Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory

E 9-21 Dollar-value LIFO retail

Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory. Accounting records provides the following information:

Merchandise Inventory, Jan 1, 2011 Cost 160,000 Retail 250,000
Net Purchases Cost 350,200 Retail 510,000
Net Markups Retail 7,000
Net Markdowns Retail 2,000
Net Sales Retail 380,000

Pertinent retail price indexes are as follows
January 1, 2011 1.00
December 31, 2011 1.10

Required:
Determine ending inventory and cost of goods sold.

Click here for the solution: Lance-Hefner Specialty Shoppes decided to use the dollar-value LIFO retail method to value its inventory

On December 31, Strike Company has decided to sell one of its batting cages

1. On December 31, Strike Company has decided to sell one of its batting cages. The initial cost of the equipment was $215,000 with an accumulated depreciation of $185,000. Depreciation has been taken up to the end of the year. The company found a company that is willing to buy the equipment for $55,000. What is the amount of the gain or loss on this transaction?

2. The proper journal entry to purchase a computer on account to be utilized within the business would be:

3. Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3,000 and an estimated useful life of 5 years. Determine the 2nd year’s depreciation using straight-line depreciation. Choose one answer.

4. A fixed asset with a cost of $41,000 and accumulated depreciation of $36,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the recognized loss on the trade is

5. The calculation for annual depreciation using the units-of-production method is

6. A fixed asset with a cost of $52,000 and accumulated depreciation of $47,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $5,000, the cost basis of the new asset is

7. When a company replaces a component of property, plant and equipment, which statement below does not account for one of the steps to this process?

8. All of the following below are needed for the calculation of straight-line depreciation except

9. Expenditures that add to the utility of fixed assets for more than one accounting period are

10. The exclusive right to use a certain name or symbol is called a

11.When the amount of use of a fixed asset varies from year to year, the method of determining depreciation expense that best matches allocation of cost with revenue is

12. A machine with a cost of $75,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second full year, using the double declining-balance method?

13. Expenditures for research and development are generally recorded as

14. Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

15. Which of the following should be included in the acquisition cost of a piece of equipment?

16. A fixed asset's estimated value at the time it is to be retired from service is called

17. Equipment with a cost of $130,000 has an estimated residual value of $10,000 and an estimated life of 5 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

18. The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is

19. The calculation for annual depreciation using the straight-line depreciation method is

20. On December 31, Strike Company has decided to trade-in one of its batting cages for another one that has a cost of $500,000. The seller of the batting cage is willing to allow a trade-in amount of $40,000. The initial cost of the old equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The difference will be paid in cash. What is the amount of the gain or loss on this transaction?

Click here for the solution: On December 31, Strike Company has decided to sell one of its batting cages

Desmond Drury and Ty Wilkins have decided to form a partnership

Desmond Drury and Ty Wilkins have decided to form a partnership. They have agreed that Drury is to invest $20,000 and that Wilkins is to invest $30,000. Drury is to devote full time to the business, and Wilkins is to devote one-half time. The following plans for the division of income are being considered:
a. Equal division.
b. In the ratio of original investments.
c. In the ratio of time devoted to the business.
d. Interest of 10% on original investments and the remainder in the ratio of 3:2.
e. Interest of 10% on original investments, salary allowances of $34,000 to Drury and $17,000 to Wilkins, and the remainder equally.
f. Plan (e), except that Drury is also to be allowed a bonus equal to 20% of the amount by which net income exceeds the salary allowances.

Instructions
For each plan, determine the division of the net income under each of the following assumptions: (1) net income of $150,000 and (2) net income of $66,000. Present the data in tabular form, using the following column headings:
$150,000 $66,000
Plan Drury Wilkins Drury Wilkins

Check: 1. f. Drury net income, $92,900


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Consider a firm that has decided to make, but has not yet announced, a large “bonus” cash dividend amounting in the aggregate to $5 million

B3. (Cash dividend versus share repurchase) Consider a firm that has decided to make, but has not yet announced, a large “bonus” cash dividend amounting in the aggregate to $5 million. The firm has 1 million shares outstanding that sell for $20 each. The firm has no debt; there are no taxes; and all transactions take place in a perfect capital market. Using calculations like those in the illustration of dividend irrelevance in a perfect capital market, show that shareholders will be indifferent between whether the firm pays out the “bonus” as a dividend or uses the money to buy back $5 million of its shares.


Click here for the solution: Consider a firm that has decided to make, but has not yet announced

Charlie's Pets succeeded so well that Charlie decided to manufacture his own brand of chewing bone—Fido Treats

P16-25A Charlie's Pets succeeded so well that Charlie decided to manufacture his own brand of chewing bone—Fido Treats. At the end of December 2012, his accounting records showed the following:

Inventories: Beginning Ending
Materials $ 13,400 $ 9,500
Work in process 0 2,000
Finished goods 0 5,300

Other information:
Direct material purchases $ 33,000 Utilities for plant $ 1,600
Plant janitorial services 800 Rent of plant 13,000
Sales salaries expense 5,000 Customer service hotline expense 1,400
Delivery expense 1,700 Direct labor 22,000
Sales revenue 109,000

Requirements
1.Prepare a schedule of cost of goods manufactured for Fido Treats for the year ended December 31, 2012.
2.Prepare an income statement for Fido Treats for the year ended December 31, 2012.
3.How does the format of the income statement for Fido Treats differ from the income statement of a merchandiser?
4.Fido Treats manufactured 18,075 units of its product in 2012. Compute the company's unit product cost for the year.


Click here for the solution: Charlie's Pets succeeded so well that Charlie decided to manufacture his own brand of chewing bone—Fido Treats

Sterling Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2012

E10-14 (Purchase of Equipment with Zero-Interest-Bearing Debt) Sterling Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2012, to expand its production capacity to meet customers’ demand for its product. Sterling issues a $900,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $180,000 installments due at the end of each year over the life of the note.

Instructions
(a) Prepare the journal entry(ies) at the date of purchase. (Round to nearest dollar in all computations.)
(b) Prepare the journal entry(ies) at the end of the first year to record the payment and interest, assuming that the company employs the effective-interest method.
(c) Prepare the journal entry(ies) at the end of the second year to record the payment and interest.
(d) Assuming that the equipment had a 10-year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year. (Straight-line depreciation is employed.)


Click here for the solution: Sterling Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2012

At the beginning of the 2010 school year, Britney Logan decided to prepare a cash budget for the months of September, October, November, and December

At the beginning of the 2010 school year, Britney Logan decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the soring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1(from a summer job) $7,000
Purchase season football tickets in September 100
Additional entertainment for each month 250
Pay fall semester tuition on September 3 3,800
Pay rent at the beginning of each month 350
Pay for food each month 200
Pay apartment deposit on September 2(to be returned Dec 15) 500
Part-time job earnings each month (net of taxes) 900

a. Prepare a cash budget for September, October, November, and December.
b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?
c. What are the budget implications for Britney Logan?

Click here for the solution: At the beginning of the 2010 school year, Britney Logan decided to prepare a cash budget for the months of September, October, November, and December

Bruno Company has decided to expand its operations

E5-5 (Preparation of a Corrected Balance Sheet) Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented on the next page in order to obtain additional funds for expansion.

BRUNO COMPANY
BALANCE SHEET
DECEMBER 31, 2010
Current assets
Cash $260,000
Accounts receivable (net) 340,000
Inventories at lower of average cost or market 401,000
Trading securities—at cost (fair value $120,000) 140,000
Property, plant, and equipment
Building (net) 570,000
Office equipment (net) 160,000
Land held for future use 175,000
Intangible assets
Goodwill 80,000
Cash surrender value of life insurance 90,000
Prepaid expenses 12,000
Current liabilities
Accounts payable 135,000
Notes payable (due next year) 125,000
Pension obligation 82,000
Rent payable 49,000
Premium on bonds payable 53,000
Long-term liabilities
Bonds payable 500,000
Stockholders’ equity
Common stock, $1.00 par, authorized
400,000 shares, issued 290,000 290,000
Additional paid-in capital 180,000
Retained earnings ?

Instructions
Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

Click here for the solution: Bruno Company has decided to expand its operations

On May 31, six brothers decided to form the Grimm Brothers Partnership to publish and print children's stories

On May 31, six brothers decided to form the Grimm Brothers Partnership to publish and print children's stories. The contributions of the brothers and their partnership interests are listed below. They share the economic risk of loss from liabilities according to their partnership interests.

Individual Asset Basis FMV Partnership to Partner Interest

Al Cash $15,000 $15,000 15%
Bob accounts Receiv. 0 20,000 20%
Clay Office equip. 13,000 15,000 15%
Dave Land 50,000 15,000 15%
Ed Building 15,000 150,000 20%
Fred Services ? 15,000 15%

The following other information about the contributions may be of interest:

1. Bob contributes accounts receivable from this proprietorship, which uses the cash method of accounting.
2. Clay uses the office equipment in a small business he owns. When he joins the partnership, he sells the remaining business assets to an outsider. He has claimed $8,000 of MACRS depreciation on the office equipment.
3. The partnership assumes a $130,000 mortgage on the building Ed contributes. Ed claimed $100,000 of straight-line MACRS depreciation on the commercial property.
4. Fred, an attorney, drew up all the partnership agreements and filed the neccessary paperwork. He receives a full 15% capital and profits interest for his services.

a. How much gain, loss or income must each partner recognize as a result of the formation?
b. How much gain, loss, or income must the partnership recognize as a result of the formation?
c. What is each partner's basis in the partnership interest?
d. What is the partnership's basis in its assets?
e. What is the partnership's initial book value of each asset?
f. What effects do the depreciation recapture provisions have on the property contributions?
g. How would your answer to Part a change if Fred received only a profits interest?
h. What are the tax consequences to the partners and the partnership when the partnership sells for $9,000 the land contributed by Dave? Prior to the sale, the partnership held the land as an investment for two years.

Click here for the solution: On May 31, six brothers decided to form the Grimm Brothers Partnership to publish and print children's stories

Martinez Company has decided to introduce a new product

Martinez Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows.

Capital-Intensive Labor-Intensive
Direct materials $5 per unit $5.50 per unit
Direct labor $6 per unit $8.00 per unit
Variable overhead $3 per unit $4.50 per unit
Fixed manufacturing costs $2,508,000 $1,538,000

Martinez's market research department has recommended an introductory unit sales price of $30. The incremental selling expenses are estimated to be $502,000 annually plus $2 for each unit sold, regardless of manufacturing method.

(a) Calculate the estimated break-even point in annual unit sales of the new product if Martinez Company uses the:
(1) Capital-intensive manufacturing method.
(2) Labor-intensive manufacturing method.
(b) Determine the annual unit sales volume at which Martinez Company would be indifferent between the two manufacturing methods.
(c) Explain the circumstance under which Martinez should employ each of the two manufacturing methods.

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(Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations

ACC 421  Week Four (Week 4)

Exercise 5-5 (E5-5) (Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

AND SO ON

Instructions
Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $160,000 and for the office equipment, $105,000. The allowance for doubtful accounts has a balance of $17,000. The pension obligation is considered a long-term liability.

Click here for the solution: (Preparation of a Corrected Balance Sheet) Uhura Company has decided to expand its operations