PowerSwitch, Inc: Determine ending inventories after flood; insurance claim letter
PowerSwitch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected PowerSwitch's facilities. Inventory was completely ruined, and the company's computer system, including all accounting records, was destroyed.
Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.
"I didn't know mud could smell so bad, " Paul says. "What would I be looking for?" "Don't worry about beginning inventory numbers, " responds Stephen, "we'll get them from last year's annual report. We need first quarter cost data."
I was working on the first quarter results just before the storm hit, Paul says. Look, my reports still in my desk drawer. All I can make out is that for the first quarter, material purchases were $476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were $505,000, $245,000, and $1,425,000, respectively. Wait, and cost of goods available for sale was $1,340,000."
"Great, "says Stephen. "I remember that sales for the period were approximately $1.7 million. Given our gross profit of 30%, thats all you should need." Paul is not sure about that, but decides to see what he can do with this information. The beginning inventory numbers are
Direct materials - $113,000
Work in process - $229,000
Finished goods - $154,000
He remembers a schedule he learned in college that may help him get started.
Requirements:
1. Determine the ending inventories of direct materials, work in process, and finished goods.
2. Draft an insurance claim letter for the controller, seeking reimbursment for the flood damage to inventory. PowerSwitch's insurance representative is Gary Ogleby, at Industrial Insurance Co., 1122 Main Street, Hartford, CT 06268. The policy number is #3454340-23. PowerSwitch address is 5 Research Triangle Way, Raleigh, NC 27698
Click here for the solution: PowerSwitch, Inc: Determine ending inventories after flood; insurance claim letter
Showing posts with label after. Show all posts
Showing posts with label after. Show all posts
Tuesday, November 10, 2015
Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
PR 8-5A Bank Reconciliation and entries
Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
BANK RECONCILIATION FOR PRECEDING MONTH (DATED JUNE 30):
Cash balance according to bank statement $9,422.80
Add: Deposit of June 30, not recorded by bank 780.80
$10,203.60
Deducting : Outstanding checks :
No. 580 $310.10
No. 602 85.50
No. 612 92.50
No. 613 137.50 625.60
Adjusted Balance $9,587.00
Cash balance according to company’s records $ 9,605.7
Deduct : Service Charges 27.70
Adjusted Balance $9,587.00
AND SO ON
1. Prepare a bank reconciliation as of July 31. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
2. Journalize the necessary entries. The accounts have not been closed.
3. What is the amount of cash that should appear on the balance sheet as of July 31?
4. Assume that a canceled check for $125 has been incorrectly recorded by the bank as $125. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.
Check: 1. Adjusted Balance: $11,178.59
Click here for the solution: Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
BANK RECONCILIATION FOR PRECEDING MONTH (DATED JUNE 30):
Cash balance according to bank statement $9,422.80
Add: Deposit of June 30, not recorded by bank 780.80
$10,203.60
Deducting : Outstanding checks :
No. 580 $310.10
No. 602 85.50
No. 612 92.50
No. 613 137.50 625.60
Adjusted Balance $9,587.00
Cash balance according to company’s records $ 9,605.7
Deduct : Service Charges 27.70
Adjusted Balance $9,587.00
AND SO ON
1. Prepare a bank reconciliation as of July 31. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
2. Journalize the necessary entries. The accounts have not been closed.
3. What is the amount of cash that should appear on the balance sheet as of July 31?
4. Assume that a canceled check for $125 has been incorrectly recorded by the bank as $125. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.
Check: 1. Adjusted Balance: $11,178.59
Click here for the solution: Rocky Mountain Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
Wednesday, October 14, 2015
The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below
E3-13 The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below.
GARCIA COMPANY
Trial Balance
August 31, 2008
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $10,400 $10,400
Accounts Receivable 8,800 9,800
Office Supplies 2,300 700
Prepaid Insurance 4,000 2,500
Office Equipment 14,000 14,000
Accumulated Depreciation–Office Equipment $3,600 $4,500
Accounts Payable 5,800 5,800
Salaries Payable -0- 1,100
Unearned Rent 1,500 600
Common Stock 10,000 10,000
Retained Earnings 5,600 5,600
Service Revenue 34,000 35,000
Rent Revenue 11,000 11,900
Salaries Expense 17,000 18,100
Office Supplies Expense -0- 1,600
Rent Expense 15,000 15,000
Insurance Expense -0- 1,500
Depreciation Expense -0- 900
$71,500 $71,500 $74,500 $74,500
Instructions
Prepare the adjusting entries that were made.
Click here for the solution: The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below
GARCIA COMPANY
Trial Balance
August 31, 2008
Before Adjustment After Adjustment
Dr. Cr. Dr. Cr.
Cash $10,400 $10,400
Accounts Receivable 8,800 9,800
Office Supplies 2,300 700
Prepaid Insurance 4,000 2,500
Office Equipment 14,000 14,000
Accumulated Depreciation–Office Equipment $3,600 $4,500
Accounts Payable 5,800 5,800
Salaries Payable -0- 1,100
Unearned Rent 1,500 600
Common Stock 10,000 10,000
Retained Earnings 5,600 5,600
Service Revenue 34,000 35,000
Rent Revenue 11,000 11,900
Salaries Expense 17,000 18,100
Office Supplies Expense -0- 1,600
Rent Expense 15,000 15,000
Insurance Expense -0- 1,500
Depreciation Expense -0- 900
$71,500 $71,500 $74,500 $74,500
Instructions
Prepare the adjusting entries that were made.
Click here for the solution: The trial balances before and after adjustment for Garcia Company at the end of its fiscal year is presented below
Sunday, September 27, 2015
Jennings Co. has earnings after interest but before taxes of $3,000
Jennings Co. has earnings after interest but before taxes of $3,000. The Company's times interest earned ratio is 7.00. Calculate the company's interest charges.
Click here for the solution: Jennings Co. has earnings after interest but before taxes of $3,000
Click here for the solution: Jennings Co. has earnings after interest but before taxes of $3,000
Tuesday, September 15, 2015
After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb
After securing lease commitments from several major stores, Auer
Shopping Center, Inc was organized and built a shopping center in a
growing suburb. The shopping center would had opened on scheduled
January 1, 2020 if it had not been struck by a severe tornado in
December. Instead, it opened for business on October 1, 2010. All of the
additional construction costs were incurred as a result of the tornado
were covered by insurance.
In July 2009, in anticipation of the scheduled January opening a permanent staff had been hired to promote the shopping center, obtain tenants for the uncommitted space and manager the property. A summary of some of the costs incurred in 2009 and the firs nine months of 2010 follows:
2009 January 1, 2010 to September 30, 2010
Interest on Mortgage Bonds 720,000 540,000
Cost of obtaining tenants 300,000 360,000
Promotional Advertising 540,000 557,000
The promotional advertising campaign was designed to familiarize shoppers the center. Had it been known in time that the center would not open until October 2010, the 2009 expenditure would not had been made. The advertising had to be repeated in 2010 .
All of the tenants who had leased space in the shopping center at the time of the tornado had accepted the October occupancy date on condition the rental charge for the first 9 months of 2010 was cancelled.
Instructions:
Explain how each of the costs for 2009 and the first 9 months of 2010 should be treated in the accounts of the shopping center corporation. Give reasons for each treatment?
Click here for the solution: After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb
In July 2009, in anticipation of the scheduled January opening a permanent staff had been hired to promote the shopping center, obtain tenants for the uncommitted space and manager the property. A summary of some of the costs incurred in 2009 and the firs nine months of 2010 follows:
2009 January 1, 2010 to September 30, 2010
Interest on Mortgage Bonds 720,000 540,000
Cost of obtaining tenants 300,000 360,000
Promotional Advertising 540,000 557,000
The promotional advertising campaign was designed to familiarize shoppers the center. Had it been known in time that the center would not open until October 2010, the 2009 expenditure would not had been made. The advertising had to be repeated in 2010 .
All of the tenants who had leased space in the shopping center at the time of the tornado had accepted the October occupancy date on condition the rental charge for the first 9 months of 2010 was cancelled.
Instructions:
Explain how each of the costs for 2009 and the first 9 months of 2010 should be treated in the accounts of the shopping center corporation. Give reasons for each treatment?
Click here for the solution: After securing lease commitments from several major stores, Auer Shopping Center, Inc was organized and built a shopping center in a growing suburb
The ledger of Amid Moshref and Alex Weekley, lawyers, contains the following accounts and balances after adjustments
The ledger of Amid Moshref and Alex Weekley, lawyers, contains the following accounts and balances after adjustments have been recorded on December 31, 2010:
Debit Credit
Balances Balances
Cash 24,200
Accounts Receivable 41,300
Supplies 6,700
Land 120,000
Building 160,000
Accumulated Amortization—Building 52,300
Office Equipment 53,000
Accumulated Amortization—Office Equipment 21,300
Accounts Payable 3,400
Salaries Payable 5,200
Amid Moshref, Capital 125,000
Amid Moshref, Withdrawals 50,000
Alex Weekley, Capital 160,000
Alex Weekley, Withdrawals 60,000
Professional Fees 562,200
Salaries Expense 312,300
Amortization Expense 81,700
Property Tax Expense 3,500
Heating and Lighting Expense 11,200
Supplies Expense 3,400
Miscellaneous Expense 2,100
929,400 929,400
The balance in Weekley’s capital account includes an additional investment of $20,000 made on April 5, 2010.
Instructions
1. Prepare an income statement for the current fiscal year, indicating the division of net income as shown on page 568. The articles of partnership provide for salary allowances of $60,000 to Moshref and $75,000 to Weekley, allowances of 12% on each partner’s capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss.
2. Prepare a statement of partners’ equity for 2010.
3. Prepare a balance sheet as of the end of 2010.
Check: 2. Dec. 31 capital—Weekley, $182,400
Click here for the solution: The ledger of Amid Moshref and Alex Weekley, lawyers, contains the following accounts and balances after adjustments
Debit Credit
Balances Balances
Cash 24,200
Accounts Receivable 41,300
Supplies 6,700
Land 120,000
Building 160,000
Accumulated Amortization—Building 52,300
Office Equipment 53,000
Accumulated Amortization—Office Equipment 21,300
Accounts Payable 3,400
Salaries Payable 5,200
Amid Moshref, Capital 125,000
Amid Moshref, Withdrawals 50,000
Alex Weekley, Capital 160,000
Alex Weekley, Withdrawals 60,000
Professional Fees 562,200
Salaries Expense 312,300
Amortization Expense 81,700
Property Tax Expense 3,500
Heating and Lighting Expense 11,200
Supplies Expense 3,400
Miscellaneous Expense 2,100
929,400 929,400
The balance in Weekley’s capital account includes an additional investment of $20,000 made on April 5, 2010.
Instructions
1. Prepare an income statement for the current fiscal year, indicating the division of net income as shown on page 568. The articles of partnership provide for salary allowances of $60,000 to Moshref and $75,000 to Weekley, allowances of 12% on each partner’s capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss.
2. Prepare a statement of partners’ equity for 2010.
3. Prepare a balance sheet as of the end of 2010.
Check: 2. Dec. 31 capital—Weekley, $182,400
Click here for the solution: The ledger of Amid Moshref and Alex Weekley, lawyers, contains the following accounts and balances after adjustments
Sunday, July 26, 2015
Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority
Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority. They filed suit against the utility, arguing, among other things, that the utility had breached the UCC implied warranty of merchantability when it sold them contaminated water. The utility moved to dismiss their complaint, arguing that since water was not “goods,” the UCC did not apply. Should the Galls’ complaint be dismissed?
Click here for the solution: Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority
Click here for the solution: Stephen Gall and his family became ill after drinking contaminated water supplied to their home by the McKeesport Municipal Water Authority
Tuesday, July 14, 2015
After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year
Panarude Airfreight is an international air freight hauler with more
than 45 jet aircraft operating in the United States and the Pacific Rim.
The firm is headquartered in Melbourne, Australia, and is organized
into five geographic areas: Australia, Japan, Taiwan, Korea, and the
United States. Sup-porting these areas are several centralized corporate
function services (cost centers): human resources, data processing,
fleet acquisition and maintenance, and telecommunications. Each
responsibility center has a budget, negotiated at the beginning of the
year with the vice president of finance. Funds unspent at the end of the
year do not carry over to the next fiscal year. The firm is on a
January-to-December fiscal year.
After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year. In particular, in the first nine months of the year, expenditure accounts typically show favorable variances (actual spending is less than budget), but in the last three months, unfavorable variances are the norm. In an attempt to smooth out these spending patterns, each responsibility center is reviewed at the end of each calendar quarter and any unspent funds can be deleted from the budget for the remainder of the year. The accompanying table shows the budget and actual spending in the telecommunications department for the first quarter of this year.
At the end of the first quarter, telecommunications’ total annual budget for this year can be reduced by $7,000, the total budget underrun in the first quarter. In addition, the remaining nine monthly budgets for telecommunications are reduced by $778 (or $7,000 / 9). If, at the end of the second quarter, telecommunications’ budget shows an unfavorable variance of, say, $8,000 (after the original budget is reduced for the first-quarter underrun), management of telecommunications is held responsible for the entire $8,000 unfavorable variance. The first-quarter underrun is not restored. If the second quarter budget variance is also favorable, the remaining six monthly budgets are each reduced further by one-sixth of the second-quarter favorable budget variance.
Required:
a. What behavior would this budgeting scheme engender in the responsibility center managers?
b. Compare the advantages and disadvantages of the previous budget regime, where any end-of-year budget surpluses do not carry over to the next fiscal year, with the system of quarterly budget adjustments just described.
Click here for the solution: After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year
After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year. In particular, in the first nine months of the year, expenditure accounts typically show favorable variances (actual spending is less than budget), but in the last three months, unfavorable variances are the norm. In an attempt to smooth out these spending patterns, each responsibility center is reviewed at the end of each calendar quarter and any unspent funds can be deleted from the budget for the remainder of the year. The accompanying table shows the budget and actual spending in the telecommunications department for the first quarter of this year.
At the end of the first quarter, telecommunications’ total annual budget for this year can be reduced by $7,000, the total budget underrun in the first quarter. In addition, the remaining nine monthly budgets for telecommunications are reduced by $778 (or $7,000 / 9). If, at the end of the second quarter, telecommunications’ budget shows an unfavorable variance of, say, $8,000 (after the original budget is reduced for the first-quarter underrun), management of telecommunications is held responsible for the entire $8,000 unfavorable variance. The first-quarter underrun is not restored. If the second quarter budget variance is also favorable, the remaining six monthly budgets are each reduced further by one-sixth of the second-quarter favorable budget variance.
Required:
a. What behavior would this budgeting scheme engender in the responsibility center managers?
b. Compare the advantages and disadvantages of the previous budget regime, where any end-of-year budget surpluses do not carry over to the next fiscal year, with the system of quarterly budget adjustments just described.
Click here for the solution: After reviewing the month-to-month variances, Panarude senior management became concerned about the increased spending occurring in the last three months of each fiscal year
Tuesday, July 7, 2015
(Bank reconciliation and entries) Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
PR 8-5A Bank reconciliation and entries
Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of June 30 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
AND SO ON
Instructions
1. Prepare a bank reconciliation as of June 30. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
2. Journalize the necessary entries. The accounts have not been closed.
3. What is the amount of Cash that should appear on the balance sheet as of June 30?
4. Assume that a canceled check for $270 has been incorrectly recorded by the bank as $720. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.
Check: 1. Adjusted Balance: $13,900.50
Click here for the solution: (Bank reconciliation and entries) Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of June 30 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.
AND SO ON
Instructions
1. Prepare a bank reconciliation as of June 30. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
2. Journalize the necessary entries. The accounts have not been closed.
3. What is the amount of Cash that should appear on the balance sheet as of June 30?
4. Assume that a canceled check for $270 has been incorrectly recorded by the bank as $720. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.
Check: 1. Adjusted Balance: $13,900.50
Click here for the solution: (Bank reconciliation and entries) Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours
You expect to receive a payment of 1,000,000 in British pounds after six months the pound is currently worth $1.60 (i.e. 1 pound = $1.60), but the six-month futures price is $1.56 (i.e. 1 pound = $1.56)
You expect to receive a payment of 1,000,000 in British pounds after six months the pound is currently worth $1.60 (i.e. 1 pound = $1.60), but the six-month futures price is $1.56 (i.e. 1 pound = $1.56). You expect the price of the pound to decline (i.e. the value of the dollar to rise.) If this expectation is fulfilled, you will suffer a loss when the pounds are converted into dollars when you receive them six months in the future.
a. Given the current price, what is the expected payment in dollars?
b. Given the futures price, how much would you receive in dollars?
c. If, after six months the pound is worth $1.35, what is your loss from the decline in the value of the pound?
d. To avoid this potential loss, you decide to hedge and sell a contract for the future delivery of pounds at the going futures price of $1.56. What is the cost to you of this protection from the possible decline in the value of the pound?
e. If, after hedging, the price of the pound falls to $1.35, what is the maximum amount that you lose? Why is your answer different from (c)?
f. If, after hedging the price of the pound rises to $1.80, how much do you gain from your position?
g. How would your answer to part (f) be different if you had not hedged and the price of the pound had risen to $1.80?
Click here for the solution: You expect to receive a payment of 1,000,000 in British pounds after six months the pound is currently worth $1.60 (i.e. 1 pound = $1.60), but the six-month futures price is $1.56 (i.e. 1 pound = $1.56)
a. Given the current price, what is the expected payment in dollars?
b. Given the futures price, how much would you receive in dollars?
c. If, after six months the pound is worth $1.35, what is your loss from the decline in the value of the pound?
d. To avoid this potential loss, you decide to hedge and sell a contract for the future delivery of pounds at the going futures price of $1.56. What is the cost to you of this protection from the possible decline in the value of the pound?
e. If, after hedging, the price of the pound falls to $1.35, what is the maximum amount that you lose? Why is your answer different from (c)?
f. If, after hedging the price of the pound rises to $1.80, how much do you gain from your position?
g. How would your answer to part (f) be different if you had not hedged and the price of the pound had risen to $1.80?
Click here for the solution: You expect to receive a payment of 1,000,000 in British pounds after six months the pound is currently worth $1.60 (i.e. 1 pound = $1.60), but the six-month futures price is $1.56 (i.e. 1 pound = $1.56)
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