year. The dividend is expected to grow at a constant rate of five percent over the next three years. Common stockholders require a 12 percent return. What is the total amount of dividends stockholders will receive during the next three years? (Points : 3)
$6.62
$6.03
$6.52
$6.85
9. (TCO 6) Which of the following is true regarding the primary market? (Points : 3)
it is the market where the largest number of shares are traded on a daily basis.
it is the market in which the largest number of issues are listed.
it is the market with the largest number of participants.
it is the market where new securities are offered.
it is the market where shareholders trade most frequently with each other.
10. (TCO 6) A member of the NYSE who trades on the floor of the exchange for his or her personal account is called a(n): (Points : 3)
specialist.
independent broker.
floor trader.
stand-alone agent.
dealer.
11. (TCO 6) The yield to maturity on a bond is: (Points : 3)
equal to the coupon rate divided by the current market price.
another name for the current yield.
equal to the annual interest divided by the face value.
the current required market rate.
another name for the coupon rate.
12. (TCO 6) Star Industries has one outstanding bond issue. An indenture provision prohibits the firm from redeeming the bonds during the first two years. This provision is referred to as a _____ provision. (Points : 3)
deferred call
market
liquidity
debenture
sinking fund
13. (TCO 8) Which of the following is true regarding bonds? (Points : 3)
Most bonds do not carry default risk.
Municipal bonds are free of default risk.
Bonds are not sensitive to changes in the interest rates.
Moody’s and Standard and Poor’s provide information regarding a bond’s interest rate risk.
None of the above is true
14. (TCO 6) Which of the following best describes a zero-coupon bond? (Points : 3)
A bond that adjusts the coupon payments based on an interest rate index, such as the T-bill.
A bond that is issued by the U.S. government.
A bond that adjusts the coupon payment date.
A bond that has no coupons and pays a face value at maturity.
An EE Savings Bond
15. (TCO 6) Which of the following is true regarding convertible bonds? Select all that apply: (Points : 3)
Are relatively common
Can be exchanged for a fixed number of shares at maturity only
Can be exchanged for a fixed number of shares before maturity
Allow the holder to require the issuer to buy the bond back
16. One of the techniques for controlling batch processing is the use of hash totals.
17. A hash total is obtained by counting all documents or records to be processed.
18. The control of input and output of accounting transactions to and from the information processing subsystem should be performed by an independent control group.
19. In most companies, contingency planning is unnecessary.
20. Contingency planning includes the development of a formal disaster recovery plan.
21. Both external and internal file labels are useful in avoiding the use of the wrong input tape.
22. An internal label may be used only with magnetic tape systems.
23. When they are not in use, tape and disk files should be stored apart from the computer room under the control of a librarian.
24. A limit check in a computer program is comparable to a decision that an individual makes in a manual system to judge a transaction’s reasonableness.
25. A completeness test is an internal equipment control to test whether or not all transactions have been processed.
26. Because of the integrative nature of database systems, cost-effective controls on these systems are unimportant.
17. Use the following information to answer this question.
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
‘ The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
‘ The measure of complexity is the number of tiers in the cake.
‘ The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
‘ The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Pyburn Wedding Smith Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?
A. The cost of cakes for receptions with more than the average number of guests would go down.
B. The costs of all cakes would go down.
C. The costs of all cakes would go up.
D. The cost of cakes for receptions with fewer than the average number of guests would go down.
Ursula is employed by USA Corporation. USA Corporation provides medical and health, disability, and group life insurance coverage for its employees. Premiums attributable to Ursula were as follows. Medical and Health $3,600. Disability $300 and Group life ( face amount is $40,000) $200. During the year, Ursula suffered a heart attack and died. Before her death, Ursula collected $14,000 as a reimbursement for medical expenses and $5,000 of disability income. Upon her death, Ursula’s husband collected the $40,000 face value of the life insurance policy. A) what amount can USA Corporation deduct for premiums attributable to Ursula? B) How much must Ursula include in income relative to the premiums paid? C) How much must Ursula include in income relative to the insurance benefits? D) How much must Ursula’e widower include in income?
Newteh Computer Services, Inc., has been in business for six months. The following are basic operating data for that period.
Month
July
Aug.
Sept.
Oct.
Nov.
Dec.
Service hours
118
138
256
428
320
328
Revenue
$
6,490
$
7,590
$
14,080
$
23,540
$
17,600
$
18,040
Operating costs
$
4,220
$
5,240
$
7,140
$
11,170
$
9,160
$
10,590
Required:
a.
What is the average service revenue per hour for the six-month time period? (Omit the “$” sign in your response.)
Month
July
Aug.
Sept.
Oct.
Nov.
Dec.
Average service revenue per hour
$
$
$
$
$
$
b.
Use the high-low method to estimate the total monthly fixed cost and the variable cost per hour. (Do not round intermediate calculations. Round your variable cost to 2 decimal places and fixed cost to the nearest dollar amount. Omit the “$” sign in your response.)
Variable cost
$
per hour
Fixed cost
$
c.
Determine the average contribution margin per hour. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)
Vintage Cellars manufactures a 1,000-bottle wine storage system that maintains optimum temperature (55-57 Af‚A?°F) and humidity (50-80%) for aging wines. The system has a backup battery for power failures and can store red and white wines at different temperatures. The following table depicts how average cost varies with the number of units manufactured and sold (per month): 1 12000
2 10000 3 8600 4 7700 5 7100 6 7100 7 7350 8 7850 9 8600 10 9600 Required: a. Prepare a table that computes the total cost and marginal cost for each quantity between 1 and 10 units. b. What is the relation between average cost and marginal cost? c. What is the opportunity cost of producing one more unit if the company is currently producing and selling four units? d. Vintage Cellars sells the units for $9,000 each. This price does not vary with the number of units sold. How many units should Vintage manufacture and sell each month?
Vosilo has just received a report indicating that GianAuto could purchase the entire annual output of Denver Cover from outside suppliers for $30 million. Vosilo was astonished at the low outside price because the budget for Denver Cover’s operating costs for the coming year was set at $52 million. Vosilo believes that GianAuto will have to close down operations at Denver Cover in order to realize the $22 million in annual cost savings.
The budget for Denver Cover’s operating costs for the coming year is presented on the following page. Additional facts regarding plant operations are as follows:
a.
Due to Denver Cover’s commitment to use high-quality fabrics in all its products, the purchasing department was instructed to place blanket purchase orders with major suppliers to ensure the receipt of sufficient materials for the coming year. If these orders were canceled as a consequence of the plant closing, termination charges would amount to 20 percent of the cost of direct materials.
b.
Approximately 800 plant employees will lose their jobs if the plant is closed. This includes all of the direct laborers and supervisors as well as the plumbers, electricians, and other skilled workers classified as indirect plant workers. Some would be able to find new jobs while many others would have difficulty. All employees would have difficulty matching Denver Cover’s base pay of $9.40 per hour that is the highest in the area. A clause in Denver Cover’s contract with the union may help some employees; the company must provide employment assistance to its former employees for 12 months after a plant closing. The estimated cost to administer this service would be $1.5 million for the year.
c.
Some employees would probably elect early retirement because GianAuto has an excellent pension plan. In fact, $3 million of the 2005 pension expense would continue whether Denver Cover is open or not.
d.
Vosilo and his staff would not be affected by the closing of Denver Cover. They would still be responsible for administering three other area plants.
e.
Denver Cover considers equipment depreciation to be a variable cost and uses the units-of-production method to depreciate its equipment; Denver Cover is the only
2
GianAuto plant to use this depreciation method. However, Denver Cover uses the customary straight-line method to depreciate its building.
DENVER COVER PLANT
Budget for Operating Costs
For the Year Ending December 31, 2005
Materials $14,000,000
Labor
Direct $13,100,000
Supervision 900,000
Indirect plant 4,000,000 18,000,000
Overhead
Depreciation-equipment 3,200,000
Depreciation-building 7,000,000
Pension expense 5,000,000
Plant manager and staff 800,000
Corporate allocation 4,000,000 20,000,000
Total budget costs $52,000,000
REQUIRED:
1.
Without regard to costs, identify the advantages to GianAuto Corporation of continuing to obtain covers from its own Denver Cover Plant.
2.
GianAuto Corporation plans to prepare a dollar analysis that will be used in deciding whether or not to close the Denver Cover Plant. Management has asked you to identify:
a.
The recurring annual budgeted costs that are relevant to the decision regarding closing the plant (show the dollar amounts).
b.
The recurring annual budgeted costs that are not relevant to the decision regarding closing the plant, and explain why they are not relevant (again show the dollar amounts).
c.
Any nonrecurring costs that would arise due to the closing of the plant, and explain how they would affect the decision (again show any dollar amounts).
3.
Looking at the data you have prepared in (2), should the plant be closed? Show computations, and explain your answer.
4. Identify any revenues or costs not specifically mentioned in the problem that GianAuto should consider before making a decision
Waller Inc. uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory:
Units in the beginning work in process inventory 600
Materials costs $ 4,200
Conversion costs $ 7,800
Percent complete with respect to materials 55%
Percent complete with respect to conversion 30%
Units started into production during the month 9,900
Units transferred to the next dept during the month 8,900
Materials costs added during the month $108,400
Conversion costs added during the month $364,700
Ending work in process inventory:
Units in ending work in process inventory 1,600
Percent complete with respect to materials 60%
Percent complete with respect to conversion 40%
A. What are the equivalent units for materials for the month in the first processing department?
B. What is The total cost transferred from the first processing department to the next processing department during the month?
Walters Company produces 15,000 pounds of Product A and 30,000 pounds of Product B each week by incurring a joint cost of $400,000. These two products can be sold as is or processed further. Further processing of either product does not delay the production of subsequent batches of the joint product. Data regarding these two products are as follows:
Product A Product B
Selling price per pound without further processing $12.00 $ 9.00
Selling price per pound with further processing $15.00 $11.00
Total separate weekly variable costs
of further processing $50,000 $45,000
To maximize Walters Company’s manufacturing contribution margin, how much total separate variable costs of further processing should be incurred each week?
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 $2,584 in 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 $653.
3. On August 1, Bryant borrowed $35,100 from a local bank on a 15-year mortgage. The annual interest rate is 8%.
4. A telephone bill in the amount of $201 covering August charges is unpaid at August 31.
Prepare the adjusting journal entries as of August 31, 2012, suggested by the information above.
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 $2,584 in 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 $653.
3. On August 1, Bryant borrowed $35,100 from a local bank on a 15-year mortgage. The annual interest rate is 8%.
4. A telephone bill in the amount of $201 covering August charges is unpaid at August 31.
Prepare the adjusting journal entries as of August 31, 2012, suggested by the information above.
Willingham Corporation’s comparative balance sheets are presented below.
WILLINGHAM CORPORATION Comparative Balance Sheets
December 31 2011
December 31 2010
Cash
$14,190
$10,830
Accounts receivable
$21,040
$23,380
Land
20,880
26,210
Building
70,180
70,180
Accumulated depreciation
(15,170)
(10,340)
Total
111,120
120,260
Accounts payable
$12,190
$31,170
Common stock
75,000
68,870
Retained earnings
23,930
20,220
Total
$111,120
$120,260
Additional information:
Net income was $22,890. Dividends declared and paid were $19,180.
All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $4,800.
Wilmont Company’s executive committee was meeting to select a new vice president of operations. The leading candidate was Howard Kimball, manager of Wilmont’s largest division. Howard had been divisional manager for three years. The president of Wilmont, Larry Olsen, was impressed with the significant improvements in the division’s profits since Howard had assumed command. In the first year of operations, divisional profits had increased by 20%. They had shown significant improvement for the following two years as well. To bolster support for Howard, the company’s president circulated the following divisional income statements (dollars in thousands):
2004
2005
2006
Sales
$ 30,000
$ 32,000
$ 34,000
Less: Cost of goods sold 1/
26,250
26,400
27,200
Gross margin
$ 3,750
$ 5,600
$ 6,800
Less: Selling and admin 2/
3,000
3,600
3,800
NET INCOME
$ 750
$ 2,000
$ 3,000
1/ ? assumes a LIFO inventory flow
2/ ? all costs are fixed
“As you can see,” Larry observed at a meeting, “Howard has increased profits by a factor of four times since 2004. That’s by far the most impressive performance of any divisional manager. We could certainly use someone with that kind of drive. I definitely believe that Howard should be the new vice president.”
“I’m not quite as convinced that Howard’s performance is as impressive as it appears,” responded Bill Peters, the vice president of finance. “I could hardly believe that Howard’s division could show the magnitude of improvement revealed by the income statements. So I asked the divisional controller to supply some additional information. As the data suggest, the profits realized by Howard’s division may be attributable to a concerned effort to produce for inventory. In fact, I believe it can be shown that the division is actually showing a loss each year and that real profits have declined as much as 15% since 2004.” Peters then showed the following information:
2004
2005
2006
Sales (units)
150,000
160,000
170,000
Production 1/
200,000
250,000
300,000
Actual (and budgeted) fixed overhead
$15,000,000
Fixed overhead rate
$ 75
$ 60
$ 50
Unit variable production costs
$ 100
$ 105
$ 110
1/ ? this represents both expected and actual production.
Fixed overhead rates are computed using expected actual production
Required:
1. Explain what Bill Peters meant by “producing for inventory”.
2. Recast the income statements in variable-costing format. Now, how does the performance of the division appear?
3. Reconcile the differences in the income figures using the two methods for each of the three years.
4. If you were a shareholder, how would you detect income increases that are caused mainly by production for inventory?
Wilmont Company’s executive committee was meeting to select a new vice president of operations. The leading candidate was Howard Kimball, manager of Wilmont’s largest division. Howard had been divisional manager for three years. The president of Wilmont, Larry Olsen, was impressed with the significant improvements in the division’s profits since Howard had assumed command. In the first year of operations, divisional profits had increased by 20%. They had shown significant improvement for the following two years as well. To bolster support for Howard, the company’s president circulated the following divisional income statements (dollars in thousands):
2004
2005
2006
Sales
$ 30,000
$ 32,000
$ 34,000
Less: Cost of goods sold 1/
26,250
26,400
27,200
Gross margin
$ 3,750
$ 5,600
$ 6,800
Less: Selling and admin 2/
3,000
3,600
3,800
NET INCOME
$ 750
$ 2,000
$ 3,000
1/ ? assumes a LIFO inventory flow
2/ ? all costs are fixed
“As you can see,” Larry observed at a meeting, “Howard has increased profits by a factor of four times since 2004. That’s by far the most impressive performance of any divisional manager. We could certainly use someone with that kind of drive. I definitely believe that Howard should be the new vice president.”
“I’m not quite as convinced that Howard’s performance is as impressive as it appears,” responded Bill Peters, the vice president of finance. “I could hardly believe that Howard’s division could show the magnitude of improvement revealed by the income statements. So I asked the divisional controller to supply some additional information. As the data suggest, the profits realized by Howard’s division may be attributable to a concerned effort to produce for inventory. In fact, I believe it can be shown that the division is actually showing a loss each year and that real profits have declined as much as 15% since 2004.” Peters then showed the following information:
2004
2005
2006
Sales (units)
150,000
160,000
170,000
Production 1/
200,000
250,000
300,000
Actual (and budgeted) fixed overhead
$15,000,000
Fixed overhead rate
$ 75
$ 60
$ 50
Unit variable production costs
$ 100
$ 105
$ 110
1/ ? this represents both expected and actual production.
Fixed overhead rates are computed using expected actual production
REQUIRED:
1. Explain what Bill Peters meant by “producing for inventory”.
2. Recast the income statements in a variable?costing format. Now, how does the performance of the division appear?
3. Reconcile the differences in the income figures using the two methods for each of the three years.
4. If you were a shareholder, how would you detect income increases that are caused mainly by production for inventory?
Wilmont Company’s executive committee was meeting to select a new vice president of operations. The leading candidate was Howard Kimball, manager of Wilmont’s largest division. Howard had been divisional manager for three years. The president of Wilmont, Larry Olsen, was impressed with the significant improvements in the division’s profits since Howard had assumed command. In the first year of operations, divisional profits had increased by 20%. They had shown significant improvement for the following two years as well. To bolster support for Howard, the company’s president circulated the following divisional income statements (dollars in thousands):
2004
2005
2006
Sales
$ 30,000
$ 32,000
$ 34,000
Less: Cost of goods sold 1/
26,250
26,400
27,200
Gross margin
$ 3,750
$ 5,600
$ 6,800
Less: Selling and admin 2/
3,000
3,600
3,800
NET INCOME
$ 750
$ 2,000
$ 3,000
1/ ? assumes a LIFO inventory flow
2/ ? all costs are fixed
“As you can see,” Larry observed at a meeting, “Howard has increased profits by a factor of four times since 2004. That’s by far the most impressive performance of any divisional manager. We could certainly use someone with that kind of drive. I definitely believe that Howard should be the new vice president.”
“I’m not quite as convinced that Howard’s performance is as impressive as it appears,” responded Bill Peters, the vice president of finance. “I could hardly believe that Howard’s division could show the magnitude of improvement revealed by the income statements. So I asked the divisional controller to supply some additional information. As the data suggest, the profits realized by Howard’s division may be attributable to a concerned effort to produce for inventory. In fact, I believe it can be shown that the division is actually showing a loss each year and that real profits have declined as much as 15% since 2004.” Peters then showed the following information:
2004
2005
2006
Sales (units)
150,000
160,000
170,000
Production 1/
200,000
250,000
300,000
Actual (and budgeted) fixed overhead
$15,000,000
Fixed overhead rate
$ 75
$ 60
$ 50
Unit variable production costs
$ 100
$ 105
$ 110
1/ ? this represents both expected and actual production.
Fixed overhead rates are computed using expected actual production
REQUIRED:
1. Explain what Bill Peters meant by “producing for inventory”.
2. Recast the income statements in a variable?costing format. Now, how does the performance of the
division appear?
3. Reconcile the differences in the income figures using the two methods for each of the three years.
4. If you were a shareholder, how would you detect income increases that are caused mainly by
Women’s Health Care, Inc. is owned and operated by Dr. Carrie Mills, the sole stockholder. During January 2010, Women’s Health Care engaged in the following external transactions:
1 Leased vacant space in the building to a law firm for 6 months, receiving the rent in advance, $9600.
1 Paid premium on a 1-year insurance policy, $4800.
1 Paid rent for the month on medical equipment, $4200.
7 Collected $21,900 on account from patients.
9 Purchased supplies on account, $1140.
10 Received $55,000 from Dr. Mills in exchange for common stock.
14 Paid vendors on account, $1920.
20 Provided services to patients, receiving cash at the time of service, $8200.
25 Billed patients for services provided on account, $29,700.
26 Paid utilities for the month, $925.
27 Paid miscellaneous expenses, $780.
28 Paid wages, $18,120.
31 Paid dividends to Dr. Mills, $10,000. (We have not yet covered how to journalize this transaction. Omit the transaction analysis, and record the journal entry as a debit to Dividends Declared and a credit to Cash. You should be able to complete the financial statement analysis. )
write the identifying letter of the best response in the chart below for the items described in questions 1 through 12.
A adequate (or full) disclosure
B adjusting entries
C administrative expenses
D authorized capital stock
E capital stock available for issuance
F closely held corporation
G closing entries
H common stock
I comparability
J correcting entries
K discounted note
L dishonored note
M issued stock
N objective evidence
O Paid-in Capital in Excess of Par
P par value
Q preferred stock
R premium
S promissory note
T publicly held corporation
U reliability
V Retained Earnings
W reversing entries
X selling expenses
1. This accounting concept is applied when a source document is prepared for each
transaction.
2. a corporation whose stock is widely held, has a large market, and is usually traded
on a major stock exchange
3. the operating expenses incurred to sell or market the merchandise sold
4. the maximum number of shares a corporation may issue
5. the cost of insurance protection
6. This accounting concept means that financial reports include enough information to understand a business’s financial condition.
7. If the corporation issues only one class of capital stock, it is called _?_.
8. Entries that may be made whenever an adjusting entry creates a balance in an asset or liability account that initially had a zero balance
9. This account represents the increase in stockholders’ equity from the portion of net income not distributed to the stockholders.
10. A note that is not paid when due
11. The amount assigned to each share of stock that is printed on the stock certificate is referred to as _?_.
12. This characteristic of financial information relates to the confidence users have that the financial information is reasonably free from bias and error.
Wyco Company manufactures toasters. For the first 8 months of 2011, the company reported the following operating results while operating at 75% of plant capacity.
Sales (400,000 units) $4,000,000
Cost of goods sold
2,400,000
Gross profit 1,600,000
Operating expenses
900,000
Net income
$700,000
Cost of goods sold was 70% variable and 30% fixed. Operating expenses were also 60% variable and 40% fixed.
In September, Wyco Company receives a special order for 40,000 toasters at $6.00 each from Salono Company of Mexico City. Acceptance of the order would result in $8,000 of shipping costs but no increase in fixed operating expenses.
Complete the incremental analysis for the special order. (If an amount is blank enter 0, all boxes must be filled to be correct. If the impact on net income is a decrease use either a negative sign in front of the number, e.g. -45 or parenthesis, e.g. (45). Enter all other amounts as positive amounts and subtract where necessary. Round your answers to 0 decimal places, e.g. 5,210, round your computations of unit costs to 2 decimal places, e.g. 5.25.)
The ski selected is a mass market ski with a special binding and will be sold for $80 per pair. A $125000 fixed charge will be absorbed by the ski, however, to allocate a fair share of the company’s present fixed cost to the new product.
Using the estimated sales and production of 10000 pair of skis as the expected volume,
Direct labor $35
Direct material 30
Total overhead 15
Total cost $80
They discussed the purchasing of the binding from a subcontractor at $5.25 per binding, or $10.50 per pair with direct-labor and variable cost would be reduced by 10% and direct materials costs would be reduced by 20%.
What nonquantifiable factors should the Corporation consider in determining whether they should make or buy the bindings?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
How much cost, in total, was assigned to the units transferred out to the next department during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
How many units were started into production during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
What was the cost per equivalent unit for conversion during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
What was the cost per equivalent unit for conversion during the month?
Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month
Work in process, beginning:
Units in process…6,000
Percent complete with respect to materials…60%
Percent complete with respect to conversion…20%
Costs in the beginning inventory:
Materials cost…$78,200
Conversion cost…$3,600
Units started during the month…?
Units completed and transferred out during the month…70,000
Costs added to production during the month:
Materials cost…$286,600
Conversion cost…$216,000
Work in process, ending:
Units in process…8,000
Percent complete with respect materials…75%
Percent complete with respect to conversion…25%
How much cost, in total, was assigned to the units transferred out to the next department during the month
Spring Manufacturing Company makes tents that it sells directly to camping enthusiants through a mail-order marketing program. The company pays a quality control expert $108,000 per year to inspect completed tents before they are shipped to customers. Assume that the company completed 1,600 tents in January and 1,200 tents in February. For the entire year, the company expects to produce 15,000 tents.
Required
a. Explain how changes in the cost driver (number of tents inspected) affect the total amount of fixed inspection cost.
b. Explain how changes in the cost driver (number of tents inspected) affect the amount of fixed inspection cost per unit.
c. If the cost objective is to determine the cost per tent, is the expert’s salary a direct or an indirect cost?
d. How much of the expert’s salary should be allocated to tents produced in January and February?
(Standard process costing; variances) Alberton Co. uses a standard costing system to account t for its production of toys. Plastic is added at the start of production; labor and overhead are incurred at equal rates throughout the process. The standard cost of one toy is as follows:
Direct Material $0.10
Direct Labor 0.02
Overhead 0.07
Total Cost $0.19
The following production and cost data are applicable to April 2010:
Beginning WIP Inventory (45% complete) 180,000 units
Units started in April 1,300,000 units
Ending WIP Inventory (65% complete) 144,000 units
Current cost of direct material $184,000
Current cost of direct labor 27,126
Current cost of overhead 93,000
a. What amount is carried as the April beginning balance of WIP Inventory?
b. What amount is carried as the April ending balance of WIP Inventory?
c. What amount is transferred to Finished Goods Inventory for April?
d. What are the total direct material, direct labor, and overhead variances for April?
e. Record the journal entries to recognize the direct material, direct labor, and overhead variances.
(Statement and Note Disclosure, LCM, and Purchase Commitment) Garth Brooks Specialty Company, a division of Fresh Horses Inc., manufactures three models of gear shift components for bicycles that are sold to bicycle manufacturers, retailers, and catalog outlets. Since beginning operations in 1975, Brooks has used normal absorption costing and has assumed a first-in, first-out cost flow in its perpetual inventory system. The balances of the inventory accounts at the end of Brooks’s fiscal year, November 30, 2007, are shown below. The inventories are stated at cost before any year-end adjustments. Finished goods $647,000 Work-in-process 112,500 Raw materials 240,000 Factory supplies 69,000 The following information relates to Brooks’s inventory and operations. 1. The finished goods inventory consists of the items analyzed below. Cost Market Down tube shifter Standard model $ 67,500 $ 67,000 Click adjustment model 94,500 87,000 Deluxe model 108,000 110,000 Total down tube shifters 270,000 264,000 Bar end shifter Standard model 83,000 90,050 Click adjustment model 99,000 97,550 Total bar end shifters 182,000 187,600 Head tube shifter Standard model 78,000 77,650 Click adjustment model 117,000 119,300 Total head tube shifters 195,000 196,950 Total finished goods $647,000 $648,550 2. One-half of the head tube shifter finished goods inventory is held by catalog outlets on consignment. 3. Three-quarters of the bar end shifter finished goods inventory has been pledged as collateral for a bank loan. 4. One-half of the raw materials balance represents derailleurs acquired at a contracted price 20 percent above the current market price. The market value of the rest of the raw materials is $127,400. 5. The total market value of the work-in-process inventory is $108,700. 6. Included in the cost of factory supplies are obsolete items with an historical cost of $4,200. The market value of the remaining factory supplies is $65,900. 462 ‘ Chapter 9 Inventories: Additional Valuation Issues (L0 1, 2, 4, 7) 7. Brooks applies the lower-of-cost-or-market method to each of the three types of shifters in finished goods inventory. For each of the other three inventory accounts, Brooks applies the lower-of-costor- market method to the total of each inventory account. 8. Consider all amounts presented above to be material in relation to Brooks’ financial statements taken as a whole. Instructions (a) Prepare the inventory section of Brooks’s balance sheet as of November 30, 2007, including any required note(s)
The stockholders’ equity accounts of Sigma Corporation on January 1, 2010, were as follows.
Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized) $300,000 Common Stock ($5 stated value, 300,000 shares authorized) 1,000,000 Paid-in Capital in Excess of Par Value – Preferred Stock 15,000 Paid-in Capital in Excess of Stated Value – Common Stock 480,000 Retained Earnings 688,000 Treasury Stock – Common (5,000 shares) 40,000
During 2010 the corporation had these transactions and events pertaining to its stockholders’ equity.
Feb. 1 Issued 5,000 shares of common stock for $30,000. Mar. 20 Purchased 1,000 additional shares of common treasury stock at $7 per share. Oct. 1 Declared a 8% cash dividend on preferred stock, payable November 1. Nov. 1 Paid the dividend declared on October 1. Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010. Dec. 31 Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
I have ?journalized my transaction and I don’t understand how to close income summary and the amount that debit and credit is incorrect: i got 500,5000 . Futhermore, the accounts and post the journal entries to the stockholders’ equity accounts I could not close or i should say are incorrect (some at least). Lastly, my balance sheet is also a mess, can anyone help! Thank you.
Sue is age 73 and has a great deal of difficulty living independantly as she suffers from severe rheumatoid arthritis. She is covered by a $400,000 life insurance policy, and her children are named as her beneficiaries. Because of her health, Sue decides to live in a nursing home, but she does not have enough income to pay her nursing home bills which are expected to total $42,000 per year. The insurance company offers diabled individuals the option of either a reduced settlement on their policies or an annuity. Given Sue’s age and health she has the option of receiving $3,200 per month or a lump sum payment of $225,000. to date, Sue has paid $80,000 in premiums on the policy. A) How much income must Sue report if she chooses the lump sum settlement? B) How much income must Sue report if she elects the annuity? C) How much income wouls Sue have to report if her nursing home bills amounted to only $36,000 per year?
Suppose the inflation rate is expected to be 7% next year, 5% the following year, and 3% thereafter. Assume that the real risk-free rate, r*, will remain at 2% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5 year or longer-term T-bonds.
a. Calculate the interest rate on 1-,2-,2-,4-,5-,10-, and 20 year Treasury securities and plot the yield curve.
b. Suppose a AAA-rated company had bonds witht he same maturities as the Treasury bonds. Estimate and plot what you believe a AAA-rated company’s yield curve would look like on the same graph with the Treasury bond yield curve.
c. On the same graph, plot the apporx. yield curve of a much riskier lower-rated company with a much higher risk of defaulting on it’s bonds.
Can someone please help me to find the points to plot? I can graph it but I don’t know the points.
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 RecRobo’s 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.
Using incremental analysis, determine whether SY Telc should accept this offer under each of the following independent assumptions. (If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
(1) Assume that $300,000 of the fixed overhead cost can be reduced (avoided).
Make Buy Net Income Increase (Decrease) Direct materials $ $ $ Direct labor Variable Overhead Fixed Overhead Purchase Price
Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his lot. The building and equipment are estimated to cost $1,100,000 and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Munster’s required rate of return for this project is 12 percent. Net income related to each year of the investment is as follows:
Revenue $450,000
Less:
Material cost $ 60,000
Labor 100,000
Depreciation 110,000
Other 10,000 280,000
Income before taxes 170,000
Taxes at 40% 68,000
Net income $102,000
(a) Determine the net present value of the investment in the service center. Should Munster invest in the service center?
(b) Calculate the internal rate of return of the investment to the nearest A??1 percent.
(c) Calculate the payback period of the investment.
“Timberland is considering manufacturing special crates to be used for shipping new mainframe computers. The company is working with a computer manufacturer who is thinking of using the new crates as a standard component for shipping their computers. Timberland’s marketing manager has determined that mainframe computer buyers would be willing to pay $110 for a crate. The cost to the computer maker of packaging the mainframe in the new crates is $25. In addition, the computer manufacturer requires a 10 percent return on its cost. The highest net selling price that Timberland can charge the computer maker is $74. Research conducted jointly by the computer maker and Timberland’s marketing personnel shows that customers want six features. These are: (1) durability, (2) ease of packing, (3) protection from damage (4) ease of use (5) compatibility with most brands of mainframes, and (6) ability to reuse the crates. Based on this research, Timberland’s engineers have come up with a design that uses four main production modules or processes. Each process has several major sub‐ processes. A list of the major processes, together with preliminary cost estimates (includes all labor, material and overhead) for manufacturing or buying each process, appears in Table 1 below. In addition to the above, the marketing department estimates that order filling (primarily order processing and delivery) costs would run $4.00 per unit. General and administrative costs are expected to be $14.00 a unit. Timberland expects to earn a 15 percent return on the highest net selling price.
Table One
Process Estimated Current Costs
A $9.50 B $8.50 C $8.00 D $46.00 Total Costs $72.00
Requirement: Prepare a schedule showing the target cost and the current cost. NOTE: Target cost equals selling price – required return of computer company – required return to Timberland”
<col span=”3″ width=”98″>
Name
Timberland
Timberland
Timberland
CPU Company
CPU Company
CPU Company
Total
Total
Total
Cost Element
Target Cost
Current Cost
Difference
Target Cost
Current Cost
Difference
Target Cost
Current Cost
Difference
Manufacturing
72
72
Ordering
4
4
Gen and Admin
14
14
Installation
25
25
Totals
90
25
**
115
Process
Timberland
Timberland
Timberland
Proportion of
Current Cost
Target Cost
Difference
Total cost %
A
9.5
B
8.5
C
8
D
46
Totals
72
Target Cost
Selling price – (required return to computer company)-(required return to Timberland)
required return to computer company is 10% of its cost from Timberland
required return to Timberland is 15% of its highest net selling price
**must equal target cost
Target Cost to Current Cost Ratio Must be Calculated and used to compute target cost
Tjelmeland Corporation is considering dropping product S85U. Data from the company’s accounting system appear below:
Sales………………………………………………. $350,000
variable expenses…………………………………..158,000
fixed manufacturing expenses………………………119,000
fixed selling and administrative expenses………….. 94,000
All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that $55,000 of the fixed manufacturing expenses and $71,000 of the fixed selling and administrative expenses are avoidable if product S85U is discontinued.
i. According to the company’s accounting system, what is the net operating income earned by product S85U? Show your work!
ii. What would be the effect on the company’s overall net operating income of dropping product S85U? Should the product be dropped?
This has been tried so so many times by me, but the answer is not comming out right!
On July 1, 2012, Bliss Industries Inc. issued $24,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $19,200,577. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds. For a compound transaction, if an amount box does not require an entry, leave it blank.
2. Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank.)
a. The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) nterest expense Interest payable
b. The interest payment on June 30, 2013, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 2012. $
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? SelectYesNoCorrect
5. Compute the price of $19,200,577 received for the bonds by using the tables of present value in . (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.
Present value of the face amount $ Present value of the semi-annual interest payments $ Price received for the bonds $
Rebecca’s Pottery Loft makes a variety of handmade pottery items. She has asked for your advice on one of the items manufactured-a clay pelican. The following information is provided.
Number of defective pelicans: 1,100
Number of pelicans returned: 150
Number of pelicans reworked: 200
Profit per defect-free pelican: $10.00
Processing cost of a returned pelican: $20.00
Profit per defective pelican: $5.00
Cost to rework defective pelican $4.00
Total appraisal costs: $3,400
Total prevention costs $6,000
a. calculate the total profits lost because Rebecca sold defective pelicans.
b. calculate the rework cost
c. calculate the cost of processing customer returns
Mankel LTD., a merchandising company, is the exclusive distributor of a product that is gaining rapid market acceptance. The company’s revenues and expenses (in British pounds) for the last three months are given:
Mankel Ltd. Comparative Income Statement For the three months ended June 30
April
May
June
Sales in units
3,000
3,750
4,500
Sales in revenue
420,000
525,000
630,000
Cost of goods sold
168,000
210,000
252,000
Gross margin
252,000
315,000
378,000
Selling and Administrative expenses:
Shipping expense
44,000
50,000
56,000
Advertising expense
70,000
70,000
70,000
Salaries and commissions
107,000
125,000
143,000
Insurance expense
9,000
9,000
9,000
Depreciation expense
42,000
42,000
42,000
Total selling and administrative
272,000
296,000
320,000
Expenses Net operating income (loss) (20,000) 19,000 58,000
1. I need to identify each of the company’s expenses (including cost of goods sold) as variable, fixed, or mixed.
2. Using a high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense.
3. Redo the company’s income statement at the 4,500 unit level of activity using the contribution format.
(Relevant costs; sunk costs) Prior to the 2009 Super Bowl, a Phoenix area retailer ordered 50,000 T-shirts that read: Arizona Cardinals-2009 Super Bowl Champs. The company paid $11.75 for each of the custom T-shirts. Following the loss of Arizona to the Pittsburg Steelers, the retailer found itself with 15,000 unsold T-shirts after the Super Bowl. Before the Super Bowl, the retailer was able to sell 35,000 of the T-shirts at an average per-unit price of $25. The company is currently deciding how to dispose of the 15,000 remaining T-shirts. The retailer has learned from one of its suppliers that each shirt could be reworked at an average cost of $5.50 per shirt (which involves removing the Super Bowl reference from the shirts). Management of the retailer believes the reworked shirts could be sold at an average price of $10.25 during the coming football season. Alternatively, the company could sell the shirts at an average price of $2.60 as scrap material.
a. Identify at least three alternatives courses of action management could take with regard to the leftover T-shirts.
b. Which costs are sunk in this decision?
c. Identify the relevant costs of each alternative you listed in part (a).
d. Based on your answer to part (c), what is the best alternative and what is the relative financial advantage of the best alternative over the second-best alternative?
Remmele and Littla CPAs has decided to bid on the audit of Tanner, Inc., a local manufacturing firm. After learning all they can about the potential new client, the partners have estimated the following:
All staff, managers, and partners are paid on average 30 percent of the desired client billing rate ($75,$125,$250). Fringe benefits average 30 percent of the pay rate. Other out-of-pocket costs include supplies, travel, and clerical costs and are usually fairly accurate.
Staff accountant hours: 1,500
Manager hours: 200
Partner hours: 100
Other out-of-pocket costs: $10,000
a. If the firm normally marks up nonlabor costs by 20% to arrive at the client fee, what should the bid price be?
b.Using the information available to you, compute the actual out-of-pocket cost to the CPA firm to complete this audit. Out of pocket costs do not include any profit built into the client billing rate.
c. Using your answer in B, what is the lowest price the CPA firm could charge and not lose money?
d. If Tanner, Inc., rejects the bid and states that it will pay no more than $100,000 for the audit, what are the options open to the CPA firm?
The results of operations for the Preston Manufacturing Company for the fourth quarter of 2011 were as follows:
Sales $550,000
Less variable cost of sales 330,000
Contribution margin 220,000
Less fixed production costs $110,000
Less fixed selling and administrative expenses 55,000 165,000
Income before taxes 55,000
Less taxes on income 22,000
Net income $33,000
Note: Preston Manufacturing uses the variable costing method. Thus, only variable production costs are included in inventory and cost of goods sold. Fixed production costs are charged to expense in the period incurred.
The company’s balance sheet as of the end of the fourth quarter of 2011 was as follows:
Assets:
Cash $180,000
Accounts receivable 220,000
Inventory
350,000
Total current assets 750,000
Property, plant and equipment 450,000
Less accumulated depreciation
(100,000)
Total assets
$1,100,000
Liabilities and owners’ equity:
Accounts payable $46,200
Common stock 450,000
Retained earnings
603,800
Total liabilities and owners’ equity
$1,100,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 10 percent in the next quarter.
2. All sales are on credit with 60 percent collected in the quarter of sale and 40 percent collected in the following quarter.
3. Variable cost of sales consists of 35 percent materials, 40 percent direct labor, and 25 percent variable overhead. Materials are purchased on credit. 60 percent are paid for in the quarter of purchase and the remaining amount is paid for in the quarter after purchase. The inventory balance is not expected to change. Also, direct labor and variable overhead are paid in the quarter the expenses are incurred.
4. Fixed production costs (other than $9,200 of depreciation) are expected to increase by 3 percent. Fixed production costs requiring payment are paid in the quarter they are incurred.
5. Fixed selling and administrative costs (other than $7,700 of depreciation expense) are expected to increase by 2 percent. Fixed selling and administrative costs requiring payment are paid in the quarter they are incurred.
6. The tax rate is expected to be 40 percent. All taxes are paid in the quarter they are incurred.
7. No purchases of property, plant, or equipment are expected in the first quarter of 2012.
Prepare a budgeted income statement for the first quarter of 2012. (Round your intermediate calculations to 0 decimal places and the final answers to the nearest dollar. List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
$
Less:
Contribution margin $
Less: $
Less:
Income before taxes
Less:
Net income
$
Prepare a cash budget for the first quarter of 2012. (Round your intermediate calculations to 0 decimal places and the final answers to the nearest dollar. List multiple entries from largest to smallest amounts, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)
$
Cash payments:
$
$
Plus:
Ending cash balance
$
Prepare a budgeted balance sheet as of the end of the first quarter of 2012. (Round your intermediate calculations to 0 decimal places and the final answers to the nearest dollar. List assets in order of liquidity, liabilities and owners’ equity with liabilities first followed by owners’ equity. Enter all amounts as positive amounts and subtract where necessary.)
Robin Thomas, the owner of Thomas’ custom cabinets, is preparing a bid on a kitchen remodeling job for Matt and Heather. Robin expects that the job will require $1,700 of direct materials, $2,800 of direct labor, and $2,200 of overhead costs. Selling and admin expenses for the job are expected to be $600. On average, last year Robin earned about $3,000 profit on a job this size and would like to increase the profit by 5 percent on new contracts. Robin normally applies a markup on cost of goods sold to arrive at an initial bid price and then adjusts the price if necessary in order to meet competitors’ prices. Matt and Heather already have one bid from a national home improvement chain to do the job for $8,000.
a. calculate the markup percentages on the new job.
b. what is Robin’s initial bid?
c. In light of the competitors’ price of $8,000, what would you recommend as a bid price for Robin?
Less Finished goods Inventory Rs. 6750/- Rs. 15750/-
(3000 units @ Rs. 2.25)
Gross Profit Rs. 19250/-
Less selling & administration expenses Rs. 18000/-
Net Profit Rs. 1250/-
Disturbed by low profit, M.D of the industries asked you to check the statement. Your examination revealed that the following manufacturing cost were included in selling & administrative expenses:
Heat light & Power Rs. 500/-
Salary of foreman Rs. 4000/-
Tax on Factory Building Rs. 400/-
Depreciation of Machinery Rs. 2600/-
There was no ending inventory of work in process. You are required to prepare a revised income statement and explain the reasons of variation with the help of working notes.
Sansomite Co. distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of June, Sansomite’s inventory consisted of suitcases costing $1,200. During the month of July the following merchandising transactions occurred.
July
1 Purchased suitcases on account for $1,800 from Trunk Manufacturers, FOB destination, terms 2/10, n/30. The appropriate party also made a cash payment of $100 for freight on this date.
3 Sold suitcases on account to Satchel World for $2,000. The cost of suitcases sold is
$1,200.
9 Paid Trunk Manufacturers in full.
12 Received payment in full from Satchel World.
17 Sold suitcases on account to The Going Concern for $1,500. The cost of the suitcases sold was $900.
18 Purchased suitcases on account for $1,700 from Kingman Manufacturers, FOB shipping point, terms 1/10, n/30. The appropriate party also made a cash payment of $100 for freight on this date.
20 Received $300 credit (including freight) for suitcases returned to Kingman
Manufacturers.
21 Received payment in full from The Going Concern.
22 Sold suitcases on account to Fly-By-Night for $2,250. The cost of suitcases sold
was $1,350.
30 Paid Kingman Manufacturers in full.
31 Granted Fly-By-Night $200 credit for suitcases returned costing $120.
Sansomite’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Merchandise Inventory, No. 201 Accounts Payable, No. 401 Sales, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold.
Instructions:
Journalize the transactions for the month of July for Sansomite using a perpetual inventory system. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Seasons Construction is constructing an office building under contract for Cannon Cafe. The contract calls for progress billings and payment of $620,000 each quarter. The total contract price is $7,440,000 and Seasons estimates total costs of $7,100,000. Seasons estimates that the building will take 3 years to complete, and commences construction on January 2, 2010. At December 31, 2010, Season estimates that it is 30% complete with the construction, based on costs incurred. What is the total amount of Revenue from Long-term contracts recognized for 2010 and what is the balance in the Accounts Receivable account assuming Cannon Cafe has not yet made its last quarterly payment?
A?»??Seebach Corporation has two major business segments-Apparel and Accessories. Data concerning those segments for June appear below:
Sales revenues apparel………………….$ 700,000
aluable expenses apparel………………. 406,000
Traceable fixed expenses apparel……. 98,000
sales revenues accesories……………. 710,000
variable expenses accesories………… 312,000
Traceable fixed expenses accesories 107,000
Common fixed expenses totaled $292,000 and were allocated as follows: $155,000 to the Apparel business segment and $137,000 to the Accessories business segment.
Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.
Shawn Bates was working to establish a business enterprise with four of his wealthy friends. Each of the five individual would receive a 20% ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investor asre taxedf at the rate of 15% on dividend income and 30% on the other income and that the corporate tax rate is 30%. Also suume that the new company is ex[pected to earn $400,000 of cash income before tax during its first year of operation. All earning are expected to be immeiately disturbed to the owners.
Calculate the amount of after-tax cash flow available to each investor if the business is established as a partnership versus a corporation. Write a memo explaning the advantages and disadvantages of these two form of business organization. Explain why a limited liability company may be a better choice that either a partnership or a corporatiom
Silvertone Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true?
a.The customer can take a $10 discount if the invoice is paid on June 30
b. The customer should pay $1,000 if the invoice is paid on July 9
c. The customer must pay a $10 penalty if payment is made after July 9.
d. The customer must pay $1,010 if payment is made after June 20.
Which one of the following statements is false?
a.The inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system.
b.The inventory account is updated only at the end of the accounting period under the periodic inventory system.
c.A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.
d.A purchases account is used only under the periodic inventory system.
At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of
a.The seller
b.The buyer
c.The shipping company
d.Neither the buyer nor the seller
For which type of inventory would a company most likely use the specific identification method?
a.Barbie dolls
b.Cartons of milk
c.Custom designed diamond rings
d.Gasoline in storage tanks at a gasoline station
dawson, Inc.
Dawson uses a periodic inventory system. At the end of April, Dawson had 20 units on hand.
April 1 On hand, 10 units @ $2 each
$ 20
19 Purchased 90 units @ $3 each
270
Goods available for sale
$290
Refer to Dawson, Inc. If Dawson, Inc. uses FIFO inventory costing, how much is cost of goods sold for April?
a.$230
b.$232
c.$240
d.$250
Dawson, Inc.
Dawson uses a periodic inventory system. At the end of April, Dawson had 20 units on hand.
April 1 On hand, 10 units @ $2 each
$ 20
19 Purchased 90 units @ $3 each
270
Goods available for sale
$290
Refer to Dawson, Inc. If Dawson uses the LIFO inventory method, how much is inventory on the balance sheet as of April 30?
a.$40
b.$50
c.$58
d.$60
During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?
a.Any method in which the company uses a periodic inventory system
b.FIFO
c.LIFO
d.Weighted Average CostIf
the amount assigned to ending inventory is incorrect,
a.The balance sheet is affected, but the income statement is not
b.The income statement is affected, but the balance sheet is not
c.The balance sheet is affected, but cost of goods sold is not
d.Both the balance sheet and the income statement are affected
Advent Corp. uses a periodic inventory system. At the beginning of 2010 its inventory balance was $40,000. During the first 4 months of 2010, net purchases amounted to $110,000 and net sales were $200,000. On May 1, 2010, a tornado destroyed the company’s warehouse and its entire inventory. The average gross profit percentage in recent years had been 40%. What is the estimated amount of Advent’s inventory loss on May 1, 2010?
a.$20,000
b.$30,000
c.$40,000
d.$70,000
Selected data for Fish, Inc. and Worm Corp., two companies in the same industry, are presented below:
Fish, Inc.
Worm Corp.
Sales
$50,000
$80,000
Cost of goods sold
30,000
50,000
Average inventory balance
5,000
5,000
Based on this data, which statement below is true?
a.Fish, Inc. has a lower gross profit ratio than Worm Corp.
b.Worm Corp has a higher net income than Fish, Inc.
c.Worm Corp sells its inventory faster than Fish, Inc.
d.Fish, Inc. has lower storage costs and a lower investment in inventory than Worm Corp.
The ski selected is a mass market ski with a special binding and will be sold for $80 per pair. A $125000 fixed charge will be absorbed by the ski, however, to allocate a fair share of the company’s present fixed cost to the new product.
Using the estimated sales and production of 10000 pair of skis as the expected volume,
Direct labor $35
Direct material 30
Total overhead 15
Total cost $80
They discussed the purchasing of the binding from a subcontractor at $5.25 per binding, or $10.50 per pair with direct-labor and variable cost would be reduced by 10% and direct materials costs would be reduced by 20%.
Should the Corporation make or buy the bindings? Show calculations to support answer.
The ski selected is a mass market ski with a special binding and will be sold for $80 per pair. A $125000 fixed charge will be absorbed by the ski, however, to allocate a fair share of the company’s present fixed cost to the new product.
Using the estimated sales and production of 10000 pair of skis as the expected volume,
Direct labor $35
Direct material 30
Total overhead 15
Total cost $80
They discussed the purchasing of the binding from a subcontractor at $5.25 per binding, or $10.50 per pair with direct-labor and variable cost would be reduced by 10% and direct materials costs would be reduced by 20%.
What would be the maximum purchase price acceptable to the Corporation for the bindings? Support your answer with and appropriate explanation.
The ski selected is a mass market ski with a special binding and will be sold for $80 per pair. A $125000 fixed charge will be absorbed by the ski, however, to allocate a fair share of the company’s present fixed cost to the new product.
Using the estimated sales and production of 10000 pair of skis as the expected volume,
Direct labor $35
Direct material 30
Total overhead 15
Total cost $80
They discussed the purchasing of the binding from a subcontractor at $5.25 per binding, or $10.50 per pair with direct-labor and variable cost would be reduced by 10% and direct materials costs would be reduced by 20%.
Instead of 10000 pairs of skis, revised estimates show sales volume at 12500 pairs. At this new volume, additional equipment, at an annual rental of 10000, must be acquired to manufacture the bindings. This incremental cos would be the only additional fixed cost required, even if sales increased to 30000 pairs. (The 30000 level is the goal for the third year of production.) Under these circumstances, should the Corporation make or buy the bindings? Show calculations to support the answer.
The ski selected is a mass market ski with a special binding and will be sold for $80 per pair. A $125000 fixed charge will be absorbed by the ski, however, to allocate a fair share of the company’s present fixed cost to the new product.
Using the estimated sales and production of 10000 pair of skis as the expected volume,
Direct labor $35
Direct material 30
Total overhead 15
Total cost $80
They discussed the purchasing of the binding from a subcontractor at $5.25 per binding, or $10.50 per pair with direct-labor and variable cost would be reduced by 10% and direct materials costs would be reduced by 20%.
The company has the option of making and buying at the same time. What would be your answer to number 3 if this alternative were considered? Show calculations to support your answer.
—————Popeye Heckle ——-Jeckle Cash —————–112,000 —–50,000 Supplies —————46,000 Equipment ————-226,000— 222,000 Building ——124,000 Land ———-20,000
Consider each question as an independent situation.
14. If the net income of the partnership is $48,255 and the partnership agreement does not state how net income is to be divided, what amount of net income should be allocated to Jeckle?
15. The partners Popeye, Heckle, and Jeckle share net income based on the amount of time they spend working in the business, which is expressed as 6:3:1 respectively. If the net income is $80,260, what amount of net income should be allocated to Popeye?
16. The partners share net income in the same ratio as the beginning balances of their capital accounts. If the net income is $54,200, what amount of net income should be allocated to Heckle?
Total liabilities & stockholders’ equity $1,980 $1,840
Praven Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $1,700
Cost of goods sold 1,190
Gross Margin 510
Selling and administrative expense 200
Net operating income 310
Interest expense 40
Net income before taxes 270
Income taxes (30%) 81
Net income $189
Dividends during Year 2 totaled $89 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $130.
Prepare the income statement and owner’s equity statement for March and a classified balance sheet at March 31. (List amounts from largest to smallest eg 10, 5, 3, 2. List assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2. If answer is zero, please enter 0. Do not leave any fields blank.)
EDDY’S CARPET CLEANERS
Income Statement
Revenues
$
Expenses
$
Total expenses
Net income
$
EDDY’S CARPET CLEANERS
Owner’s Equity Statement
$
Add:
Less:
$
EDDY’S CARPET CLEANERS
Balance Sheet
Assets
Current Assets
$
Total current assets
Property, plant and equipment
$
:
Total assets
$
Liabilities and Owner’s Equity
Current liabilities
$
Total current liabilities
Owner’s Equity
Total liabilities and owner’s equity
$
Journalize adjusting entries. Use page J2 for the journal.
Prepare journal entries to record the following merchandising transactions of Yang Company, which applies the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on May 2 in Accounts Payable”Bots.)
May 2 Purchased merchandise from Bots Co. for $9,000 under credit terms of 1y15, ny30, FOB shipping
point, invoice dated May 2.
May 4 Sold merchandise to Chase Co. for $1,200 under credit terms of 2y10, ny60, FOB shipping
point, invoice dated May 4. The merchandise had cost $750.
May 5 Paid $150 cash for freight charges on the purchase of May 2.
May 9 Sold merchandise that had cost $1,800 for $2,400 cash.
May10 Purchased merchandise from Snyder Co. for $3,450 under credit terms of 2y15, ny60, FOB
destination, invoice dated May 10.
May12 Received a $300 credit memorandum from Snyder Co. for the return of part of the merchandise
purchased on May 10.
May14 Received the balance due from Chase Co. for the invoice dated May 4, net of the discount.
May17 Paid the balance due to Bots Co. within the discount period.
May20 Sold merchandise that cost $1,450 to Tex Co. for $2,800 under credit terms of May2y15, ny60, FOB
shipping point, invoice dated May 20.
May22 Issued a $400 credit memorandum to Tex Co. for an allowance on goods sold from May 20.
25 Paid Snyder Co. the balance due after deducting the discount.
30 Received the balance due from Tex Co. for the invoice dated May 20, net of discount and
allowance.
31 Sold merchandise that cost $4,800 to Chase Co. for $7,500 under credit terms of 2y10, ny60,
Prepare a trial balance at March 31 on a worksheet. Enter the following adjustments on the worksheet and complete the worksheet. (If answer is zero, please enter 0. Do not leave any fields blank.)
Earned but unbilled revenue at March 31 was $706.
Depreciation on equipment for the month was $252.
One-twelfth of the insurance expired.
An inventory count shows $378 of cleaning supplies on hand at March 31.
Accrued but unpaid employee salaries were $488.
EDDY’S CARPET CLEANERS
Worksheet
For the Month Ended March 31, 2010
Trial Balance
Adjustments
Adjusted Trial Balance
Income Statement
Balance Sheet
Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Assume the January 1, 2012, net asset balances are as follows: $1,000,000 unrestricted net assets, $300,000 temporarily restricted net assets; and $1,700,000 permanently restricted net assets.
A. Prepare a Statement of Activities using the format presented in Illustration 10-1.
B. Prepare a Statement of Unrestricted Revenues, Expenses, and Other Changes in Unrestricted Net Assets together with a Statement of Changes in Net assets.
Complete Exercise 11-8, preparing the statements described in parts a and b. Explain the process by which you completed the final statements. Offer your opinion and analysis of the data in answer to the question: “What is the financial health of Lee College?”
Presented below is information related to Dickinson Company for 2012.
Retained earnings balance, January 1, 2012 $982,900
Sales for the year 26,323,600
Cost of goods sold 16,187,900
Interest revenue 71,800
Selling and administrative expenses 4,736,300
Write-off of goodwill (not tax deductible) 835,300
Income taxes for 2012 1,204,100
Gain on the sale of investments (normal recurring) 116,000
Loss due to flood damage’extraordinary item (net of tax) 392,400
Loss on the disposition of the wholesale division (net of tax) 458,100
Loss on operations of the wholesale division (net of tax) 96,900
Dividends declared on common stock 257,000
Dividends declared on preferred stock 85,000
Prepare a multiple-step income statement and a retained earnings statement. Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2012, there were 500,000 shares of common stock outstanding all year.
The stockholders’ equity accounts of Sigma Corporation on January 1, 2010, were as follows.
Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized)
$300,000
Common Stock ($5 stated value, 300,000 shares authorized)
1,000,000
Paid-in Capital in Excess of Par Value – Preferred Stock
15,000
Paid-in Capital in Excess of Stated Value – Common Stock
480,000
Retained Earnings
688,000
Treasury Stock – Common (5,000 shares)
40,000
During 2010 the corporation had these transactions and events pertaining to its stockholders’ equity.
Feb. 1
Issued 5,000 shares of common stock for $30,000.
Mar. 20
Purchased 1,000 additional shares of common treasury stock at $7 per share.
Oct. 1
Declared a 8% cash dividend on preferred stock, payable November 1.
Nov. 1
Paid the dividend declared on October 1.
Dec. 1
Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010.
Dec. 31
Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
Incorrect.
Journalize the transactions. (Include entries to close net income to Retained Earnings. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Date
Account/Description
Debit
Credit
Feb. 1
Cash
30,000
Common Stock
25,000
Paid-in Capital in Excess of Stated Value-Common Stock
5,000
Mar. 20
Treasury Stock
7,000
Cash
7,000
Oct. 1
Cash Dividends
24,000
Dividends Payable
24,000
Nov. 1
Dividends Payable
24,000
Cash
24,000
Dec. 1
Cash Dividends
99,500
Dividends Payable
99,500
Dec. 31
Income Summary
280,000
Retained Earnings
280,000
(To close income summary)
(To close dividends)
Dividends Payable
Cash
(To pay dividends)
Incorrect.
Enter the beginning balances in the accounts and post the journal entries to the stockholders’ equity accounts. (Use T accounts.) (If answer is zero please enter 0, do not leave any fields blank.)
Preferred Stock
Paid-in Cap. in Excess of Par Value – Pref. Stock
1/1
0
1/1
300,000
1/1
0
1/1
15,000
12/31 Bal.
0
12/31 Bal.
300,000
12/31 Bal.
0
12/31 Bal.
15,000
Common Stock
Paid-in Cap. in Exc. of Stated Value – Comm. Stock
1/1 Bal.
0
1/1 Bal.
1,000,000
1/1 Bal.
0
1/1 Bal.
480,000
2/1
0
2/1
25,000
2/1
0
2/1
5,000
12/31 Bal.
0
12/31 Bal.
1,025,000
12/31 Bal.
0
12/31 Bal.
485,000
Retained Earnings
Treasury Stock – Common
12/31
1/1 Bal.
688,000
1/1 Bal.
40,000
1/1 Bal.
0
12/31
0
12/31
280,000
3/20
7,000
3/20
0
12/31 Bal.
0
12/31 Bal.
12/31 Bal.
47,000
12/31 Bal.
0
Cash Dividends
10/1
24,000
10/1
0
12/1
99,500
12/31
12/31 Bal.
12/31 Bal.
0
Incorrect.
Complete the stockholders’ equity section of the balance sheet at December 31, 2010 below. (If amount should be deducted please put either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
SIGMA CORPORATION
Partial Balance Sheet
December 31, 2010
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock,
$100 par value, noncumulative,
5,000 shares authorized,
3,000 shares issued and outstanding
$ 300,000
Common stock,
no par, $5 stated value
300,000 shares authorized,
shares issued
and shares outstanding
Total capital stock
$
Additional paid-in capital
In excess of par value-preferred stock
15,000
In excess of stated value-common stock
485,000
Total additional paid-in capital
500,000
Total paid-in capital
Retained earnings
Total paid-in capital and retained earnings
Less: Treasury stock
( 6,000 common shares)
-47,000
Total Stockholders’ Equity
$
Incorrect.
Calculate the payout ratio, earnings per share, and return on common stockholders’ equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine average shares outstanding.) (Round all ratios to 1 decimal place, e.g. 25.5 and earnings per share to 2 decimal places, e.g. 2.25.)
Payout ratio
35.5 %
Earnings per share
$
Return on common stockholders’ equity
%
Question Attempts: 2 of 3 used
Journal is correct but t and balance are not all correct help!
Prior to the 2009 Super Bowl, a Phoenix-area retailer ordered 50,000 T-shirts that read: Arizona Cardinals-2009 Super Bowl Champs. The company paid $11.75 for each of the customer T-shirts. Following the loss of Arizona to the Pittsburgh Steelers, the retailer found itself with 15,000 unsold T-shirts after the Super Bowl. Before the Super Bowl, the retailer was able to sell 35,000 of the T-shirts at an average per-unit price of $25. The company is currently deciding how to dispose of the 15,000 remaining T-shirts. The retailer has learned from one of its suppliers that each shirt could be reworked at an average cost of $5.50 per shirt (which involves removing the Super Bowl reference from the shirts). Management of the retailer believes the reworked shirts could be sold at an average price of $10.25 during the coming football season. Alternatively, the company could sell the shirts at an aver price of $2.60 as scrap material.
a. Identify at least three alternative courses of action management could take with regard to the leftover T-shirts.
Answer:
1. Donate and use as a tax incentive
2. Write off the loss and discard the T-shirts
b. Which costs are sunk in this decision?
c. Identify the relevant costs of each alternative you listed in part (a).
d. Based on your answer to part (c), what is the best alternative and what is the relative financial advantage of the best alternative over the second-best alternative?
This problem is based on the 2008 annual report of Intel Corporation.
Requirement 1:
Compute the following profitability measures for the year ended December 27, 2008:
(a)
Return on investment, based on net income (perform a DuPont analysis). (Do not round intermediate calculations and round final answer to 1 decimal place. Omit the “%” sign in your response.)
ROI %
(b)
Return on equity, based on net income. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)
ROE %
(c)
Price/earnings ratio. Use $14.18 as the year-end market price. (Round your answer to 1 decimal place.)
Price/earnings ratio
(d)
Dividend yield. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)
Dividend yield %
(e)
Dividend payout ratio. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)
Dividend payout ratio %
Requirement 2:
Compute the following liquidity measures at December 27, 2008:
(a) Working capital. (Enter your answer in millions. Omit the “$” sign in your response.)
Working capital $ million
(b) Current ratio. (Round your answer to 2 decimal places.)
Current ratio
(c) Acid-test ratio (Round your answer to 2 decimal places.)
Acid-test ratio
Requirement 3:
Compute the following activity measures for the year ended December 27, 2008:
(a)
Number of days’ sales in accounts receivable, based on a 365-day year. (Do not round intermediate calculations and round your answer to 1 decimal place.)
Number of days’ sales days
(b)
Number of days’ sales in inventory, based on a 365-day year. (Do not round intermediate calculations and roundyour answer to 1 decimal place.)
Number of days’ sales days
(c) Accounts receivable turnover. (Round your answer to 1 decimal place.)
Turnover times
(d) Inventory turnover. (Round your answer to 1 decimal place.)
Turnover times
(e) Turnover of net property, plant, and equipment. (Round your answer to 1 decimal place.)
Turnover times
Requirement 4:
Compute the following financial leverage measures at December 27, 2008:
(a) Debt ratio. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)
Debt ratio %
(b)
Debt/equity ratio. (Round your answer to 1 decimal place. Omit the “%” sign in your response.)
Debt/equity ratio %
Requirement 5:
Compute the following physical measures of Intel’s profitability at December 27, 2008:
(a)
Net revenues per employee. (Round your answer to the nearest dollar amount. Enter your answers in thousands of dollars. Omit the “$” sign in your response.)
Net revenues $ per employee
(b)
Operating income per employee. (Hint: The number of employees at year-end is disclosed on the Intel annual report.) (Round your answer to the nearest dollar amount. Enter your answers in thousands of dollars. Omit the “$” sign in your response.)
The following information has been gathered from the production department of the XYZ Company for April. The XYZ production department uses a process costing system and manufactures a pasta sauce which uses two raw material components (RM1 and RM2).
Work in Process at 1 April (85% completed) 6,000
Units started during April 72,000
Completed and transferred to finished goods during April 75,000
Cost In WIP “1 April Current Month
Material – RM1 $14,460 $121,920
Material – RM2 6,510 75,800
Direct Labour 6,000 61,866
Factory overhead 7,500 77,334
Raw material RM1 is introduced at the beginning of the process while RM2 is added at the stage when the product is 60% complete. Conversion costs are incurred at a uniform rate throughout the process. On April 30, Work-in-Process is 35% complete. There were no losses or spoilage during processing.
Using the weighted average cost method, calculate the:
(i) cost per equivalent unit of production
(ii) cost of completed units for the month of April
Number of visitors for the year 50000. Next year management anticipates an increase in unit variable cost of 10 percent and a profit target of 1 million. 1.calculate total fixed and total variable cost for the year. show annual results showing fixed and variable separately. show revenue and cost per visitor.
2.if there is no increase in visitors for the next year, what will be the required revenue rate per hotel visitor to meet the profit margin?
If the required revenue rate per visitor is not raised what will be required to meet the profit target?
Discuss the assumptions that are made in typical PV or break even analysis and whether they limit its usefulness.
The Rago Corporation had the following stock outstanding from 2009 through 2012:
Preferred stock: $100 par value, 8 percent cumulative, 5,000 shares authorized, issued, and outstanding
Common stock: $10 par value, 100,000 shares authorized, issued, and outstanding
The company paid $30,000, $30,000, $94,000, and $130,000 in dividends during 2009, 2010, 2011, and 2012, respectively. The market price per common share was $7.25 and $8.00 per share at the end of years 2011 and 2012, respectively.
Determine the dividends per share and the total dividends paid to common stockholders and preferred stockholders in the years 2009, 2010, 2011, and 2012.
Perform the same computations, with the assumption that the preferred stock was noncumulative. If an amount is zero, enter “0”. Round per share amounts to two decimal places
Plasticon manufactures plastic containers used to package a variety of liquid consumer products (such as fabric softener, cleaners, and shampoo, hair spray, and liquid soap). The containers are manufactured on a job-order basis to customer specifications.
Plasticon has received five proposals for capital investment projects. Your job is to evaluate these proposals and rank them in the order in which they should be funded. Begin your analysis by computing the average rate of return and the payback period for each proposal. Any project that has an average rate of return of less than 15% or a payback period of longer than 5 years should be eliminated from further consideration. After this initial screening, compute the net present value (using a 15% discount rate) and internal rate of return for the remaining projects. Rank the projects, based on both their profitability and overall merit to the corporation (qualitative factors).
Projects A B C D E
Cost$200,000 $250,000 $325,000 $500,000 $400,000
Life (in years) 8 10 10 10 8
residual value $0 $0 $0 $0 $0
Annual project net income $17,000 $18,000 $33,000 $55,000 $45,000
Annual net cash flows $42,000 $43,000 $65,500 $105,000 $95,000
Project A: This proposal requests funds to purchase hardware and software that will allow the Accounting Department to process payroll in-house. Paychecks are currently processed by an outside payroll service company. The annual increase in net income and cash flows will result from cost savings if the payroll function is no longer contracted to an outside company.
Project B: This proposal requests funds for new manufacturing equipment. This equipment will allow Plasticon to make containers as large as 10 gallons. Currently, Plasticon cannot make containers that are larger than 3 gallons.
Project C: This proposal requests funds for equipment to make stick-on labels that are applied to the plastic containers. Currently, all stick-on labels are ordered from another company. This supplier has not proven very reliable in meeting delivery deadlines.
Project D: This proposal requests funds for automated manufacturing equipment that will reduce the cycle time from receipt of a customer order to delivery of that order. Plasticon’s cycle time is currently days. The automated equipment will reduce that time to 4 days, while saving costs due to the elimination of five jobs. It will also make Plasticon more competitive; the company’s major competitor currently has a cycle time of 5 days.
Project E: This proposal requests funds for computerized drafting and design equipment that will allow engineers to complete manufacturing instructions on special orders more quickly. This equipment should reduce Plasticon’s cycle time from 7 to 5 days.
Present Value of an Annuity of $1 Compound Interest
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Find the return on common stockholders’ equity for year2
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Total liabilities & stockholders equity……$1,400…….$1,370
Shull Corporation Income Statement
For the Year Ended December 31, Year 2 (Dollars in thousands)
Sales (all on account)………………..$1,130
Cost of goods sold……………………..700
=
Gross margin…………………………….430
Selling and administrative expense….244
=
Net operating income…………………..186
Interest expense………………………..29
=
Net income before taxes………………157
Income taxes (30%)……………………47
=
Net income…………………………….$110
Dividends on common stock during Year 2 totaled $40 thousand. Dividends on preferred stock total $10 thousand. The market price of common stock at the end of the year 2 was $9.80 per share.
Find the Earnings per share(of common stock) for year 2
pls show all your answers in detail with the calculations
6. (Chapter 19) Black Hawk Wineries is considering the purchase of lockbox services from first Bancorp. Currently, it takes 6 days to collect funds from customers. The collection period would be reduced by 2 days if the lockbox system is implemented. The average number of payments received daily is 300 and the average check size is $150. First Bancorp will charge 5 cents per check in return for operating the lockbox system. Assume a 360-day year. Suppose one-year T-bills yield 6%. Should Black Hawk Wineries purchase the system?
7. (Chapter 14) Treasury bills have a return of 3.5 percent and the market risk premium is 8 percent. If a firm has a beta of 1.6, what is the cost of equity?
8.
9. (Chapter 18) Bubbagump Shrimp, Inc. had sales of $8,000 in November, $14,000 in December, $10,000 in January, $12,000 in February, and $8,000 in March. The firm’s cost of goods sold (COGS) in any given month is equal to 70 percent of the next month’s sales. The firm collects its receivables in 60 days and pays its payables in 30 days. The firm begins January 1 with $10,000 in cash. All sales and purchases are on credit. There are no other costs or revenues. What are Bubbagump’s total cash disbursements in March? Assume there are 30 days in every month.
18. (Chapter 10) You are given the following information about equipment that is required for your business. Assume that the equipment will be replaced as it wears out, that you can buy only one of the machines, and that straight-line depreciation to zero is used. The required return is 15 percent. Ignore taxes. Machine A has an initial cost of $200,000, an operating cost per year of $15,000, and an expected life of 8 years. Machine B has an initial cost of $300,000, and operating cost per year of $17,500, and an expected life of 10 years. Which machine would you buy and why?
20. (Chapter 16) Felony Federal Bank has expected EBIT of $910, debt with a face and market value of $2,000 paying an 8.5 percent annual coupon, and an unlevered cost of capital of 12 percent. If the tax rate is 34 percent, what is the value of the firm?
27. (Chapter 17) Sesame Sweet, Inc. has 220,000 shares outstanding with a par value of $1 per share and a market price of $12 per share. Capital in excess of par amounts to $540,000, while retained earnings is $275,000. There is no treasury stock and there are no transaction costs. Suppose Sesame Sweet declares a 3-for-1 stock split. What is the market price of a share of the company’s stock after the split?
28. (Chapter 20) Cindy’s Infant Toys currently has an average inventory of 1,800 teething rings. The carrying cost per unit per year is 5 cents. Cindy places an order for 3,600 teething rings on the first of each month and the order cost is $25. What will be the average inventory count if the firm switches to the EOQ model?
33. (Chapter 18) Suppose that the inventory period is 50 days, the accounts payable period is 35 days, and the cash cycle is 55 days. What is the operating cycle?
1. (Chapter 14) Project 1 has a beta of 0.65 and a projected return of 12 percent. Project 2 has a beta of 0.9 and a projected return of 17 percent. Project 3 has a beta of 1.4 and a projected return of 19 percent. Given the risk-free rate is 8 percent and the market risk premium is 8.5 percent, which projects should be accepted if the firm’s beta is 1.2?
2. (Chapter 10) You are considering investing in a cost cutting proposal. Net income from the project is expected to equal $27.50 each of the three years of the project’s life. The process has an initial cost of $125 and will be depreciated straight line over 3 years to a salvage value of $0. Assume a 34 percent tax bracket and a discount rate of 15 percent. Suppose the equipment is sold at the end of year 3 for $20, pretax. What is the net present value? (Round to the nearest whole dollar)
3. (Chapter 15) Amalgamated Bottle Cap, Inc. needs to raise $5 million. If the subscription price is $10, the stock price $12.50, and there are 4,000,000 shares outstanding, how many rights will buy a share of stock?
Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the company’s products follows.
Standard:
Estimated production volume, 3,000 units
Direct-material cost, $25 per unit
Direct labor per unit, 3 hours at $12 per hour
Enhanced:
Estimated production volume, 4,000 units
Direct-material cost, $40 per unit
Direct labor per unit, 4 hours at $12 per hour
Ontario’s overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow.
Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed—machinery that was expected to produce significant operating efficiencies.
1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.
2. Ontario’s selling prices are based heavily on cost.
A. By using direct labor hours as an application base, which product is overcosted and which product is undercosted? Calculate the amount of the cost distortion for each product.
B. Is it possible that overcosting and undercosting (i.e. cost distortion) and the subsequent determination of selling prices are contributing to the company’s profit woes?
P 10- 1: (Classification of Acquisition and Other Asset Costs) At December 31, 2011, certain accounts included in the property, plant, and equipment section of Reagan Company’s balance sheet had the following balances. Land $ 230,000 Buildings 890,000 Leasehold improvements 660,000 Equipment 875,000 During 2012, the following transactions occurred. 1. Land site number 621 was acquired for $850,000. In addition, to acquire the land Reagan paid a $51,000 commission to a real estate agent. Costs of $ 35,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for $13,000. 2. A second tract of land (site number 622) with a building was acquired for $420,000. The closing statement indicated that the land value was $300,000 and the building value was $120,000. Shortly after acquisition, the building was demolished at a cost of $41,000. A new building was constructed for $330,000 plus the following costs. Excavation fees $38,000 Architectural design fees 11,000 Building permit fee 2,500 Imputed interest on funds used during construction (stock financing) 8,500
The building was completed and occupied on September 30, 2012. 3. A third tract of land (site number 623) was acquired for $650,000 and was put on the market for resale. 4. During December 2012, costs of $89,000 were incurred to improve leased office space. The related improvements should be handled in the same manner as land improvements.) 5. A group of new machines was purchased under a royalty agreement that provides for payment of royalties based on units of production for the machines. The invoice price of the machines was $87,000, freight costs were $3,300, installation costs were $ 2,400, and royalty payments for 2012 were $17,500.
Instructions: (a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2012. Land Leasehold improvement Buildings Equipment Disregard the related accumulated depreciation accounts. (b) List the items in the situation that were not used to determine the answer to (a) above, and indicate where, or if, these items should be included in Reagan’s financial statements.
P 8. Laurence Norton is the chief financial officer of Rotham Industries, a company that makes special-order sound systems for home theaters. His records for February revealed the following information:
Beginning inventory balances Materials Inventory $27,450 Work in Process Inventory 22,900 Finished Goods Inventory 19,200 Direct materials purchased and received February 6 $ 7,200 February 12 8,110 February 24 5,890 Direct labor costs February 14 $13,750 February 28 13,230 Direct materials requested for production February 4 $ 9,080 February 13 5,940 February 25 7,600 View PDF
Job order cost cards for jobs in process on February 28 had the following totals:
Job No. Direct Materials Direct Labor Overhead AJ-10 $3,220 $1,810 $2,534 AJ-14 3,880 2,110 2,954 AJ-15 2,980 1,640 2,296 AJ-16 4,690 2,370 3,318 View PDF
The predetermined overhead rate for the month was 140 percent of direct labor costs. Sales for February totaled $152,400, which represented a 70 percent markup over the cost of production.
Required
Using T accounts for Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Overhead, Accounts Receivable, Payroll Payable, Sales, and Cost of Goods Sold, reconstruct the transactions in February. Compute the cost of units completed during the month. What was the total cost of goods sold during February? Determine the ending balances in the inventory accounts. During the first week of March, Jobs AJ-10 and AJ-14 were completed. No additional direct materials costs were incurred, but Job AJ-10 needed $720 more of direct labor, and Job AJ-14 needed an additional $1,140 of direct labor. Job AJ-10 was 40 units; Job AJ-14, 55 units. Compute the product unit cost for each completed job (round to two decimal places).
Pro Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2008, the company reported the following operating results while operating at 90% of plant capacity and producing 112,500 units.
Amount
Sales
$4,500,000
Cost of goods sold
3,600,000
Selling and administrative expenses
450,000
Net income
$ 450,000
Fixed costs for the period were: cost of goods sold $1,080,000, and selling and administrative expenses $225,000.
In July, normally a slack manufacturing month, Pro Sports receives a special order for 10,000 basketballs at $28 each from the Italian Basketball Association (IBA). Acceptance of the order would increase variable selling and administrative expenses $0.50 per unit because of shipping costs but would not increase fixed costs and expenses.
Instructions
(a)Prepare an incremental analysis for the special order.
(b)Should Pro Sports Inc. accept the special order? Explain your answer.
(c)What is the minimum selling price on the special order to produce net income of $4.10 per ball?
(d) What nonfinancial factors should management consider in making its decision?
PDF Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000. It will cost the company $10,000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2,000. The new machine is also being depreciated on a straight-line basis over ten years. Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year. PDF’s marginal tax rate is 40%. Additional working capital of $3,000 is required to maintain the new machine and higher sales level. The new lathe is expected to be sold for $5,000 at the end of the project’s ten-year life. What is the incremental free cash flow during years 2 through 10 of the project?
Periodic Inventory by Three Methods; Cost of Merchandise Sold
The units of an item available for sale during the year were as follows:
Jan. 1 Inventory 50 units @ $110
Mar. 10 Purchase 60 units @ $118
Aug. 30 Purchase 10 units @ $124
Dec. 12 Purchase 80 units @ $128
There are 40 units of the item in the physical inventory at December 31. The periodic inventory system is used.
Hide
Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations and final answers to the nearest whole dollar.
Schedule of Cost of Merchandise Inventory and Cost of Merchandise Sold
You are manager of a painting department of a large office complex. The painting department is responsible for painting the buildings’ exteriors and interiors. Your performance is judged in part on minimizing your department’s operating costs, which consists of paint and labor, while providing a high-quality and timely service.
Your job of painting the halls of a particular building is being evaluated. Paint and labor are substitutes. To provide the quality job demanded you can use less paint and more labor, or more paint and less labor. The accompanying table summarizes this trade-off. Paint costs $10 per gallon, and labor costs $6.40 per hour.
Paint (gallons)
Labor (hours)
50
200
80
125
100
100
125
80
200
50
a. How much paint and how much labor do you choose in order to minimize the total cost of the hall paining job? (Show calculations in neatly labeled exhibit.)
b. The accounting department institutes an overhead allocation on labor. For every dollar spent on labor, $0.5625 of overhead is allocated to the paint department to cover corporate overhead items including payroll, human resources, security, legal costs, and so forth. Now how much labor and paint do you choose to minimize the total accounting cost of the hall painting job? (Show calculations in neatly labeled exhibit.)
c. Explain why your decisions differ between parts (a) and (b).
d. Explain why the accounting department might want to allocate corporate overhead based on direct labor to your painting department.
How is managerial accounting different from financial accounting?
Comment on the different needs and use of financial information for internal purposes.
The managerial accounting profession and its role in today’s business environment. How has it changed over time?
Comment on the Certified Management Accountant (CMA) designation.
Part II:
Explain the main differences between the absorption and contribution (behavioral, variable) income statements. Will net income always be the same under the two approaches? If not, explain the difference.
Comment specifically on why companies feel the need to create yet another income statement in a different format. What information can the company gleam from this approach which is helpful as a tool in the decision making process.
Explain situations in which break-even analysis can be a useful tool. Provide a specific example.
2 to 4 pages jnclude answers to all the questions listed above. Include references
Total liabilities & stockholders’ equity $1,980 $1,840
Praven Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) $1,700
Cost of goods sold 1,190
Gross Margin 510
Selling and administrative expense 200
Net operating income 310
Interest expense 40
Net income before taxes 270
Income taxes (30%) 81
Net income $189
Dividends during Year 2 totaled $89 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $130.
Manufacturing support costs have to be allocated as per their cost driver.. It is mentioned in the question that machining department uses machine hours to allocate manufacturing support cost whereas finishing department uses direct labor cost..
So, for machining department, cost driver rate would be Total manufacturing support cost/Total machine hours i.e. $350,000/14,000 = $25 per machine hour.
For finishing department, cost driver rate would be Total manufacturing support cost/total direct labor cost i.e. $280,000/$350,000 = $0.8 per $ 1 of direct labor cost
Marc and Michelle are married and earned salaries this year (2011) of $88,500 and $18,300, respectively. In addition to their salaries, they received interest of $520 from municipal bonds and $720 from corporate bonds. Marc and Michelle also paid $4,200 of qualifying moving expenses, and Marc paid alimony to a prior spouse in the amount of $2,440. Marc and Michelle have a 10-year-old son, Matthew, who lived with them throughout the entire year. Thus, Marc and Michelle are allowed to claim a $1,000 child tax credit for Matthew. Marc and Michelle paid $9,100 of expenditures that qualify as itemized deductions and they had a total of $7,000 in federal income taxes withheld from their paychecks during the course of the year.
Taxable income is $78,180
What is Marc and Michelle’s taxes payable or refund due for the year? (use the tax rate schedules.) (Refunds should be indicated by a minus sign. Omit the “$” sign in your response.)
Maria Gonzalez opened a veterinary business in Nashville, Tennessee, on August 1. On August 31, the balance sheet showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, and M. Gonzalez, Capital $13,700. During September the following transactions occurred.
1.Paid $2,900 cash on accounts payable.
2.Collected $1,300 of accounts receivable.
3.Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account.
4.Earned revenue of $8,000 of which $2,500 is collected in cash and the balance is due in October.
5.Withdrew $1,000 in cash for personal use.
6.Paid salaries $1,700, rent for September $900, and advertising expenses $300.
7.Incurred utility expenses for month on account $170.
8.Received $10,000 from Capital Money Bank – money borrowed on a note payable.
Instructions
(a) Complete the table below. (If amount is a decrease, use either a negative sign preceding the number eg -45 or parentheses eg (45). For item 6. list amounts from largest to smallest eg 10, 5, 3, 2. If answer is zero, please enter 0. All blanks must be filled in. Note: Drawings and Expenses always decrease the account.)
MARIA GONZALEZ, VETERINARIAN
Maria Gonzalez Capital
Cash
+
Accounts
Receivable
+
Supplies
+
Office
Equipment
=
Notes
Payable
+
Accounts
Payable
+
M. Gonzalez
Capital
–
M. Gonzalez
Drawing
+
Revenues
–
Expenses
Bal.
1.
2.
3.
4.
5.
6.
7.
8.
(b) Complete the income statement for September, an owner’s equity statement for September, and a balance sheet at September 30. (List amounts from largest to smallest eg 10, 5, 3, 2. If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45). For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2.)
Maria Gonzalez, Veterinarian
Income Statement
For the Month Ended September 30, 2010September 30, 2010
MC Qu. 61At the beginning of the year, a firm has current assets of…
At the beginning of the year, a firm has current assets of $396 and current liabilities of $227. At the end of the year, the current assets were $432 and the current liabilities were $267. What is the change in net working capital?
$66
$-36
$-4
$76
$36
MC Qu. 59Crandall Oil has total sales of…
Crandall Oil has total sales of $1,140 and costs of $685. Depreciation is $138 and the tax rate is 33 percent. The firm does not have any interest expense. What is the operating cash flow?
$350
$340
$375
$325
$355
P2-2 Building an Income Statement [LO1]
Papa Roach Exterminators, Inc., has sales of $541,000, costs of $290,000, depreciation expense of $40,000, interest expense of $12,000, and a tax rate of 33 percent. (Do not include the dollar sign ($).)
The net income for this firm is $ .
P2-4 Per-Share Earnings and Dividends [LO1]
Papa Roach Exterminators, Inc., has sales of $521,000, costs of $270,000, depreciation expense of $35,000, interest expense of $19,000, and a tax rate of 37 percent. The firm paid out $53,000 in cash dividends, and has 24,000 shares of common stock outstanding. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))
The earnings per share, or EPS are $ ____ and the dividends per share are $ .____
P2-6 Calculating Taxes [LO3]
The Renata Co. had $180,000 in 2009 taxable income. Using the rates from the table below, the company’s 2009 income taxes are $ . (Do not include the dollar sign ($).)
Taxable Income Tax Rate
$0 ‘ 50,000 15%
50,001 ‘ 75,000 25%
75,001 ‘ 100,000 34%
100,001 ‘ 335,000 39%
335,001 ‘ 10,000,000 34%
10,000,001 ‘ 15,000,000 35%
15,000,001 ‘ 18,333,333 38%
18,333,334 + 35%
________________________________________
P2-8 Calculating OCF [LO4]
So Long, Inc., has sales of $11,700, costs of $4,500, depreciation expense of $900, and interest expense of $500.
If the tax rate is 37 percent, the operating cash flow, or OCF, is $ ____. (Round your answer to the nearest whole dollar amount. Do not include the dollar sign ($).)
Nick Elodeon established HBO Link Data Encoder on May 20CY. The following transactions occurred during the month:
May 1-Mr. Elodeon invested P250,000 into his business. 1-Rented office space and paid two months’ rent in advance, P8,000. 2-Issued a promissory notes for a P210,000 loan from the BANK Savings Bank. 4-Acquire service vehicle for P420,000. 4-Paid P14,400 for a one-year comprehensive insurance coverage on the service vehicle. 5-Acquire office equipment P60,000; paying P15,000 in cash and the balance next month. 8-Purchase supplies on credit for P18,000. 9-Paid merchandising P10,000 of the amount owed. 10-Collected P8,800 fees for service rendered. 13-Paid salaries, P6,600. 15-Received cash payment in advance from the client, P10,000. 19-Received from three clients, P12,000 per client for service rendered. 25-Withdrew P14,000 for personal expenses. 27-Paid salaries, P7,200. 30-Received telephone bill, P1,400. 30-Received P24,000 from two clients for service billed last May 19. 31-Settle the electricity bill of P3,000 for the month.
ntario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period are $800,000 and 25,000 hours, respectively. Information about the company’s products follows.
Standard:
Estimated production volume, 3,000 units
Direct-material cost, $25 per unit
Direct labor per unit, 3 hours at $12 per hour
Enhanced:
Estimated production volume, 4,000 units
Direct-material cost, $40 per unit
Direct labor per unit, 4 hours at $12 per hour
Ontario’s overhead of $800,000 can be identified with three major activities: order processing ($150,000), machine processing ($560,000), and product inspection ($90,000). These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Data relevant to these activities follow.
Top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in income is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed”machinery that was expected to produce significant operating efficiencies.
1. Assuming use of direct-labor hours to apply overhead to production, compute the unit manufacturing costs of the Standard and Enhanced products if the expected manufacturing volume is attained.
2. Ontario’s selling prices are based heavily on cost.
A. By using direct labor hours as an application base, which product is overcosted and which product is undercosted? Calculate the amount of the cost distortion for each product.
B. Is it possible that overcosting and undercosting (i.e. cost distortion) and the subsequent determination of selling prices are contributing to the company’s profit woes?
OBJECTIVE 4 — Diagram the flow of costs for a service business that uses a job order cost accounting system.
Explain that cost accounting can be applied to any organization that needs to determine the cost of its product. For a service business, the product is the service provided. Cost accounting can be used by an advertising agency to determine the cost to produce an ad for a customer, by an accountant to determine the cost of preparing a tax return, or by a plumber to determine the cost to clean a drain.
Refer to Exhibit 11 on page 872 of the text(Accounting/warren 24e). While reviewing that diagram, stress the following points:
1. The costs incurred by a service organization are labor and overhead. Any supplies used are treated as an overhead expense.
2. A cost of services account is used to record the cost of completed jobs.
GROUP LEARNING ACTIVITY — Job Order Costing in a Service Business
The objective of the Course Project is to analyze the financial statements of a publicly traded company.
Obtain an annual report from a publicly traded corporation that is interesting to you. Be sure that the company has deferred taxes, a retirement plan, share-based compensation, earnings per share, and a cash flow statement. Using techniques you have learned in the previous weeks, respond to the following questions:
1.What amount of deferred tax assets or deferred tax liabilities are on the two most recent years on the balance sheet? What gives rise to these deferred taxes? What information is disclosed in the footnotes related to deferred taxes? Please define a deferred tax asset and deferred tax liability.
2. What temporary and permanent differences does the company disclose in its footnotes? What are some other examples of temporary and permanent differences?
3.What is the amount of income tax provision in the two most recent years on the income statement? What information is disclosed in the footnotes relating to income tax expense? Does the company have a net operating loss carryforward or carryback? What are the guidelines for carryforwards and carrybacks?
4. Does the company have a defined benefit or defined contribution plan? What are the key elements of the plan discussed in the footnotes? What amounts on the balance sheet relate to this plan? What are the differences between defined benefit and defined contribution plans?
5. What are the earnings-per-share amounts disclosed on the income statement for the most recent year? What dilutive securities are discussed in the footnotes? Please identify and describe other examples of dilutive securities. How do these impact earnings per share?
6. What kind of share-based compensation does the company have? What was the compensation expense for the two most recent years? What are the key elements of this plan discussed in the footnotes? Please identify and describe other types of share-based compensation.
7. Does the company use the direct or indirect cash flow presentation method? What is the difference between these two methods? How does the cash flow statement agree to the other financial statements?
8.What investing and financing activities does the company have? What are some other examples of investing and financing activities?
9.What non-cash transactions does the company have on its cash flow statement? What are some other examples of non-cash transactions?
Body of the report, summary or conclusion, and works cited.
Even though this is not a scientific-type writing assignment, references are still very important. At least three authoritative, outside references are required (Anonymous authors or Web pages are not acceptable.). These should be listed on the last page titled Works Cited. APA format.
You are now required to conduct a cost-benefit analysis to determine if marketing your tim tam product to your two japan and singapore international marketplaces would be viable.
You are required to submit a cost-benefit analysis for each of japan and singapore international marketplaces. Include the following information in each cost-benefit analysis:
§ Itemised tangible costs, including one time and ongoing costs
§ Itemised intangible costs
§ Estimated projected benefits (based on evidence from research on similar projects)
Calculate and compare each marketing opportunities costs and benefits
The price of AT&T stock is currently $25. In each of the next two years, the stock price is expected to rise or fall by 20%. The stock pays no dividends. The one-year risk-free interest rate is 6% and is unlikely to change. Using the Binomial Tree, calculate the price of a one- year European call option on AT&T stock with a strike price of $25, using a) the portfolio replication approach, b) the risk neutral valuation approach. Leave your answers to 2 decimal places.
Consider a two-good economy with one private and one public good. There are four consumers in this economy who contribute to public good provision. The price of the private good is $1 and the demand function of the public good for each consumer is as follows: p1 = 20 – 2G, p2 = 30-(5/10)G, p3 = 100-(G/2) and p4 = 60-G where G is the number of units of the public good and p^i is the price of each unit for consumer i in dollars. The cost of providing one extra unit of the public good is (alpha).
(a) With 170 < alpha < 210, what is the optimal level of provision of the public good? Show the optimal point on a graph.
(b) Is there a possibility that the public good is not supplied at all? Why?
(c) If the public good is not supplied at all, what is the size of the deadweight loss due to this market failure?
(d) If at least one person contributes, for what values of the public good will be supplied?
We are going to use Excel to build a 2 step binomial model. The steps below are intended to assist.
1.1 Basic inputs
We begin by giving the inputs for the variables. These will change depending on the parameters given in each example/exercise.
1. The stock price (in cell B1) S0;
2. Exercise/Strike price (cell B2) K;
3. Annual risk free rate (cell B3) r;
4. Expiry (cell B4) T;
5. Number of time steps (cell B5) N;
6. Up-move (cell B7) u;
7. Down-move (cell B8) d.
As a first example, we will use the following variables:
1. S0 = 80
2. K = 78
3. r = 0,04 per annum
4. T = 2 years
5. N = 2
6. u = 1,05
7. d = 1/u
Suggestion: Label all the input values for the cells in the B column in the A column.
1.2 Basic formulae
Next we input the basic formulae needed for building our model.
The input for the formulae is provided in the square brackets.
1. Length of time interval per step (cell B6) ∆t = T N [=B4/B5].
2. The risk-neutral probability of an up-move (cell B9), since the short rate r is continuously compounded, is q = e r∆t−d u−d [=((EXP(B3*B6))-B8)/(B7-B8)].
3. The risk neutral probability of a down-move (cell B10) 1 − q.
1.3 Stock price tree
We now construct the 2 step stock price tree.
Suggestion: Put the label “Stock tree” in cell D1.
1. Start the first node of the stock tree (S0) in cell D2 [=B1] and then you branch it to the right; 2. the node uS0 [=B7*B1] in cell E2 and dS0 [=B8*B1] in cell E3;
3. the node u^2S0 [=E2*B7] in cell F2, the node udS0 = duS0 [=E2*B8] in cell F3 and the node d^2S0 [=E3*B8] in cell F4.
2 1.4 European put option tree Suggestion: Put the label “European put option” in cell D16.
1. Type the formula for the payoff of the European put option at T = 2 for the state
• uu in cell F17 [=MAX(B2-F2;0)]; • ud = du in cell F18;
• dd in cell F19. 2.
Compute the values of the option at the other nodes in the option tree.
3. Your formula in cell D18 should show the price of the European put option as 0,044479.
1.5 European call option tree
You can use put call parity or a 2 step option tree to determine the value of the European call option with the same parameters (same underlying, same expiry time and exercise price). The price of the European call option at t = 0 should be 8,041404.
Remark 1.1. Once your 2 step model is working correctly, save the file and use the model to complete the following exercise.
Excercise 1.1. Assume that a 2 step binomial stock model has the following parameters:
• T = 2 years
• N = 2
• u = 1,6
• d = 1/u
• Stock price at time 0: S0 = 140
• Strike price K = 160
• Continuously compunded annual risk free rate r = 8%.
Calculations in Excel without any rounding but give answers rounded off to two significant decimals.
1.1.1 The risk-neutral probability q is . . . . . . . . . .
1.1.2 The fair price of a European put option, expiring in 2 years time with an exercise price of 160 is . . . . . . . . . .
1.1.3 The fair price of a European call option, expiring in 2 years with an exercise price of 160 is . . . . . . . . . .
Electronic via Blackboard Turnitin ONLY (Please ensure that your name does not appear on any part of your work)
Any submitted after 16:00 on the deadline date will be subject to the standard University late penalties (see below), unless an extension has been granted, in writing by the Senior Tutor, in advance of the deadline.University Working Days Late:Mark: 1 (final agreed mark) * 0.9 2 (final agreed mark) * 0.8 3 (final agreed mark) * 0.7 4 (final agreed mark) * 0.6 5 (final agreed mark) * 0.5 More than 5 0
This assessment relates to the following module learning outcomes:A. Knowledge and Understanding all B. Subject Specific Intellectual and Research Skills all C. Transferable and Generic Skills all 3
Coursework Brief: This coursework aims to reinforce your appreciation of the module material by applying your knowledge and skills to data obtained from financial statements and other sources with a view to assess company accounting policy on the conceptual framework 2018, financial performance and position, and recommendations of improvements in the context of COVID 19. Requirement You are required to choose 3 UK companies from the FTSE100 index as the subject of your assignment and obtain the latest audited annual report and financial statements for each company. The companies should be in the same industry sector (i.e., a FTSE sector) You are required to prepare a written report to Discuss, compare, and critically evaluate selected companies’ accounting policies on the conceptual Framework 2018, particularly focus on revenue recognition and non-current assets (for examples: PPE, intangible assets, substance over form).Critically evaluate and compare selected companies’ financial position and performance and a recommendation of improvement in the context of COVID 19. Further information • You are not required to calculate the ratios. You can access the ratios for your chosen companies from the FAME database. You are required to extract total 18-21 ratios (6-7 similar ratios for each of 3 companies) from all the groups of ratios you have studied in the module. • When carrying out the analysis and formulating a recommendation, due consideration must be given to the effect(s) of any financial reporting practice and standards which may affect comparisons between selected companies within the same sector. •When writing your report, please ensure that: 1. The companies come from a homogenous industry. In 400 words, there must be sufficient background information of the companies’ and the industry. 2. In 600 words, there are non-financial aspects of the company included in the analysis. 3. In about 1600 words, there is appropriate application and interpretation of specific accounting standards, practices, financial performance and position, and recommendation; there is appropriate use of additional sources of information beyond the Statement of Financial Position, Income Statement, and the Statement of Cash Flows, Notes, amongst others. For both 2 and 3 above: In addition to using the main financial statements, you should consider consulting other relevant sections of the annual report, such as the Business Review and the Directors’ report, as well as other sources, such as share price movements, news reports and press comments. You needs to be selective in the information gathered. The analysis is not merely a rephrasing of information provided in the annual report, the report demonstrates a critical evaluation and use of evidence drawn from the appropriate published theoretical and empirical literature (e.g., journal articles) to support arguments. 4. In 400 words, the report’s conclusions are adequately supported by the analysis contained from 2 and 3 The report should be clearly structured, coherent and that there is a logical flow to the argumentation No marks will be rewarded on copying and pasting the information from annual report without analysis. Length The assignment should be 3,000 words in English, excluding references and appendices. A 10% (+/-) variation in word length is permissible. Structure The assignment should be presented in a logical sequence of sections/chapters. It should not be a personal narrative and must not be purely subjective or descriptive in content. Your assignment will normally have the following format: • Title page • Contents list (with section headings and page numbers) • Introduction • Non-financial aspects • Discussion and Evaluation Accounting policies • Discussion and Evaluation financial performance and position • Recommendation and conclusions • References (in alphabetical author order using the Harvard • Appendices (for example: ratio calculations from Fame) Format The assignment must be word processed using Times 12-point font double spaced for the body of the text. A margin of at least 2.5cms should be left on both sides and at the top and bottom of the page. The bottom margin should include a page number. Quotations of more than a few words should be indented and single spaced; shorter quotations should be shown in quotation marks. You must submit an electronic copy only through Turnitin on Blackboard. Submission The submission date is 4pm on 17th May 2021. There is a university-wide penalty. You may request an extension in advance and if necessary are advised to do so in good time before the deadline. If an extension is granted and the assessment is submitted by the revised deadline, no penalty will be applied. Extensions will only be granted for good reasons. You are strongly advised to ensure that the assignment is submitted by the deadline. Important: If you have any problems during the submission process you should contact ServiceLine immediately by email at Serviceline@soton.ac.uk or by phone on +44 (0)23 8059 5656. Role of Academic Staff The assignment is wholly the result of independent work by you, the student. You will NOT be allocated a supervisor for this assessment. Assessment Criteria The assignment is marked 100% on the text submitted. See Appendix A to this handout for further guidance. Some Advice The following points may be helpful. 1. Avoid story-telling. Your text should not be a simple account of a process or history of a company. Avoid uncritical repetition of the company’s own material and their evaluation of their performance and achievements. 2. The assignment requirements are key statements of what your assignment is trying to do. You need to keep reminding yourself of them to ensure you maintain your focus on what is relevant. 3. Keep reviewing your work-in-progress. 4. Use charts and diagrams and tables to present data in a useful way. Diagrams make your assignment more interesting for the reader but avoid too many diagrams especially if the diagram or chart conveys very little information. 5. The purpose of your analysis is to produce the evidence upon which you are able to draw your conclusions with regard to the assignment requirement. Beware opinions and conclusions unsupported by clear evidence. 6. Keep all your notes and other evidence (electronic files/folders). This evidence of your work may be revisit from time to time during the writing. Make sure you keep a note of your sources/references as you go along (it is much more difficult to find these weeks later). 7. Plagiarism is the theft of other people’s words. It is an offence of which examiners always take a severe view, as they are bound to do by University rules and conventions. People who steal by trying to pass off long passages of other people’s writing or an entire assignment as their own are aware of what they are doing and will be found out. 8. Check the typescript. You are responsible for the accuracy of the final text. Leave plenty of time for careful checking. Don’t leave the checking until the last minute. 9. Always keep a spare copy of your assignment and a spare hard copy. You should regularly back up all work done in multiple ways e.g. cloud, USB stick, e-mail attachment. 10.Keep working to your plan on the topic in a regular manner. You will find that the time passes very quickly. Manage your time by setting your own timeline and targets, reviewing this periodically to ensure a successful completion of your assignment. Marking Rubric
Nature of Assessment: This is a SUMMATIVE ASSESSMENT. See ‘Weighting’ section above for the percentage that this assignment counts towards your final module mark. Word Limit: +/-10% either side of the word count (see above) is deemed to be acceptable. Any text that exceeds an additional 10% will not attract any marks. The relevant word count includes items such as cover page, executive summary, title page, table of contents, tables, figures, in-text citations and section headings, if used. The relevant word count excludes your list of references and any appendices at the end of your coursework submission. You should always include the word count (from Microsoft Word, not Turnitin), at the end of your coursework submission, before your list of references. Title/Cover Page: You must include a title/ cover page that includes: your Student ID, Module Code, Assignment Title, Word Count. This assignment will be marked anonymously, please ensure that your name does not appear on any part of your assignment. References: You should use the Harvard style to reference your assignment. The library provide guidance on how to reference in the Harvard style and this is available from: Submission Deadline: Please note that the submission deadline for Southampton Business School is 16.00 for ALL assessments.Turnitin Submission: The assignment MUST be submitted electronically via Turnitin, which is accessed via the individual module on Blackboard. Further guidance on submitting assignments is available on the Blackboard support pages. It is important that you allow enough time prior to the submission deadline to ensure your submission is processed on time as all late submissions are subject to a late penalty. We would recommend you allow 30 minutes to upload your work and check the submission has been processed and is correct. Please make sure you submit to the correct assignment link. You will know that your submission has completed successfully when you see a message stating ‘Congratulations – your submission is complete…’. It is vital that you make a note of your Submission ID (Digital Receipt Number). This is a unique receipt number for your submission and is proof of successful submission. You may be required to provide this number at a later date. We recommend that you take a screenshot of this page or note the number down on a piece of paper. You should also receive an email receipt containing this number, and the number can be found after submitting by following this guide. This method of checking your submission is particularly useful in the event that you don’t receive an email receipt. You are allowed to test submit your assignment via Turnitin before the due date. You can use Turnitin to check your assignment for plagiarism before you submit your final version. See “Viewing Your Originality Report” for guidance. Please see the Module Leader/lecturer on your module if you would like advice on the Turnitin Originality report. The last submission prior to the deadline will be treated as the final submission andwill be the copy that is assessed by the marker.It is your responsibility to ensure that the version received by the deadline is the final version, resubmissions after the deadline will not be accepted in any circumstances.Late Penalties: Further information on penalties for work submitted after the deadline can be found here. Extension Requests: : Extension requests along with supporting evidence should be submitted to the Student Office as soon as possible before the submission date. Information regarding the regulations governing extension requests can be accessed via the Calendar: Academic Integrity Policy: Please note that you can access Academic Integrity Guidance for Students via the Quality Handbook: http://www.southampton.ac.uk/quality/assessment/academic_integrity.page?. Please note any suspected cases of Academic Integrity will be notified to the Academic Integrity Officer for investigation. Feedback: Southampton Business School is committed to providing feedback within 4 weeks (University working days). Once the marks are released and you have received your feedback, you can meet with your Module Leader / Module Lecturer / Personal Academic Tutor to discuss the feedback within 4 weeks from the release of marks date. Any additional arrangements for feedback are listed in the Module Profile. Student Support: Study skills and language support for Southampton Business School students is available at: http://www.sbsaob.soton.ac.uk/study-skills-and-language-support/.
Electronic via Blackboard Turnitin ONLY (Please ensure that your name does not appear on any part of your work)
Any submitted after 16:00 on the deadline date will be subject to the standard University late penalties (see below), unless an extension has been granted, in writing by the Senior Tutor, in advance of the deadline.University Working Days Late:Mark: 1 (final agreed mark) * 0.9 2 (final agreed mark) * 0.8 3 (final agreed mark) * 0.7 4 (final agreed mark) * 0.6 5 (final agreed mark) * 0.5 More than 5 0
This assessment relates to the following module learning outcomes:A. Knowledge and Understanding A1. The core areas of equity markets and equity finance. A2. The forms and motives of mergers, and the defensive tactics in hostile attempts. A3. The theoretical underpinning of asset allocation and portfolio management. A4. The supportive evidence and challenges to market efficiency. C. Transferable and Generic Skills C1. Numeracy skills developed through exercises. Analytical skills developed through case studies and an assignment.
Coursework Brief For the purpose of this assignment you will have to conduct a case study analysis of a recent merger / takeover of your choice. In particular, your analysis and report MUST CLEARLY include, among others, the following details: Discuss the background and motivation of the merger deal.Explain the share price movements (of both the acquirer and target companies) around the announcement date of the bid. (Hint: you are advised to use graphs and other forms of evidence to enrich your analysis).How realistic are the bidder company’s claims to be able to generate greater shareholder value (greater return on capital) after the merger (i.e. ex-post-merger). Analyse the proposed funding (method of finance) of the bid by the bidder company. Analyse the defence tactics employed by the target company (if hostile). Analyse the possibility of successful completion of the deal (if the deal is not completed yet).M&A is critical part of active portfolio management. Acquisitions are an important way to strengthen existing businesses or expand into new ones. Discuss the outcome of this deal from the acquirer’s portfolio perspective. Important information You may choose any merger or takeover, from any country, provided it occurred (completed or announced) in the previous 3 years (i.e. in the period 2018 – 2020).It is recommended that you use the Zephyr database to find deals. Please see the next pages for detailed instructions. You can, of course, find a deal by other means.The merger does not have to be one that was successful. Failed merger or takeover bids are just as interesting to analyse as successful ones. Furthermore, you could choose a bid battle that is still ongoing (i.e. not completed). Read textbooks before you begin to write. Refer to other books and journal papers.Cite all papers and electronic sources you use and include a references list at the end of the document. Failing to do so might mean you could be accused of plagiarism. Instructions for Zephyr databaseMETHOD I Go to the following page: http://library.soton.ac.uk/business/databases/companyinfo Find the “Zephyr” database, and click: Type “University of Southampton”, and “continue” Once you are logged in, you can choose the following search option, and click “Go”. You will see the following search box: Choose “Latest completed deals” or “Latest announced deals” to find the deal you would like to analyse. Notice you need to choose a merger/acquisition deal, not issuance of equities, share repurchase, or other capital market events. METHOD II Alternatively, you can use the advanced search options (on home page). Before arriving to this step you need to follow steps 1-3 from Method I. Where you can specify time period, geography (country), industry, and so on, to filter the deals. Once you have specified the criteria, click “view list of deals” at the bottom of page (right hand side). METHOD III If you choose to study UK or Irish firms, there are two additional databases that you can use to get company information: Morningstar and Fame. Find them on this site: http://library.soton.ac.uk/business/databases/companyinfoWhere to find news Search in Google News: https://news.google.com/ Use “Nexis” database (you must be connected to the University network to access the database):Go to http://library.soton.ac.uk/business/databases/companyinfoFind the “Nexis” database Example: search for news stories about “Precision Castparts acquisition by Berkshire Hathaway ”
Nature of Assessment: This is a SUMMATIVE ASSESSMENT. See ‘Weighting’ section above for the percentage that this assignment counts towards your final module mark. Word Limit: +/-10% either side of the word count (see above) is deemed to be acceptable. Any text that exceeds an additional 10% will not attract any marks. The relevant word count includes items such as cover page, executive summary, title page, table of contents, tables, figures, in-text citations and section headings, if used. The relevant word count excludes your list of references and any appendices at the end of your coursework submission. You should always include the word count (from Microsoft Word, not Turnitin), at the end of your coursework submission, before your list of references. Title/Cover Page: You must include a title/ cover page that includes: your Student ID, Module Code, Assignment Title, Word Count. This assignment will be marked anonymously, please ensure that your name does not appear on any part of your assignment. References: You should use the Harvard style to reference your assignment. The library provide guidance on how to reference in the Harvard style and this is available from: http://library.soton.ac.uk/sash/referencingSubmission Deadline: Please note that the submission deadline for Southampton Business School is 16.00 for ALL assessments.Turnitin Submission: The assignment MUST be submitted electronically via Turnitin, which is accessed via the individual module on Blackboard. Further guidance on submitting assignments is available on the Blackboard support pages. It is important that you allow enough time prior to the submission deadline to ensure your submission is processed on time as all late submissions are subject to a late penalty. We would recommend you allow 30 minutes to upload your work and check the submission has been processed and is correct. Please make sure you submit to the correct assignment link. You will know that your submission has completed successfully when you see a message stating ‘Congratulations – your submission is complete…’. It is vital that you make a note of your Submission ID (Digital Receipt Number). This is a unique receipt number for your submission, and is proof of successful submission. You may be required to provide this number at a later date. We recommend that you take a screenshot of this page, or note the number down on a piece of paper. You should also receive an email receipt containing this number, and the number can be found after submitting by following this guide. This method of checking your submission is particularly useful in the event that you don’t receive an email receipt. You are allowed to test submit your assignment via Turnitin before the due date. You can use Turnitin to check your assignment for plagiarism before you submit your final version. See “Viewing Your Originality Report” for guidance. Please see the Module Leader/lecturer on your module if you would like advice on the Turnitin Originality report. The last submission prior to the deadline will be treated as the final submission andwill be the copy that is assessed by the marker.It is your responsibility to ensure that the version received by the deadline is the final version, resubmissions after the deadline will not be accepted in any circumstances.Important: If you have any problems during the submission process you should contact ServiceLine immediately by email atServiceline@soton.ac.uk or by phone on +44 (0)23 8059 5656.Late Penalties: Further information on penalties for work submitted after the deadline can be found here. Special Considerations: If you believe that illness or other circumstances have adversely affected your academic performance, information regarding the regulations governing Special Considerations can be accessed via the Calendar: http://www.calendar.soton.ac.uk/sectionIV/special-considerations.htmlExtension Requests: : Extension requests along with supporting evidence should be submitted to the Student Office as soon as possible before the submission date. Information regarding the regulations governing extension requests can be accessed via the Calendar: http://www.calendar.soton.ac.uk/sectionIV/special-considerations.htmlAcademic Integrity Policy: Please note that you can access Academic Integrity Guidance for Students via the Quality Handbook: http://www.southampton.ac.uk/quality/assessment/academic_integrity.page?. Please note any suspected cases of Academic Integrity will be notified to the Academic Integrity Officer for investigation. Feedback: Southampton Business School is committed to providing feedback within 4 weeks (University working days). Once the marks are released and you have received your feedback, you can meet with your Module Leader / Module Lecturer / Personal Academic Tutor to discuss the feedback within 4 weeks from the release of marks date. Any additional arrangements for feedback are listed in the Module Profile. Student Support: Study skills and language support for Southampton Business School students is available at: http://www.sbsaob.soton.ac.uk/study-skills-and-language-support/.
External Examiner:
External Examiner Comments:
Final Approval by External Examiner Date:
Module Leader Response to External Examiner:(Please note these comments are REQUIRED and will be sent to the External Examiner)
Electronic via Blackboard Turnitin ONLY (Please ensure that your name does not appear on any part of your work)
Any submitted after 16:00 on the deadline date will be awarded mark of Zero
This assessment relates to the following module learning outcomes:A. Knowledge and UnderstandingA1. the differences in accounting systems worldwide; A2. how social, economic and cultural factors lead to differences in accounting systems; A3. the efforts being made to harmonise accounting systems; A4. framework, theories and techniques of foreign exchange risk management; A5. the potential influences of taxation and behavioural responses in an international context. B. Subject Specific Intellectual and Research SkillsB2. translate foreign financial statements into local currency using appropriate rates; B3. calculate and decide the most cost-effective way to hedge against foreign exchange risk; B4. discuss the costs and benefits of International Accounting Standardisation; B5. evaluate the tax implications of international transactions. C. Transferable and Generic SkillsC1. demonstrate problem solving; C2. demonstrate numeracy; 3
Coursework Brief: Answer ALL the questions in section A&B Section AInternational Accounting Q1- Different approaches have been identified for segment reporting. Critically describe the approach of segment reporting required by IFRS8, and critically discuss the benefits and constraints of segment reporting. Support your answers with academic literatures and practical examples. (words limit 800 words, 30 Marks)Section B: TaxationQ1- Set out below is a summary information relating to the results of Halitax plc for the year ended 31st March 2021: £, 000 (i) Profit before tax per the income statement. 164,000 (ii) This is after charging/crediting the following: Interest received gross on a long-term deposit 9,000 Dividend received from a UK resident company 52,000 Dividend received from an overseas company 20,000 Research and development (R&D) 20,000 Legal fees relating to a claim for damages from a faulty product 34,400 Interest paid on bonds issued for trade purposes Interest paid on arranged overdraft used for trade 38,400 400 Profit on disposal of land and buildings 48,000 Service charge received from an overseas subsidiary 8,400 Legal fees relating to an unsuccessful bid to buy another company 5,000 (iii) The net book value of the plant and machinery as at 31st March 2021 (after deducting depreciation at 25% reducing balance method) was £33,000,000. Net purchases of fixed assets in the year were 5,000,000. Of these, 40% qualified for capital allowances at 25% per annum. (v) The tax written down value of expenditure qualifying for capital allowances as at 1st April 2020 was £36,000,000. (vi) Unutilised trading losses brought forward were £23,500,000. (vii) The chargeable gain on the land and buildings has been calculated at £28,000,000. (viii) The company was considered as small company in 2019-20 financial year. (ix)The UK corporation tax rate for 2020-21 financial year is 19%. Required: Using UK tax principles and the information given above, calculate the company’s corporation tax liability for the year ended 31st March 2021. Your calculations should be to the nearest £1,000. (20 Marks)Q2– Discuss and critically evaluate the transfer pricing methods of determining Arm’s Length Prices and evaluate the effectiveness of the transfer pricing Legislation to tackle tax-Havens? Support your answers with academic literatures and practical examples. (words limit 600 words, 25 Marks)Q3– Critically evaluate the objectives and structures of the double taxation treaties with critical reflection on the convention between the government of the UK and the government of Canada? (words limit 600 words, 25 Marks) (Total: 100 Marks)Please note that the convention is available in BlackboardThe End
Nature of Assessment: This is a SUMMATIVE ASSESSMENT. See ‘Weighting’ section above for the percentage that this assignment counts towards your final module mark. Word Limit: +/-10% either side of the word count (see above) is deemed to be acceptable. Any text that exceeds an additional 10% will not attract any marks. The relevant word count includes items such as cover page, executive summary, title page, table of contents, tables, figures, in-text citations and section headings, if used. The relevant word count excludes your list of references and any appendices at the end of your coursework submission. You should always include the word count (from Microsoft Word, not Turnitin), at the end of your coursework submission, before your list of references. Title/Cover Page: You must include a title/ cover page that includes: your Student ID, Module Code, Assignment Title, Word Count. This assignment will be marked anonymously, please ensure that your name does not appear on any part of your assignment. References: You should use the Harvard style to reference your assignment. The library provide guidance on how to reference in the Harvard style and this is available from: http://library.soton.ac.uk/sash/referencingSubmission Deadline: Please note that the submission deadline for Southampton Business School is 16.00 for ALL assessments.Turnitin Submission: The assignment MUST be submitted electronically via Turnitin, which is accessed via the individual module on Blackboard. Further guidance on submitting assignments is available on the Blackboard support pages. It is important that you allow enough time prior to the submission deadline to ensure your submission is processed on time as all late submissions are subject to a late penalty. We would recommend you allow 30 minutes to upload your work and check the submission has been processed and is correct. Please make sure you submit to the correct assignment link. You will know that your submission has completed successfully when you see a message stating ‘Congratulations – your submission is complete…’. It is vital that you make a note of your Submission ID (Digital Receipt Number). This is a unique receipt number for your submission, and is proof of successful submission. You may be required to provide this number at a later date. We recommend that you take a screenshot of this page, or note the number down on a piece of paper. You should also receive an email receipt containing this number, and the number can be found after submitting by following this guide. This method of checking your submission is particularly useful in the event that you don’t receive an email receipt. You are allowed to test submit your assignment via Turnitin before the due date. You can use Turnitin to check your assignment for plagiarism before you submit your final version. See “Viewing Your Originality Report” for guidance. Please see the Module Leader/lecturer on your module if you would like advice on the Turnitin Originality report. The last submission prior to the deadline will be treated as the final submission andwill be the copy that is assessed by the marker.It is your responsibility to ensure that the version received by the deadline is the final version, resubmissions after the deadline will not be accepted in any circumstances.Important: If you have any problems during the submission process you should contact ServiceLine immediately by email atServiceline@soton.ac.ukor by phone on +44 (0)23 8059 5656.Late Penalties: Further information on penalties for work submitted after the deadline can be found here. Special Considerations: If you believe that illness or other circumstances have adversely affected your academic performance, information regarding the regulations governing Special Considerations can be accessed via the Calendar: http://www.calendar.soton.ac.uk/sectionIV/special-considerations.htmlAcademic Integrity Policy: Please note that you can access Academic Integrity Guidance for Students via the Quality Handbook: http://www.southampton.ac.uk/quality/assessment/academic_integrity.page?. Please note any suspected cases of Academic Integrity will be notified to the Academic Integrity Officer for investigation. Feedback: Southampton Business School is committed to providing feedback within 4 weeks (University working days). Once the marks are released and you have received your feedback, you can meet with your Module Leader / Module Lecturer / Personal Academic Tutor to discuss the feedback within 4 weeks from the release of marks date. Any additional arrangements for feedback are listed in the Module Profile. Student Support: Study skills and language support for Southampton Business School students is available at: http://www.sbsaob.soton.ac.uk/study-skills-and-language-support/.
The project is separated into 3 interrelated tasks. All 3 tasks are due at the same time in report format. The final due date is Friday 6th of November at 1pm Adelaide time (UTC +09:30). Please submit your projects online via MyUni by uploading a single file in Microsoft Word format (either .doc or .docx) through the Assignments tab and associated link. If your assignment is late, please email it to George personally.
Tasks 1, 2 and 3 most closely relate to Topics 2, 8 and 9 as detailed in the course outline.
This is an individual project (you can discuss it with other students but everyone needs to make an individual report submission).
The project comprises 50% of your final Quantitative Methods (M) grade with the following assessment breakdown:
Headline Regression Model Derivation 10%
Task 1: Data Summary 20%
Task 2: Regression Model – Build and Use 40%
Task 3: Regression Model – Evaluation 20%
Report Structure and Written Presentation Quality 10%
Your final report will be processed through Turnitin as a check for plagiarism so please ensure that you only present your own work. In addition, your final report needs to meet all of the following criteria:
Font: Times New Roman
Font size: 12 point
Page margins: 2.54cm all around (Normal)
Page Limit: 5 pages only (A4, single sided)
Appropriate font, font size, and page margins are all graded against ‘Written Presentation Quality’. Submissions which exceed the page limit will only have their first 5 pages graded.
Further Advice:
Do not use a title page.
Do not use a table of contents.
Only provide a short introduction.
Ensure your report is free from spelling and grammatical errors.
Ensure your report is clear and well-structured.
Ensure your report is written in context and answers questions in context.
Make sure it is clear which model is your “Headline Regression Model” (Final answer)
Loxton is a small town with two suburbs. The data file “Major Project – Data Set” contains data on 545 houses sold in Loxton between 2015 and 2020. This data includes the price at which the house was sold, which of two agents sold the house (all houses are sold through an agent by law), the year in which the house was sold as well as data on various characteristics of each house sold (age, size, number of stories etc.). These characteristics serve as possible explanatory variables of sale price.
Data definitions follow:
OBS
= observation
AGE
= age of house in years
SHOPS
= 1 if house is close to shopping precinct, 0 otherwise
CRIME
= crime rate of the suburb within which the house is located
TOWN
= distance in kilometres to the town centre
STORIES
= number of dwelling stories
OCEAN
= 1 if house has an ocean view, 0 otherwise
POOL
= 1 if house has a pool, 0 otherwise
PRICE
= price at which the house was sold (in dollars)
SELLER
= selling agent – “W&M” (0) or “A&B” (1)
SIZE
= size of the house in square metres
SUBURB
= Mayfair (0) or Claygate (1)
TENNIS
= 1 if house has a tennis court, 0 otherwise
SOLD
= year of last sale (2015 to 2020)
Your tasks
Task 1 – 20% of project grade (recommended length of 1 page)
You are required to provide a comprehensive summary of the data set contained in the “Major Project – Data
Set” file. How you choose to do this is entirely at your discretion. However, it is recommended that you consider using both summary statistic and graphical methods while also noting any peculiarities within the data set.
Task 2 (including Headline Regression Model) – 50% of project grade (recommended length of 2.5 pages)
You have been hired by Jane, the wealthy owner of a house on Elm Street in Loxton (not included in the data set) to predict the price at which her house will sell. Her house has two stories, is in Claygate, is 192 square metres large, is not near a shopping precinct and is 10 km from the town centre. She estimates that the house is about 10 years old and in a low crime area according to her experiences. Jane inherited the house from her uncle and is therefore unsure when it was last sold. Some other features of the property can be seen below:
1
Views of and from the house whose sale price you are to predict
You are expected to build a regression model of house prices. In doing so, make sure that you use an appropriate number of predictors to develop your estimates. Once you have constructed an appropriate model, use it to obtain and provide for Jane’s house:
A point prediction of the sales price which it can be expected to fetch
A 95% interval prediction for this sale price
An estimate of the marginal effect of house size on this sale price
Financial advice on whether Jane should use “W&M” or “A&B” to sell her house. “W&M” charges a commission of 5% whereas “A&B” charges a commission of 10% of the final sale price.
Jane, who claims to have some knowledge of regression analysis, has stressed that she thinks you should use a regression model with an R2 of at least 85%.
Note: Task 1 directed you to take note of any peculiarities in the data set. There are other additional errors in the data set that you may not have picked up on in Task 1. These will only become clear to you once you start working on Task 2. Several problems can result if you fail to handle these issues correctly, so be mindful to address them, both in your regression application as well as your final report. If resolving any of the errors in the dataset requires you to make assumptions, make sure to clearly state your reasoning and approach in your report.
Task 3 – 20% of project grade (recommended length of 1.5 pages)
Please provide a reflective discussion on how you executed Task 2 of the project above. Specifically consider the following:
Verify that your regression model does not suffer from any misspecification errors and provide the relevant regression diagnostics which support your findings.
If you found that your model is in fact partially misspecified in part (1) of Task 3 above, explain what you did to ensure that the misspecification only has a minimal impact on your results in Task 2 above.
Were there any other oddities in the data set or your model? Explain.
Is there anything else worth mentioning which is relevant to your work or to your results for Jane?
Electronic via Blackboard Turnitin ONLY (Please ensure that your name does not appear on any part of your work)
Any submitted after 16:00 on the deadline date will be subject to the standard University late penalties (see below), unless an extension has been granted, in writing by the Senior Tutor, in advance of the deadline.University Working Days Late: Mark: (final agreed mark) * 0.9(final agreed mark) * 0.8(final agreed mark) * 0.7(final agreed mark) * 0.6(final agreed mark) * 0.5 More than 5 0
A1. Demonstrate understanding of research methodologies; A2. Understand and critically analyse academic papers.
B. Subject Specific Intellectual and Research Skills
B1. Interpret the results of data analysis, and understand the strengths and weaknesses of different methods; B2. Prepare an effective research proposal, formulate research questions, and choose appropriate data collection methods and analysis.
C. Transferable and Generic Skills
C1. Apply analysis skills, which include qualitative data interpretation and quantitative analysis skills; C2. Apply critical analytical skills on research projects; C3. Plan and control effectively for successful completion of workload; C4. Communicate effectively in writing, using and justifying argument within reports.
INDIVIDUAL RESEARCH PROPOSAL BRIEF:This should include the following aspects. Research purpose Introduction: introduce the research problematisation that underlies your choice of topic and its background or connection to the relevant literature/evidence. What is the research all about? Why is it important or interesting? Overall aim(s) and objective(s) and research question(s) Literature review What research has been undertaken before in your area? Identify and explain the key journal papers. Methodology Which research paradigm do you intend to use and why is it most appropriate? What theoretical framework do you intend to use? What are your research hypotheses or research questions? Research methods What are your data sources going to be (data bases, questionnaires, interviews etc)? What method of analysis are you likely to use? Critique of project What limitations do you envisage of your research? Research project timetable.ReferencesEnsure your proposal is fully and properly referenced.Nature of Assessment: This is a SUMMATIVE ASSESSMENT. See ‘Weighting’ section above for the percentage that this assignment counts towards your final module mark. Word Limit: +/-10% either side of the word count (see above) is deemed acceptable. Any text that exceeds an additional 10% will not attract any marks. The relevant word count includes a cover page, executive summary, title page, table of contents, tables, figures, in-text citations and section headings if used. The relevant word count excludes your list of references and any appendices at the end of your coursework submission. You should always include the word count (from Microsoft Word, not Turnitin), at the end of your coursework submission, before your list of references. Title/Cover Page: You must include a title/ cover page that includes: your Student ID, Module Code, Assignment Title, Word Count. This assignment will be marked anonymously, and please ensure that your name does not appear on any part of your assignment. References: You should use the Harvard style to reference your assignment. The library guides how to reference in the Harvard style, and this is available from http://library.soton.ac.uk/sash/referencingSubmission Deadline: Not later than 16.00 on 25th August, 2021.Turnitin Submission: The assignment MUST be submitted electronically via Turnitin, accessed via the individual module on Blackboard. Further guidance on submitting assignments is available on the Blackboard supportpages. You must allow enough time before the submission deadline to ensure your submission is processed on time as all late submissions are subject to a late penalty. We recommend you allow 30 minutes to upload your work and check the submission has been processed and correct. Please make sure you submit to the correct assignment link. You will know that your submission has completed successfully when you see a message stating ‘Congratulations – your submission is complete…’. It would help if you made a note of your Submission ID (Digital Receipt Number). This is a unique receipt number for your submission and is proof of successful submission. You may be required to provide this number at a later date. We recommend that you take a screenshot of this page, or note the number down on a piece of paper. You should also receive an email receipt containing this number, and the number can be found after submitting by following this guide. This method of checking your submission is beneficial if you don’t receive an email receipt. You are allowed to test-submit your assignment via Turnitin before the due date. You can use Turnitin to check your assignment for plagiarism before you submit your final version. See “Viewing Your Originality Report” for guidance. Please see the Module Leader/lecturer on your module if you would like advice on the Turnitin Originality report. The last submission before the deadline will be treated as the final submission andwill be the copy that isassessed by the marker.It is your responsibility to ensure that the version received by the deadline is the final version, resubmissions afterthe deadline will not be accepted in any circumstances.Important: If you have any problems during the submission process, you should contact ServiceLine immediately by email at Serviceline@soton.ac.uk or by phone on +44 (0)23 8059 5656.Late Penalties: Further information on penalties for work submitted after the deadline can be found here.Special Considerations: If you believe that illness or other circumstances have adversely affected your academic performance, information regarding the regulations governing Special Considerations can be accessed via the Calendar: http://www.calendar.soton.ac.uk/sectionIV/special-considerations.html
Suppose you buy a put option contract on October gold futures with a strike price of $1,200 per ounce. Each contract is for the delivery of 100 ounces. What happens if you exercise when the October futures price is $1,160?
You gain (1,200 −1,160)×100 = $4,000. This gain is made up of a) a short futures contract in October gold and b) a cash payoff you receive which is 100 times the excess of $1,200 over the previous settlement price. The short futures position is marked to market in the usual way until you choose to close it out.
Problem 16.9.
Suppose you sell a call option contract on April live cattle futures with a strike price of 140 cents per pound. Each contract is for the delivery of 40,000 pounds. What happens if the contract is exercised when the futures price is 145 cents?
In this case, you lose (1.45 −1.40)×40,000 = $2,000. The loss is made up of a) a cash payoff you have to make equal to 40,000 times the excess of the previous settlement price over the previous settlement price and b) a short April futures contract.
Problem 16.10.
Consider a two-month futures call option with a strike price of 40 when the risk-free interest rate is 10% per annum. The current futures price is 47. What is a lower bound for the value of the futures option if it is (a) European and (b) American?
Lower bound if option is European is
Lower bound if option is American is
Problem 16.11.
Consider a four-month futures put option with a strike price of 50 when the risk-free interest rate is 10% per annum. The current futures price is 47. What is a lower bound for the value of the futures option if it is (a) European and (b) American?
Lower bound if option is European is
Lower bound if option is American is
Problem 16.12.
A futures price is currently 60 and its volatility is 30%. The risk-free interest rate is 8% per annum. Use a two-step binomial tree to calculate the value of a six-month European call option on the futures with a strike price of 60? If the call were American, would it ever be worth exercising it early?
In this case; d = 1/u = 0.8607; and
In the tree shown in Figure S16.1 the middle number at each node is the price of the European option and the lower number is the price of the American option. The tree shows that the value of the European option is 4.3155 and the value of the American option is 4.4026. The American option should sometimes be exercised early.
Figure S16.1 Tree to evaluate European and American call options in Problem 16.12
Problem 16.13.
In Problem 16.12 what value does the binomial tree give for a six-month European put option on futures with a strike price of 60? If the put were American, would it ever be worth exercising it early? Verify that the call prices calculated in Problem 16.12 and the put prices calculated here satisfy put–call parity relationships.
The parameters u, d, and p are the same as in Problem 16.12. The tree in Figure S16.2 shows that the prices of the European and American put options are the same as those calculated for call options in Problem 16.12. This illustrates a symmetry that exists for at-the-money futures options. The American option should sometimes be exercised early. Because and , the European put–call parity result holds.
Also because , , and the result in equation (16.2) holds. (The first expression in equation (16.2) is negative; the middle expression is zero, and the last expression is positive.)
Figure S16.2 Tree to evaluate European and American put options in Problem 16.13
Problem 16.14.
A futures price is currently 25, its volatility is 30% per annum, and the risk-free interest rate is 10% per annum. What is the value of a nine-month European call on the futures with a strike price of 26?
In this case, , , , ,
Problem 16.15.
A futures price is currently 70, its volatility is 20% per annum, and the risk-free interest rate is 6% per annum. What is the value of a five-month European put on the futures with a strike price of 65?
In this case , , , ,
Problem 16.16.
Suppose that a one-year futures price is currently 35. A one-year European call option and a one-year European put option on the futures with a strike price of 34 are both priced at 2 in the market. The risk-free interest rate is 10% per annum. Identify an arbitrage opportunity.
In this case
Put-call parity shows that we should buy one call, short one put and short a futures contract. This costs nothing up front. In one year, either we exercise the call or the put is exercised against us. In either case, we buy the asset for 34 and close out the futures position. The gain on the short futures position is .
Problem 16.17.
“The price of an at-the-money European futures call option always equals the price of a similar at-the-money European futures put option.” Explain why this statement is true.
The put price is
Because for all the put price can also be written
Because this is the same as the call price:
This result can also be proved from put–call parity showing that it is not model dependent.
Problem 16.18.
Suppose that a futures price is currently 30. The risk-free interest rate is 5% per annum. A three-month American futures call option with a strike price of 28 is worth 4. Calculate bounds for the price of a three-month American futures put option with a strike price of 28.
From equation (16.2), must lie between
and
Because we must have or
Problem 16.19.
Show that if is the price of an American call option on a futures contract when the strike price is and the maturity is , and is the price of an American put on the same futures contract with the same strike price and exercise date,
where is the futures price and is the risk-free rate. Assume that and that there is no difference between forward and futures contracts. (Hint: Use an analogous approach to that indicated for Problem 15.12.)
In this case we consider
Portfolio A: A European call option on futures plus an amount invested at the risk-free interest rate
Portfolio B: An American put option on futures plus an amount invested at the risk-free interest rate plus a long futures contract maturing at time .
Following the arguments in Chapter 5 we will treat all futures contracts as forward contracts.
Portfolio A is worth while portfolio B is worth . If the put option is exercised at time , portfolio B is worth
at time where is the futures price at time . Portfolio A is worth
Hence Portfolio A is worth more than Portfolio B. If both portfolios are held to maturity (time T), Portfolio A is worth
Portfolio B is worth
Hence portfolio A is worth more than portfolio B.
Because portfolio A is worth more than portfolio B in all circumstances:
Because it follows that
or
This proves the first part of the inequality.
For the second part of the inequality consider:
Portfolio C: An American call futures option plus an amount invested at the risk-free interest rate
Portfolio D: A European put futures option plus an amount invested at the risk-free interest rate plus a long futures contract.
Portfolio C is worth while portfolio D is worth . If the call option is exercised at time , portfolio C becomes:
while portfolio D is worth
Hence portfolio D is worth more than portfolio C. If both portfolios are held to maturity (time T), portfolio C is worth while portfolio D is worth
Hence portfolio D is worth more than portfolio C.
Because portfolio D is worth more than portfolio C in all circumstances
Because it follows that
or
This proves the second part of the inequality. The result:
has therefore been proved.
Problem 16.20.
Calculate the price of a three-month European call option on the spot price of silver. The three-month futures price is $12, the strike price is $13, the risk-free rate is 4%, and the volatility of the price of silver is 25%.
This has the same value as a three-month European call option on silver futures where the futures contract expires in three months. It can therefore be valued using equation (16.5) with , , , and . The value is 0.244.
Further Questions
Problem 16.21.
A futures price is currently 40. It is known that at the end of three months the price will be either 35 or 45. What is the value of a three-month European call option on the futures with a strike price of 42 if the risk-free interest rate is 7% per annum?
In this case and . The risk-neutral probability of an up move is
The value of the option is
Problem 16.22.
The futures price of an asset is currently 78 and the risk-free rate is 3%. A six-month put on the futures with a strike price of 80 is currently worth 6.5. What is the value of a six-month call on the futures with a strike price of 80 if both the put and call are European? What is the range of possible values of the six-month call with a strike price of 80 if both put and call are American?
Put call parity for European options gives
6.5+78e-0.03×0.5 = c+80e-0.03×0.5
so that c=4.53.
The relation for American options gives
78 e-0.03×0.5 – 80 < C − 6.5 < 78 − 80 e-0.03×0.5
so that
−3.16 < C −6.5 < −0.81
so that C lies between 3.34 and 5.69
Problem 16.23.
Use a three-step tree to value an American futures put option when the futures price is
50, the life of the option is 9 months, the strike price is 50, the risk-free rate is 3%, and
the volatility is 25%.
u=1.331, d = 0.8825, and =0.4688. As the tree in Figure S16.3 shows the value of the option is 4.59
Figure S16.3: Tree for Problem 16.23
Problem 16.24.
Calculate the implied volatility of soybean futures prices from the following information concerning a European put on soybean futures:
Current futures price
525
Exercise price
525
Risk-free rate
6% per annum
Time to maturity
5 months
Put price
20
In this case , , , . We wish to find the value of for which where:
This must be done by trial and error. When , . When , . When , . When , . These calculations show that the implied volatility is approximately 15.2% per annum.
Problem 16.25.
It is February 4. July call options on corn futures with strike prices of 260, 270, 280, 290, and 300 cost 26.75, 21.25, 17.25, 14.00, and 11.375, respectively. July put options with these strike prices cost 8.50, 13.50, 19.00, 25.625, and 32.625, respectively. The options mature on June 19, the current July corn futures price is 278.25, and the risk-free interest rate is 1.1%. Calculate implied volatilities for the options using DerivaGem. Comment on the results you get.
There are 135 days to maturity (assuming this is not a leap year). Using DerivaGem with , , = 135/365, and 500 time steps gives the implied volatilities shown in the table below.
Strike Price
Call Price
Put Price
Call Implied Vol
Put Implied Vol
260
26.75
8.50
24.69
24.59
270
21.25
13.50
25.40
26.14
280
17.25
19.00
26.85
26.86
290
14.00
25.625
28.11
27.98
300
11.375
32.625
29.24
28.57
We do not expect put–call parity to hold exactly for American options and so there is no reason why the implied volatility of a call should be exactly the same as the implied volatility of a put. Nevertheless it is reassuring that they are close.
There is a tendency for high strike price options to have a higher implied volatility. As explained in Chapter 19, this is an indication that the probability distribution for corn futures prices in the future has a heavier right tail and less heavy left tail than the lognormal distribution.
Problem 16.26.
Calculate the price of a six-month European put option on the spot value of the S&P 500. The six-month forward price of the index is 1,400, the strike price is 1,450, the risk-free rate is 5%, and the volatility of the index is 15%.
The price of the option is the same as the price of a European put option on the forward price of the index where the forward contract has a maturity of six months. It is given by equation (16.6) with , , , , and . It is 86.35.
Problem 16.27
The strike price of a futures option is 550 cents, the risk-free rate of interest is 3%, the volatility of the futures price is 20%, and the time to maturity of the option is 9 months. The futures price is 500 cents.
What is the price of the option if it is a European call?
What is the price of the option if it is a European put?
Verify that put-call parity holds
What is the futures price for a futures style option if it is a call?
What is the futures price for a futures style option if it is a put?
(a) The price given by equation (16.5) or DerivaGem is 16.20 cents
(b) The price given by equation (16.6) or DerivaGem is 65.08 cents
(c) In this case, the left hand side of equation (16.1) is 16.2+550e−0.03×0.75 = 553.96. The right hand side of equation (16.1) is 65.03+500 e−0.03×0.75=553.96. This verifies that put-call parity holds.
(d) The futures price for a futures-style call is 16.20e0.03×0.75=16.57 cents
(e) The futures price for a futures-style put is 65.08e0.03×0.75=66.56 cents
Identify and describe the various fundamentals concepts of music and music notation symbols by applying traditional terminology.
Discuss and compare the various functions, uses, and contexts of music.
Assignment Purpose & Instructions
LTAAs are designed to prepare you for writing the Concert Report.
In this assignment, I want you to pay close attention to the type of sentences I have you create, and the order in which they come. This is the form I’d like for you to follow in the Concert Report.
Provided examples are to give you general guidance on how to construct sentences only. You are NOT to copy them directly, as that constitutes a Code of Conduct violation for plagiarism. Change the words, structure, phrasing enough so that you write your original thoughts, not mine. I am not considering the copying of major term definitions word-for-word plagiarism for these assignments/the Concert Report.
Paragraph Creation
ITEM ONE: Subjective Opinion and Term Identification
Say whether or not you enjoyed the song due to its timbre. Indicate the type and number of timbres present and include the title/artist!
Ex.) I very much enjoyed listening to the variety of distinctive timbres in “Hello Dolly” performed by Louis Armstrong.
ITEM TWO: Term Definition
Define timbre using the definitions from the book/PowerPoint.
ITEM THREE: Timbre Identification
Identify specific instruments whose timbres you will discuss
Ex.) Throughout the song, I noticed especially the timbres of Mr. Armstrong’s voice and his trumpet solo.
ITEM FOUR: Timbre Attributes (this will take more than one sentence)
In the order you listed them, discuss the instruments and their timbres (comparing and contrasting a voice with an instrument is a great idea):
When discussing VOCAL timbres, you can identify their perceived vocal range as well as vocal registrations used.
Ex.) Based on the pitches he sang, I determined Mr. Armstrong possesses a baritone vocal range and sang the entire song his modal voice.
For specificity, link VOCAL timbres directly to excerpts from sung lyrics:
Ex.) At the beginning when he sang, “Hello Dolly! This is Louis, Dolly!” I felt the timbre of his voice was a bit dark and rough.
Remember that pitch and volume will also cause timbral changes:
Ex.) When he began to scat, however, he sang both louder and higher, which caused the timbre of his voice to become brighter yet even more gravely.
When discussing INSTRUMENTAL timbres, you can identify the instrument’s group and orchestral family:
Ex.) His voice contrasted sharply with his trumpet solo, which is an aerophone from the brass family.
Feel free to make analogies in your timbral descriptions:
Ex) The timbre of Mr. Armstrong’s trumpet shone bright and yellow, like a fiery sun.
And again, remember that pitch and volume will cause timbral changes:
Ex) When he played lower pitches in the middle of this solo, the timbre seemed to cool somewhat. He then quickly shot back up high and loud, focusing the timbre like a red laser beam.
ITEM SEVEN: Summary
Wrap it all up, referencing the attributes you addressed, and linking back to your initial opinion.
An “ideal” response would thus look something like this:
I very much enjoyed listening to the variety of distinctive timbres in “Hello Dolly” performed by Louis Armstrong. Timbre is defined as the tone color or quality of an instrument. Throughout the song, I noticed especially the timbres of Mr. Armstrong’s voice and his trumpet solo. Based on the pitches he sang, I determined Mr. Armstrong possesses a baritone vocal range and sang the entire song his modal voice. At the beginning when he sang, “Hello Dolly! This is Louis, Dolly!” I felt the timbre of his voice was a bit dark and rough. When he began to scat, however, he sang both louder and higher, which caused the timbre of his voice to become brighter yet even more gravely. His voice contrasted sharply with his trumpet solo, which is an aerophone from the brass family. The timbre of Mr. Armstrong’s trumpet shone bright and yellow, like a fiery sun. When he played lower pitches in the middle of this solo, the timbre seemed to cool somewhat. He then quickly shot back up high and loud, focusing the timbre like a red laser beam. Because of the exciting and contrasting timbres of Mr. Armstrong’s voice and trumpet, I really liked listening to this performance of “Hello Dolly!”
Specified Listening
For the LTAA assessment, you will be working with two new pieces linked below. Excerpts are automatically included for appropriate questions, but if you would like to hear the pieces in their entirety, please use these links:
Identify and describe the various fundamentals concepts of music and music notation symbols by applying traditional terminology.
Discuss and compare the various functions, uses, and contexts of music.
Define and contrast historical eras and their musical genres.
Evaluate music’s relationship to culture and society.
Instructions:
Select three different songs as indicated below for analysis. Be sure to include functioning hyperlinks to a YouTube performance for reference purposes.
Submit your essay online via SafeAssign. No emails, please.
Essays will be graded in accordance with the Music Paper Grading Rubric.
Successful essays will include the following sections:
A paragraph analyzing one contemporary popular commercial music song of your choice written within the last twenty years (2000+) for melody and texture.
Include a functioning hyperlink to a YouTube performance of the song.
Justify your choice by answering the following prompts:
What is the full title of this song?
Who is/are the artist(s) featured on this work?
What genre of music is this work considered to be from?
When was this song released?
What do the lyrics of this song say? (summarize in 2-3 sentences)
Why is this song and artist important to you?
Define melody and texture using official, correct definitions from course resources.
Provide a detailed, objective analysis that specifically addresses melody and texture as heard in the music using associated course terminology.
A paragraph analyzing one work of your choice in the Western Classical tradition from any of the musical periods studied in this course for two of the following elements of music: rhythm, harmony, dynamics, tempo, and timbre.
Note: This work may NOT be one of the ones we have studied explicitly in the course. You are to make a unique choice based on the works and/or composers that appealed to you from the historical periods we studied. Jazz and American Musical Theatre are not considered to be in the Western Classical tradition.
Include a functioning hyperlink to a YouTube performance of the work.
Justify your choice by answering the following prompts:
What is the full title of this work?
Who is/are the composer of this work?
What time period is this work and its composer from?
What type/genre of classical music is this work considered to be from? (e.g., symphony, concerto, art song, etc.)
Who is performing this work? An ensemble? Soloists? Is there a conductor? Be sure to identify and differentiate between ensembles, single performers, and/or conductors as necessary.
If there are lyrics, what do they say/mean in English? (summarize in 2-3 sentences)
Why did you choose this work/composer?
Define using correct and official definitions any two (2) of the following elements of music: rhythm, harmony, dynamics, tempo, and timbre.
Provide a detailed, objective analysis that specifically addresses the two elements defined above as heard in the music using associated course terminology. If using a multimovement work, please identify and choose just one movement to analyze.
A paragraph addressing the following prompts on another work of your choice that we did study from one of the following styles: Western Classical tradition, Jazz, or American Musical Theatre. Please no popular/commercial music for this choice.
Include a functioning hyperlink to a YouTube performance of the work.
Justify your choice by answering the following prompts:
What is the full title of this work?
Who is/are the composer of this work?
What time period and genre is this work and its composer from?
Who is performing this work? An ensemble? Soloists? Is there a conductor? Be sure to identify and differentiate between ensembles, single performers, and/or conductors as necessary.
If there are lyrics, what do they say/mean in English? (summarize in 2-3 sentences)
Respond now to the following subjective prompts:
Why does this piece appeal to you subjectively/Why did you choose this particular work? (No objective analysis required.)
How does this music make you feel emotionally overall?
Does the music remind you of anything? A life experience? A person? Another piece?
Was there a specific point in the composition that affected you especially? If so, what did you feel emotionally during that/those moment(s)?
How does this piece align with your cultural background and/or history?
How does this piece align with your personal moral/ethical views?
How would you convince someone else that this is a “good” piece of music?
Essay Format:
Your essay should adhere to the following formatting requirements. If you are unsure how to select these options, check with your instructor:
Font size: 12 point
Acceptable Fonts: Cambria, Arial, or Times New Roman
Spacing: Double-spaced
Length: At least 1000 words prose in the body of the essay
Identify and describe the various fundamentals concepts of music and music notation symbols by applying traditional terminology.
Discuss and compare the various functions, uses, and contexts of music.
Assignment Purpose & Instructions
LTAAs are designed to prepare you for writing the Concert Report.
In this assignment, I want you to pay close attention to the type of sentences I have you create, and the order in which they come. This is the form I’d like for you to follow in the Concert Report.
This assignment closely mirrors the prompts of the Concert Report in that you’ll be tasked with discussing two materials of music for the same composition.
Provided examples are to give you general guidance on how to construct sentences only. You are NOT to copy them directly, as that constitutes a Code of Conduct violation for plagiarism. Change the words, structure, phrasing enough so that you write your original thoughts, not mine. I am not considering the copying of major term definitions word-for-word plagiarism for these assignments/the Concert Report.
Paragraph Creation
ITEM ONE: Subjective Opinion and Term Identification
Say whether or not you enjoyed the work due to its melody and texture. Indicate the general type of main melodies and textures present and include the title/artist!
Ex.) The tonal melody and simple textures in “The Sound of Music” performed by Julie Andrews really made the song exciting and pleasant to hear.
ITEM TWO: Term Definitions
Define melody and texture using the definitions from the book/PowerPoint.
Ex.) Melody can be defined as a collection of pitches perceived as single unit. Texture describes the number of pitches and melodies sounding at the same time, often referencing the instruments making them.
ITEM THREE: Melody Identification
Identify the most important melody and the instrument(s) that play it.
Ex.) Ms. Andrews’ vocal melody was the most important, clearly prominent for the entire song.
ITEM FOUR: Melody Attributes (this will take more than one sentence)
Identify the melodic aspects you wish to discuss (For instructional sake, I will provide examples of all of the major attributes. You need only to use two to three depending on what you notice in the music.)
Ex.) I specifically noticed interesting elements in the melodic range, contour, motion, phrasing and climax.
In the order you listed them, discuss the attributes of the important melody, citing the instrument playing them:
Range: say whether a specific melodies’ range overall seems wide or narrow, then go on to include why (i.e., the pitches either seemed close together or wide apart).
Ex.) Overall Ms. Andrews’ vocal melody seemed to have a fairly narrow range, as the pitches she sang sounded closer together.
Contour: make an analogy as to what you think the overall shape the melody takes.
Ex.) The contour of her vocal melody seemed to flow up and down, just like the hills she describes in the lyrics.
Melodic Motion: first generally describe if the melody is mostly conjunct/disjunct, or some combination of the two. Then, more specifically describe the contour, justifying your observation with evidence. Avoid note-by-note, play-by-play description!
Ex.)I would describe the vocal melodic motion as mostly conjunct, as the pitches remained close together, with certain moments that were more disjunct. When she sings, “every song” the melody descends quickly, doing so again at the very end at “and I’ll sing once more.”
Phrasing: first generally describe the types of phrases you noticed (short/medium/long, regular/irregular) and whether they stayed consistent or changed as the piece progressed.
Ex.) The phrasing of the main vocal melody was consistently medium throughout the song. She took breaths at regular intervals, but sang mostly complete lyrics like “The hills are alive with the sound of music” and “my heart wants to sing every song it hears.”
Climax: identify generally if there are many, only a few, or just one over the course of the song. Describe further where those occur with lyrical, pitch, and intensity specificity.
There were two noticeable climaxes in the song. The first one occurred at the very beginning with her first vocal entrance. The orchestra swelled with rising lines to meet her opening phrase “the hills are alive…”. The second climax occurred about halfway through the piece, where again the orchestra got louder as she sang her highest pitches at “I go to the hills…”.
ITEM FIVE: Texture Identification
Identify whether the texture of the composition was overall more consistent or variable, and whether the textures were simple or complex.
Ex.) Overall the textures in “The Sound of Music” were relatively simple and consistent.
ITEM SIX: Texture Attributes (this will take more than one sentence)
Discuss the overall thick/thinness of the texture, referencing instrumentation, and an important moment where (if) it changes.
Ex.) For the most part the song had a thick texture: Ms. Andrews’ voice was continuously supported by an orchestra, which included brass, woodwinds, and strings. The texture was thickest at the climax of the piece, when she sings “I go to the hills” with all of the instruments playing together.
Discuss the specific type of textures (mono-, homo-, and/or polyphonic) you noticed, referencing specific moments and roles the instruments play.
The piece is essentially homophonic: Ms. Andrews sings the main melody and the orchestra supports her. I can identify, however, brief moments of polyphony. This mainly occurs when high woodwinds play small melodic fragments over her initial lyrics like “…with the sound of music” and “…song it hears.”
SEVEN: Summary
Wrap it all up, referencing the attributes you addressed, and linking back to your initial opinion.
An “ideal” response would thus look something like below. In this paragraph I have chosen just two melodic and textural attributes each (four total) to discuss:
The engaging melodic and textural in “The Sound of Music” performed by Julie Andrews really made the song exciting to hear. Melody can be defined as a collection of pitches perceived as single unit, whereas texture describes the number of pitches and melodies sounding together, usually referencing instrumentation. Ms. Andrews’ vocal melody was the most important one, clearly prominent for the entire song. I specifically noticed interesting elements in melodic motion and climax. I would describe the vocal melodic motion as mostly conjunct, as the pitches remained close together, with certain moments that were more disjunct. Specifically, when she sings, “every song” the melody descends quickly, doing so again at the very end at “and I’ll sing once more.” There were two noticeable climaxes in the song. The first one occurred at the very beginning with her first vocal entrance. The orchestra swelled with rising lines to meet her opening phrase “the hills are alive…”. The second climax occurred about halfway through the piece, where again the orchestra got louder as she sang her highest pitches at “I go to the hills…”. The overall texture in “The Sound of Music” was relatively simple and consistent. For the most part the song had a thick texture: Ms. Andrews’ voice was supported by a full orchestra of brass, strings, and woodwinds. The texture was thickest at the climaxes of the piece, when she sings “the hills are alive…” and “I go to the hills…” with all of the instruments playing together. The piece is essentially homophonic: Ms. Andrews sings the main melody and the orchestra supports her. I can identify, however, brief moments of polyphony. This mainly occurs when high woodwinds play small melodic fragments over her initial lyrics like “…with the sound of music” and “…song it hears.” In summary, the stirring melodic features and pleasing textures made Ms. Andrews’ performance of “The Sound of Music” an all-time favorite of mine.
Specified Listening
For the LTAA, you will be working with two pieces from the PowerPoint linked below. Excerpts are automatically included for appropriate questions, but if you would like to hear the pieces in their entirety, please use these links:
Identify and describe the various fundamentals concepts of music and music notation symbols by applying traditional terminology.
Discuss and compare the various functions, uses, and contexts of music.
Assignment Purpose & Instructions
LTAAs are designed to prepare you for writing the Concert Report.
In this assignment, I want you to pay close attention to the type of sentences I have you create, and the order in which they come. This is the form I’d like for you to follow in the Concert Report.
Provided examples are to give you general guidance on how to construct sentences only. You are NOT to copy them directly, as that constitutes a Code of Conduct violation for plagiarism. Change the words, structure, phrasing enough so that you write your original thoughts, not mine. I am not considering the copying of major term definitions word-for-word plagiarism for these assignments/the Concert Report.
Paragraph Creation
ITEM ONE: Subjective Opinion and Term Identification
Say whether or not you enjoyed the song due to the harmonies. Include the title/artist!
Ex.) I found Hesperion XXI’s performance of Johann Pachelbel’s “Canon in D” enchanting, especially because of its consistent tonal harmonies.
ITEM TWO: Term Definitions
Define harmony using the definition from the book/PowerPoint (just define the term, avoid phrases like “The PowerPoint/Dr. Neal/the book defines harmony as…”)
Ex.) Harmony is defined the combination of two or more pitches.
ITEM THREE: Harmony Identification
Introduce the harmonic attributes you will discuss. You should be able to address: consonance/dissonance, chord qualities, and chord progressions.
Ex.) Throughout the work there were interesting examples of consonance, dissonance, varying chord qualities, and a consistent chord progression.
ITEM FOUR: Harmony Attributes (this will take more than one sentence)
Identify the attribute, including its definition. Make your observation with justification.
For consonance/dissonance, you can generally describe if the piece is mostly consonant, dissonant, or a combination of the two. Then you need to go into specifics, referencing instrumentation and sections of the work.
Ex.) Overall the work sounded mostly consonant, because the instruments seemed to harmonize well together. There were brief moments of dissonance between the three violins, but usually it resolved quickly. I noticed it especially once the third violin entered for the first time.
For chord qualities, say whether the piece contains mostly major or minor harmonies, or some combination thereof. If different sections contain different types, identify those. Go further and link them to your opinion/the lyrics/or the mood.
The piece seemed to contain mostly major harmonies, fitting its happy, uplifting mood. Since the chord progression did not change, these harmonies repeated throughout the work.
For chord progressions, start by saying if the piece contains simple/complex, long/short chord progressions. Then go into more detail by section, comparing/contrasting as necessary. Go further by linking these to the musical/emotional effect you think they have.
Ex.) This composition contains a fairly long, yet simple and highly consistent chord progression. There are eight chords that repeat continuously throughout the work, played by a cello and organ while the violins play overlapping melodies. The consistency of this chord progression makes the piece predictable, but in a reassuring way that supports the increasing complexity of the violin melodies.
ITEM FIVE: Summary
Wrap it all up, referencing the attributes you addressed, and linking back to your initial opinion.
In summary, the multitude of consonant major harmonies combined with a consistent simple chord progression made Pachelbel’s “Canon in D” very enjoyable for me.
Paragraph on Harmony
An “ideal” response would thus look something like this:
I found Hesperion XXI’s performance of Johann Pachelbel’s “Canon in D” enchanting, especially because of its consistent tonal harmonies. Harmony is defined the combination of two or more pitches. Throughout the work there were interesting examples of consonance, dissonance, varying chord qualities, and a consistent chord progression. Overall the work sounded mostly consonant, because the instruments seemed to harmonize well together. There were brief moments of dissonance between the three violins, but usually it resolved quickly. I noticed it especially once the third violin entered for the first time. The piece seemed to contain mostly major harmonies, fitting its happy, uplifting mood. Since the chord progression did not change, these harmonies repeated throughout the work. This composition contains a fairly long, yet simple and highly consistent chord progression. There are eight chords that repeat continuously throughout the work, played by a cello and organ while the violins play overlapping melodies. The consistency of this chord progression makes the piece predictable, but in a reassuring way that supports the increasing complexity of the violin melodies. In summary, the multitude of consonant major harmonies combined with a consistent simple chord progression made Pachelbel’s “Canon in D” very enjoyable for me.
Specified Listening
For the LTAA assessment, you will be working with two new pieces linked below. Excerpts are automatically included for appropriate questions, but if you would like to hear the pieces in their entirety, please use these links:
Question:HF_Test 2020 Question 1. Traditional mean/variance analysis as proposed by Markowitz shows that for the period 1994-2019 the risk adjusted performance of hedge funds is superior to traditional investments. However, it can be argued that this approach seriously understates the risk of hedge fund investments. Discuss the limitations of the Markowitz approach with particular emphasis on the statistical properties of hedge fund returns. Question 2. Fung & Hsieh (1999) found that linear regression models were less successful at explaining the returns of hedge funds when compared to mutual funds. In order to overcome this, some subsequent research has focussed on using option strategies as explanatory variables with more success. Using your knowledge of the Trend Following and Risk Arbitrage strategies as well as the academic literature, discuss which option strategies best explain the returns of these two strategies and why this might be the case. Question 3. In 2000 only 17% of the assets invested in hedge funds came via funds of funds, by 2007 this proportion had grown to over 40%, however by 2016 the proportion had again reduced significantly to 20%. What factors explained the popularity of funds of funds and why did investors choose to invest via this route rather than directly in the individual underlying hedge funds despite the additional fees? What factors have driven the subsequent reduction in popularity of funds of funds? HF_Test 2018 Question 1. The way in which hedge fund indices are constructed mean that they are potentially subject to several biases and these biases can lead to a distorted view of hedge fund performance. A colleague suggests that to overcome these issues investable hedge fund indices should be used as a benchmark as they are most definitely bias free. Briefly discuss the three key biases, including causes and magnitude. Do you agree with your colleague or is there a better solution? Question 2. Researchers have found that hedge fund returns often display a non-linear relationship with traditional asset classes which makes analysis using linear regression problematic. One way of overcoming these problems is to use option strategies as explanatory variables. Discuss the findings of Fung & Hsieh (2001) for Trend Followers and Mitchell & Pulvino (2001) for Risk Arbitrage highlighting not only what the option strategies are but also why they help to explain the returns of the underlying hedge fund strategies. HF_Test 2017 Question 1. A consultant has prepared an investment proposal for a very large pension fund with $10bn of assets which currently has allocations of 60% to equities, 40% to government bonds. The key points of the consultant’s proposal are: • The fund should allocate 50% to hedge funds and reduce the allocation to government bonds to zero. • The 50% allocation to hedge funds should comprise of 10% Long/Short Equity, 15% Fixed Income Arbitrage, 15% Convertible Arbitrage, 10% Distressed. • To ensure diversification the $5bn allocation to hedge funds should be split between 100 funds ($50m in each). The consultant has based his analysis on a database of funds which is free from any major biases and used mean/variance analysis to arrive at the weights. Briefly describe any issues you see with this proposal drawing on your knowledge of both the academic literature and empirical observations. Question 2. One of the features that distinguish Hedge Funds from Mutual funds is the compensation structure. While mutual funds generally only charge a management fee hedge funds usually also charge an incentive fee which is often accompanied by a high-water mark. Discuss the mechanics of the hedge fund compensation structure and explain its rationale. Do incentive fees lead to any agency issues and if so how can they be resolved?
The only question here that i want help with is Step 2 Part one which is (Time series analysis for the most recent 3 years (2018 – 2019 – 2020)
Summer 2021 FINC303 – 2101 Group Project (20%) Stock Valuation
This group is Assigned company PEPSICO.
Each group will start finding data on the assigned company you are asked to evaluate.
The following links can help you find data about the companies you are assigned as well as the company’s competitors;
https://finance.yahoo.com/
http://www.morningstar.com/
https://www.investing.com
Project Objective: To price the stock of a company using the dividend discounting model we learned in class. (You should submit the Excel sheet you prepared to value your company)
Step 1: Conduct Macro-economic and Industry Analysis. (2%)
Top-Down Analysis:
Major macroeconomic trends affecting industry
Conduct SWOT, Porter’s Five Forces model and PESTEL analysis.
Company Analysis:
c. Products and Services d. Growth Opportunities
Step 2: Conduct Ratio Analysis for the Company (5%)
We need to see a full analysis of the following;
Time series analysis for the most recent 3 years (2018 – 2019 – 2020)
Cross sectional analysis with one major competitor as well as the industry for the most recent year.
(You need to calculate the ratios by yourself and find the story behind each significant change in any of the calculated ratios) (Check the Appendix)
a. Most important Liquidity Ratios (Current Ratio, Quick Ratio)
b. Most important Profitability Ratios (GPM, NPM, ROA, ROE, EPS)
c. Most important Activity Ratios (Inventory Turnover, Asset Turnover)
d. Most important Debt Ratios (Debt to Equity Ratio, Times Interest Earned)
1. On January 1, Year 1, A, B, and C join together to form an equal partnership. A and B contribute $30,000 each to the partnership. C does not make a capital contribution, but instead agrees to act as the manager of the partnership’s business. Each of A, B, and C receives a one-third interest in the capital, profits, and losses of the partnership. What are the tax consequences to C on the transfer of the partnership capital interest, including (a) the amount of income, gain, or loss and its character for tax purposes and (b) the adjusted basis and holding period of the interest received? What are the tax consequences to the partnership on the transfer, including (c) the income, gain, or loss realized and (d) deductions? Assume, in each case, that the value of the partnership interest transferred to C is $20,000.
2. What if, in 1. above, C previously negotiated a contract to purchase a new office building in which to locate the business of the partnership and contributes the contract to the partnership?
3. In 1. above, what result if A and B each contributes property with a basis of $10,000 and a fair market value of $30,000 instead of cash?
4. In 3. above, what result if C receives his capital interest for services he has provided in the past to A and B?
5. Since October, Year 1, A and B have operated an equal law partnership. Each partner contributed $30,000 cash at the partnership’s formation with which it purchased the small office building where the partners practice in a suburban community. The building is now worth $120,000 and has an adjusted basis of $55,000. In December, Year 3, the partners seek to persuade C, a highly respected tax attorney, to join them as a partner. C has no money or property to contribute. Nevertheless, A and B are willing to give him a one-third interest in the capital, profits, and losses of the partnership. C agrees to join the firm and to establish and conduct a tax department. What are the tax consequences of the transaction to all parties? Assume that the building is the partnership’s only asset and that the value of the partnership interest transferred to C is $40,000.
6. In 5. above, what are the tax effects to C and the partnership if the partnership agreement provides that C cannot sell his partnership interest unless he has performed services for the partnership until the earlier of his death or five years from the date he entered the partnership?
7. In 6. above, compare the current and future tax consequences to C if he:
a. Reports the partnership interest as income by electing Section 83(b).
b. Does not elect to report income under section 83(b).
A researcher used the Dickey-Fuller method to test for stationarity of four individual countries bond market indices. Monthly total return government bond index data for four countries: Germany, Japan, UK and US for the period January 1978 to April 1990. The results are in the accompanying table
Table 1: DF tests on international bond indices
Country DF Statistic
Germany -0.395
Japan -0.799
UK -0.884
US 0.174
Use DF statistic values to determine whether the individual bond markets are stationary.
2.In February, a palm oil producer anticipates that he will have 200 metric tonnes of CPO ready for sale in July. The current market price of the palm oil is about RM2,550 per metric tonne while July FCPO is currently trading at RM2,650.
a) Calculate the number of futures contracts that the palm oil producer needs to sell to hedge this exposure. (1m)
b) Assume that by July, the price of CPO in the cash market has fallen by 10%, calculate what is the gain per metric ton from the futures market that the producer get to offset his losses in the cash market. (3m)
c) Calculate the producer total sales value and losses due to price decline in the cash market at maturity if there is no hedge.(3m) d) How would your answer be different if the producer decided to hedge only 80% of the total produced CPO. (3m)
(a) Purchase a 10-year bond that pays a 6% coupon on a monthly basis with a 4.8% yield to maturity. Answer the questions below and assume $100 face for prices and coupons. Show all your work for full credit.
What is the periodic coupon, C:
What is the periodic yield, y:
What is the number of payments T:
What is the price, P:
(b) You hold the bond for 5 years. During the holding period you reinvest the coupons at 3.6%.
What is the future value of your coupons and reinvestment interest?
Coupons and interest:
(c) At the end of 5 years you sell the bond at a 6% YTM. What is the sales price?
t is January 1st, 2018. You are a Senior Analyst at Canada Hardware Inc. (CHI), one of the tophardware, sports, and apparel providers in Canada with hundreds of stores across Canada. TheCEO of Canada Hardware, Tony Stark, has reached out to you to draft a report to evaluate twoinvestment proposals, building on your analysis from Assignment 1.PurposeFor this case approach, you will demonstrate your ability to develop costing methods and a set offorecasts of future cash flows for two proposed investment projects. You will also be required toidentify the cost of financing through the issuance of bonds.How to ProceedBuilding on your analysis and proposal from Assignment 1, develop your investment proposalbusiness case draft:1.Calculate the bond yield to utilize as your required return.2.Prepare a summary narrative (i.e., a detailed description) of each proposal with detailedelements on the initial investment, as well as the costs/revenues over the life of each of theprojects. Identify which revenues and costs are relevant to your analysis, and which costs areirrelevant. Identify the time horizon for each investment.3.Calculate the after-tax cash flows during the life of each of the projects. Be sure to identifythe total costs of ownership and deduct those costs from the benefits to arrive at the net cashinflow per year.4.Utilizing the after-tax cash flows from Part 4, evaluate each investment proposal utilizing thefollowing criteria (unless directed otherwise):changes in payments from beginning of period to end;Payback;Discounted payback;NPV;Profitability index.5.Clearly indicate whether any of the above criteria support each of the project proposals, andwhat the company should ultimately decide to do.Format Your report narratives may be done in Word or Excel, but calculations and tables of values mustbe prepared in Excel with the amounts derived from actual formulas that use your variables,rounded to four (4) decimals or lower.The Excel tab worksheet must be print and presentation ready, formatted to print in 2 to 3 pageswithout page fragmentation of equations or tables between pages.It is permissible to break your report down using the questions listed above as headings
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
50.
You have a $28,000 balance on your credit card. You plan to make monthly payments of $550 until the balance is paid off. The interest rate on your credit card is 19.5% p.a., compounded monthly. A letter in the mail informs you that you are approved for a new credit card and balance transfers are subject to a 8.5% p.a., compounded monthly. How many months sooner will you pay off your bill?
Today is your 30th birthday and you have a dream of retiring on your 65th birthday. You want to put aside however much is necessary on your 31st through 65th birthdays (35 annual payments) to have enough to retire. You’ve estimated that you will live until you are 90 and you want the first withdrawal to occur on your 66th birthday, with the last payment occurring on your 90thbirthday. You think that you will need $150,000 per year to spend during retirement. You estimate constant interest rates of 11.25%. Assuming that you currently have $7,500 deposited in your retirement account, how much must you put aside each year in order to have sufficient money to retire at age 65?
49.
John Keene recently invested $5,000 in a project that is promising to return 6.5 percent per year. The cash flows are expected to be as follows:
End of CashYear Flow 1 $1000 2 950 3 875 4 ???
5 850
Note that the 4th year cash flow is unknown. Assuming the present value of this cash flow stream is $5,000(that is, CF0 = -5000), what is the missing cash flow value (that is, what is the cash flow at the end of the 4th year)?
Laura Croft will lend you $10,000 today with terms that require you to pay off the loan in 36 monthly installments of $500 each. What is the effective annual rate of interest that Laura is charging you?
USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING THREE QUESTIONS
Vito Scaletta just bought his dream car, 2021 Aston Martin DB11 V8 Shadow Edition that cost $228,700. He paid $50,000 down and financed the balance over 84months at 5.5% p.a. (Assume that Vitomakes all required payments on time).
45.
What is the monthly payment on Vito’sloan?
46.
What will the balance on Vito’sloan be at the end of the third year(that is, immediately after Vitomakes his 36th payment on the loan)?
bbg
47.
What is the total amount of interest that Vitowill pay over the entire term of the loan(that is, the total amount of interest that is paid on payments 1 through 84)?
It is now January 1. You plan to make 5 deposits of $300 each, one every 6 months, with the first payment being made exactly six months from today. If the bank pays a nominal interest rate of 12% but uses semiannual compounding, how much will be in your account exactly 12 years from today?
42.
You must make a payment of $3,800 exactly 8 years from today. To prepare for this payment, you will make 5 equal deposits into an account that pays a nominal interest rate of 7.6% p.a., with quarterly compounding.If your first deposit is made today (and then you make four additional deposits in each of the next four quarters -that is, a deposit 3 months from today, another 6 months from today and so on), what must each of the 5 payments be for you to exactly achieve your goal?
43.
Senua just borrowed $1 million. The loan requires her to make quarterly payments (i.e., 4 payments per year, or one payment every 3 months)with the first payment due exactly 3 months from today for a total of nine years (i.e., 36 payments in all). If the interest rate on this loan is 6% p.a., but with quarterly compounding, what is Senua’s required quarterly payment?
What is the future value at the end of year 40of depositing $15,000 today, $3,500 at the end of years 1, 2 and 3, $5,000 at the end of years 4, 5, 6 and 7 and $4,250 at the end of years 8, 9, 10, 11 and 12 into an account that pays 9.5% p.a.?(No deposits will be made into the account after year 12).
39.
If Jill Valentine wants to fund a scholarship that will pay $15,700 per year forever at GSU, how much would Jill have to deposit today if she wants the scholarship to start paying seven(7)years from today? Assume the endowment could earn 6.25% p.a. interest forever.
40.
Assume that Randall Enzo was born today and to celebrate his birth, his parents deposited $10,000 into an account in his name. The account pays interest of 2.35 percent p.a., with monthly compounding, and it is expected to continue paying this amount forever. Assume that exactly 1.5 years after the deposit was made, Randall’s parents changed their minds and withdrew $10,000 from the account(all that remained in the account was the interest earned in the first 18 months). How much money will be in Randall’saccount on his 65th birthday?
Assume that Aloystarted a paper route on January 1, 1970. Since that day, at the end of every three (3) months (first deposit made on April 1, 1970),she deposited $500.00 in to a savings account, which paid her interest of 4 percent annually but with quarterly compounding. On January 1, 1980, she took the balance in her savings account and transferred it to an account that paid 11.5% p.a.Assuming that Aloy did not deposit any additional money into the account after the transfer, how much did she have in her account on January 1, 2021?
36.
On the day that his first child was born, Ezio Auditore de Firenzedeposited $4,000 into an investment account. The only purpose for the account was to pay for his son’s first year of college tuition. Assume that his son, Flavia, started college on his 18th birthday and his first year tuition payment had to be made that day. The amount needed on that day was $26,000. If that was indeed the amount of money in the account on Flavia’s 18th birthday, what annual rate of return did Ezio earn on his investment account?
37.
Suppose that today, Ellie deposited$5,000 into an account earning 2.75 percent interest, compounded monthly. How many years (rounded to one decimal place -for example, 32.1843 year = 32.2) will it take for your account to triple?
Assume that a gallon of milk costs $3.69today. If the average annual inflation rate over the past 30 years was 2.16% p.a., what did a gallon of milk cost 30years ago?
33.
What is the future value at the end of year 15of $10,000 deposited today into an account that pays interest of 4.5% p.a., but with monthly compounding?
34.
Chun-Li is evaluating an investment that will provide the following returns at the end of each of the following years: year 1, $12,500; year 2, $10,000; year 3, $7,500; year 4, $5,000; year 5, $2,500; year 6, $0; and year 7, $12,500. Chun-Li believes that she should earn an annual rate of 7.5 percent on this investment. How much should Chun-Li pay for this investment?
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
31.
Your neighbor, Bayonetta,offers you an investment opportunity which will pay a single lump sum of $2,150 four years from today.The investment requires a single payment of $1,100 today.What is the annual rate of return on this investment?
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
30.
You have just received an advertisement from Corleone Inc., a “paycheck loan”service. Corleone will charge you a fee of 4% for a two-week loan (i.e. if you borrow $100, you must repay $104in two weeks’ time). Assuming a 52 week year, what is the Effective Annual Rate (EAR) that Corleone charges (rounded to the nearest whole percent)?
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
29.
Samus Aranwishes to save money to provide for her retirement.Beginning one year from now, Samus Aran will begin depositing the same fixed amount each year for the next 30 years into a retirement savings account.Starting one year after making her final deposit, she will withdraw $100,000 annually for each of the following 25 years (i.e. she will make 25 withdrawals in all).Assume that the retirement fund earns 12% annually over both the period that she is depositing money and the period she makes withdrawals. In order for Samus Aranto have sufficient funds in her account to fund her retirement, how much should she deposit annually (rounded to the nearest dollar)?
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
28.
You just decided to begin saving for retirement.You will make deposits of $1,000 per month into a retirement account that earns 8.00% p.a.The first deposit is made today and the last deposit will be made when you retire exactly 30 years from today. The day you retire you will buy an RV for $240,000. You will begin to make withdrawals from the account the first month after you retire.If you plan to live an addition 25 years, you will be able to withdraw $_____.(Note: you make 300 total monthly withdrawals from your retirement account.)
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
27.
An investment will pay $32,000 per year forever beginning 10years from today.If the relevant rate is 8% compounded monthly, the investment is worth $______ today.
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
26.
The effective annual rate of 5.525% compounded daily (365 days per year)is _____%.
(Record your answer to this question on iCollege as a percent rounded to 2 decimal places).
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
25.
You wish to buy a house today for $385,000.You plan to put 10% down and finance the rest at 3.20% p.a. for thirty years.You will make equal monthly payments of $_______.
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
24.
November Avenue, Inc. wants to have $7,500,000 in an account exactly 16 years from today. They will make equal quarterly payments of $50,000 beginning next quarter and ending in 16 years. The account earns 8.00% p.a., compounded quarterly. November Avenue must have $_______ in its account today.
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
23.
KQ Technologies plans to borrow money from SunState Bank. KQ agrees to make 15 equal annual payments of $200,000 beginning next year.If the rate on the loan is 8%, then KQ can borrow $______.
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
22.
Jebron Lames is considering the purchase of a car, which will cost him $895,000.He will borrow the entire purchase price and make monthly payments over the next six years.The first payment is due next month,and the interest rate is 4.165%.He will owe $____ on the car immediately following the 33rdpayment.
Compute a final numerical answer for each of the following problems. You should work out your solutions on loose leaf paper, however, I may or may not collect your worked out solutions. To be safe, however, I suggest that you write out a solution for every problem and be ready to turn it in if asked. For any problems that require multiple steps, be sure to carry all intermediate step calculations to at least four (4) decimal places to ensure that your final numerical answer is as precise as possible.
When recording your final numerical answers on iCollege, round all dollar answers to 2 decimal places, round time (years or months) answers to one (1) decimal place and record interest rates as percent values rounded to one (1) decimal place. However, be sure to input a dollar sign, commas, or percent sign on iCollege. For example, record $3,284.33965 as 3284.34, record 37.285432 years as 37.3 and record .064358 = 6.4358% as 6.4.
21.
A money machine will produce $125,000 exactly 17years from today. The return on this investment is 22.5% p.a. The machine is worth $____ to you today.
The French bank BNP Paribas (rated AAA) intends to set up a subsidiary office in Cambodia (Cambodia has a sovereign credit rating of a single B by Standard and Poors). BNP Paribas has global assets of about US$2,400 billion (ranking it as one of the largest banks by assets last year). This local subsidiary will try to develop bank-lending business. The major market sector targeted by BNP Paribas is the restructuring of fixed-rate long-term loans to local Cambodian firms. BNP Paribas hope to have Cambodian assets of US$500 million within 2 years.
(a) Ignoring credit risk concerns discuss three key financial risk management issues that are of concern for BNP Paribas ?
(b) Explain, using key risk management products or techniques, how the bank could manage the three risks mentioned in (a).
PowerPoint Slide shows are short slide shows based on your APA paper topic, testing and preparing students on their ability to do a professional presentation. Each student will: (a) discuss their paper using a power point presentation with 12 slides (5 of the 12 slides must be picture, charts or graph slides) All slides must be numbered.
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