For each of the following costs, identify whether the item is:
A variable or fixed cost?
Direct or indirect cost?
Controllable or uncontrollable cost?
For example: Plant Utilities would be a variable, indirect, and controllable cost.
Not all items will fit into each category. Items that do not fit a category should be labeled as not applicable.
Raw materials.
Staples used to secure packed boxes of the product.
Plant janitor’s wages.
Order processing clerk’s wages.
Advertising expenses.
Production worker’s wages.
Production supervisor’s salaries.
Sales force commissions.
Maintenance supplies used.
President’s salary.
Electricity cost for the office building.
Real estate taxes for the plant.
Production-run setup costs.
Depreciation of plant equipment.
Outbound shipping costs.
Use a table format to complete this assignment.
Click here for the solution: For each of the following costs, identify whether the item is:
Showing posts with label each. Show all posts
Showing posts with label each. Show all posts
Wednesday, April 13, 2016
(Cost of trade credit) Calculate the cost of skipping the discount and paying at the end of the net period for each of the following credit terms
A14. (Cost of trade credit) Calculate the cost of skipping the discount and paying at the end of the net period for each of the following credit terms. Calculate the APR and the APY.
a. 5/10, net 50
b. 3/15, net 30
c. 2/10, net 20
Click here for the solution: Calculate the cost of skipping the discount and paying at the end of the net period for each of the following credit terms
a. 5/10, net 50
b. 3/15, net 30
c. 2/10, net 20
Click here for the solution: Calculate the cost of skipping the discount and paying at the end of the net period for each of the following credit terms
Fill in the blanks for each of the following independent cases
2-29 Basic Review Exercises
Fill in the blanks for each of the following independent cases:
(a) (b) (c) (d) (e)
Selling Variable Total Total Total (f)
Price Cost Units Contribution Fixed Net
Case per Unit per Unit Sold Margin Costs Income
1 $25 $— 120,000 $720,000 $640,000 $ —
2 10 6 100,000 — 320,000 —
3 20 15 — 100,000 — 15,000
4 30 20 70,000 — — 12,000
5 — 9 80,000 160,000 110,000 —
Click here for the solution: Fill in the blanks for each of the following independent cases
Fill in the blanks for each of the following independent cases:
(a) (b) (c) (d) (e)
Selling Variable Total Total Total (f)
Price Cost Units Contribution Fixed Net
Case per Unit per Unit Sold Margin Costs Income
1 $25 $— 120,000 $720,000 $640,000 $ —
2 10 6 100,000 — 320,000 —
3 20 15 — 100,000 — 15,000
4 30 20 70,000 — — 12,000
5 — 9 80,000 160,000 110,000 —
Click here for the solution: Fill in the blanks for each of the following independent cases
Tuesday, April 12, 2016
(Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns
P6-2 (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns.
(a) What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,000 by the end of the eighth year, if the fund earns 8% interest, compounded annually?
(b) Robert Hitchcock is 40 years old today and he wishes to accumulate $500,000 by his sixty-fifth birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his fortieth through his sixty-fourth birthdays. What annual deposit must Robert make if the fund will earn 12% interest compounded annually?
(c) Diane Ross has $20,000 to invest today at 9% to pay a debt of $47,347. How many years will it take her to accumulate enough to liquidate the debt?
(d) Cindy Houston has a $27,600 debt that she wishes to repay 4 years from today; she has $19,553 that she intends to invest for the 4 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt?
Click here for the solution: (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns
(a) What is the amount of the payments that Ned Winslow must make at the end of each of 8 years to accumulate a fund of $90,000 by the end of the eighth year, if the fund earns 8% interest, compounded annually?
(b) Robert Hitchcock is 40 years old today and he wishes to accumulate $500,000 by his sixty-fifth birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his fortieth through his sixty-fourth birthdays. What annual deposit must Robert make if the fund will earn 12% interest compounded annually?
(c) Diane Ross has $20,000 to invest today at 9% to pay a debt of $47,347. How many years will it take her to accumulate enough to liquidate the debt?
(d) Cindy Houston has a $27,600 debt that she wishes to repay 4 years from today; she has $19,553 that she intends to invest for the 4 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt?
Click here for the solution: (Various Time Value Situations) Using the appropriate interest table, provide the solution to each of the following four questions by computing the unknowns
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
P21-1 Determining Type of Lease and Subsequent Accounting
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay $70,000 annually at the beginning of each year under the non-cancelable lease. Superior Equipment Company, the lessor, agrees to pay all executor costs, estimated to be $3,450 per year. The cost and also fair value of the equipment is 305,000. Its estimated life is 10 years. The estimated residual value at the end of five years is $64,000 and is not guaranteed by Alice; at the end of 10 years, it is $5,000. There is no bargain purchase option in the lease or any agreement to transfer ownership at the end of the lease to the lessee. The implicit interest rate is 12%. During 2010, Superior Equipment pays property taxes of $650, maintenance costs of $1,600, and insurance of $1,200. There are no important uncertainties surrounding the amount of un-reimbursable costs yet to be incurred by the lessor. Straight-line depreciation is considered the appropriate method both companies.
REQUIRED:
1.Identify the type of lease involved for Alice Company and Superior Equipment Company and give reasons for your classifications.
2.Prepare appropriate journal entries for 2010 for the lessee and lessor.
3.If the residual value at the end of five years is guaranteed by Alice, identify the type of lease. Prepare journal entries for 2010 and 2011 for the lessee and lessor. Also prepare the journal entries for the lessee and the lessor when the lessee pays the guaranteed residual value.
Click here for the solution: On January 1, 2010, the Alice Company leases equipment for five years, agreeing to pay $70,000 annually at the beginning of each year under the non-cancelable lease
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
Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components
Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components of an entity’s system of internal control to plan the audit of the entity’s financial statements and to assess control risk for the assertions embodied in the account balance, transaction class, and disclosure components of the financial statements.
Required
a. Explain the reasons an auditor may assess control risk at the maximum level for one or more assertions embodied in an account balance.
b. What must an auditor do to support assessing control risk at less than the maximum level when the auditor has determined that controls have been placed in operation?
c. What should an auditor consider when seeking a further reduction in the planned assessed level of control risk?
d. What are an auditor’s documentation requirements concerning an entity’s system of internal control and the assessed level of control risk?
AICPA (adapted)
Click here for the solution: Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components
Required
a. Explain the reasons an auditor may assess control risk at the maximum level for one or more assertions embodied in an account balance.
b. What must an auditor do to support assessing control risk at less than the maximum level when the auditor has determined that controls have been placed in operation?
c. What should an auditor consider when seeking a further reduction in the planned assessed level of control risk?
d. What are an auditor’s documentation requirements concerning an entity’s system of internal control and the assessed level of control risk?
AICPA (adapted)
Click here for the solution: Comprehensive Questions 11-21 (Assessing Control Risk) An auditor is required to obtain a sufficient understanding of each of the components
Monday, October 26, 2015
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
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
Wednesday, October 14, 2015
Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011.
1. Commercial paper.
2. Noncommitted line of credit.
3. Customer advances.
4. Estimated warranty cost.
5. Accounts payable.
6. Long-term bonds that will be callable by the creditor in ther upcoming year unless an existing violation is not corrected (there is a reasonable possibility the violation will be corrected within the grace period).
7. Note due March 3, 2012.
8. Interest accrued on note, Dec. 31, 2011.
9. Short-term bank loan to be paid with proceeds of sale of common stock.
10. A determinable gain that is contingent on a future event that appears extremely likely to occur in three months.
11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months.
12. Unasserted assessment of back taxes with a reasonable possibility of being asserted, in which case there would probably be a loss in 13 months.
13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months.
14. Bond sinking fund.
15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called.
Click here for the solution: Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
1. Commercial paper.
2. Noncommitted line of credit.
3. Customer advances.
4. Estimated warranty cost.
5. Accounts payable.
6. Long-term bonds that will be callable by the creditor in ther upcoming year unless an existing violation is not corrected (there is a reasonable possibility the violation will be corrected within the grace period).
7. Note due March 3, 2012.
8. Interest accrued on note, Dec. 31, 2011.
9. Short-term bank loan to be paid with proceeds of sale of common stock.
10. A determinable gain that is contingent on a future event that appears extremely likely to occur in three months.
11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months.
12. Unasserted assessment of back taxes with a reasonable possibility of being asserted, in which case there would probably be a loss in 13 months.
13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months.
14. Bond sinking fund.
15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called.
Click here for the solution: Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
Sunday, September 27, 2015
The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store. It was agreed as of June 30, 2008, to combine the partnerships to form a new partnership to be known as Discount Partnership. Trial balances of the two original partnerships as of June 30, 2008 follow.
Up & Down Back & Forth
Trial Balance Trial Balance
June 30, 2008 June 30, 2008
Cash $ 25,000 $ 20,000
Accounts Receivable 90,000 140,000
Allowance for Doubtful Accounts $ 2,000 $ 6,000
Merchandise Inventory 180,000 115,000
Land 25,000 35,000
Buildings and Equipment 80,000 125,000
Allowance for Depreciation 24,000 61,000
Prepaid Expenses 6,000 8,000
Accounts Payable 42,000 54,000
Notes Payable 65,000 74,000
Accrued Expenses 34,000 44,000
Up, Capital 95,000
Down, Capital 144,000
Back, Capital 65,000
Forth, Capital 139,000
Totals $406,000 $406,000 $443,000 $443,000
The following additional information is available.
1. The profit- and loss-sharing ratios for the former partnerships were 40% to Up and 60% to Down; 30% to Back and 70% to Forth. The profit- and loss-sharing ratio for the new partnership will be Up, 20%; Down, 30%; Back, 15%; and Forth, 35%.
2. The opening capital ratios for the new partnership are to be the same as the profit- and loss-sharing ratios for the new partnership. The capital assigned to Up & Down will total $225,000. Any cash settlements among the partners arising from capital account adjustments will be a private matter and will not be recorded on the partnership books.
3. The partners agreed that the allowance for bad debts for the new partnership is to be 4% of the accounts receivable balances.
4. The opening inventory of the new partnership is to be valued by the FIFO method. The inventory of Up & Down was valued by the FIFO method and the Back & Forth inventory was valued by the LIFO method. The LIFO inventory represents 80% of its FIFO value.
5. Depreciation is to be computed by the double-declining balance method with a 10-year life for the depreciable assets. Depreciation for three years is to be accumulated in the opening balance of the Allowance for Depreciation account. Up & Down computed depreciation by the straight-line method, and Back & Forth used the double-declining balance method. All assets were obtained on July 1, 2005.
6. After the books were closed, an unrecorded merchandise purchase of $4,000 by Back & Forth was discovered. The merchandise had been sold by June 30, 2008.
7. The accounts of Up & Down include a vacation pay accrual. It was agreed that Back & Forth should make a similar accrual for their 10 employees, who will receive a two-week vacation of $200 per employee per week.
Required:
A. Prepare a worksheet to determine the opening balances of a new partnership after giving effect to the information above. Formal journal entries are not required. Supporting computations, including the computation of goodwill, should be in good form.
B. Prepare a schedule computing the cash to be exchanged between Up & Down and between Back & Forth, in settlement of the affairs of each original partnership.
Click here for the solution: The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
Up & Down Back & Forth
Trial Balance Trial Balance
June 30, 2008 June 30, 2008
Cash $ 25,000 $ 20,000
Accounts Receivable 90,000 140,000
Allowance for Doubtful Accounts $ 2,000 $ 6,000
Merchandise Inventory 180,000 115,000
Land 25,000 35,000
Buildings and Equipment 80,000 125,000
Allowance for Depreciation 24,000 61,000
Prepaid Expenses 6,000 8,000
Accounts Payable 42,000 54,000
Notes Payable 65,000 74,000
Accrued Expenses 34,000 44,000
Up, Capital 95,000
Down, Capital 144,000
Back, Capital 65,000
Forth, Capital 139,000
Totals $406,000 $406,000 $443,000 $443,000
The following additional information is available.
1. The profit- and loss-sharing ratios for the former partnerships were 40% to Up and 60% to Down; 30% to Back and 70% to Forth. The profit- and loss-sharing ratio for the new partnership will be Up, 20%; Down, 30%; Back, 15%; and Forth, 35%.
2. The opening capital ratios for the new partnership are to be the same as the profit- and loss-sharing ratios for the new partnership. The capital assigned to Up & Down will total $225,000. Any cash settlements among the partners arising from capital account adjustments will be a private matter and will not be recorded on the partnership books.
3. The partners agreed that the allowance for bad debts for the new partnership is to be 4% of the accounts receivable balances.
4. The opening inventory of the new partnership is to be valued by the FIFO method. The inventory of Up & Down was valued by the FIFO method and the Back & Forth inventory was valued by the LIFO method. The LIFO inventory represents 80% of its FIFO value.
5. Depreciation is to be computed by the double-declining balance method with a 10-year life for the depreciable assets. Depreciation for three years is to be accumulated in the opening balance of the Allowance for Depreciation account. Up & Down computed depreciation by the straight-line method, and Back & Forth used the double-declining balance method. All assets were obtained on July 1, 2005.
6. After the books were closed, an unrecorded merchandise purchase of $4,000 by Back & Forth was discovered. The merchandise had been sold by June 30, 2008.
7. The accounts of Up & Down include a vacation pay accrual. It was agreed that Back & Forth should make a similar accrual for their 10 employees, who will receive a two-week vacation of $200 per employee per week.
Required:
A. Prepare a worksheet to determine the opening balances of a new partnership after giving effect to the information above. Formal journal entries are not required. Supporting computations, including the computation of goodwill, should be in good form.
B. Prepare a schedule computing the cash to be exchanged between Up & Down and between Back & Forth, in settlement of the affairs of each original partnership.
Click here for the solution: The partnerships of Up & Down and Back & Forth started in business on July 1, 2005; each partnership owns one retail appliance store
In each of the following independent cases the company closes its books on December 31
Problem: P14-5 -- Reporting Liabilities (Comprehensive Bond Problem)
In each of the following independent cases the company closes its books on December 31.
1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2010. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2013. The bonds yield 12%. Give entries through December 31, 2011.
2. Titania Co. sells $400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 10%. On October 1, 2011. Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2012.
Instructions
(Round to the nearest dollar.)
For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)
Click here for the solution: In each of the following independent cases the company closes its books on December 31
In each of the following independent cases the company closes its books on December 31.
1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2010. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2013. The bonds yield 12%. Give entries through December 31, 2011.
2. Titania Co. sells $400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yield 10%. On October 1, 2011. Titania buys back $120,000 worth of bonds for $126,000 (includes accrued interest). Give entries through December 1, 2012.
Instructions
(Round to the nearest dollar.)
For the two cases prepare all of the relevant journal entries from the time of sale until the date indicated. Use the effective-interest method for discount and premium amortization (construct amortization tables where applicable). Amortize premium or discount on interest dates and at year-end. (Assume that no reversing entries were made.)
Click here for the solution: In each of the following independent cases the company closes its books on December 31
Friday, September 25, 2015
Smith and Jones each own tracts of land
Smith and Jones each own tracts of land. Because of the location of
their current operations, each would prefer to have the other's land.
Smith and Jones agree to exchange tracts. Jones pays Smith $36,000 based
upon the following data.
Smith Land Jones Land
Original Cost $270,000 $280,000
Appraised fair value at date of exchange $300,000 $264,000
Instructions
(a) Prepare the journal entry to record the exchange on Smith's books, assuming the transaction has commercial substance.
(b) Prepare the journal entry to record the exchange on Smith's books, assuming the transaction does not have commercial substance.
(c) Prepare the journal entry to record the exchange on Jones’s books, assuming the transaction has commercial substance.
(d) Prepare the journal entry to record the exchange on Jones’s books, assuming the transaction does not have commercial substance.
Click here for the solution: Smith and Jones each own tracts of land
Smith Land Jones Land
Original Cost $270,000 $280,000
Appraised fair value at date of exchange $300,000 $264,000
Instructions
(a) Prepare the journal entry to record the exchange on Smith's books, assuming the transaction has commercial substance.
(b) Prepare the journal entry to record the exchange on Smith's books, assuming the transaction does not have commercial substance.
(c) Prepare the journal entry to record the exchange on Jones’s books, assuming the transaction has commercial substance.
(d) Prepare the journal entry to record the exchange on Jones’s books, assuming the transaction does not have commercial substance.
Click here for the solution: Smith and Jones each own tracts of land
Wednesday, September 23, 2015
For each of the following depreciable assets, determine the missing amount (?)
E11-5 Depreciation methods; solving for unknowns
For each of the following depreciable assets, determine the missing amount (?). Abbreviations for depreciation methods are SL for straight line, SYD for sum-of-the-years' digits, and DDB for double-declining balance.
Asset Cost Residual Value Service of Life Depreciation Method Depreciation (Yr 2)
A ? $20,000 5 DDB $24,000
B $40,000 ? 8 SYD 7,000
C 65,000 5,000 ? SL 6,000
D 230,000 10,000 10 ? 22,000
E 200,000 20,000 8 150% DB ?
Click here for the solution: For each of the following depreciable assets, determine the missing amount (?)
For each of the following depreciable assets, determine the missing amount (?). Abbreviations for depreciation methods are SL for straight line, SYD for sum-of-the-years' digits, and DDB for double-declining balance.
Asset Cost Residual Value Service of Life Depreciation Method Depreciation (Yr 2)
A ? $20,000 5 DDB $24,000
B $40,000 ? 8 SYD 7,000
C 65,000 5,000 ? SL 6,000
D 230,000 10,000 10 ? 22,000
E 200,000 20,000 8 150% DB ?
Click here for the solution: For each of the following depreciable assets, determine the missing amount (?)
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
2-19 Basic Concepts
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v) and whether they are most likely period costs (p) or product cost (m) and under full absorption costing.
1. Energy to run machines producing units of output in the factory.
2. Depreciation on the building for administrative staff offices.
3. Bonuses of top executives in the company.
4. Overtime pay for assembly workers.
5. Transportation-in costs on materials purchased.
6. Assembly line workers’ wages.
7. Sales commissions for sales personnel.
8. Administrative support for sales supervisors.
9. Controller’s office rental.
10. Cafeteria costs for the factory.
Click here for the solution: For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v) and whether they are most likely period costs (p) or product cost (m) and under full absorption costing.
1. Energy to run machines producing units of output in the factory.
2. Depreciation on the building for administrative staff offices.
3. Bonuses of top executives in the company.
4. Overtime pay for assembly workers.
5. Transportation-in costs on materials purchased.
6. Assembly line workers’ wages.
7. Sales commissions for sales personnel.
8. Administrative support for sales supervisors.
9. Controller’s office rental.
10. Cafeteria costs for the factory.
Click here for the solution: For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
Sunday, September 20, 2015
The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede
Problem 3.15 The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede:
ACTIVITY DURATION (WEEKS) PRECEDES
A (START) 1 B,C
B 1 E
C 4 F
E 2 F
F(END) 2 -
a) Draw an AON diagram of the project, including activity durations.
c) What is the project duration (in weeks)?
d) What is the slack (in weeks) associated with any and all noncritical paths through the project?
Click here for the solution: The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede
ACTIVITY DURATION (WEEKS) PRECEDES
A (START) 1 B,C
B 1 E
C 4 F
E 2 F
F(END) 2 -
a) Draw an AON diagram of the project, including activity durations.
c) What is the project duration (in weeks)?
d) What is the slack (in weeks) associated with any and all noncritical paths through the project?
Click here for the solution: The following is a table of activities associated with a project at Bill Figg Enterprises, their durations and what activities each must precede
Tuesday, September 15, 2015
The following situations are similar, but each represents a variation of a particular crime
7-1A. Types of Cyber Crimes. The following situations are similar, but
each represents a variation of a particular crime. Identify the crime
and point out the differences in the variations.
(a) Chen, posing fraudulently as Diamond Credit Card Co., e-mails Emily, stating that the company has observed suspicious activity in her account and observed suspicious activity in her account and has frozen the account. The e-mail asks her to re-register her credit-card number and password to reopen the account.
(b) Claiming falsely to be Big Buy Retail Finance Co,. Conner sends an e-mail to Dino, asking him to confirm or update his personal security information to prevent his Big Buy account from being discontinued.
(c) Felicia posts her resume on GoWork.com, an online job-posting site, seeking a position in business and managerial finance and accounting. Hayden, who misrepresents himself as an employment officer with International Bank & Commerce Corp., sends her an e-mail asking for more personal information.
Click here for the solution: The following situations are similar, but each represents a variation of a particular crime
(a) Chen, posing fraudulently as Diamond Credit Card Co., e-mails Emily, stating that the company has observed suspicious activity in her account and observed suspicious activity in her account and has frozen the account. The e-mail asks her to re-register her credit-card number and password to reopen the account.
(b) Claiming falsely to be Big Buy Retail Finance Co,. Conner sends an e-mail to Dino, asking him to confirm or update his personal security information to prevent his Big Buy account from being discontinued.
(c) Felicia posts her resume on GoWork.com, an online job-posting site, seeking a position in business and managerial finance and accounting. Hayden, who misrepresents himself as an employment officer with International Bank & Commerce Corp., sends her an e-mail asking for more personal information.
Click here for the solution: The following situations are similar, but each represents a variation of a particular crime
Sunday, September 13, 2015
5-53 For each of the following situations, evaluate the segregation of duties implemented by the company and indicate the following
5-53 (Segregation of Duties) For each of the following situations, evaluate the segregation of duties implemented by the company and indicate the following:
a. Any deficiency in the segregation of duties described. (Indicate none if no deficiency is present.)
b. The potential errors or irregularities that might occur because of the inadequate segregation of duties.
c. Compensation, or other, controls that might be added to mitigate potential misstatements.
d. A specific audit test that ought to be performed to determine whether a misstatement had occurred.
Situations:
1. The company’s payroll is computerized and is handled by one person in charge of payroll who enters all weekly time reports into the system. The payroll system is password so that only the payroll person can change pay rates or add/delete company personnel to the payroll file. Payroll checks are prepared weekly, and the payroll person batches the checks by supervisor or department head for subsequent distribution to employees.
2. XYZ is a relatively small organization but has segregated the duties of cash receipts and cash disbursements. However, the employee responsible for handling cash receipts also reconciles the monthly bank account.
3. Nick’s is a small family-owned restaurant in a northern resort area whose employees are trusted. When the restaurant is very busy, any of the wait staff has the ability to operate the cash register and collect the amounts due from the customer. All orders are tabulated on “tickets.” Although there is a place to indicate the waiter or waitress on each ticket, most d not bothers to do so, nor does management reconcile the ticket numbers and amounts with total cash receipts for the day.
4. A purchasing agent for JC Penney has the responsibility for ordering specific products, e.g., women’s clothes, and setting the prices for those products. The purchasing agent is eligible for a bonus based on the profitability of his or her line of business. The receipt, demonstration, and sale of the goods are handled by individuals who are separate from the purchasing agent.
5. Bass Pro Shops takes customer orders via a toll-free phone number. The order taker sits at a terminal and has complete access to the customer’s previous credit history and a list of inventory available for sale. The order clerk has the ability to input all the customer’s requests and generate a sales invoice and shipment with no additional supervisory review or approval.
6. The purchasing department of Big Dutch is organized around three purchasing agents. the first is responsible for ordering electrical gear and motors, the second orders fabrication material, and the third orders nuts and bolts and other smaller supplies that go into the assembly process. to improve the accountability to vendors, all receiving slips and vendor invoices are sent directly to the purchasing agent placing the order. This allows the purchasing agent to better monitor the performance of vendors. When approved by the purchasing agent for payment, the purchasing agent must forward (a) a copy of the purchase order, (b) a copy of the receiving slip, and (c) a copy of the vendor invoice to accounts payable for payment. Accounts payable will not pay an invoice unless all three items are present and match as to quantities, prices, and so forth. The receiving department reports to the purchasing department.
7. The employees of Americana TV and Appliance-a major electronics retailer-are paid based on their performance in generating profitable sales for the company. Each salesperson has the ability to modify a tagged sales price (within specified but very broad parameters). Once a sales price has been negotiated with the customer, an invoice is prepared. At the close of the day, the salesperson looks up the cost of the merchandise on a master price list. The salesperson then enters the cost of the merchandise on a master price list. The salesperson then enters the cost of the merchandise on the copy of the invoice and submits it to accounting for data entry and processing. The salesperson’s commission is determined by the gross margin realized on sales.
Click here for the solution: For each of the following situations, evaluate the segregation of duties implemented by the company and indicate the following
a. Any deficiency in the segregation of duties described. (Indicate none if no deficiency is present.)
b. The potential errors or irregularities that might occur because of the inadequate segregation of duties.
c. Compensation, or other, controls that might be added to mitigate potential misstatements.
d. A specific audit test that ought to be performed to determine whether a misstatement had occurred.
Situations:
1. The company’s payroll is computerized and is handled by one person in charge of payroll who enters all weekly time reports into the system. The payroll system is password so that only the payroll person can change pay rates or add/delete company personnel to the payroll file. Payroll checks are prepared weekly, and the payroll person batches the checks by supervisor or department head for subsequent distribution to employees.
2. XYZ is a relatively small organization but has segregated the duties of cash receipts and cash disbursements. However, the employee responsible for handling cash receipts also reconciles the monthly bank account.
3. Nick’s is a small family-owned restaurant in a northern resort area whose employees are trusted. When the restaurant is very busy, any of the wait staff has the ability to operate the cash register and collect the amounts due from the customer. All orders are tabulated on “tickets.” Although there is a place to indicate the waiter or waitress on each ticket, most d not bothers to do so, nor does management reconcile the ticket numbers and amounts with total cash receipts for the day.
4. A purchasing agent for JC Penney has the responsibility for ordering specific products, e.g., women’s clothes, and setting the prices for those products. The purchasing agent is eligible for a bonus based on the profitability of his or her line of business. The receipt, demonstration, and sale of the goods are handled by individuals who are separate from the purchasing agent.
5. Bass Pro Shops takes customer orders via a toll-free phone number. The order taker sits at a terminal and has complete access to the customer’s previous credit history and a list of inventory available for sale. The order clerk has the ability to input all the customer’s requests and generate a sales invoice and shipment with no additional supervisory review or approval.
6. The purchasing department of Big Dutch is organized around three purchasing agents. the first is responsible for ordering electrical gear and motors, the second orders fabrication material, and the third orders nuts and bolts and other smaller supplies that go into the assembly process. to improve the accountability to vendors, all receiving slips and vendor invoices are sent directly to the purchasing agent placing the order. This allows the purchasing agent to better monitor the performance of vendors. When approved by the purchasing agent for payment, the purchasing agent must forward (a) a copy of the purchase order, (b) a copy of the receiving slip, and (c) a copy of the vendor invoice to accounts payable for payment. Accounts payable will not pay an invoice unless all three items are present and match as to quantities, prices, and so forth. The receiving department reports to the purchasing department.
7. The employees of Americana TV and Appliance-a major electronics retailer-are paid based on their performance in generating profitable sales for the company. Each salesperson has the ability to modify a tagged sales price (within specified but very broad parameters). Once a sales price has been negotiated with the customer, an invoice is prepared. At the close of the day, the salesperson looks up the cost of the merchandise on a master price list. The salesperson then enters the cost of the merchandise on a master price list. The salesperson then enters the cost of the merchandise on the copy of the invoice and submits it to accounting for data entry and processing. The salesperson’s commission is determined by the gross margin realized on sales.
Click here for the solution: For each of the following situations, evaluate the segregation of duties implemented by the company and indicate the following
Friday, September 11, 2015
Explain why each of the following phrases or clauses is used rather than the alternative provided
Auditing P 3-26 A careful reading of an unqualified report indicates several important phrases.
Explain why each of the following phrases or clauses is used rather than the alternative provided:
a. "The financial statements referred to above present fairly in all material respects the financial position" rather than "The financial statements mentioned above are correctly stated."
b. "In conformity with accounting principles generally accepted in the United States of America" rather than "are properly stated to represent the true economic conditions."
c. "In our opinion, the financial statements present fairly" rather than "The financial statements present fairly."
d. "Brown & Phillips, CPAs (firm name)," rather than "James E. Brown, CPA (individual partner's name)."
e. "We conducted our audit in accordance with auditing standards generally accepted in the United States of America" rather than "Our audit was performed to detect material misstatements in the financial statements."
Click here for the solution: Explain why each of the following phrases or clauses is used rather than the alternative provided
Explain why each of the following phrases or clauses is used rather than the alternative provided:
a. "The financial statements referred to above present fairly in all material respects the financial position" rather than "The financial statements mentioned above are correctly stated."
b. "In conformity with accounting principles generally accepted in the United States of America" rather than "are properly stated to represent the true economic conditions."
c. "In our opinion, the financial statements present fairly" rather than "The financial statements present fairly."
d. "Brown & Phillips, CPAs (firm name)," rather than "James E. Brown, CPA (individual partner's name)."
e. "We conducted our audit in accordance with auditing standards generally accepted in the United States of America" rather than "Our audit was performed to detect material misstatements in the financial statements."
Click here for the solution: Explain why each of the following phrases or clauses is used rather than the alternative provided
Erika and Kitty who are twins just received $30,000 each for their 25th birthday
5-30 (Reaching a financial goal) Erika and Kitty who are twins just received $30,000 each for their 25th birthday. They both have aspirations to become millionaires. Each plans to make a $5,000 annual contribution to their “retirement fund”, on her birthday, beginning a year from today. Erika opened an account with Safety first bond fund, a mutual fund that invest in high quality bonds, whose investors have earned 6% per year in the past. Kitty invested in the new issue BIO-tech fund, which invest in small, newly issued bio-tech stocks and whose investors have earned an average 20% per year in the fund’s relatively short history.
a. If the two women’s funds earn the same returns in the future as in the past, how old will each be when they become millionaires?
b. How large will Erika’s annual contributions have to be for her to become a millionaire at the same age as Kitty, assuming their expected returns are realized?
c. Is it rational or irrational for Erika to invest in the bond fund rather than in stocks and why?
Click here for the solution: Erika and Kitty who are twins just received $30,000 each for their 25th birthday
a. If the two women’s funds earn the same returns in the future as in the past, how old will each be when they become millionaires?
b. How large will Erika’s annual contributions have to be for her to become a millionaire at the same age as Kitty, assuming their expected returns are realized?
c. Is it rational or irrational for Erika to invest in the bond fund rather than in stocks and why?
Click here for the solution: Erika and Kitty who are twins just received $30,000 each for their 25th birthday
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