The Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating room overhead. On November 1 of the current year, the annual operating room overhead is estimated to be:
Disposable supplies $150,000
Depreciation expense 27,000
Utilities 5,500
Nurse salaries 225,500
Technician wages 74,000
Total operating room overhead $492,000
The overhead costs will be assigned to procedures based on the number of surgical room hours. The Medical Center expects to use the operating room an average of eight hours per day, six days per week. In addition, the operating room will be shut down two weeks per year for general repairs.
a. Determine the predetermined operating room overhead rate for the year.
b. Gretchen Kelton had a 6 hour procedure on November 10. How much operating room overhead would be charged to her procedure, using the rate determined in part (a)?
c. During November, the operating room was used 192 hours. The actual overhead costs incurred for November were $38,500. Determine the overhead under-or over- applied for the period.
Click here for the solution: The Medical Center has a single operating room that is used by local physicians to perform surgical procedures
Showing posts with label local. Show all posts
Showing posts with label local. Show all posts
Wednesday, October 14, 2015
A local government has four federal grants
A local government has four federal grants. Expenditures amounted to $1,000,000 during the year that ended June 30, 2003, as follows:
Type A HHS grant, audited last year, no major findings $400,000
HHS grant, new this year and never audited 350,000
Type B Department of Transportation 205,000
FFA 45,000
Total all funds $1,000,000
a. Which grants would the auditor be required to audit, assuming the government is not found to be low risk?
b. Which grants would the auditor be required to audit, assuming the government is found to be low risk?
Click here for the solution: A local government has four federal grants
Type A HHS grant, audited last year, no major findings $400,000
HHS grant, new this year and never audited 350,000
Type B Department of Transportation 205,000
FFA 45,000
Total all funds $1,000,000
a. Which grants would the auditor be required to audit, assuming the government is not found to be low risk?
b. Which grants would the auditor be required to audit, assuming the government is found to be low risk?
Click here for the solution: A local government has four federal grants
Sunday, September 27, 2015
Accounts are listed below for a foreign subsidiary that maintains its books in its local currency
Exercise 13-1 Identifying the Exchange Rate
Accounts are listed below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming that the functional currency was identified (a) as the U.S. dollar and (b) as the foreign entity’s local currency. Use the following letters to identify the exchange rate:
H—historical exchange rate
C—current exchange rate
A—average exchange rate for the current period
Exchange Rate if the
Functional Currency Is:
Account U.S. Dollar Local Currency
Cash _____ __________
Accounts receivable _____ __________
Inventory carried at cost _____ __________
Inventory carried at market _____ __________
Prepaid rent _____ __________
Property, plant, and equipment _____ __________
Goodwill _____ __________
Accounts payable _____ __________
Bonds payable _____ __________
Unamortized premium on bonds payable _____ __________
Preferred stock carried at issuance price _____ __________
Common stock _____ __________
Sales _____ __________
Cost of goods sold _____ __________
Depreciation expense
Click here for the solution: Accounts are listed below for a foreign subsidiary that maintains its books in its local currency
Accounts are listed below for a foreign subsidiary that maintains its books in its local currency. The equity interest in the subsidiary was acquired in a purchase transaction. In the space provided, indicate the exchange rate that would be used to translate the accounts into dollars assuming that the functional currency was identified (a) as the U.S. dollar and (b) as the foreign entity’s local currency. Use the following letters to identify the exchange rate:
H—historical exchange rate
C—current exchange rate
A—average exchange rate for the current period
Exchange Rate if the
Functional Currency Is:
Account U.S. Dollar Local Currency
Cash _____ __________
Accounts receivable _____ __________
Inventory carried at cost _____ __________
Inventory carried at market _____ __________
Prepaid rent _____ __________
Property, plant, and equipment _____ __________
Goodwill _____ __________
Accounts payable _____ __________
Bonds payable _____ __________
Unamortized premium on bonds payable _____ __________
Preferred stock carried at issuance price _____ __________
Common stock _____ __________
Sales _____ __________
Cost of goods sold _____ __________
Depreciation expense
Click here for the solution: Accounts are listed below for a foreign subsidiary that maintains its books in its local currency
Friday, September 25, 2015
Where's the cash? (Ethics Case 21-7)
Ethics Case 21-7 Where's the cash?
After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben's initial excitement has turned to distress.
The cause of Ben's distress is the set of financial statements he's stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations.
Ben had sketched out the following comparison ($ in millions):
2011 2010 2009 2008
Income from Operations $140.0 $132.0 $127.5 $127.0
Net Income 38.5 35.0 34.5 29.5
Cash Flow from Operations 1.6 17.0 12.0 15.5
Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow which is consistently lower than net income.
Upon closer review, Ben noticed three events in the last two years that, unfortunately, seemed related:
a. Park's credit policy had been loosened; credit terms were relaxed and payment periods were lengthened.
b. Accounts receivable balances had increased dramatically.
c. Several of the company's compensation arrangements, including that of the controller and the company president, were based on reported net income.
Required:
1. What is so ominous about the combination of events Ben sees?
2. What course of action, if any, should Ben take?
Click here for the solution: Ethics Case 21-7 Where's the cash?
After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistant controller. This was last week. Now Ben's initial excitement has turned to distress.
The cause of Ben's distress is the set of financial statements he's stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations.
Ben had sketched out the following comparison ($ in millions):
2011 2010 2009 2008
Income from Operations $140.0 $132.0 $127.5 $127.0
Net Income 38.5 35.0 34.5 29.5
Cash Flow from Operations 1.6 17.0 12.0 15.5
Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow which is consistently lower than net income.
Upon closer review, Ben noticed three events in the last two years that, unfortunately, seemed related:
a. Park's credit policy had been loosened; credit terms were relaxed and payment periods were lengthened.
b. Accounts receivable balances had increased dramatically.
c. Several of the company's compensation arrangements, including that of the controller and the company president, were based on reported net income.
Required:
1. What is so ominous about the combination of events Ben sees?
2. What course of action, if any, should Ben take?
Click here for the solution: Ethics Case 21-7 Where's the cash?
Sunday, September 20, 2015
The board of trustees of a local church is concerned about the internal accounting controls pertaining
The board of trustees of a local church is concerned about the internal
accounting controls pertaining to the offering collections made at
weekly services. They ask you to serve on a three-person audit team with
the internal auditor of the university and a CPA who has just joined
the church. At a meeting of the audit team and the board of trustees you
learn the following.
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
1. The church’s board of trustees has delegated responsibility for the financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been made in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years. The church does not carry any fidelity insurance.
2. The collection at the weekly service is taken by a team of ushers who volunteer to serve for 1 month. The ushers take the collection plates to a basement office at the rear of the church. They hand their plates to the head usher and return to the church service. After all plates have been turned in, the head usher counts the cash received. The head usher then places the cash in the church safe along with a notation of the amount counted. The head usher volunteers to serve for 3 months.
3. The next morning the financial secretary opens the safe and recounts the collection. The secretary withholds $150 – $200 in cash, depending on the cash expenditures expected for the week, and deposits the remainder of the collections in the bank. To facilitate the deposit, church members who contribute by check are asked to make their checks payable to “Cash.”
4. Each month the financial secretary reconciles the bank statement and submits a copy of the reconciliation to the board of trustees. The reconciliations have rarely contained any bank errors and have never shown any errors per books.
Instructions
(a) Indicate the weaknesses in internal accounting control in the handling of collections.
(b) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.
(c) What church policies should be changed to improve internal control?
Click here for the solution: The board of trustees of a local church is concerned about the internal accounting controls pertaining
Tuesday, September 15, 2015
Suppose that Everett McCleskey, a local businessperson, is a good friend of Al Miller, the owner of a local candy store
9-1A. Express versus Implied Contracts. Suppose that Everett McCleskey, a
local businessperson, is a good friend of Al Miller, the owner of a
local candy store. Every day on his lunch hour, McCleskey goes into
Miller's candy store and spends about five minutes looking at the candy.
After examining Miller's candy and talking with Miller, McCleskey
usually buys one or two candy bars. One afternoon McCleskey goes into
Miller's candy shop, looks at the candy, and picks up a $1 candy bar.
Seeing that Miller is very busy, he waves the candy bar at Miller
without saying a word and walks out. Is there a contract? If so,
classify it.
Click here for the solution: Suppose that Everett McCleskey, a local businessperson, is a good friend of Al Miller, the owner of a local candy store
Click here for the solution: Suppose that Everett McCleskey, a local businessperson, is a good friend of Al Miller, the owner of a local candy store
Sunday, September 6, 2015
Farmer Frank’s produces items from local farm products and distributes them to supermarkets
Ethics and Standard Costs
Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company’s controller, is planning to implement a standard cost system for Farmer Frank’s. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $.60 per quart. Margaret is sure that the $.75 price will be enough to pull her friend’s farm out of the red and into the black.
Required:
Is Margaret’s behavior regarding the cost information she provided to Susan unethical? Explain your answer.
Click here for the solution: Farmer Frank’s produces items from local farm products and distributes them to supermarkets
Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company’s controller, is planning to implement a standard cost system for Farmer Frank’s. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $.60 per quart. Margaret is sure that the $.75 price will be enough to pull her friend’s farm out of the red and into the black.
Required:
Is Margaret’s behavior regarding the cost information she provided to Susan unethical? Explain your answer.
Click here for the solution: Farmer Frank’s produces items from local farm products and distributes them to supermarkets
Friday, August 21, 2015
Listed are typical financial activities of a local governmental unit
Exercise 17-2 (General Fund Journal Entries) Listed are typical financial activities of a local governmental unit.
1. The legislative unit approved the budget for the general operating fund. Estimated revenues are $4,000,000, and appropriations for expenditures are $3,800,000.
2. Statements of property tax assessments totaling $3,000,000 were mailed to property owners. It is estimated that 4% of the assessed taxes will be uncollectible.
3. Notification was received from the state that this unit’s share of sales tax revenues from the fourth quarter of the previous year will be $500,000.
4. The manager signed a contract to purchase equipment costing $250,000.
5. The equipment ordered above was received and paid for.
6. Employees were paid their biweekly wages of $36,000.
7. Property taxes in the amount of $2,050,000 were collected.
Required:
Prepare the necessary journal entries to record the transactions listed above in the records of the General Fund
Click here for the solution: Listed are typical financial activities of a local governmental unit
1. The legislative unit approved the budget for the general operating fund. Estimated revenues are $4,000,000, and appropriations for expenditures are $3,800,000.
2. Statements of property tax assessments totaling $3,000,000 were mailed to property owners. It is estimated that 4% of the assessed taxes will be uncollectible.
3. Notification was received from the state that this unit’s share of sales tax revenues from the fourth quarter of the previous year will be $500,000.
4. The manager signed a contract to purchase equipment costing $250,000.
5. The equipment ordered above was received and paid for.
6. Employees were paid their biweekly wages of $36,000.
7. Property taxes in the amount of $2,050,000 were collected.
Required:
Prepare the necessary journal entries to record the transactions listed above in the records of the General Fund
Click here for the solution: Listed are typical financial activities of a local governmental unit
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