E 18-24 Profitability ratio
Comparative balance sheets for Softech Canvas Goods for 2011 and 2010 are shown below. Softech pays no dividends, and instead reinvests all earnings for future growth.
Comparative Balance sheets ($in 000s)
December 31
2011 2010
Assets:
Cash $ 50 $40
Accounts receivable 100 120
Short-term investment 50 40
Inventory 200 140
Property, plant, and equipment (net) 600 550
$1,000 $890
Liabilities and Shareholder’s Equity:
Current liabilities $240 $210
Bonds payable 160 160
Paid-in Capital 400 400
Retained earnings 200 120
$1,000 $890
Required:
1. Determine the return on shareholders' equity for 2011.
2. What does the ratio measure?
Click here for the solution: Comparative balance sheets for Softech Canvas Goods for 2011 and 2010 are shown below
Monday, October 26, 2015
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
E 18-18 Transactions affecting retained earnings
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.
Retained Earnings ($ in millions)
90 Beginning balance
Retirement of 5 million common
Shares for $22 million 2
88 Net income for the year
Declaration and payment of a
$0.33 per share cash dividend 33
Declaration and distribution
Of a 4% stock dividend 20
123 ending balance
Required:
1. From the information provided by the account changes you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2011. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions.
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.
Click here for the solution: Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1, 2011, the corporation had outstanding 105 million common shares, $1 par per share.
Retained Earnings ($ in millions)
90 Beginning balance
Retirement of 5 million common
Shares for $22 million 2
88 Net income for the year
Declaration and payment of a
$0.33 per share cash dividend 33
Declaration and distribution
Of a 4% stock dividend 20
123 ending balance
Required:
1. From the information provided by the account changes you should be able to recreate the transactions that affected Brenner-Jude’s retained earnings during 2011. Prepare the journal entries that Brenner-Jude must have recorded during the year for these transactions.
2. Prepare a statement of retained earnings for Brenner-Jude for the year ended 2011.
Click here for the solution: Shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011
(Surmise Company) The comparative balance sheets for 2011 and 2010 are given below for Surmise Company
P 21-14 Statement of cash flows; indirect method; limited information
The comparative balance sheets for 2011 and 2010 are given below for Surmise Company. Net income for 2011 was $50 million.
Surmise Company
Comparative Balance sheets
December 31, 2011 and 2010
($In millions)
2011 2010
Assets
Cash $45 $40
Accounts receivable 92 96
Less: Allowance for uncollectible accounts (12) (4)
Prepaid expense 8 5
Inventory 145 130
Long-term investment 80 40
Land 100 100
Buildings and equipment 411 300
Less: Accumulated depreciation (142) (120)
Patent 16 17
$743 $604
Liabilities
Account payable $17 $32
Accrued liabilities (2) 10
Notes payable 35 0
Lease liability 111 0
Bonds payable 65 125
Shareholder’s equity
Common Stock 60 50
Paid-in capital-excess of par 245 205
Retained earnings 212 182
$743 $604
Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2011. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for change in some account balances. A spreadsheet or T-account analysis will be helpful.
Click here for the solution: The comparative balance sheets for 2011 and 2010 are given below for Surmise Company
The comparative balance sheets for 2011 and 2010 are given below for Surmise Company. Net income for 2011 was $50 million.
Surmise Company
Comparative Balance sheets
December 31, 2011 and 2010
($In millions)
2011 2010
Assets
Cash $45 $40
Accounts receivable 92 96
Less: Allowance for uncollectible accounts (12) (4)
Prepaid expense 8 5
Inventory 145 130
Long-term investment 80 40
Land 100 100
Buildings and equipment 411 300
Less: Accumulated depreciation (142) (120)
Patent 16 17
$743 $604
Liabilities
Account payable $17 $32
Accrued liabilities (2) 10
Notes payable 35 0
Lease liability 111 0
Bonds payable 65 125
Shareholder’s equity
Common Stock 60 50
Paid-in capital-excess of par 245 205
Retained earnings 212 182
$743 $604
Required:
Prepare the statement of cash flows of Surmise Company for the year ended December 31, 2011. Use the indirect method to present cash flows from operating activities because you do not have sufficient information to use the direct method. You will need to make reasonable assumptions concerning the reasons for change in some account balances. A spreadsheet or T-account analysis will be helpful.
Click here for the solution: The comparative balance sheets for 2011 and 2010 are given below for Surmise Company
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
Analysis Case 20-10 Various changes
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method to the straight-line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2011, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared.
Required:
1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific.
2. Why should companies disclose changes in accounting principles?
Click here for the solution: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method to the straight-line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2011, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared.
Required:
1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific.
2. Why should companies disclose changes in accounting principles?
Click here for the solution: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company
P 21-11 Prepare a statement of cash flows; direct method
The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company. Additional information from Arduous's accounting records is provided also.
AND SO ON
Additional information from the accounting records:
a. During 2011, $6 million of customer accounts were written off as uncollectible.
b. Investment revenue includes Arduous Company's $6 million share of the net income of Demur Company, an equity method investee.
c. Treasury bills were sold during 2011 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
d. A machine originally costing $70 million that was one-half depreciated was rendered unusable by a rare flood. Most major components of the machine were unharmed and were sold for $17 million.
e. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.
f. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.
g. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
h. A building was acquired by a 15-year capital lease; present value of lease payments, $82 million. i. $60 million of bonds were retired at maturity. j. In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
k. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.
Required:
Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2011. Present cash flows from operating activities by the direct method. (A reconciliation schedule is not required.)
Click here for the solution: The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company
The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company. Additional information from Arduous's accounting records is provided also.
AND SO ON
Additional information from the accounting records:
a. During 2011, $6 million of customer accounts were written off as uncollectible.
b. Investment revenue includes Arduous Company's $6 million share of the net income of Demur Company, an equity method investee.
c. Treasury bills were sold during 2011 at a gain of $2 million. Arduous Company classifies its investments in Treasury bills as cash equivalents.
d. A machine originally costing $70 million that was one-half depreciated was rendered unusable by a rare flood. Most major components of the machine were unharmed and were sold for $17 million.
e. Temporary differences between pretax accounting income and taxable income caused the deferred income tax liability to increase by $3 million.
f. The preferred stock of Tory Corporation was purchased for $25 million as a long-term investment.
g. Land costing $46 million was acquired by issuing $23 million cash and a 15%, four-year, $23 million note payable to the seller.
h. A building was acquired by a 15-year capital lease; present value of lease payments, $82 million. i. $60 million of bonds were retired at maturity. j. In February, Arduous issued a 4% stock dividend (4 million shares). The market price of the $5 par value common stock was $7.50 per share at that time.
k. In April, 1 million shares of common stock were repurchased as treasury stock at a cost of $9 million.
Required:
Prepare the statement of cash flows of Arduous Company for the year ended December 31, 2011. Present cash flows from operating activities by the direct method. (A reconciliation schedule is not required.)
Click here for the solution: The comparative balance sheets for 2011 and 2010 and the income statement for 2011 are given below for Arduous Company
Indicate with the appropriate letter the nature of each situation described below
E 20-18 Classifying accounting changes
Indicate with the appropriate letter the nature of each situation described below
Type of change
PR change in principle reported retrospectively
PP change in principle reported prospectively
E change in estimate
EP change in estimate resulting from a change in principle
R change in reporting entity
N not an accounting change
1. Change from declining balance depreciation to straight-line
2. Change in the estimate useful life of office equipment
3. Technological advance that renders worthless a patent with an unamortized cost of $45,000.
4. Change from determining lower of cost or market for the inventories by the individual item approach to the aggregate approach.
5. Change from LIFO inventory costing to the weighted-average inventory costing.
6. Settling a lawsuit for less than the amount accrued previously as a loss contingency.
7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.
8. Change by the retail store from reporting bad debt expense on a pay-as-you-go basis to the allowance method.
9. A shift of certain manufacturing overhead cost to inventory that previously were expensed as incurred to more accurate measure cost of goods sold. (Either method is generally acceptable).
10. Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.
Click here for the solution: Indicate with the appropriate letter the nature of each situation described below
Indicate with the appropriate letter the nature of each situation described below
Type of change
PR change in principle reported retrospectively
PP change in principle reported prospectively
E change in estimate
EP change in estimate resulting from a change in principle
R change in reporting entity
N not an accounting change
1. Change from declining balance depreciation to straight-line
2. Change in the estimate useful life of office equipment
3. Technological advance that renders worthless a patent with an unamortized cost of $45,000.
4. Change from determining lower of cost or market for the inventories by the individual item approach to the aggregate approach.
5. Change from LIFO inventory costing to the weighted-average inventory costing.
6. Settling a lawsuit for less than the amount accrued previously as a loss contingency.
7. Including in the consolidated financial statements a subsidiary acquired several years earlier that was appropriately not included in previous years.
8. Change by the retail store from reporting bad debt expense on a pay-as-you-go basis to the allowance method.
9. A shift of certain manufacturing overhead cost to inventory that previously were expensed as incurred to more accurate measure cost of goods sold. (Either method is generally acceptable).
10. Pension plan assets for a defined benefit pension plan achieving a rate of return in excess of the amount anticipated.
Click here for the solution: Indicate with the appropriate letter the nature of each situation described below
Douglas Manufacturing Company has two production departments: Cutting and Assembly
ACCT 560 Week 2 Assignment
E3-4 Douglas Manufacturing Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process-Cutting $2,900, Work in Process-Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred.
1. Purchased $62,500 of raw materials on account.
2. Incurred $56,000 of factory labor. (Credit Wages Payable.)
3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Cutting $15,700 and Assembly $8,900.
5. Used factory labor for Cutting $29,000 and Assembly $27,000.
6. Applied overhead at the rate of $15 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720.
7. Transferred goods costing $67,600 from the Cutting Department to the Assembly Department.
8. Transferred goods costing $134,900 from Assembly to Finished Goods.
9. Sold goods costing $150,000 for $200,000 on account.
Journalize the transactions.
Click here for the solution: Douglas Manufacturing Company has two production departments: Cutting and Assembly
E3-4 Douglas Manufacturing Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process-Cutting $2,900, Work in Process-Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred.
1. Purchased $62,500 of raw materials on account.
2. Incurred $56,000 of factory labor. (Credit Wages Payable.)
3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Cutting $15,700 and Assembly $8,900.
5. Used factory labor for Cutting $29,000 and Assembly $27,000.
6. Applied overhead at the rate of $15 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720.
7. Transferred goods costing $67,600 from the Cutting Department to the Assembly Department.
8. Transferred goods costing $134,900 from Assembly to Finished Goods.
9. Sold goods costing $150,000 for $200,000 on account.
Journalize the transactions.
Click here for the solution: Douglas Manufacturing Company has two production departments: Cutting and Assembly
The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2008, the first month of operation
ACC 560 Week 2 Assignment
E3-7 The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2008, the first month of operation.
Production: 12,000 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs.
Manufacturing costs: Materials $33,000; labor $27,000; overhead $36,000.
Prepare a production cost report.
Click here for the solution: The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2008, the first month of operation
E3-7 The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2008, the first month of operation.
Production: 12,000 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs.
Manufacturing costs: Materials $33,000; labor $27,000; overhead $36,000.
Prepare a production cost report.
Click here for the solution: The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2008, the first month of operation
Podsednik Company has gathered the following information
ACC 560 Week 2 Assignment
E3-9 Podsednik Company has gathered the following information.
Units in beginning work in process -0-
Units started into production 36,000
Units in ending work in process 6,000
Percent complete in ending work in process:
Conversion costs 40%
Materials 100%
Costs incurred:
Direct materials $72,000
Direct labor $81,000
Overhead $97,200
Required:
1. Compute equivalent units of production for materials and for conversion costs.
2. Determine the unit costs of production.
Click here for the solution: Podsednik Company has gathered the following information
E3-9 Podsednik Company has gathered the following information.
Units in beginning work in process -0-
Units started into production 36,000
Units in ending work in process 6,000
Percent complete in ending work in process:
Conversion costs 40%
Materials 100%
Costs incurred:
Direct materials $72,000
Direct labor $81,000
Overhead $97,200
Required:
1. Compute equivalent units of production for materials and for conversion costs.
2. Determine the unit costs of production.
Click here for the solution: Podsednik Company has gathered the following information
Mancini manufactures embroidered jackets
P23-33B Mancini manufactures embroidered jackets. The company prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a jacket is based on static budget volume of 14,000 jackets per month:
Actual cost and production information:
a. Actual production was 13,600 jackets.
b. Actual direct materials usage was 2.8 square feet per jacket, at an actual price of $4.10 per square foot.
c. Actual direct labor usage of 25,000 hours at a total cost of $237,500.
d. Total actual overhead cost was $79,000.
Computing and journalizing standard cost variances
Requirements
1. Compute the price and efficiency variances for direct materials and direct labor. (pp. 1168, 1170)
2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances. (pp. 1175, 1177)
3. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance. (Hint: Remember that the fixed overhead in the flexible budget equals the fixed overhead in the static budget.) (pp. 1173, 1174)
4. Mancini’s management intentionally purchased superior materials for November production. How did this decision affect the cost variances? Overall, was the decision wise? (p. 1171)
Click here for the solution: Mancini manufactures embroidered jackets
Actual cost and production information:
a. Actual production was 13,600 jackets.
b. Actual direct materials usage was 2.8 square feet per jacket, at an actual price of $4.10 per square foot.
c. Actual direct labor usage of 25,000 hours at a total cost of $237,500.
d. Total actual overhead cost was $79,000.
Computing and journalizing standard cost variances
Requirements
1. Compute the price and efficiency variances for direct materials and direct labor. (pp. 1168, 1170)
2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances. (pp. 1175, 1177)
3. For manufacturing overhead, compute the total variance, the flexible budget variance, and the production volume variance. (Hint: Remember that the fixed overhead in the flexible budget equals the fixed overhead in the static budget.) (pp. 1173, 1174)
4. Mancini’s management intentionally purchased superior materials for November production. How did this decision affect the cost variances? Overall, was the decision wise? (p. 1171)
Click here for the solution: Mancini manufactures embroidered jackets
Container Shipping, Inc. is contemplating the use of process costing to track the cost of its operations
ACC 560 Week 2 Assignment
E3-14 Container Shipping, Inc. is contemplating the use of process costing to track the cost of its operations. The operation consists of three segments (departments): receiving, shipping, and delivery. Containers are received at Container's docks and sorted according to the ship they will be carried on. The containers are then loaded onto a ship, which carries them to the appropriate port of destination. The containers are then off-loaded and delivered to the receiving company. Container shipping wants to begin to use process costing in the shipping department. Direct materials represent the fuel costs to run the ship, and "Containers in transit" represents work in process. Listed below is information about the shipping department's first month's activity.
Containers in Transit April 1 0
Containers loaded 800
Containers in Transit April 30 350 40% of direct materials and
30% of conversion costs
Determine the physical flow of containers for the month
Compute the equivalent units for direct materials and conversion costs
Click here for the solution: Container Shipping, Inc. is contemplating the use of process costing to track the cost of its operations
E3-14 Container Shipping, Inc. is contemplating the use of process costing to track the cost of its operations. The operation consists of three segments (departments): receiving, shipping, and delivery. Containers are received at Container's docks and sorted according to the ship they will be carried on. The containers are then loaded onto a ship, which carries them to the appropriate port of destination. The containers are then off-loaded and delivered to the receiving company. Container shipping wants to begin to use process costing in the shipping department. Direct materials represent the fuel costs to run the ship, and "Containers in transit" represents work in process. Listed below is information about the shipping department's first month's activity.
Containers in Transit April 1 0
Containers loaded 800
Containers in Transit April 30 350 40% of direct materials and
30% of conversion costs
Determine the physical flow of containers for the month
Compute the equivalent units for direct materials and conversion costs
Click here for the solution: Container Shipping, Inc. is contemplating the use of process costing to track the cost of its operations
Ortega Industries Inc. manufactures in separate processes furniture for homes
ACC 560 Week 2 Assignment
P3-2A Ortega Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.
Cutting Department
Plant 1 Plant 2
Production Data-July T12-Tables C10-Chairs
Work in process units, July 1 -0- -0-
Units started into production 20,000 16,000
Work in process units, July 31 3,000 500
Work in process percent complete 60 80
Cost Data-July
Work in process, July 1 $ -0- $ -0-
Materials 380,000 288,000
Labor 234,400 125,900
Overhead 104,000 96,700
Total $718,400 $510,600
a) For each plant:
1. Compute the physical units of production
2. Compute equivalent units of production for materials and for conversion costs.
3. Determine the unit costs of production.
4. Show the assignment of costs to units transferred out and in process.
b) Prepare the production cost report for Plant 1 for July 2008
Click here for the solution: Ortega Industries Inc. manufactures in separate processes furniture for homes
P3-2A Ortega Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.
Cutting Department
Plant 1 Plant 2
Production Data-July T12-Tables C10-Chairs
Work in process units, July 1 -0- -0-
Units started into production 20,000 16,000
Work in process units, July 31 3,000 500
Work in process percent complete 60 80
Cost Data-July
Work in process, July 1 $ -0- $ -0-
Materials 380,000 288,000
Labor 234,400 125,900
Overhead 104,000 96,700
Total $718,400 $510,600
a) For each plant:
1. Compute the physical units of production
2. Compute equivalent units of production for materials and for conversion costs.
3. Determine the unit costs of production.
4. Show the assignment of costs to units transferred out and in process.
b) Prepare the production cost report for Plant 1 for July 2008
Click here for the solution: Ortega Industries Inc. manufactures in separate processes furniture for homes
Chen Company manufactures basketballs
ACC 560 Week 2 Assignment
P3-5A Chen Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2008 are as follows.
Production Data-Basketballs Units Percent Complete
Work in process units, July 1 500 60%
Units started into production 1,000
Work in process units, July 31 600 30%
Cost Data - Basketballs
Work in process, July 1
Materials $750
Conversion costs 600 $1,350
Direct materials 2,400
Direct labor 1,580
Manufacturing overhead 1,060
a. Calculate the following.
1. The equivalent units of production for materials and conversion.
2. The unit costs of production for materials and conversion costs.
3. The assignment of costs to units transferred out and in process at the end of the period.
b. Complete the production cost report for the month of July for the basketballs
Click here for the solution: Chen Company manufactures basketballs
P3-5A Chen Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2008 are as follows.
Production Data-Basketballs Units Percent Complete
Work in process units, July 1 500 60%
Units started into production 1,000
Work in process units, July 31 600 30%
Cost Data - Basketballs
Work in process, July 1
Materials $750
Conversion costs 600 $1,350
Direct materials 2,400
Direct labor 1,580
Manufacturing overhead 1,060
a. Calculate the following.
1. The equivalent units of production for materials and conversion.
2. The unit costs of production for materials and conversion costs.
3. The assignment of costs to units transferred out and in process at the end of the period.
b. Complete the production cost report for the month of July for the basketballs
Click here for the solution: Chen Company manufactures basketballs
Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm
ACC 560 Week 2 Assignment
E1-13 Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm, has recently completed a managerial course at her local college. One of the topics covered in the course was the cost of goods manufactured schedule. Sara wondered if such a schedule could be prepared for her firm. She realized that, as a service-oriented company, it would have no Work-in-Process inventory to consider.
Listed below are the costs her firm incurred for the month ended August 31, 2008.
Supplies used on consulting contracts $ 1,200
Supplies used in the administrative offices 1,500
Depreciation on equipment used for contract work 900
Depreciation used on administrative office equipment 1,050
Salaries of professionals working on contracts 12,600
Salaries of administrative office personnel 7,700
Janitorial services for professional offices 400
Janitorial services for administrative offices 500
Insurance on contract operations 800
Insurance on administrative operations 900
Utilities for contract operations 1,400
Utilities for administrative offices 1,300
a. Prepare a schedule of cost of contract services provided (similar to a cost of goods manufactured schedule) for the month.
Answer to requirement (b) included.
Click here for the solution: Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm
E1-13 Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm, has recently completed a managerial course at her local college. One of the topics covered in the course was the cost of goods manufactured schedule. Sara wondered if such a schedule could be prepared for her firm. She realized that, as a service-oriented company, it would have no Work-in-Process inventory to consider.
Listed below are the costs her firm incurred for the month ended August 31, 2008.
Supplies used on consulting contracts $ 1,200
Supplies used in the administrative offices 1,500
Depreciation on equipment used for contract work 900
Depreciation used on administrative office equipment 1,050
Salaries of professionals working on contracts 12,600
Salaries of administrative office personnel 7,700
Janitorial services for professional offices 400
Janitorial services for administrative offices 500
Insurance on contract operations 800
Insurance on administrative operations 900
Utilities for contract operations 1,400
Utilities for administrative offices 1,300
a. Prepare a schedule of cost of contract services provided (similar to a cost of goods manufactured schedule) for the month.
Answer to requirement (b) included.
Click here for the solution: Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm
Tombert Company is a manufacturer of computers
ACC 560 Week 2 Assignment
P1-5A Tombert Company is a manufacturer of computers. Its controller resigned in October 2008. An inexperienced assistant accountant has prepared the following income statement for the month of October 2008.
TOMBERT COMPANY
Income Statement
For the Month Ended October 31, 2008
Sales (net) $780,000
Less: Operating expenses
Raw materials purchases $264,000
Direct labor cost 190,000
Advertising expense 90,000
Selling and administrative salaries 75,000
Rent on factory facilities 60,000
Depreciation on sales equipment 45,000
Depreciation on factory equipment 31,000
Indirect labor cost 28,000
Utilities expense 12,000
Insurance expense 8,000 803,000
Net loss $(23,000)
Prior to October 2008 the company had been profitable every month. The company's president is concerned about the accuracy of the income statement. As his friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of October were:
October 1 October 31
Raw materials $18,000 $34,000
Work in process 16,000 14,000
Finished goods 30,000 48,000
2. Only 70% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Required:
a. Prepare a schedule of cost of goods manufactured for October 2008.
b. Prepare a correct income statement for October 2008
Click here for the solution: Tombert Company is a manufacturer of computers
P1-5A Tombert Company is a manufacturer of computers. Its controller resigned in October 2008. An inexperienced assistant accountant has prepared the following income statement for the month of October 2008.
TOMBERT COMPANY
Income Statement
For the Month Ended October 31, 2008
Sales (net) $780,000
Less: Operating expenses
Raw materials purchases $264,000
Direct labor cost 190,000
Advertising expense 90,000
Selling and administrative salaries 75,000
Rent on factory facilities 60,000
Depreciation on sales equipment 45,000
Depreciation on factory equipment 31,000
Indirect labor cost 28,000
Utilities expense 12,000
Insurance expense 8,000 803,000
Net loss $(23,000)
Prior to October 2008 the company had been profitable every month. The company's president is concerned about the accuracy of the income statement. As his friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows.
1. Inventory balances at the beginning and end of October were:
October 1 October 31
Raw materials $18,000 $34,000
Work in process 16,000 14,000
Finished goods 30,000 48,000
2. Only 70% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities.
Required:
a. Prepare a schedule of cost of goods manufactured for October 2008.
b. Prepare a correct income statement for October 2008
Click here for the solution: Tombert Company is a manufacturer of computers
Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
ACC 560 Week 2 Assignment
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
E2-5 Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $305,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $322,000 of overhead costs are incurred and 130,000 hours are used.
1. Compute the manufacturing overhead rate for the year.
2. What is the amount of under- or overapplied overhead at December 31?
3. Prepare the adjusting entry to assign the under- or overapplied overhead for the year to cost of goods sold.
Click here for the solution: Renteria Company applies manufacturing overhead to jobs on the basis of machine hours used
Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method
Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method.
Rashid Corporation
Income Statement
For Year ended Dec. 31, 2009
Sales 504,000
Cost of goods sold 327,600
Depreciation expense 42000
other operating expenses 125500 (495100)
other gains (losses):
Gain on sale of equipment 7200
Income before taxes 16100
Income tax expense (4800)
Net income 11,300
Rashid Corporation
Balance Sheets
For Year ended Dec. 31, 2009
2009 2008
Assets
Cash 64650 55800
Accounts Receivable 21000 29000
Inventory 58000 52100
Equipment 240000 222000
Accumulated depreciation (106000) (96000)
Total assets 277650 262900
Liabilities:
Accounts Payable 28400 23700
Income taxes payable 1050 1200
Total Liabilities 29450 24900
Equity
Common Stock 106000 106000
Capital in excess of par value 18000 18000
Retained earnings 124200 114000
Total equity 248200 238000
Click here for the solution: Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method
Rashid Corporation
Income Statement
For Year ended Dec. 31, 2009
Sales 504,000
Cost of goods sold 327,600
Depreciation expense 42000
other operating expenses 125500 (495100)
other gains (losses):
Gain on sale of equipment 7200
Income before taxes 16100
Income tax expense (4800)
Net income 11,300
Rashid Corporation
Balance Sheets
For Year ended Dec. 31, 2009
2009 2008
Assets
Cash 64650 55800
Accounts Receivable 21000 29000
Inventory 58000 52100
Equipment 240000 222000
Accumulated depreciation (106000) (96000)
Total assets 277650 262900
Liabilities:
Accounts Payable 28400 23700
Income taxes payable 1050 1200
Total Liabilities 29450 24900
Equity
Common Stock 106000 106000
Capital in excess of par value 18000 18000
Retained earnings 124200 114000
Total equity 248200 238000
Click here for the solution: Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method
Use the financial data shown below to calculate the following ratios for the current year
Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income statement data
Sales (all on credit)……………………………………………….. $650,000
Cost of goods sold…………………………………………………. 425,000
Income before taxes……………………………………………. 78,000
Net Income…………………………………………………………… 54,000
Ending Beginning
Balances Balances
Cash…………………………………………………………….. $ 19,500 $ 15,000
Accounts receivable (net)………………………….. 65,000 60,000
Inventory…………………………………………………… 71,500 64,500
Plant and equipment (net) ………………………… 195,000 183,900
Total assets………………………………………………… $351,000 $323,400
Current liabilities…………………………………………. $ 62,400 $ 52,700
Long-term notes payable ……………………………. 97,500 100,000
Click here for the solution: Use the financial data shown below to calculate the following ratios for the current year
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income statement data
Sales (all on credit)……………………………………………….. $650,000
Cost of goods sold…………………………………………………. 425,000
Income before taxes……………………………………………. 78,000
Net Income…………………………………………………………… 54,000
Ending Beginning
Balances Balances
Cash…………………………………………………………….. $ 19,500 $ 15,000
Accounts receivable (net)………………………….. 65,000 60,000
Inventory…………………………………………………… 71,500 64,500
Plant and equipment (net) ………………………… 195,000 183,900
Total assets………………………………………………… $351,000 $323,400
Current liabilities…………………………………………. $ 62,400 $ 52,700
Long-term notes payable ……………………………. 97,500 100,000
Click here for the solution: Use the financial data shown below to calculate the following ratios for the current year
CVP analysis requires costs to be categorized as
MULTIPLE CHOICE
1. CVP analysis requires costs to be categorized as _______. (Points : 1)
2. According to CVP analysis, a company could never incur a loss that exceeded its total _______. (Points : 1)
3. CVP analysis is based on concepts from _______. (Points : 1)
4. Which of the following factors is involved in studying cost-volume-profit relationships? (Points : 1)
5. After the level of volume exceeds the break-even point _______. (Points : 1)
6. The method of cost accounting that lends itself to break-even analysis is _______. (Points : 1)
7. Given the following notation, what is the break-even sales level in units?
SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit
(Points : 1)
8. To compute the break-even point in units, which of the following formulas is used? (Points : 1)
9. Below is an income statement for Thompson Company. Based on the cost and revenue structure on the income statement, below, what was Thompson's break-even point in dollars?
Sales $400,000
Variable costs (125,000)
Contribution margin $275,000
Fixed costs (200,000)
Profit before taxes $ 75,000
(Points : 1)
10. Unique Company manufactures a single product. In the prior year, the company had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Unique expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year's net income by _______. (Points : 1)
11. Which of the following is not a characteristic of relevant costing information? It is _______. (Points : 1)
12. Relevant costs are _______. (Points : 1)
13. If a cost is irrelevant to a decision, the cost could not be _______. (Points : 1)
14. A cost is sunk if it _______. (Points : 1)
15. In deciding whether an organization will keep an old machine or purchase a new machine, a manager would ignore the _______. (Points : 1)
16. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is _______. (Points : 1)
17. In a make or buy decision, the opportunity cost of capacity could _______. (Points : 1)
18. When a scarce resource, such as space, exists in an organization, the criterion that should be used to determine production is _______. (Points : 1)
19. Fixed costs are ignored in allocating scarce resources because _______. (Points : 1)
20. The minimum selling price that should be acceptable in a special order situation is equal to total _______. (Points : 1)
Click here for the solution: CVP analysis requires costs to be categorized as
1. CVP analysis requires costs to be categorized as _______. (Points : 1)
2. According to CVP analysis, a company could never incur a loss that exceeded its total _______. (Points : 1)
3. CVP analysis is based on concepts from _______. (Points : 1)
4. Which of the following factors is involved in studying cost-volume-profit relationships? (Points : 1)
5. After the level of volume exceeds the break-even point _______. (Points : 1)
6. The method of cost accounting that lends itself to break-even analysis is _______. (Points : 1)
7. Given the following notation, what is the break-even sales level in units?
SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit
(Points : 1)
8. To compute the break-even point in units, which of the following formulas is used? (Points : 1)
9. Below is an income statement for Thompson Company. Based on the cost and revenue structure on the income statement, below, what was Thompson's break-even point in dollars?
Sales $400,000
Variable costs (125,000)
Contribution margin $275,000
Fixed costs (200,000)
Profit before taxes $ 75,000
(Points : 1)
10. Unique Company manufactures a single product. In the prior year, the company had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Unique expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year's net income by _______. (Points : 1)
11. Which of the following is not a characteristic of relevant costing information? It is _______. (Points : 1)
12. Relevant costs are _______. (Points : 1)
13. If a cost is irrelevant to a decision, the cost could not be _______. (Points : 1)
14. A cost is sunk if it _______. (Points : 1)
15. In deciding whether an organization will keep an old machine or purchase a new machine, a manager would ignore the _______. (Points : 1)
16. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is _______. (Points : 1)
17. In a make or buy decision, the opportunity cost of capacity could _______. (Points : 1)
18. When a scarce resource, such as space, exists in an organization, the criterion that should be used to determine production is _______. (Points : 1)
19. Fixed costs are ignored in allocating scarce resources because _______. (Points : 1)
20. The minimum selling price that should be acceptable in a special order situation is equal to total _______. (Points : 1)
Click here for the solution: CVP analysis requires costs to be categorized as
Elder Corporation incurred the following transactions
E2-7 Elder Corporation incurred 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 indicated 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.
Journalize the transactions.
Click here for the solution: Elder Corporation incurred 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 indicated 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.
Journalize the transactions.
Click here for the solution: Elder Corporation incurred the following transactions
At May 31, 2008, the accounts of Hannifan Manufacturing Company show the following
E2-9 At May 31, 2008, the accounts of Hannifan Manufacturing Company show the following.
1. May 1 inventories-finished goods $12,600, work in process $14,700, and raw materials $8,200.
2. May 31 inventories-finished goods $9,500, work in process $17,900, and raw materials $7,100.
3. Debit postings to work in process were: direct materials $62,400, direct labor $32,000, and manufacturing overhead applied $40,000.
4. Sales totaled $200,000.
Required:
a) Prepare a condensed cost of goods manufactured schedule.
b) Prepare an income statement for May through gross profit.
c) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2008.
Click here for the solution: At May 31, 2008, the accounts of Hannifan Manufacturing Company show the following
1. May 1 inventories-finished goods $12,600, work in process $14,700, and raw materials $8,200.
2. May 31 inventories-finished goods $9,500, work in process $17,900, and raw materials $7,100.
3. Debit postings to work in process were: direct materials $62,400, direct labor $32,000, and manufacturing overhead applied $40,000.
4. Sales totaled $200,000.
Required:
a) Prepare a condensed cost of goods manufactured schedule.
b) Prepare an income statement for May through gross profit.
c) Indicate the balance sheet presentation of the manufacturing inventories at May 31, 2008.
Click here for the solution: At May 31, 2008, the accounts of Hannifan Manufacturing Company show the following
Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
E2-13 Easy Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.
Budgeted overhead $960,000
Actual overhead $982,800
Budgeted decorator hours 40,000
Actual decorator hours 40,500
The company uses Operating Overhead in place of Manufacturing Overhead.
Required:
a) Compute the predetermined overhead rate.
b) Prepare the entry to apply the overhead for the year.
c) Determine whether the overhead was under- or overapplied and by how much.
Click here for the solution: Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
Budgeted overhead $960,000
Actual overhead $982,800
Budgeted decorator hours 40,000
Actual decorator hours 40,500
The company uses Operating Overhead in place of Manufacturing Overhead.
Required:
a) Compute the predetermined overhead rate.
b) Prepare the entry to apply the overhead for the year.
c) Determine whether the overhead was under- or overapplied and by how much.
Click here for the solution: Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
Enos Inc. is a construction company specializing in custom patios
P2-3A Enos Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2008, the general ledger for Enos Inc. contains the following data.
Raw Materials Inventory $4,200
Work in Process Inventory $5,540
Manufacturing Overhead Applied (during the month) $32,640
Manufacturing Overhead Incurred (during the month) $31,650
Subsidiary data for Work in Process Inventory on June 1 are as follows.
Job Cost Sheets
Customer Job
Cost Element Fowler (No.101) Haines (No.102) Krantz (No.103)
Direct materials $ 600 $ 800 $ 900
Direct labor 320 540 580
Manufacturing overhead 400 675 725
$1,320 $2,015 $2,205
During June, raw materials purchased on account were $3,900, and all wages were paid. Additional overhead costs consisted of depreciation on equipment $700 and miscellaneous costs of $400 incurred on account.
A summary of materials requisition slips and time tickets for June shows the following.
Customer Job Materials
Requisition Slips Time Tickets
Fowler (No.101) $ 800 $ 450
Elgin (No.104) 2,000 800
Haines (No.102) 500 360
Krantz (No.103) 1,300 1,600
Fowler (No.101) 300 390
4,900 3,600
Indirect materials 1,500 1,200
$6,400 $4,800
Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for customers Fowler (No.101), Haines (No.102), and Krantz (No.103) were completed during June and sold for a total of $18,900. Each customer paid in full.
Required:
a) Journalize the June transactions: (i) for purchase of raw materials, factory labor costs incurred, and manufacturing overhead costs incurred; (ii) assignment of direct materials, labor, and overhead to production; and (iii) completion of jobs and sale of goods.
b) Post the entries to Work in Process Inventory.
c) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.
d) Prepare a cost of goods manufactured schedule for June.
Click here for the solution: Enos Inc. is a construction company specializing in custom patios
Raw Materials Inventory $4,200
Work in Process Inventory $5,540
Manufacturing Overhead Applied (during the month) $32,640
Manufacturing Overhead Incurred (during the month) $31,650
Subsidiary data for Work in Process Inventory on June 1 are as follows.
Job Cost Sheets
Customer Job
Cost Element Fowler (No.101) Haines (No.102) Krantz (No.103)
Direct materials $ 600 $ 800 $ 900
Direct labor 320 540 580
Manufacturing overhead 400 675 725
$1,320 $2,015 $2,205
During June, raw materials purchased on account were $3,900, and all wages were paid. Additional overhead costs consisted of depreciation on equipment $700 and miscellaneous costs of $400 incurred on account.
A summary of materials requisition slips and time tickets for June shows the following.
Customer Job Materials
Requisition Slips Time Tickets
Fowler (No.101) $ 800 $ 450
Elgin (No.104) 2,000 800
Haines (No.102) 500 360
Krantz (No.103) 1,300 1,600
Fowler (No.101) 300 390
4,900 3,600
Indirect materials 1,500 1,200
$6,400 $4,800
Overhead was charged to jobs at the same rate of $1.25 per dollar of direct labor cost. The patios for customers Fowler (No.101), Haines (No.102), and Krantz (No.103) were completed during June and sold for a total of $18,900. Each customer paid in full.
Required:
a) Journalize the June transactions: (i) for purchase of raw materials, factory labor costs incurred, and manufacturing overhead costs incurred; (ii) assignment of direct materials, labor, and overhead to production; and (iii) completion of jobs and sale of goods.
b) Post the entries to Work in Process Inventory.
c) Reconcile the balance in Work in Process Inventory with the costs of unfinished jobs.
d) Prepare a cost of goods manufactured schedule for June.
Click here for the solution: Enos Inc. is a construction company specializing in custom patios
Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments
P2-4A Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.
In establishing the predetermined overhead rates for 2008 the following estimates were made for the year.
Department
D E K
Manufacturing overhead $1,050,000 $1,500,000 $840,000
Direct labor costs $1,500,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000
During January, the job cost sheets showed the following costs and production data.
Department
D E K
Direct materials used $140,000 $126,000 $78,000
Direct labor costs $120,000 $110,000 $37,500
Manufacturing overhead incurred $89,000 $124,000 $74,000
Direct labor hours 8,000 11,000 3,500
Machine hours 34,000 45,000 10,400
Required:
a) Compute the predetermined overhead rate for each department
b) Compute the total manufacturing costs assigned to jobs in January in each department
c) Compute the under- or overapplied overhead for each department at January 31
Click here for the solution: Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments
In establishing the predetermined overhead rates for 2008 the following estimates were made for the year.
Department
D E K
Manufacturing overhead $1,050,000 $1,500,000 $840,000
Direct labor costs $1,500,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000
During January, the job cost sheets showed the following costs and production data.
Department
D E K
Direct materials used $140,000 $126,000 $78,000
Direct labor costs $120,000 $110,000 $37,500
Manufacturing overhead incurred $89,000 $124,000 $74,000
Direct labor hours 8,000 11,000 3,500
Machine hours 34,000 45,000 10,400
Required:
a) Compute the predetermined overhead rate for each department
b) Compute the total manufacturing costs assigned to jobs in January in each department
c) Compute the under- or overapplied overhead for each department at January 31
Click here for the solution: Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments
Decision Case 1 Steve and Linda Hom live in Bartlesville, Oklahoma
Decision Case 1 Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in the Thai food. Bartlesville does not have a Thai restaurant, and the Homs are contemplating opening one. Linda would supervise the cooking, and Steve would leave his current job to be the maitre d’. The restaurant would serve dinner Tuesday through Saturday.
Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is planning two seatings per evening, and the restaurant will be open 50 weeks per year.
The Homs have drawn up the following estimates:
Requirements
Compute the annual breakeven number of meals and sales revenue for the restaurant. Also compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year. How many meals must the Homs serve each night to earn their target income of $75,600? Should the couple open the restaurant?
Click here for the solution: Decision Case 1 Steve and Linda Hom live in Bartlesville, Oklahoma
Steve has noticed a restaurant for lease. The restaurant has seven tables, each of which can seat four. Tables can be moved together for a large party. Linda is planning two seatings per evening, and the restaurant will be open 50 weeks per year.
The Homs have drawn up the following estimates:
Requirements
Compute the annual breakeven number of meals and sales revenue for the restaurant. Also compute the number of meals and the amount of sales revenue needed to earn operating income of $75,600 for the year. How many meals must the Homs serve each night to earn their target income of $75,600? Should the couple open the restaurant?
Click here for the solution: Decision Case 1 Steve and Linda Hom live in Bartlesville, Oklahoma
Caroline Company reports the following costs and expenses in May
ACC 560 Week 2 Assignment
E1-4 Caroline Company reports the following costs and expenses in May.
Factory utilities $ 11,500 Direct labor $69,100
Depreciation on factory equipment 12,650 Sales salaries 46,400
Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 80,800 Factory repairs 2,000
Direct materials used 137,600 Advertising 18,000
Factory manager's salary 8,000 Office supplies used 2,640
From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs.
Click here for the solution: Caroline Company reports the following costs and expenses in May
E1-4 Caroline Company reports the following costs and expenses in May.
Factory utilities $ 11,500 Direct labor $69,100
Depreciation on factory equipment 12,650 Sales salaries 46,400
Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 80,800 Factory repairs 2,000
Direct materials used 137,600 Advertising 18,000
Factory manager's salary 8,000 Office supplies used 2,640
From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs.
Click here for the solution: Caroline Company reports the following costs and expenses in May
Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
ACC 560 Week 2 Assignment
P1-2A Copa Company, a manufacturer of stereo systems, started its production in October 2008. For the preceding 3 years Copa had been a retailer of stereo systems. After a thorough survey of stereo system markets, Copa decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.
Required:
(a) Prepare an answer sheet. Assuming that Copa manufactures, on average, 1,300 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one stereo system.
Click here for the solution: Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
P1-2A Copa Company, a manufacturer of stereo systems, started its production in October 2008. For the preceding 3 years Copa had been a retailer of stereo systems. After a thorough survey of stereo system markets, Copa decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.
Required:
(a) Prepare an answer sheet. Assuming that Copa manufactures, on average, 1,300 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one stereo system.
Click here for the solution: Copa Company, a manufacturer of stereo systems, started its production in October 2008 (ACC 560 Week 2)
(ACC 557 Week 1) The following are users of financial statements
ACC 557 Week 1 Assignment
E1-2 (a) The following are users of financial statements.
______Customers ______Securities and Exchange Commission
______Internal Revenue Service ______Store manager
______Labor unions ______Suppliers
______Marketing manager ______Vice-president of finance
______Production supervisor
Instructions
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an external user.
______Can we afford to give our employees a pay raise?
______Did the company earn a satisfactory income?
______Do we need to borrow in the near future?
______How does the company’s profitability compare to other companies?
______What does it cost us to manufacture each unit produced?
______Which product should we emphasize?
______Will the company be able to pay its short-term debts?
Instructions
Identify each of the questions as being more likely asked by an internal user or an external user.
Click here for the solution: (ACC 557 Week 1) The following are users of financial statements
E1-2 (a) The following are users of financial statements.
______Customers ______Securities and Exchange Commission
______Internal Revenue Service ______Store manager
______Labor unions ______Suppliers
______Marketing manager ______Vice-president of finance
______Production supervisor
Instructions
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an external user.
______Can we afford to give our employees a pay raise?
______Did the company earn a satisfactory income?
______Do we need to borrow in the near future?
______How does the company’s profitability compare to other companies?
______What does it cost us to manufacture each unit produced?
______Which product should we emphasize?
______Will the company be able to pay its short-term debts?
Instructions
Identify each of the questions as being more likely asked by an internal user or an external user.
Click here for the solution: (ACC 557 Week 1) The following are users of financial statements
The following situations involve accounting principles and assumptions
ACC 557 Week 1 Assignment
E1-4 The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, president of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
Click here for the solution: The following situations involve accounting principles and assumptions
E1-4 The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, president of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
Click here for the solution: The following situations involve accounting principles and assumptions
An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
ACC 557 Week 1 Assignment
E1-8 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 stockholders’ equity is explained.
Cash Accounts Office Accounts Stockholders’ _ Receivable _ Supplies _ Equipment _ Payable _ 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) Describe each transaction that occurred for the month.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the amount of net income for the month.
Click here for the solution: An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
E1-8 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 stockholders’ equity is explained.
Cash Accounts Office Accounts Stockholders’ _ Receivable _ Supplies _ Equipment _ Payable _ 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) Describe each transaction that occurred for the month.
(b) Determine how much stockholders’ equity increased for the month.
(c) Compute the amount of net income for the month.
Click here for the solution: An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below
Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008
ACC 557 Week 1 Assignment
E1-14 Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008.
Revenues during 2008—camping fees $140,000 Notes payable $ 60,000
Revenues during 2008—general store 50,000 Expenses during 2008 150,000
Accounts payable 11,000 Supplies on hand 2,500
Cash on hand 23,000 Common stock 20,000
Original cost of equipment 105,500 Retained earnings ?
Market value of equipment 140,000
Instructions
(a) Determine Deer Park’s net income for 2008.
(b) Prepare a balance sheet for Deer Park as of December 31, 2008.
Click here for the solution: Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008
E1-14 Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008.
Revenues during 2008—camping fees $140,000 Notes payable $ 60,000
Revenues during 2008—general store 50,000 Expenses during 2008 150,000
Accounts payable 11,000 Supplies on hand 2,500
Cash on hand 23,000 Common stock 20,000
Original cost of equipment 105,500 Retained earnings ?
Market value of equipment 140,000
Instructions
(a) Determine Deer Park’s net income for 2008.
(b) Prepare a balance sheet for Deer Park as of December 31, 2008.
Click here for the solution: Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008
Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
ACC 557 Week 1 Assignment
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008. The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008. The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008
Financial statement information about four different companies is as follows
ACC 557 Week 1 Assignment
P1–5A Financial statement information about four different companies is as follows.
Instructions
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets _ Liabilities _ Stockholders’ Equity _ $45,000.)
(b) Prepare the retained earnings statement for Yates Company. Assume beginning retained earnings was $20,000.
(c) Write a memorandum explaining the sequence for preparing financial statements and the interrelationship of the retained earnings statement to the income statement and balance sheet.
Karma Yates McCain Dench
Company Company Company Company
January 1, 2008
Assets $ 95,000 $110,000 (g) $170,000
Liabilities 50,000 (d) 75,000 ( j)
Stockholders’ equity (a) 60,000 45,000 90,000
December 31, 2008
Assets (b) 137,000 200,000 (k)
Liabilities 55,000 75,000 (h) 80,000
Stockholders’ equity 60,000 (e) 130,000 170,000
Stockholders’ equity changes in year
Additional investment (c) 15,000 10,000 15,000
Dividends 25,000 (f) 14,000 20,000
Total revenues 350,000 420,000 (i) 520,000
Total expenses 320,000 385,000 342,000 (l)
Click here for the solution: Financial statement information about four different companies is as follows
P1–5A Financial statement information about four different companies is as follows.
Instructions
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets _ Liabilities _ Stockholders’ Equity _ $45,000.)
(b) Prepare the retained earnings statement for Yates Company. Assume beginning retained earnings was $20,000.
(c) Write a memorandum explaining the sequence for preparing financial statements and the interrelationship of the retained earnings statement to the income statement and balance sheet.
Karma Yates McCain Dench
Company Company Company Company
January 1, 2008
Assets $ 95,000 $110,000 (g) $170,000
Liabilities 50,000 (d) 75,000 ( j)
Stockholders’ equity (a) 60,000 45,000 90,000
December 31, 2008
Assets (b) 137,000 200,000 (k)
Liabilities 55,000 75,000 (h) 80,000
Stockholders’ equity 60,000 (e) 130,000 170,000
Stockholders’ equity changes in year
Additional investment (c) 15,000 10,000 15,000
Dividends 25,000 (f) 14,000 20,000
Total revenues 350,000 420,000 (i) 520,000
Total expenses 320,000 385,000 342,000 (l)
Click here for the solution: Financial statement information about four different companies is as follows
(Exam 061691) 1. A warranty is an example of a/an _______ liability
EXAM 061691
MULTIPLE CHOICE
1. A warranty is an example of a/an _______ liability.
2. Cash equivalents are
3. Which of the following would indicate poor internal control over accounts receivable?
4. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)
5. Taylor Company has given you the following information from its aging of accounts receivable. The current amount in the allowance for doubtful accounts is a $958 credit.
Current $24,400 2% uncollectible
31–60 days 7,350 8% uncollectible
61–90 days 3,380 15% uncollectible
91 and up 1,220 30% uncollectible
Using this information, what is the amount of the journal entry to record the allowance for doubtful accounts?
6. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the depreciation for 2012 to the nearest dollar will be
7. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables as its method of estimating uncollectable accounts?
8. Use the _______ principle to estimate warranty liabilities.
9. By not accruing warranty expense,
10. Nick Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of $15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term liabilities. The quick ratio for Nick Company is
11. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the following will occur as a result of this mistake?
12. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)
13. Which marketable securities are reported at cost on the balance sheet date?
14. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item C should be recorded (rounded to the nearest dollar) is
15. If a $6,000, 10%, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?
16. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50. Casey's book balance shows outstanding checks of $5,288 and deposits in transit of $9,325. The bank-side reconciliation would show cash of
17. Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey will report this liability as a
18. Which of the following is not a benefit to extending credit to customers?
19. Amanda Industries had total assets of $600,000; total liabilities of $175,000; and total stockholders' equity of $425,000. Amanda Industries' debt ratio is
20. Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of $44,000; and long-term liabilities of $90,000. Jewell Company's debt ratio is
Click here for the solution: (Exam 061691) 1. A warranty is an example of a/an _______ liability
MULTIPLE CHOICE
1. A warranty is an example of a/an _______ liability.
2. Cash equivalents are
3. Which of the following would indicate poor internal control over accounts receivable?
4. Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded to the nearest cent)
5. Taylor Company has given you the following information from its aging of accounts receivable. The current amount in the allowance for doubtful accounts is a $958 credit.
Current $24,400 2% uncollectible
31–60 days 7,350 8% uncollectible
61–90 days 3,380 15% uncollectible
91 and up 1,220 30% uncollectible
Using this information, what is the amount of the journal entry to record the allowance for doubtful accounts?
6. A company purchased furniture on January 1, 2012. Its cost was $15,600, and it had a residual value of $1,600. Its useful life is determined to be three years. Using double-declining balance depreciation, the depreciation for 2012 to the nearest dollar will be
7. Brandon Company completed an aging of its accounts receivable and came up with an estimated amount of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables as its method of estimating uncollectable accounts?
8. Use the _______ principle to estimate warranty liabilities.
9. By not accruing warranty expense,
10. Nick Company has cash of $33,000; net accounts receivable of $41,000; short-term investments of $15,000; and inventory of $25,000. It also has $30,000 in current liabilities and $50,000 in long-term liabilities. The quick ratio for Nick Company is
11. Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the following will occur as a result of this mistake?
12. Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is (rounded to the nearest cent)
13. Which marketable securities are reported at cost on the balance sheet date?
14. Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The amount at which item C should be recorded (rounded to the nearest dollar) is
15. If a $6,000, 10%, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?
16. Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank service charge of $50. Casey's book balance shows outstanding checks of $5,288 and deposits in transit of $9,325. The bank-side reconciliation would show cash of
17. Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey will report this liability as a
18. Which of the following is not a benefit to extending credit to customers?
19. Amanda Industries had total assets of $600,000; total liabilities of $175,000; and total stockholders' equity of $425,000. Amanda Industries' debt ratio is
20. Jewell Company has current assets of $56,000; long-term assets of $135,000; current liabilities of $44,000; and long-term liabilities of $90,000. Jewell Company's debt ratio is
Click here for the solution: (Exam 061691) 1. A warranty is an example of a/an _______ liability
Ferris Company began 2011 with 6,000 units of its principal product
P 8-5 Various inventory costing methods
Ferris Company began 2011 with 6,000 units of its principal product. The cost of each unit is $8. Merchandise transactions for the month of January 2011 are as follows:
Purchases______________________
Date of Purchase Units Unit Cost* Total Cost
Jan. 10 5,000 $ 9 $ 45,000
Jan. 19 6,000 10 60,000
Totals 11,000 $105,000
*Includes purchase price and cost of freight.
Sales_____________
Date of Sale Units
Jan. 5 3,000
Jan. 12 2,000
Jan. 20 4,000
Total 9,000
8,000 units were on hand at the end of the month.
Calculate January’s ending inventory and cost of goods sold for the month using each of the following alternatives:
1. FIFO, periodic system
2. LIFO, periodic system
3. LIFO, perpetual system
4. Average cost, periodic system
5. Average cost, perpetual system
Click here for the solution: Ferris Company began 2011 with 6,000 units of its principal product
Ferris Company began 2011 with 6,000 units of its principal product. The cost of each unit is $8. Merchandise transactions for the month of January 2011 are as follows:
Purchases______________________
Date of Purchase Units Unit Cost* Total Cost
Jan. 10 5,000 $ 9 $ 45,000
Jan. 19 6,000 10 60,000
Totals 11,000 $105,000
*Includes purchase price and cost of freight.
Sales_____________
Date of Sale Units
Jan. 5 3,000
Jan. 12 2,000
Jan. 20 4,000
Total 9,000
8,000 units were on hand at the end of the month.
Calculate January’s ending inventory and cost of goods sold for the month using each of the following alternatives:
1. FIFO, periodic system
2. LIFO, periodic system
3. LIFO, perpetual system
4. Average cost, periodic system
5. Average cost, perpetual system
Click here for the solution: Ferris Company began 2011 with 6,000 units of its principal product
Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012
P4-8A Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012. During July the following transactions were completed.
July 1 Issued 12,000 shares of common stock for $12,000 cash.
1 Purchased used truck for $8,000, paying $2,000 cash and the balance on account.
3 Purchased cleaning supplies for $900 on account.
5 Paid $1,800 cash on 1-year insurance policy effective July 1.
12 Billed customers $3,700 for cleaning services.
18 Paid $1,000 cash on amount owed on truck and $500 on amount owed on cleaning supplies.
20 Paid $2,000 cash for employee salaries.
21 Collected $1,600 cash from customers billed on July 12.
25 Billed customers $2,500 for cleaning services.
31 Paid $290 for maintenance of the truck during month.
31 Declared and paid $600 cash dividend.
The chart of accounts for Pro Window Washing contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation— Equipment, Accounts Payable, Salaries and Wages Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Maintenance and Repairs Expense, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense.
Instructions
(a) Journalize the July transactions.
(b) Post to the ledger accounts. (Use T accounts.)
(c) Prepare a trial balance at July 31.
(d) Journalize the following adjustments.
(1) Services provided but unbilled and uncollected at July 31 were $1,700.
(2) Depreciation on equipment for the month was $180.
(3) One-twelfth of the insurance expired.
(4) An inventory count shows $320 of cleaning supplies on hand at July 31.
(5) Accrued but unpaid employee salaries were $400.
(e) Post adjusting entries to the T accounts.
(f ) Prepare an adjusted trial balance.
(g) Prepare the income statement and a retained earnings statement for July and a classified
balance sheet at July 31.
(h) Journalize and post closing entries and complete the closing process.
(i) Prepare a post-closing trial balance at July 31.
Check Figures:
(f) Cash $5,410
(g) Total Assets $21,500
Click here for the solution: Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012
July 1 Issued 12,000 shares of common stock for $12,000 cash.
1 Purchased used truck for $8,000, paying $2,000 cash and the balance on account.
3 Purchased cleaning supplies for $900 on account.
5 Paid $1,800 cash on 1-year insurance policy effective July 1.
12 Billed customers $3,700 for cleaning services.
18 Paid $1,000 cash on amount owed on truck and $500 on amount owed on cleaning supplies.
20 Paid $2,000 cash for employee salaries.
21 Collected $1,600 cash from customers billed on July 12.
25 Billed customers $2,500 for cleaning services.
31 Paid $290 for maintenance of the truck during month.
31 Declared and paid $600 cash dividend.
The chart of accounts for Pro Window Washing contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation— Equipment, Accounts Payable, Salaries and Wages Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Maintenance and Repairs Expense, Supplies Expense, Depreciation Expense, Insurance Expense, Salaries and Wages Expense.
Instructions
(a) Journalize the July transactions.
(b) Post to the ledger accounts. (Use T accounts.)
(c) Prepare a trial balance at July 31.
(d) Journalize the following adjustments.
(1) Services provided but unbilled and uncollected at July 31 were $1,700.
(2) Depreciation on equipment for the month was $180.
(3) One-twelfth of the insurance expired.
(4) An inventory count shows $320 of cleaning supplies on hand at July 31.
(5) Accrued but unpaid employee salaries were $400.
(e) Post adjusting entries to the T accounts.
(f ) Prepare an adjusted trial balance.
(g) Prepare the income statement and a retained earnings statement for July and a classified
balance sheet at July 31.
(h) Journalize and post closing entries and complete the closing process.
(i) Prepare a post-closing trial balance at July 31.
Check Figures:
(f) Cash $5,410
(g) Total Assets $21,500
Click here for the solution: Dana La Fontsee opened Pro Window Washing Inc. on July 1, 2012
Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
ACC 557 Week 1 Assignment
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008.The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
P1-4A Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008.The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the following format.
Stockholders’
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
Click here for the solution: Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008 (ACC 557 Week 1)
Saturday, October 17, 2015
Beck Company uses the indirect method of preparing the Statement of Cash Flows
Beck Company uses the indirect method of preparing the Statement of Cash Flows and reports the following comparative balance sheet information. As customary, the most recent data is in the first column.
Balance Sheets
12-31-2007 12-31-2006
Cash $60,000 $80,000
Inventory 150,000 128,000
Equipment 240,000 205,000
Accumulated depreciation (39,000) (15,000)
$411,000 $398,000
Accounts payable $93,000 $133,000
Bonds payable (due in 7 years) 81,000 70,000
Common stock 129,000 120,000
Retained earnings 108,000 75,000
$411,000 $398,000
Additional information:
Net income for 2007 was $40,000.
No equipment was disposed of during 2007.
Required:
Prepare a Cash Flow Statement using the indirect method.
Click here for the solution: Beck Company uses the indirect method of preparing the Statement of Cash Flows
Balance Sheets
12-31-2007 12-31-2006
Cash $60,000 $80,000
Inventory 150,000 128,000
Equipment 240,000 205,000
Accumulated depreciation (39,000) (15,000)
$411,000 $398,000
Accounts payable $93,000 $133,000
Bonds payable (due in 7 years) 81,000 70,000
Common stock 129,000 120,000
Retained earnings 108,000 75,000
$411,000 $398,000
Additional information:
Net income for 2007 was $40,000.
No equipment was disposed of during 2007.
Required:
Prepare a Cash Flow Statement using the indirect method.
Click here for the solution: Beck Company uses the indirect method of preparing the Statement of Cash Flows
Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007. All balances are as of the end of the year except Retained Earnings.
Accounts Payable.............................................$22,000
Accounts Receivable........................................$34,000
Cash................................................................ $12,000
Common Stock................................................ $50,000
Cost of Goods Sold.......................................... $120,000
Equipment, net of Accumulated Depreciation..... $60,000
Dividends......................................................... $14,000
Income Tax Expense......................................... $10,000
Interest Expense............................................... $7,000
Inventory.......................................................... $23,000
Operating Expenses.......................................... $45,000
Retained Earnings, Jan. 1, 2007........................ $19,000
Sales Revenue.................................................. $220,000
Unearned Revenue............................................ $14,000
Number of shares of stock outstanding at the end of 2007 is 10,000 shares.
Required:
Prepare an accrual basis income statement and a classified balance sheet in proper form.
Click here for the solution: Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Accounts Payable.............................................$22,000
Accounts Receivable........................................$34,000
Cash................................................................ $12,000
Common Stock................................................ $50,000
Cost of Goods Sold.......................................... $120,000
Equipment, net of Accumulated Depreciation..... $60,000
Dividends......................................................... $14,000
Income Tax Expense......................................... $10,000
Interest Expense............................................... $7,000
Inventory.......................................................... $23,000
Operating Expenses.......................................... $45,000
Retained Earnings, Jan. 1, 2007........................ $19,000
Sales Revenue.................................................. $220,000
Unearned Revenue............................................ $14,000
Number of shares of stock outstanding at the end of 2007 is 10,000 shares.
Required:
Prepare an accrual basis income statement and a classified balance sheet in proper form.
Click here for the solution: Big Slick Oil Co., Inc., has the following account balances and other information in alphabetical order at Dec. 31, 2007
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Integrative—Complete ratio analysis
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Dacher Company uses a job order cost system
Dacher Company uses a job order cost system. The following data summarize the operations related to production for October:
a. Materials purchased on account, $450,000.
b. Materials requisitioned, $425,000, of which $4,500 was for general factory use.
c. Factory labor used, $385,000, of which $95,000 was indirect.
d. Other costs incurred on account were for factory overhead, $125,400; selling expenses, $87,500; and administrative expenses, $56,400.
e. Prepaid expenses expired for factory overhead were $12,500; for selling expenses, $14,500; and for administrative expenses, $8,500.
f. Depreciation of factory equipment was $25,300; of office equipment, $31,600; and of store equipment, $7,600.
g. Factory overhead costs applied to jobs, $261,500.
h. Jobs completed, $965,000.
i. Cost of goods sold, $952,400.
Journalize the entries to record the summarized operations.
Click here for the solution: Dacher Company uses a job order cost system
a. Materials purchased on account, $450,000.
b. Materials requisitioned, $425,000, of which $4,500 was for general factory use.
c. Factory labor used, $385,000, of which $95,000 was indirect.
d. Other costs incurred on account were for factory overhead, $125,400; selling expenses, $87,500; and administrative expenses, $56,400.
e. Prepaid expenses expired for factory overhead were $12,500; for selling expenses, $14,500; and for administrative expenses, $8,500.
f. Depreciation of factory equipment was $25,300; of office equipment, $31,600; and of store equipment, $7,600.
g. Factory overhead costs applied to jobs, $261,500.
h. Jobs completed, $965,000.
i. Cost of goods sold, $952,400.
Journalize the entries to record the summarized operations.
Click here for the solution: Dacher Company uses a job order cost system
Multiple Choice: A budget aids in
1. A budget aids in _______. (Points : 1)
2. The preparation of an organization's budget _______. (Points : 1)
3. When actual performance varies from the budgeted performance, managers will be more likely to revise future budgets if the variances were _______. (Points : 1)
4. Strategic planning is _______. (Points : 1)
5. Tactical planning usually involves which level of management? (Points : 1)
6. Which of the following is not an "operating" budget? (Points : 1)
7. The master budget is a _______. (Points : 1)
8. Chronologically, the first part of the master budget to be prepared would be the _______. (Points : 1)
9. It is least likely that a production budget revision would cause a revision in the ______. (Points : 1)
10. Chronologically, in what order are the sales, purchases, and production budgets prepared? (Points : 1)
11. The amount of raw material purchased in a period may be different than the amount of material used that period because _______. (Points : 1)
12. Which of the following equations can be used to budget purchases?
(BI = beginning inventory, EI = ending inventory desired, CGS = budgeted cost of goods sold, P = budgeted purchases)
(Points : 1)
13. A company that maintains a raw material inventory, which is based on the following month's production needs, will purchase less material than it uses in a month where _______. (Points : 1)
14. The budgeted amount of selling and administrative expense for a period can be found in the ______. (Points : 1)
15. The budgeted payment for labor cost each period would be found in the _______. (Points : 1)
16. The primary reason that managers impose a minimum cash balance in the cash budget is _______. (Points : 1)
17. The pro forma income statement is not a component of the _______. (Points : 1)
18. A budget that includes a 12-month planning period at all times is called a ____ budget. (Points : 1)
19. Slack in operating budgets ______. (Points : 1)
20. Ball Company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month's sales. For the forthcoming month of March, Ball has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that ______. (Points : 1)
Click here for the solution: Multiple Choice: A budget aids in
2. The preparation of an organization's budget _______. (Points : 1)
3. When actual performance varies from the budgeted performance, managers will be more likely to revise future budgets if the variances were _______. (Points : 1)
4. Strategic planning is _______. (Points : 1)
5. Tactical planning usually involves which level of management? (Points : 1)
6. Which of the following is not an "operating" budget? (Points : 1)
7. The master budget is a _______. (Points : 1)
8. Chronologically, the first part of the master budget to be prepared would be the _______. (Points : 1)
9. It is least likely that a production budget revision would cause a revision in the ______. (Points : 1)
10. Chronologically, in what order are the sales, purchases, and production budgets prepared? (Points : 1)
11. The amount of raw material purchased in a period may be different than the amount of material used that period because _______. (Points : 1)
12. Which of the following equations can be used to budget purchases?
(BI = beginning inventory, EI = ending inventory desired, CGS = budgeted cost of goods sold, P = budgeted purchases)
(Points : 1)
13. A company that maintains a raw material inventory, which is based on the following month's production needs, will purchase less material than it uses in a month where _______. (Points : 1)
14. The budgeted amount of selling and administrative expense for a period can be found in the ______. (Points : 1)
15. The budgeted payment for labor cost each period would be found in the _______. (Points : 1)
16. The primary reason that managers impose a minimum cash balance in the cash budget is _______. (Points : 1)
17. The pro forma income statement is not a component of the _______. (Points : 1)
18. A budget that includes a 12-month planning period at all times is called a ____ budget. (Points : 1)
19. Slack in operating budgets ______. (Points : 1)
20. Ball Company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month's sales. For the forthcoming month of March, Ball has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that ______. (Points : 1)
Click here for the solution: Multiple Choice: A budget aids in
Shady Lady sells window coverings to both commercial and residential customers
E4-5 Shady Lady sells window coverings to both commercial and residential customers. The following information relates to its budgeted operations for the current year.
Commercial Residential
Revenues $300,000 $480,000
Direct material costs 30,000 50,000
Direct labor costs 100,000 300,000
Overhead costs 50,000 180,000 150,000 500,000
Operating income (loss) $120,000 ($ 20,000)
The controller, Wanda Lewis, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex to install for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed:
Activity Cost Pools Estimated Overhead Cost Drivers
Scheduling and travel $90,000 Hours of travel
Setup time 70,000 Number of setups
Supervision 40,000 Direct labor cost
Expected Use of Cost Drivers per Product
Commercial Residential
Scheduling and travel 1,000 500
Setup time 450 250
Instructions:
a) Compute the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line
b) Compute the operating income for the each product line, using the activity-based overhead rates
c) What do you believe Wanda Lewis should do?
Click here for the solution: Shady Lady sells window coverings to both commercial and residential customers
Commercial Residential
Revenues $300,000 $480,000
Direct material costs 30,000 50,000
Direct labor costs 100,000 300,000
Overhead costs 50,000 180,000 150,000 500,000
Operating income (loss) $120,000 ($ 20,000)
The controller, Wanda Lewis, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex to install for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed:
Activity Cost Pools Estimated Overhead Cost Drivers
Scheduling and travel $90,000 Hours of travel
Setup time 70,000 Number of setups
Supervision 40,000 Direct labor cost
Expected Use of Cost Drivers per Product
Commercial Residential
Scheduling and travel 1,000 500
Setup time 450 250
Instructions:
a) Compute the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line
b) Compute the operating income for the each product line, using the activity-based overhead rates
c) What do you believe Wanda Lewis should do?
Click here for the solution: Shady Lady sells window coverings to both commercial and residential customers
Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant
E4-8 Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant. The following costs are budgeted for the first quarter's operations.
Machine setup, indirect materials $ 4,000
Inspections 16,000
Tests 4,000
Insurance, plant 110,000
Engineering design 140,000
Depreciation, machinery 520,000
Machine setup, indirect labor 20,000
Property taxes 29,000
Oil, heating 19,000
Electricity, plant lighting 21,000
Engineering prototypes 60,000
Depreciation, plant 210,000
Electricity, machinery 36,000
Custodial (machine maintenance) wages 19,000
Classify the above costs of Galavic Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.
Click here for the solution: Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant
Machine setup, indirect materials $ 4,000
Inspections 16,000
Tests 4,000
Insurance, plant 110,000
Engineering design 140,000
Depreciation, machinery 520,000
Machine setup, indirect labor 20,000
Property taxes 29,000
Oil, heating 19,000
Electricity, plant lighting 21,000
Engineering prototypes 60,000
Depreciation, plant 210,000
Electricity, machinery 36,000
Custodial (machine maintenance) wages 19,000
Classify the above costs of Galavic Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.
Click here for the solution: Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant
Wednesday, October 14, 2015
Dewey and Cheatam is a law firm that is initiating an activity-based costing system
ACC 560 Week 3 Assignment
E4-16 Dewey and Cheatam is a law firm that is initiating an activity-based costing system. Jim Dewey, the senior partner and strong supporter of ABC, has prepared the following list of activities performed by a typical attorney in a day at the firm.
Classify each activity as either value-added or non-value-added.
Activity Hours
Writing contracts and letters 1.0
Attending staff meetings 0.5
Taking depositions 1.0
Doing research 1.0
Traveling to/from court 1.0
Contemplating legal strategy 1.0
Eating lunch 1.0
Litigating a case in court 2.5
Entertaining a prospective client 2.0
Instructions:
a) How much was value-added time
b) How much was non-value-added time
Click here for the solution: Dewey and Cheatam is a law firm that is initiating an activity-based costing system
E4-16 Dewey and Cheatam is a law firm that is initiating an activity-based costing system. Jim Dewey, the senior partner and strong supporter of ABC, has prepared the following list of activities performed by a typical attorney in a day at the firm.
Classify each activity as either value-added or non-value-added.
Activity Hours
Writing contracts and letters 1.0
Attending staff meetings 0.5
Taking depositions 1.0
Doing research 1.0
Traveling to/from court 1.0
Contemplating legal strategy 1.0
Eating lunch 1.0
Litigating a case in court 2.5
Entertaining a prospective client 2.0
Instructions:
a) How much was value-added time
b) How much was non-value-added time
Click here for the solution: Dewey and Cheatam is a law firm that is initiating an activity-based costing system
Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes
ACC 560 Week 3 Assignment
P4-3A Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are of white oak wood. Its budgeted manufacturing overhead costs for the year 2009 are as follows.
Overhead Cost Pools Amount
Purchasing $ 57,000
Handling materials 82,000
Production (cutting, milling, finishing) 210,000
Setting up machines 85,000
Inspecting 90,000
Inventory control (raw materials and finished goods) 126,000
Utilities 180,000
Total budget overhead costs $830,000
For the last 4 years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2009, 100,000 machine hours are budgeted.
Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Lindsay Baker, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar's request, Lindsay and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.
Activity Cost Pools Cost Drivers Expected
Use of Cost Drivers
Purchasing Number of orders 600
Handling materials Number of moves 8,000
Production (cutting, milling, finishing) Direct labor hours 100,000
Setting up machines Number of setups 1,250
Inspecting Number of inspections 6,000
Inventory control (raw materials and finished goods) Number of components 168,000
Utilities Square feet occupied 90,000
Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason's request, Lindsay prepares cost estimates for producing components for 280 stairs so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways.
Direct materials $103,600
Direct labor $112,000
Machine hours 14,500
Direct labor hours 5,000
Number of purchase orders 60
Number of material moves 800
Number of machine setups 100
Number of inspections 450
Number of components 16,000
Number of square feet occupied 8,000
Instructions
a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
b) What is the manufacturing cost per stairway under traditional costing?
c) What is the manufacturing cost per stairway under the proposed activity-based costing? (Prepare all of the necessary schedules.)
d) Which of the two costing systems is preferable in pricing decisions and why?
Click here for the solution: Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes
P4-3A Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes. The manufactured stair components (spindles, risers, hangers, hand rails) permit installation of stairs of varying lengths and widths. All are of white oak wood. Its budgeted manufacturing overhead costs for the year 2009 are as follows.
Overhead Cost Pools Amount
Purchasing $ 57,000
Handling materials 82,000
Production (cutting, milling, finishing) 210,000
Setting up machines 85,000
Inspecting 90,000
Inventory control (raw materials and finished goods) 126,000
Utilities 180,000
Total budget overhead costs $830,000
For the last 4 years, Stellar Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2009, 100,000 machine hours are budgeted.
Heather Fujar, owner-manager of Stellar Stairs Co., recently directed her accountant, Lindsay Baker, to implement the activity-based costing system that she has repeatedly proposed. At Heather Fujar's request, Lindsay and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.
Activity Cost Pools Cost Drivers Expected
Use of Cost Drivers
Purchasing Number of orders 600
Handling materials Number of moves 8,000
Production (cutting, milling, finishing) Direct labor hours 100,000
Setting up machines Number of setups 1,250
Inspecting Number of inspections 6,000
Inventory control (raw materials and finished goods) Number of components 168,000
Utilities Square feet occupied 90,000
Jason Dion, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At Jason's request, Lindsay prepares cost estimates for producing components for 280 stairs so Jason can submit a contract price per stair to Community Builders. She accumulates the following data for the production of 280 stairways.
Direct materials $103,600
Direct labor $112,000
Machine hours 14,500
Direct labor hours 5,000
Number of purchase orders 60
Number of material moves 800
Number of machine setups 100
Number of inspections 450
Number of components 16,000
Number of square feet occupied 8,000
Instructions
a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
b) What is the manufacturing cost per stairway under traditional costing?
c) What is the manufacturing cost per stairway under the proposed activity-based costing? (Prepare all of the necessary schedules.)
d) Which of the two costing systems is preferable in pricing decisions and why?
Click here for the solution: Stellar Stairs Co. of Poway designs and builds factory-made premium wooden stairs for homes
Hy and Lowe is a public firm that offers two primary services, auditing and tax return preparation
ACC 560 Week 3 Assignment
P4-5A Hy and Lowe is a public firm that offers two primary services, auditing and tax return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for purposes of analysis and comparison. The following overhead data are collected to develop the comparison.
Activity Cost Pool Cost Driver Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Service Audit Tax
Employee training Direct labor dollars $216,000 $1,800,000 $1,000,000 $800,000
Typing and secretarial Number of reports/forms 76,200 2,500 600 1,900
Computing Number of minutes 204,000 60,000 25,000 35,000
Facility rental Number of employees 142,500 40 22 18
Travel Per expense reports 81,300 Direct 56,000 25,300 $720,000
Instructions:
a. Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Hy and Lowe.
b. 1. Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).
2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers.
c. Classify each of the activities as a value-added activity or a non-value added activity.
d. Comment on the comparative overhead cost for the two services under both traditional costing and ABC.
Click here for the solution: Hy and Lowe is a public firm that offers two primary services, auditing and tax return preparation
P4-5A Hy and Lowe is a public firm that offers two primary services, auditing and tax return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for purposes of analysis and comparison. The following overhead data are collected to develop the comparison.
Activity Cost Pool Cost Driver Estimated Overhead Expected Use of Cost Drivers Expected Use of Cost Drivers per Service Audit Tax
Employee training Direct labor dollars $216,000 $1,800,000 $1,000,000 $800,000
Typing and secretarial Number of reports/forms 76,200 2,500 600 1,900
Computing Number of minutes 204,000 60,000 25,000 35,000
Facility rental Number of employees 142,500 40 22 18
Travel Per expense reports 81,300 Direct 56,000 25,300 $720,000
Instructions:
a. Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Hy and Lowe.
b. 1. Using activity-based costing, prepare a schedule showing the computations of the activity-based overhead rates (per cost driver).
2. Prepare a schedule assigning each activity's overhead cost pool to each service based on the use of the cost drivers.
c. Classify each of the activities as a value-added activity or a non-value added activity.
d. Comment on the comparative overhead cost for the two services under both traditional costing and ABC.
Click here for the solution: Hy and Lowe is a public firm that offers two primary services, auditing and tax return preparation
Kozy Enterprises is considering manufacturing a new product
ACC 560 Week 4 Assignment
E5-2 Kozy Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below.
Output in Units Rent Expense Direct Materials
1,000 $5,000 $4,000
2,000 5,000 6,000
3,000 5,000 7,800
4,000 7,000 8,000
5,000 7,000 10,000
6,000 7,000 12,000
7,000 7,000 14,000
8,000 7,000 16,000
9,000 7,000 18,000
10,000 10,000 23,000
11,000 10,000 28,000
12,000 10,000 36,000
Instructions
(a) Diagram the behavior of each cost for output ranging from 1,000 to 12,000 units.
(b) Determine the relevant range of activity for this product.
(c) Calculate the variable cost per unit within the relevant range.
(d) Indicate the fixed cost within the relevant range.
Click here for the solution: Kozy Enterprises is considering manufacturing a new product
E5-2 Kozy Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below.
Output in Units Rent Expense Direct Materials
1,000 $5,000 $4,000
2,000 5,000 6,000
3,000 5,000 7,800
4,000 7,000 8,000
5,000 7,000 10,000
6,000 7,000 12,000
7,000 7,000 14,000
8,000 7,000 16,000
9,000 7,000 18,000
10,000 10,000 23,000
11,000 10,000 28,000
12,000 10,000 36,000
Instructions
(a) Diagram the behavior of each cost for output ranging from 1,000 to 12,000 units.
(b) Determine the relevant range of activity for this product.
(c) Calculate the variable cost per unit within the relevant range.
(d) Indicate the fixed cost within the relevant range.
Click here for the solution: Kozy Enterprises is considering manufacturing a new product
Mozena Corporation manufactures a single product (ACC 560 Week 4)
ACC 560 Week 4 Assignment
E5-6 Mozena Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.
Production in Units 3,000
Production Costs
Direct Materials $7,500
Direct labor 15,000
Utilities 1,800
Property taxes 1,000
Indirect labor 4,500
Supervisory salaries 1,800
Maintenance 1,100
Depreciation 2,400
Instructions
(a) Identify the above costs as variable, fixed, or mixed.
(b) Calculate the expected costs when production is 5,000 units.
Click here for the solution: Mozena Corporation manufactures a single product (ACC 560 Week 4)
E5-6 Mozena Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $300 and $200, respectively.
Production in Units 3,000
Production Costs
Direct Materials $7,500
Direct labor 15,000
Utilities 1,800
Property taxes 1,000
Indirect labor 4,500
Supervisory salaries 1,800
Maintenance 1,100
Depreciation 2,400
Instructions
(a) Identify the above costs as variable, fixed, or mixed.
(b) Calculate the expected costs when production is 5,000 units.
Click here for the solution: Mozena Corporation manufactures a single product (ACC 560 Week 4)
Airport Connection provides shuttle service between four hotels near a medical center and an international airport
ACC 560 Week 4 Assignment
E5-11 Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10 passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below.
Fare revenues (1,440 fares) $36,000
Variable costs
Fuel $5,040
Tolls and Parking 3,100
Maintenance 500 8,640
Contribution margin 27,360
Fixed costs
Salaries 13,000
Depreciation 1,300
Insurance 1,128 15,428
Net income $11,932
Instructions
(a) Identify the above costs as variable, fixed, or mixed.
(b) Calculate the expected costs when production is 5,000 units.
Click here for the solution: Airport Connection provides shuttle service between four hotels near a medical center and an international airport
E5-11 Airport Connection provides shuttle service between four hotels near a medical center and an international airport. Airport Connection uses two 10 passenger vans to offer 12 round trips per day. A recent month's activity in the form of a cost-volume-profit income statement is shown below.
Fare revenues (1,440 fares) $36,000
Variable costs
Fuel $5,040
Tolls and Parking 3,100
Maintenance 500 8,640
Contribution margin 27,360
Fixed costs
Salaries 13,000
Depreciation 1,300
Insurance 1,128 15,428
Net income $11,932
Instructions
(a) Identify the above costs as variable, fixed, or mixed.
(b) Calculate the expected costs when production is 5,000 units.
Click here for the solution: Airport Connection provides shuttle service between four hotels near a medical center and an international airport
Moran Company reports the following operating results for the month of August
ACC 560 Week 4 Assignment
E5-15 Moran Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 55% of sales.
Instructions:
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?
Click here for the solution: Moran Company reports the following operating results for the month of August
E5-15 Moran Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 55% of sales.
Instructions:
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?
Click here for the solution: Moran Company reports the following operating results for the month of August
Utech Company bottles and distributes Livit, a diet soft drink
ACC 560 Week 4 Assignment
P5-2A Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2008, management estimates the following revenues and costs.
Net sales $1,800,000 Selling expenses-variable $70,000
Direct materials 430,000 Selling expenses-fixed 65,000
Direct labor 352,000 Administrative expenses-variable 20,000
Manufacturing overhead-variable 316,000 Administrative expenses-fixed 60,000
Manufacturing overhead-fixed 283,000
Instructions:
a. Prepare a CVP income statement for 2008 based on management's estimates.
b. Compute the break-even point in (1) units and (2) dollars.
c. Compute the contribution margin ratio and the margin of safety ratio. (Round to full percents.)
d. Determine the sales dollars required to earn net income of $238,000.
Click here for the solution: Utech Company bottles and distributes Livit, a diet soft drink
P5-2A Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2008, management estimates the following revenues and costs.
Net sales $1,800,000 Selling expenses-variable $70,000
Direct materials 430,000 Selling expenses-fixed 65,000
Direct labor 352,000 Administrative expenses-variable 20,000
Manufacturing overhead-variable 316,000 Administrative expenses-fixed 60,000
Manufacturing overhead-fixed 283,000
Instructions:
a. Prepare a CVP income statement for 2008 based on management's estimates.
b. Compute the break-even point in (1) units and (2) dollars.
c. Compute the contribution margin ratio and the margin of safety ratio. (Round to full percents.)
d. Determine the sales dollars required to earn net income of $238,000.
Click here for the solution: Utech Company bottles and distributes Livit, a diet soft drink
Alice Shoemaker is the advertising manager for Value Shoe Store
ACC 560 Week 4 Assignment
P5-4A Alice Shoemaker is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $34,000 in fixed costs to the $270,000 currently spent. In addition, Alice is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $22 per pair of shoes. Management is impressed with Alice's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
Instructions:
a) Compute the current break-even point in units, and compare it to the break-even point in units if Alice’s ideas are used.
b) Compute the margin of safety ratio for current operations and after Alice’s changes are introduced. (Round to nearest full percent)
c) Prepare a CVP income statement for current operations and after Alice’s changes are introduced. Would you make the changes suggested.
Click here for the solution: Alice Shoemaker is the advertising manager for Value Shoe Store
P5-4A Alice Shoemaker is the advertising manager for Value Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $34,000 in fixed costs to the $270,000 currently spent. In addition, Alice is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $22 per pair of shoes. Management is impressed with Alice's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.
Instructions:
a) Compute the current break-even point in units, and compare it to the break-even point in units if Alice’s ideas are used.
b) Compute the margin of safety ratio for current operations and after Alice’s changes are introduced. (Round to nearest full percent)
c) Prepare a CVP income statement for current operations and after Alice’s changes are introduced. Would you make the changes suggested.
Click here for the solution: Alice Shoemaker is the advertising manager for Value Shoe Store
Ger Company reports the following operating results for the month of August
E6-3 Ger Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,000; and fixed costs $70,000. Management is considering three independent courses of action to increase net income.
Compute the net income that would result from each of the independent actions below:
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 58% of sales.
3. Reduce fixed costs by $20,000.
Click here for the solution: Ger Company reports the following operating results for the month of August
Compute the net income that would result from each of the independent actions below:
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 58% of sales.
3. Reduce fixed costs by $20,000.
Click here for the solution: Ger Company reports the following operating results for the month of August
Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance
E6-9 Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.
Pairs of Shoes Pairs of Gloves Range Finder
Unit sales price $100 $30 $250
Unit variable costs 60 10 200
Unit contribution margin $40 $20 $50
Sales mix 40% 50% 10%
Fixed costs are $620,000.
Instructions:
a. Compute the break-even point in units for the company.
b. Determine the number of units to be sold at the break-even point for each product line.
c. Verify that the mix of sales units determined in (b) will generate a zero net income.
Click here for the solution: Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance
Pairs of Shoes Pairs of Gloves Range Finder
Unit sales price $100 $30 $250
Unit variable costs 60 10 200
Unit contribution margin $40 $20 $50
Sales mix 40% 50% 10%
Fixed costs are $620,000.
Instructions:
a. Compute the break-even point in units for the company.
b. Determine the number of units to be sold at the break-even point for each product line.
c. Verify that the mix of sales units determined in (b) will generate a zero net income.
Click here for the solution: Tiger Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance
Spencer Company manufactures and sells three products
E6-11 Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.
Product
A B C
Selling price $9 $12 $14
Variable costs and expenses $3 $9.50 $12
Machine hours to produce 2 1 2
Instructions:
(a) Compute the contribution margin per unit of the limited resource (machine hour) for each product.
(b) Assuming 1,500 additional machine hours are available, which product should be manufactured?
(c) Prepare an analysis showing the total contribution margin if the additional hours are (1) divided equally among the products, and (2) allocated entirely to the product identified in (b) above.
Click here for the solution: Spencer Company manufactures and sells three products
Product
A B C
Selling price $9 $12 $14
Variable costs and expenses $3 $9.50 $12
Machine hours to produce 2 1 2
Instructions:
(a) Compute the contribution margin per unit of the limited resource (machine hour) for each product.
(b) Assuming 1,500 additional machine hours are available, which product should be manufactured?
(c) Prepare an analysis showing the total contribution margin if the additional hours are (1) divided equally among the products, and (2) allocated entirely to the product identified in (b) above.
Click here for the solution: Spencer Company manufactures and sells three products
Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure
E6-15 Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfredo Ayala, Imagen's owner, is considering replacing the draftsmen with a computerized drafting system.
However, before making the change Alfredo would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative.
Manual System Computerized System
Sales $1,500,000 $1,500,000
Variable costs 1,200,000 600,000
Contribution margin 300,000 900,000
Fixed costs 60,000 660,000
Net income $240,000 $240,000
Instructions
a. Determine the degree of operating leverage for each alternative
b. Which alternative would produce the higher net income if sales increase by $100,000.
c. Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss.
Click here for the solution: Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure
Manual System Computerized System
Sales $1,500,000 $1,500,000
Variable costs 1,200,000 600,000
Contribution margin 300,000 900,000
Fixed costs 60,000 660,000
Net income $240,000 $240,000
Instructions
a. Determine the degree of operating leverage for each alternative
b. Which alternative would produce the higher net income if sales increase by $100,000.
c. Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss.
Click here for the solution: Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure
Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners
P6-3A Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Manning is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows.
Product
Economy Standard Deluxe
Selling price $30 $50 $100
Variable costs and expenses $12 $18 $42
Machine hours required .5 .8 1.6
Instructions
(a) Ignoring the machine time constraint, which single product should Manning Industries produce?
(b) What is the contribution margin per unit of limited resource for each product?
(c) If additional machine time could be obtained, how should the additional time be used?
Click here for the solution: Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners
Product
Economy Standard Deluxe
Selling price $30 $50 $100
Variable costs and expenses $12 $18 $42
Machine hours required .5 .8 1.6
Instructions
(a) Ignoring the machine time constraint, which single product should Manning Industries produce?
(b) What is the contribution margin per unit of limited resource for each product?
(c) If additional machine time could be obtained, how should the additional time be used?
Click here for the solution: Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners
The Creekside Inn is a restaurant in Tucson, Arizona
ACC 560 Week 4 Assignment
P6-4A The Creekside Inn is a restaurant in Tucson, Arizona. It specializes in southwestern style meals in a moderate price range. Terry Wilson, the manager of Creekside, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows.
Percent of Total Sales Contribution Margin Ratio
Appetizers 10% 60%
Main entrees 60% 30%
Desserts 10% 50%
Beverages 20% 80%
Terry is considering a variety of options to try to improve the profitability of the restaurant. Her goal is to generate a target net income of $150,000.The company has fixed costs of $1,200,000 per year.
Instructions:
a. Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.
b. Terry believes the restaurant could greatly improve its profitability by reducing the complexity and selling price of its entrees to increase the number of clients that it serves. It would then more heavily market its appetizers and beverages. She is proposing to drop the contribution margin ratio on the main entrees to 10% by dropping the average selling price. She envisions an expansion of the restaurant that would increase fixed costs by 50%. At the same time, she is proposing to change the sales mix to the following.
Percent of Total Sales Contribution Margin Ratio
Appetizers 20% 60%
Main entrees 30% 10%
Desserts 10% 50%
Beverages 40% 80%
Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income.
c. Suppose that Terry drops the selling price on entrees and increases fixed costs as proposed in the second part of the question, but customers are not swayed by the marketing efforts and the sales mix remains what it was in the first part of the question. Compute the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.
Click here for the solution: The Creekside Inn is a restaurant in Tucson, Arizona
P6-4A The Creekside Inn is a restaurant in Tucson, Arizona. It specializes in southwestern style meals in a moderate price range. Terry Wilson, the manager of Creekside, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerings are as follows.
Percent of Total Sales Contribution Margin Ratio
Appetizers 10% 60%
Main entrees 60% 30%
Desserts 10% 50%
Beverages 20% 80%
Terry is considering a variety of options to try to improve the profitability of the restaurant. Her goal is to generate a target net income of $150,000.The company has fixed costs of $1,200,000 per year.
Instructions:
a. Calculate the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.
b. Terry believes the restaurant could greatly improve its profitability by reducing the complexity and selling price of its entrees to increase the number of clients that it serves. It would then more heavily market its appetizers and beverages. She is proposing to drop the contribution margin ratio on the main entrees to 10% by dropping the average selling price. She envisions an expansion of the restaurant that would increase fixed costs by 50%. At the same time, she is proposing to change the sales mix to the following.
Percent of Total Sales Contribution Margin Ratio
Appetizers 20% 60%
Main entrees 30% 10%
Desserts 10% 50%
Beverages 40% 80%
Compute the total restaurant sales, and the sales of each product line that would be necessary to achieve the desired target net income.
c. Suppose that Terry drops the selling price on entrees and increases fixed costs as proposed in the second part of the question, but customers are not swayed by the marketing efforts and the sales mix remains what it was in the first part of the question. Compute the total restaurant sales and the sales of each product line that would be necessary to achieve the desired target net income.
Click here for the solution: The Creekside Inn is a restaurant in Tucson, Arizona
On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
P3-5A On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows.
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
No. Debits No. Credits
101 Cash $4,880 154 Accumulated Depreciation $1,500
112 Accounts Receivable 3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
153 Store Equipment 15,000 212 Salaries Payable 500
311 Common Stock 15,000
320 Retained Earnings 3,600
$25,400 $25,400
During September the following summary transactions were completed.
Sept. 8 Paid $1,400 for salaries due employees, of which $900 is for September.
10 Received $1,200 cash from customers on account.
12 Received $3,400 cash for services performed in September.
15 Purchased store equipment on account $3,000.
17 Purchased supplies on account $1,200.
20 Paid creditors $4,500 on account.
22 Paid September rent $500.
25 Paid salaries $1,250.
27 Performed services on account and billed customers for services provided $1,500.
29 Received $650 from customers for future service.
Adjustment data consist of:
1. Supplies on hand $1,200.
2. Accrued salaries payable $400.
3. Depreciation is $100 per month.
4. Unearned service revenue of $1,450 is earned.
Instructions
(a) Journalize the September transactions. (Your instructor may advise you to post to ledger accounts, that should be turned in as part of the problem.)
(b) Prepare a trial balance at September 30.
(c) Journalize and post adjusting entries.
(d) Prepare an adjusted trial balance.
(e) Prepare an income statement and a retained earnings statement for September and a balance sheet at September 30.
Click here for the solution: On September 1, 2008, the account balances of Rand Equipment Repair, Inc. were as follows
Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year)
P2-3A Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007 (the end of its fiscal year).
BYTE REPAIR SERVICE, INC.
Trial Balance
December 31, 2007
Cash $8,000
Accounts Receivable 15,000
Parts Inventory 13,000
Prepaid Rent 3,000
Shop Equipment 21,000
Accounts Payable $19,000
Common Stock 30,000
Retained Earnings 11,000
$60,000 $60,000
Summarized transactions for January 2008 were as follows:
1. Advertising costs, paid in cash, $1,000.
2. Additional repair parts inventory acquired on account $4,000.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Repair parts used during January $4,000. (Hint: Debit this to Repair Parts Expense.)
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,000.
9. Dividends paid in January were $3,000.
Instructions
(a) Prepare journal entries to record each of the January transactions.
(b) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2008. Post the journal entries to the accounts in the ledger.
(c) Prepare a trial balance as of January 31, 2008.
Click here for the solution: Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007
BYTE REPAIR SERVICE, INC.
Trial Balance
December 31, 2007
Cash $8,000
Accounts Receivable 15,000
Parts Inventory 13,000
Prepaid Rent 3,000
Shop Equipment 21,000
Accounts Payable $19,000
Common Stock 30,000
Retained Earnings 11,000
$60,000 $60,000
Summarized transactions for January 2008 were as follows:
1. Advertising costs, paid in cash, $1,000.
2. Additional repair parts inventory acquired on account $4,000.
3. Miscellaneous expenses, paid in cash, $2,000.
4. Cash collected from customers in payment of accounts receivable $14,000.
5. Cash paid to creditors for accounts payable due $15,000.
6. Repair parts used during January $4,000. (Hint: Debit this to Repair Parts Expense.)
7. Repair services performed during January: for cash $6,000; on account $9,000.
8. Wages for January, paid in cash, $3,000.
9. Dividends paid in January were $3,000.
Instructions
(a) Prepare journal entries to record each of the January transactions.
(b) Open T accounts for each of the accounts listed in the trial balance, and enter the opening balances for 2008. Post the journal entries to the accounts in the ledger.
(c) Prepare a trial balance as of January 31, 2008.
Click here for the solution: Jack Shellenkamp owns and manages a computer repair service, which had the following trial balance on December 31, 2007
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