Computer Boutique sells computer equipment and home office furniture. Currently, the furniture product line takes up approximately 50% of the company's retail floor space. The president of Computer Boutique is trying to decide whether the company should continue offering furniture or just concentrate on computer equipment. If furniture is dropped, salaries and other direct fixed costs can be avoided. In addition, sales of computer equipment can increase by 13%. Allocated fixed costs are assigned based on relative sales.
Computer Home
Office Equipment Furniture Total
Sales $1,200,000 $800,000 $2,000,000
Less cost of goods sold 700,000 500,000 1,200,000
Contribution margin 500,000 300,000 800,000
Less direct fixed costs:
Salaries 175,000 175,000 350,000
Other 60,000 60,000 120,000
Less allocated fixed costs:
Rent 14,118 9,882 24,000
Insurance 3,529 2,471 6,000
Cleaning 4,117 2,883 7,000
President's salary 76,470 53,350 130,000
Other 7,058 4,942 12,000
Total costs 340,292 380,708 649,000
Net Income $159,708 ($ 8,708) $151,000
Prepare an incremental analysis to determine the incremental effect on profit of discontinuing the furniture line.
Click here for the solution: Computer Boutique sells computer equipment and home office furniture
Showing posts with label Office. Show all posts
Showing posts with label Office. Show all posts
Friday, April 15, 2016
Wednesday, November 11, 2015
Star Wars Company pays its office employee payroll weekly
P13-3 (Payroll Tax Entries) Star Wars Company pays its office employee payroll weekly. Below is a partial list of employees and their payroll data for August. Because August is their vacation period, vacation pay is also listed.
Employee Earnings to July 31 Weekly Pay Vacation Pay to be Received in Aug
Mark Hamell $4,200 $180 -----------
Carrie Fisher $3,500 150 $300
Harrison Ford $2,700 110 $220
Alec Guinness $7,400 250 -----------
Peter Cushing $8,000 290 $580
Assume that the federal income tax withheld is 10% of wages. Union dues withheld are 2% of wages. Vacations are taken the second and third weeks of August by Fisher, Ford, and Cushing. The state unemployment tax rate is 2.5% and the federal is 0.8%, both on a $7,000 maximum. The F.I.C.A. rate is 7.65% on employee and employer on a maximum of $97,500 per employee. In addition, a 1.45% rate is charged both employer and employee for an employee’s wage in excess of $97,500.
Instructions
Make the journal entries necessary for each of the four August payrolls. The entries for the payroll and for the company’s liability are made separately. Also make the entry to record the monthly payment of accrued payroll liabilities.
Click here for the solution: Star Wars Company pays its office employee payroll weekly
Employee Earnings to July 31 Weekly Pay Vacation Pay to be Received in Aug
Mark Hamell $4,200 $180 -----------
Carrie Fisher $3,500 150 $300
Harrison Ford $2,700 110 $220
Alec Guinness $7,400 250 -----------
Peter Cushing $8,000 290 $580
Assume that the federal income tax withheld is 10% of wages. Union dues withheld are 2% of wages. Vacations are taken the second and third weeks of August by Fisher, Ford, and Cushing. The state unemployment tax rate is 2.5% and the federal is 0.8%, both on a $7,000 maximum. The F.I.C.A. rate is 7.65% on employee and employer on a maximum of $97,500 per employee. In addition, a 1.45% rate is charged both employer and employee for an employee’s wage in excess of $97,500.
Instructions
Make the journal entries necessary for each of the four August payrolls. The entries for the payroll and for the company’s liability are made separately. Also make the entry to record the monthly payment of accrued payroll liabilities.
Click here for the solution: Star Wars Company pays its office employee payroll weekly
Friday, September 25, 2015
Where's the cash? (Ethics Case 21-7)
Ethics Case 21-7 Where's the cash?
After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben's initial excitement has turned to distress.
The cause of Ben's distress is the set of financial statements he's stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations.
Ben had sketched out the following comparison ($ in millions):
2011 2010 2009 2008
Income from Operations $140.0 $132.0 $127.5 $127.0
Net Income 38.5 35.0 34.5 29.5
Cash Flow from Operations 1.6 17.0 12.0 15.5
Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow which is consistently lower than net income.
Upon closer review, Ben noticed three events in the last two years that, unfortunately, seemed related:
a. Park's credit policy had been loosened; credit terms were relaxed and payment periods were lengthened.
b. Accounts receivable balances had increased dramatically.
c. Several of the company's compensation arrangements, including that of the controller and the company president, were based on reported net income.
Required:
1. What is so ominous about the combination of events Ben sees?
2. What course of action, if any, should Ben take?
Click here for the solution: Ethics Case 21-7 Where's the cash?
After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben's initial excitement has turned to distress.
The cause of Ben's distress is the set of financial statements he's stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations.
Ben had sketched out the following comparison ($ in millions):
2011 2010 2009 2008
Income from Operations $140.0 $132.0 $127.5 $127.0
Net Income 38.5 35.0 34.5 29.5
Cash Flow from Operations 1.6 17.0 12.0 15.5
Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow which is consistently lower than net income.
Upon closer review, Ben noticed three events in the last two years that, unfortunately, seemed related:
a. Park's credit policy had been loosened; credit terms were relaxed and payment periods were lengthened.
b. Accounts receivable balances had increased dramatically.
c. Several of the company's compensation arrangements, including that of the controller and the company president, were based on reported net income.
Required:
1. What is so ominous about the combination of events Ben sees?
2. What course of action, if any, should Ben take?
Click here for the solution: Ethics Case 21-7 Where's the cash?
Friday, August 21, 2015
In a working paper for combined financial statements of home office and branch, the branch's net income is included in
MULTIPLE CHOICE
1. In a working paper for combined financial statements of home office and branch, the branch's net income is included in: (Points : 1)
2. If both the home office and the branch of a business enterprise use the perpetual inventory system, a Shipments to Branch ledger account appears in the accounting records of: (Points : 1)
3. The following journal entry (explanation omitted) appeared in the accounting records of Marty Corporation's only branch:
Operating Expenses 600,000
Home Office 600,000
The journal entry indicates that: (Points : 1)
4. Direct out-of-pocket costs of a business combination that are part of the cost of the combinee do not include: (Points : 1)
5. The Income: Branch ledger account is maintained in the accounting records of: (Points : 1)
6. In a business combination, the appropriate accounting for an excess of current fair values the combinee's identifiable net assets over the combinor's cost is to: (Points : 1)
7. The Shipments to Branch ledger account in the accounting records of the home office of a business enterprise: (Points : 1)
8. The business enterprises that enter into a business combination are termed the: (Points : 1)
9. If at the end of an accounting period the balance of the Investment in Branch ledger account in the accounting records of the home office is $20,000 and the balance of the Home Office account in the accounting records of the branch (after the branch recorded closing entries) is $25,500, the most likely explanation for the discrepancy of $5,500 is a: (Points : 1)
10. The Home Office ledger account in the accounting records of a branch is best described as: (Points : 1)
Click here for the solution: In a working paper for combined financial statements of home office and branch, the branch's net income is included in
1. In a working paper for combined financial statements of home office and branch, the branch's net income is included in: (Points : 1)
2. If both the home office and the branch of a business enterprise use the perpetual inventory system, a Shipments to Branch ledger account appears in the accounting records of: (Points : 1)
3. The following journal entry (explanation omitted) appeared in the accounting records of Marty Corporation's only branch:
Operating Expenses 600,000
Home Office 600,000
The journal entry indicates that: (Points : 1)
4. Direct out-of-pocket costs of a business combination that are part of the cost of the combinee do not include: (Points : 1)
5. The Income: Branch ledger account is maintained in the accounting records of: (Points : 1)
6. In a business combination, the appropriate accounting for an excess of current fair values the combinee's identifiable net assets over the combinor's cost is to: (Points : 1)
7. The Shipments to Branch ledger account in the accounting records of the home office of a business enterprise: (Points : 1)
8. The business enterprises that enter into a business combination are termed the: (Points : 1)
9. If at the end of an accounting period the balance of the Investment in Branch ledger account in the accounting records of the home office is $20,000 and the balance of the Home Office account in the accounting records of the branch (after the branch recorded closing entries) is $25,500, the most likely explanation for the discrepancy of $5,500 is a: (Points : 1)
10. The Home Office ledger account in the accounting records of a branch is best described as: (Points : 1)
Click here for the solution: In a working paper for combined financial statements of home office and branch, the branch's net income is included in
Monday, August 17, 2015
WoodGrain Technology makes home office furniture from fine hardwoods
WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine-hours, and the rate in the Fabrication Department is based on direct materials cost. At the beginning of the year, the company’s management made the following estimates for the year:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 80,000 21,000
Direct labour-hours. . . . . . . . . . . . . . 35,000 65,000
Direct materials cost. . . . . . . . . . . . . $190,000 $400,000
Direct labour cost . . . . . . . . . . . . . . . 280,000 530,000
Manufacturing overhead cost . . . . . . 416,000 720,000
Job 127 was started on April 1 and completed on May 12. The company’s cost records show the following information on the job:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 350 70
Direct labour-hours. . . . . . . . . . . . . . 80 130
Direct materials cost. . . . . . . . . . . . . $940 $1,200
Direct labour cost . . . . . . . . . . . . . . . 710 980
Required:
1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
2. Compute the total overhead cost applied to job 127.
3. What would be the total cost recorded for job 127? If the job contained 25 units, what would be the unit product cost?
4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 73,000 24,000
Direct labour-hours. . . . . . . . . . . . . . 30,000 68,000
Direct materials cost. . . . . . . . . . . . . $165,000 $420,000
Manufacturing overhead cost . . . . . . 390,000 740,000
What was the amount of underapplied or overapplied overhead in each department at the end of the year?
Click here for the solution: WoodGrain Technology makes home office furniture from fine hardwoods
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 80,000 21,000
Direct labour-hours. . . . . . . . . . . . . . 35,000 65,000
Direct materials cost. . . . . . . . . . . . . $190,000 $400,000
Direct labour cost . . . . . . . . . . . . . . . 280,000 530,000
Manufacturing overhead cost . . . . . . 416,000 720,000
Job 127 was started on April 1 and completed on May 12. The company’s cost records show the following information on the job:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 350 70
Direct labour-hours. . . . . . . . . . . . . . 80 130
Direct materials cost. . . . . . . . . . . . . $940 $1,200
Direct labour cost . . . . . . . . . . . . . . . 710 980
Required:
1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
2. Compute the total overhead cost applied to job 127.
3. What would be the total cost recorded for job 127? If the job contained 25 units, what would be the unit product cost?
4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 73,000 24,000
Direct labour-hours. . . . . . . . . . . . . . 30,000 68,000
Direct materials cost. . . . . . . . . . . . . $165,000 $420,000
Manufacturing overhead cost . . . . . . 390,000 740,000
What was the amount of underapplied or overapplied overhead in each department at the end of the year?
Click here for the solution: WoodGrain Technology makes home office furniture from fine hardwoods
Saturday, August 1, 2015
On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000
P18-7 (Long-Term Contract with an Overall Loss) On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2012, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2010, 2011, and 2012.
At At At
12/31/10 12/31/11 12/31/12
Contract costs incurred to date $ 300,000 $1,200,000 $2,100,000
Estimated costs to complete the contract 1,200,000 800,000 –0–
Billings to Gumbel 300,000 1,100,000 1,850,000
Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
Click here for the solution: On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000
At At At
12/31/10 12/31/11 12/31/12
Contract costs incurred to date $ 300,000 $1,200,000 $2,100,000
Estimated costs to complete the contract 1,200,000 800,000 –0–
Billings to Gumbel 300,000 1,100,000 1,850,000
Instructions
(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2010, 2011, and 2012. (Ignore income taxes.)
Click here for the solution: On July 1, 2010, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000
Friday, July 3, 2015
The budget committee of Clipboard Office Supply has assembled the following data
P21-21A Preparing an operating budget
The budget committee of Clipboard Office Supply has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June 2011.
a. Sales in April were $50,000. You forecast that monthly sales will increase 2.0% in May and 2.4% in June.
b. Clipboard maintains inventory of $9,000 plus 25% of sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $13,000, sales budgeted for July are $65,000.
c. Monthly salaries amount to $3,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.
d. Other monthly expenses are as follows:
Rent expense $2,600, paid as incurred
Depreciation expense $ 300
Insurance expense $ 200, expiration of prepaid amount
Income tax 20% of operating income
Requirement:
1. Prepare Clipboard Office Supply's budgeted income statements for May and June. Show cost of goods sold computations. (Round all amounts to the nearest $100. (Round amounts ending in $50 or more upward, and amounts ending in less than downward). For example, budgeted May sales are $51,000 ($50,000 x 1.02), and June sales are $52,200 ($51,000 x 1.024)
Click here for the solution: The budget committee of Clipboard Office Supply has assembled the following data
The budget committee of Clipboard Office Supply has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June 2011.
a. Sales in April were $50,000. You forecast that monthly sales will increase 2.0% in May and 2.4% in June.
b. Clipboard maintains inventory of $9,000 plus 25% of sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $13,000, sales budgeted for July are $65,000.
c. Monthly salaries amount to $3,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.
d. Other monthly expenses are as follows:
Rent expense $2,600, paid as incurred
Depreciation expense $ 300
Insurance expense $ 200, expiration of prepaid amount
Income tax 20% of operating income
Requirement:
1. Prepare Clipboard Office Supply's budgeted income statements for May and June. Show cost of goods sold computations. (Round all amounts to the nearest $100. (Round amounts ending in $50 or more upward, and amounts ending in less than downward). For example, budgeted May sales are $51,000 ($50,000 x 1.02), and June sales are $52,200 ($51,000 x 1.024)
Click here for the solution: The budget committee of Clipboard Office Supply has assembled the following data
Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit
P21-22A Preparing a financial budget
Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit. (Use the rounded sales values) Credit sales are collected in the month of purchase and 75% the following month. Salaries and sales commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.
The April 30, 2011 balance sheet showed the following balances:
Cash $25,000
Accounts payable 53,000
Salaries and commission payable 2,500
Requirements:
1. Prepare schedules of (a) budgeted cash collections, (b) budgeted cash payments for purchases, and (c) budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round your computations to the nearest dollar.
2. Prepare a cash budget. If no financing activity took place, what is the budgeted cash balance on June 30, 2011?
Click here for the solution: Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit
Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit. (Use the rounded sales values) Credit sales are collected in the month of purchase and 75% the following month. Salaries and sales commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.
The April 30, 2011 balance sheet showed the following balances:
Cash $25,000
Accounts payable 53,000
Salaries and commission payable 2,500
Requirements:
1. Prepare schedules of (a) budgeted cash collections, (b) budgeted cash payments for purchases, and (c) budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round your computations to the nearest dollar.
2. Prepare a cash budget. If no financing activity took place, what is the budgeted cash balance on June 30, 2011?
Click here for the solution: Refer to P21-21A. Clipboard Office Supply's sales are 75% cash and 25% credit
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