Digital Tunes Inc. is in the business of developing, promoting, and selling musical talent on compact disc (CD)

PR 19-5A Digital Tunes Inc. is in the business of developing, promoting, and selling musical talent on compact disc (CD). The company signed a new group, called Smashing Britney, on January 1, 2010. For the first six months of 2010, the company spent $4,000,000 on a media campaign for Smashing Britney and $1,200,000 in legal costs. The CD production began on February 1, 2010.

Digital Tunes uses a job order cost system to accumulate costs associated with a CD title. The unit direct materials cost for the CD is:
Blank CD…………. $1.80
Jewel case………….. 0.60
Song lyric insert…… 0.60

The production process is straightforward. First, the blank CDs are brought to a production area where the digital soundtrack is copied onto the CD. The copying machine requires one hour per 2,400 CDs.

After the CDs are copied, they are brought to an assembly area where an employee packs the CD with a jewel case and song lyric insert. The direct labor cost is $0.25 per unit.

The CDs are sold to record stores. Each record store is given promotional materials, such as posters and aisle displays. Promotional materials cost $40 per record store. In addition, shipping costs average $0.25 per CD.

Total completed production was 1,000,000 units during the year. Other information is as follows:
Number of customers (record stores)………………….. 42,500
Number of CDs sold………………………………….. 850,000
Wholesale price (to record store) per CD…………………. $16

Factory overhead cost is applied to jobs at the rate of $1,200 per copy machine hour. There were an additional 25,000 copied CDs, packages, and inserts waiting to be assembled on December 31, 2010.

Instructions
1. Prepare an annual income statement for the Smashing Britney CD, including supporting calculations, from the information above.
2. Determine the balances in the work in process and finished goods inventory for the Smashing Britney CD on December 31, 2010.


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Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000)

Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000).

Gross $45,789
Accumulated Depreciation (26,328)
Net Fixed Assets $19,461

The capital plan already completed calls for expenditures of $7,042,000 on new equipment next year, which will be depreciated straight line over a 10-year period without a half-year convention. Assets currently on the books will depreciate by $4,258,000 next year. Develop Livetree’s ending fixed asset balances for the planned year.


Click here for the solution: Livetree Ltd. Is developing a detailed financial plan for next year and expects to have the following fixed asset accounts by the end of this year ($000)

Iridium Corp. has spent $3.5 billion over the past decade developing a satellite, based telecommunication system

Iridium Corp. has spent $3.5 billion over the past decade developing a satellite, based telecommunication system. It is currently trying to decide whether to spend an additional $350 million on the project. The firm expects that this outlay will finish the project and will generate cash flow of $15 million per year over the next 5 years. The competitor has offered $450 million for the satellites already in orbit. Classify the firm’s outlays as sunk costs or opportunity costs, and specify the relevant cash flows.

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Metro Video Inc. is developing its annual financial statements at December 31, 2011

Metro Video Inc. is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative sheets and income statement are summarized:
2011 2010
Balance sheet at December 31
Cash $68,250 $65,500
Accounts receivable 15,250 22,250
Merchandise inventory 22,250 18,000
Property and equipment 209,250 150,000
Less: Accumulated depreciation (59,000) (45,750)
Accounts payable $9,000 $19,000
Wages payable 4,000 1,200
Note payable, long-term 59,500 71,000
Contributed capital 98,500 65,900
Retained earnings 85,000 52,900
$256,000 $210,000

Income statement for 2011
Sales $195,00
Cost of goods sold 92,000
Depreciation expense 13,250
Other expenses 43,000
Net income $46,750
Additional Data:
a. Bought equipment for cash, $59,250
b. Paid $11,500 on the long-term note payable.
c. Issued new shares of stock for $32,600 cash.
d. Dividends of $14,650 were declared and paid.
e. Other expenses all relate to wages. f. Accounts payable includes only inventory purchases made on credit.
Required:
1. Prepare the statement of cash flows using the indirect method for the year ended December 31, 2011.
2. Based on the cash flow statement, write a short paragraph explaining the major sources and uses of cash by Metro Video during 2011. 

Click here for the solution: Metro Video Inc. is developing its annual financial statements at December 31, 2011