E8-9 (Periodic versus Perpetual Entries) Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company.
Jan 2 Inventory 100 units at $5 each
4 Sale 80 units at $8 each
11 Purchase 150 units at $6 each
13 Sale 120 units at $8.75 each
20 Purchase 160 units at $7 each
27 Sale 100 units at $9 each
Instructions
a.) Assume Fong Sai-Yuk uses a periodic system. Prepare all necessary journal entries, including the end of month closing entry to record cost of goods sol. A physical count indicates that ending inventory for January is 110 units.
b.) Compute gross profit using the periodic system.
c.) Assume Fong Sai-Yuk uses a perpetual system. Prepare all necessary journal entries.
d.) Compute gross profit using the perpetual system.
Click here for the solution: Fong Sai-Yuk Company sells one product
Showing posts with label one. Show all posts
Showing posts with label one. Show all posts
Monday, March 21, 2016
Wednesday, November 11, 2015
South Carolina Corporation has one temporary difference at the end of 2008 that will reverse and cause taxable amounts
E19-1 (One Temporary difference, Future Taxable Amounts, One Rate, No Beginning Deferred Taxes) South Carolina Corporation has one temporary difference at the end of 2008 that will reverse and cause taxable amounts of $55,000 in 2009, $60,000 in 2010, and $65,000 in 2011. South Carolina's pretax financial income for 2008 is $300,000 and the tax rate us 30% for all years. There are no deferred taxes at the beginning of 2008.
Instructions
a.) Compute taxable income and income taxes payable for 20008.
b.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2008.
c.) Prepare the income tax expense section of the income statement for 2008, beginning with the line "Income before income taxes"
Click here for the solution: South Carolina Corporation has one temporary difference at the end of 2008 that will reverse and cause taxable amounts
Instructions
a.) Compute taxable income and income taxes payable for 20008.
b.) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2008.
c.) Prepare the income tax expense section of the income statement for 2008, beginning with the line "Income before income taxes"
Click here for the solution: South Carolina Corporation has one temporary difference at the end of 2008 that will reverse and cause taxable amounts
Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty
E13-10 (Warranties) Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty. Maintenance on each machine during the warranty period averages $330.
a.) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2008 were $17,000.
b.) Prepare 2008 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.
Click here for the solution: Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty
a.) Prepare entries to record the sale of the machines and the related warranty costs, assuming that the accrual method is used. Actual warranty costs incurred in 2008 were $17,000.
b.) Prepare 2008 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $150,000 relates to sales warranty contracts. Crow estimates the total cost of servicing the warranties will be $120,000 for 2 years. Estimate revenues earned on the basis of costs incurred and estimated costs.
Click here for the solution: Soundgarden Company sold 200 copymaking machines in 2008 for $4,000 apiece together with a one year warranty
Wednesday, October 14, 2015
Baucom Industries Inc. manufactures only one product
Baucom Industries Inc. manufactures only one product. For the year ended December 31, 2010, the contribution margin increased by 36,000 from the planned level of 720,000. The president of Baucom Industries Inc. has expressed some concern about such a small increase and has requested a follow-up report. The following data have been gathered from the accounting records for the year ended December 31, 2010.
Sales: Actual: 1,470,000 Planned: 1,440,000 Difference-Increase (Decrease): 30,000
Less: Variable cost of goods sold: Actual 560,000 Planned 592,000 Difference-Increase (Decrease): (32,000)
Variable selling and administrative expenses: Actual 154,000 Planned: 128,000 Difference-Increase (Decrease): 26,000
Total: Actual 714,000 Planned: 720,000
Difference-Increase (Decrease): (6,000)
Contribution Margin Actual 756,000 Planned 720,000 Difference-Increase (Decrease): 36,000
Number of units sold: Actual 14,000 Planned 16,000
Per unit:
Sales price: Actual 105.00 Planned 90.00
Variable cost of goods sold: Actual 40.00 Planned 37.00
Variable selling and administrative expenses: Actual 11.00 Planned 8.00
Instructions:
1. Prepare a contribution margin analysis report for the year ended Dec 31, 2010.
2. At a meeting of the board of directors on Jan 30, 2011, the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of 15.00 had the effect of decreasing sales volume. However, this was a favorable trade off. The variable cost of goods sold was less than planned. Apparently, we are efficiently managing our variable cost of goods sold. However, the variable selling and administrative expenses appear out of control. Let’s look into these expenses and get them under control. Also, let’s consider increasing the sales price to 120 and continue this favorable tradeoff between higher price and lower volume.
Do you agree with the President's comment? Explain.
Click here for the solution: Baucom Industries Inc. manufactures only one product
Sales: Actual: 1,470,000 Planned: 1,440,000 Difference-Increase (Decrease): 30,000
Less: Variable cost of goods sold: Actual 560,000 Planned 592,000 Difference-Increase (Decrease): (32,000)
Variable selling and administrative expenses: Actual 154,000 Planned: 128,000 Difference-Increase (Decrease): 26,000
Total: Actual 714,000 Planned: 720,000
Difference-Increase (Decrease): (6,000)
Contribution Margin Actual 756,000 Planned 720,000 Difference-Increase (Decrease): 36,000
Number of units sold: Actual 14,000 Planned 16,000
Per unit:
Sales price: Actual 105.00 Planned 90.00
Variable cost of goods sold: Actual 40.00 Planned 37.00
Variable selling and administrative expenses: Actual 11.00 Planned 8.00
Instructions:
1. Prepare a contribution margin analysis report for the year ended Dec 31, 2010.
2. At a meeting of the board of directors on Jan 30, 2011, the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of 15.00 had the effect of decreasing sales volume. However, this was a favorable trade off. The variable cost of goods sold was less than planned. Apparently, we are efficiently managing our variable cost of goods sold. However, the variable selling and administrative expenses appear out of control. Let’s look into these expenses and get them under control. Also, let’s consider increasing the sales price to 120 and continue this favorable tradeoff between higher price and lower volume.
Do you agree with the President's comment? Explain.
Click here for the solution: Baucom Industries Inc. manufactures only one product
Sunday, October 4, 2015
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
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
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
Friday, September 25, 2015
Scheer Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour
ACC 560 Week 7 Assignment
E11-6 Scheer Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,800 hours of labor are incurred at a cost of $12.10 per hour to produce 10,000 units of Product DD.
Instructions:
a) Compute the total labor variance.
b) Compute the labor price and quantity variances.
c) Repeat the previous question, assuming the standard is 4.2 hours of direct labor at $12.25 per hour.
Click here for the solution: Scheer Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour
E11-6 Scheer Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,800 hours of labor are incurred at a cost of $12.10 per hour to produce 10,000 units of Product DD.
Instructions:
a) Compute the total labor variance.
b) Compute the labor price and quantity variances.
c) Repeat the previous question, assuming the standard is 4.2 hours of direct labor at $12.25 per hour.
Click here for the solution: Scheer Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour
Jay Levitt Company produces one product, a putter called GO-Putter
E11-11 Jay Levitt Company produces one product, a putter called GO-Putter. Levitt uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $800,000 comprised of $200,000 of variable costs and $600,000 of fixed costs. Levitt applies overhead on the basis of direct labor hours.
During the current year, Levitt produced 90,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $186,000 and fixed overhead costs of $600,000.
Instructions:
a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
b) Compute the applied overhead for Levitt for the year.
c) Compute the total overhead variance.
Click here for the solution: Jay Levitt Company produces one product, a putter called GO-Putter
During the current year, Levitt produced 90,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $186,000 and fixed overhead costs of $600,000.
Instructions:
a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.
b) Compute the applied overhead for Levitt for the year.
c) Compute the total overhead variance.
Click here for the solution: Jay Levitt Company produces one product, a putter called GO-Putter
The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one
The Balboa Bottling Company is contemplating the replacement of one of
its bottling machines with a newer and more efficient one. The old
machine has a book value of $600,000 and a remaining useful life of 5
years. The firm does not expect to realize any return from scrapping the
old machine in 5 year, but it can sell it now to another firm in the
industry for $265,000. The old machine is being depreciated by $120,000
per year, using the straight line method.
The new machine has a purchase price of $1,175,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11% and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.
a) What is the initial net cash flow if the new machine is purchased and the old one is replaced?
b) Calculate the annual depreciation allowances for both machines, and compute the change in the annual depreciation expense if the replacement is made.
c) What are the incremental net cash flows in Years 1 through 5?
d) Should the firm purchase the new machine? Support your answer.
e) In general, how would each of the following factors affect the investment decision, and how should each be treated?
(1) The expected life of the existing machine decreases.
(2) The WACC is not constant but is increasing as Balboa adds more projects into its
capital budget for the year.
Click here for the solution: The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one
The new machine has a purchase price of $1,175,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11% and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.
a) What is the initial net cash flow if the new machine is purchased and the old one is replaced?
b) Calculate the annual depreciation allowances for both machines, and compute the change in the annual depreciation expense if the replacement is made.
c) What are the incremental net cash flows in Years 1 through 5?
d) Should the firm purchase the new machine? Support your answer.
e) In general, how would each of the following factors affect the investment decision, and how should each be treated?
(1) The expected life of the existing machine decreases.
(2) The WACC is not constant but is increasing as Balboa adds more projects into its
capital budget for the year.
Click here for the solution: The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one
TLC Corp. is considering purchasing one of two new diagnostic machines
E12-3 TLC Corp. is considering purchasing one of two new diagnostic
machines. Either machine would make it possible for the company to bid
on jobs that it currently isn't equipped to do. Estimates regarding each
machine are provided below.
Machine A Machine B
Original cost $78,000 $190,000
Estimated life 8 years 8 years
Salvage value 0 0
Estimated annual cash inflows $20,000 $40,000
Estimated annual cash outflows $5,000 $9,000
Instructions
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should be purchased?
Click here for the solution: TLC Corp. is considering purchasing one of two new diagnostic machines
Machine A Machine B
Original cost $78,000 $190,000
Estimated life 8 years 8 years
Salvage value 0 0
Estimated annual cash inflows $20,000 $40,000
Estimated annual cash outflows $5,000 $9,000
Instructions
Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. Which machine should be purchased?
Click here for the solution: TLC Corp. is considering purchasing one of two new diagnostic machines
Sunday, September 20, 2015
Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year
Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year. Is Georgia correct? Explain.
Click here for the solution: Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year
Click here for the solution: Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year
Sunday, September 13, 2015
(WorldCom Fraud) The WorldCom bankruptcy is one of the largest in U.S. economic history
13-35 (WorldCom Fraud) The WorldCom bankruptcy is one of the largest in U.S. economic history. Much of the fraud was carried out by capitalizing operating expenses such as payments to other companies for line rental, as fixed assets. Adjusting journal entries were made at the company’s headquarters in Mississippi even though property accounting records were located in Dallas.
Required:
1. Would it be considered unusual to find debits to fixed assets coming from a journal entry source rather than a purchase journal? Explain.
2. Would it be considered unusual to find entries to accumulated depreciation and depreciation expense to come from a journal entry source rather than another source?
3. Assume you were auditing WorldCom and in your sample of debits to fixed assets, you find an entry for $500,000 with the following notation:
“Capitalization of line capacity per CFO, amounts were originally incorrectly recorded as an expense.”
Explain what you would do to complete the audit of this item. What evidence would you need to see to either corroborate or question the entry?
Click here for the solution: (WorldCom Fraud) The WorldCom bankruptcy is one of the largest in U.S. economic history
Required:
1. Would it be considered unusual to find debits to fixed assets coming from a journal entry source rather than a purchase journal? Explain.
2. Would it be considered unusual to find entries to accumulated depreciation and depreciation expense to come from a journal entry source rather than another source?
3. Assume you were auditing WorldCom and in your sample of debits to fixed assets, you find an entry for $500,000 with the following notation:
“Capitalization of line capacity per CFO, amounts were originally incorrectly recorded as an expense.”
Explain what you would do to complete the audit of this item. What evidence would you need to see to either corroborate or question the entry?
Click here for the solution: (WorldCom Fraud) The WorldCom bankruptcy is one of the largest in U.S. economic history
Wednesday, September 2, 2015
In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
MULTIPLE CHOICE
1) In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component? (CMA adapted, 6/96)
2) You have been asked to help a student health center determine which costs will vary with the number of students who come to the health center. The health center employs one doctor, three nurses, and several other employees. How would you classify (1) the nurse's salary and (2) film and other materials used in radiology to give X-rays to students? The nurse’s salary would be considered a ______, while the film and other materials would be considered a ______.
3) Given the following information:
Sales $5,000
Fixed Expenses 2,000
Variable Expenses 1,750
What would expected net income be if the company experienced a 10 percent increase in fixed costs and 10 percent increase in sales volume?
4) Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.
5) Which of the following statements is (are) true?
(1). An asset is a cost that will be matched with revenues in a future accounting period.
(2). Opportunity costs are recorded as intangible assets in the current accounting period.
6) If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? The contribution margin ratio will _____ and the breakeven point will _____.
7) Which of the following activities would not be considered a value-added activity?
8) The development of just-in-time (JIT) methods of production focused on
9) The field of accounting that depends on generally accepted accounting principles (GAAP) is called
10) Inventoriable costs:
Click here for the solution: In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
1) In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component? (CMA adapted, 6/96)
2) You have been asked to help a student health center determine which costs will vary with the number of students who come to the health center. The health center employs one doctor, three nurses, and several other employees. How would you classify (1) the nurse's salary and (2) film and other materials used in radiology to give X-rays to students? The nurse’s salary would be considered a ______, while the film and other materials would be considered a ______.
3) Given the following information:
Sales $5,000
Fixed Expenses 2,000
Variable Expenses 1,750
What would expected net income be if the company experienced a 10 percent increase in fixed costs and 10 percent increase in sales volume?
4) Pete's Pizza Place wishes to determine which of its costs will vary with the number of pizzas made. The Pizza Place has four pizza makers and ten other employees who take orders from customers and perform other tasks. The four pizza makers and the other employees are paid an hourly wage. How would one classify (1) the wages paid to the pizza makers and other employees and (2) materials (e.g., cheeses, sauce, etc.) used to make the pizza? The employees’ wages would be considered a ______, while the materials to make the pizza are a ______.
5) Which of the following statements is (are) true?
(1). An asset is a cost that will be matched with revenues in a future accounting period.
(2). Opportunity costs are recorded as intangible assets in the current accounting period.
6) If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the breakeven point respectively? The contribution margin ratio will _____ and the breakeven point will _____.
7) Which of the following activities would not be considered a value-added activity?
8) The development of just-in-time (JIT) methods of production focused on
9) The field of accounting that depends on generally accepted accounting principles (GAAP) is called
10) Inventoriable costs:
Click here for the solution: In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?
Monday, August 31, 2015
Jill Loomis believes a current liability is a debt that can be expected to be paid in one year
1. Jill Loomis believes a current liability is a debt that can be expected to be paid in one year. Is Jill correct? Explain.
2. Frederickson Company obtains $40,000 in cash by signing a 9%, 6-month, $40,000 note payable to First Bank on July 1. Frederickson’s fiscal year ends on September 30. What
information should be reported for the note payable in the annual financial statements?
Click here for the solution: Jill Loomis believes a current liability is a debt that can be expected to be paid in one year
2. Frederickson Company obtains $40,000 in cash by signing a 9%, 6-month, $40,000 note payable to First Bank on July 1. Frederickson’s fiscal year ends on September 30. What
information should be reported for the note payable in the annual financial statements?
Click here for the solution: Jill Loomis believes a current liability is a debt that can be expected to be paid in one year
Sunday, August 23, 2015
Chippewas Company sells one product
(Periodic versus Perpetual Entries) Chippewas Company sells one product. Presented below is information for January for Chippewas Company.
Jan. 1 Inventory 100 units at $6 each
4 Sale 80 units at $8 each
11 Purchase 150 units at $6.50 each
13 Sale 120 units at $8.75 each
20 Purchase 160 units at $7 each
27 Sale 100 units at $9 each
Chippewas uses the FIFO cost flow assumption. All purchases and sales are on account.
(a) Assume Chippewas uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
(b) Compute gross profit using the periodic system.
(c) Assume Chippewas uses a perpetual system. Prepare all necessary journal entries.
(d) Compute gross profit using the perpetual system.
Click here for the solution: Chippewas Company sells one product
Jan. 1 Inventory 100 units at $6 each
4 Sale 80 units at $8 each
11 Purchase 150 units at $6.50 each
13 Sale 120 units at $8.75 each
20 Purchase 160 units at $7 each
27 Sale 100 units at $9 each
Chippewas uses the FIFO cost flow assumption. All purchases and sales are on account.
(a) Assume Chippewas uses a periodic system. Prepare all necessary journal entries, including the end-of-month closing entry to record cost of goods sold. A physical count indicates that the ending inventory for January is 110 units.
(b) Compute gross profit using the periodic system.
(c) Assume Chippewas uses a perpetual system. Prepare all necessary journal entries.
(d) Compute gross profit using the perpetual system.
Click here for the solution: Chippewas Company sells one product
Saturday, August 22, 2015
On January 1, 2010, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing $80,000, one-year note
P13-16 (Non-interest-bearing Note Payable: Present Value) On January 1, 2010, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing $80,000, one-year note. The face value of the note includes the price of the equipment and the interest. The effective interest rate is an annual rate of 16%, and the note is to be paid in four in four $20,000 quarterly installments. The price of the equipment is the present value of the four payments discounted at the effective interest rate.
1. Prepare all journal entries to record the preceding information. Present value techniques should be used.
2. If Northern’s financial statements were issued on June 30, 2010, what amount would the company report as notes payable?
Click here for the solution: On January 1, 2010, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing $80,000, one-year note
1. Prepare all journal entries to record the preceding information. Present value techniques should be used.
2. If Northern’s financial statements were issued on June 30, 2010, what amount would the company report as notes payable?
Click here for the solution: On January 1, 2010, Northern Manufacturing Company bought a piece of equipment by signing a non-interest-bearing $80,000, one-year note
Which of the following is NOT one of the purposes of internal control?
MULTIPLE CHOICE
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
1. Which of the following is NOT one of the purposes of internal control? (Points : 1)
2. Journal entries must be made to record the reconciling items on the bank side of the reconciliation. (Points : 1)
3. If the bank reconciliation includes a deposit in transit, a journal entry is required which includes a debit to cash. (Points : 1)
4. Check Number 6135 for $576 was incorrectly entered as $657. Which adjustment needs to be made? (Points : 1)
5. The Allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of Uncollectible account expense reported on the income statement? (Points : 1)
6. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the balance of the Allowance for uncollectible accounts reported on the balance sheet? (Points : 1)
7. Which of the following is NOT a key element of good internal control? (Points : 1)
8. The Allowance for uncollectible accounts currently has a credit balance of $900. After analyzing the accounts in the accounts receivable subsidiary ledger using the aging method, the company's management estimates that uncollectible accounts will be $15,000. What will be the amount of Uncollectible accounts expense reported on the income statement? (Points : 1)
9. A petty cash fund was established with a $400 balance. It currently has cash of $10 and petty cash tickets as shown below.
Travel expense $120
Office supplies $200
Equipment rental expense $70
The journal entry to replenish the account would be which of the following: (Points : 1)
10. In a bank reconciliation, an NSF check will be shown on the bank side of the reconciliation. (Points : 1)
Click here for the solution: Which of the following is NOT one of the purposes of internal control?
Friday, August 21, 2015
Which of the following companies would be MOST likely to have an operating cycle longer than one year
MULTIPLE CHOICE
1. Which of the following companies would be MOST likely to have an operating cycle longer than one year? (Points : 2)
2. Which of the following investments is NOT reported on the balance sheet at current market value? (Points : 2)
3. Marbella Company has an investment in stock, classified as available-for-sale, with the following information at December 31, 2007:
Cost = $240,000
Market value = $280,000
How would Marbella report this information? (Points : 2)
4. Cash received from the sale of long-term assets is reported as (Points : 2)
5. Emergent Markets Corporation purchased a machine for $200,000 on January 1, 2007. The estimated life is 10 years. What is the book value on the December 31, 2009 balance sheet assuming straight-line depreciation is used and estimated residual value is zero?(Points : 2)
6. The excess of cost over the fair market value of net assets acquired when one company purchases another company should be reported as a(n) (Points : 2)
7. Purple Company owns 25% of the common stock of Marroon after purchasing 45,000 shares of Marroon's stock at a price of $30 per share on January 1, 2007. At the end of the year, Marroon reported net income of $100,000 and paid dividends of $40,000. What is the book value of Purple Company's investment at year-end? (Points : 2)
8. Which statement below is true about a company's operating cycle? (Points : 2)
9. Investments in tangible assets by a company that are intended to be used in the future to manufacture and/or sell products are recorded in the books as (Points : 2)
10. The term "current assets" is usually used to refer to assets that (Points : 2)
11. Meteorite Company sells its Available-For-Sale stock investment at a price of $61 per share. It had originally been purchased at $20 per share and its most recent adjustment had been to a market value of $32 per share. What was the per share realized gain or loss on sale? (Points : 2)
12. Trading and available-for-sale securities are reported on the balance sheet at(Points : 2)
13. Which of the following is NOT an intangible asset? (Points : 2)
14. GAAP requires that intangibles other than goodwill be amortized over a period of: (Points : 2)
15. The "using-up" process or utilization of intangible assets is referred to as (Points : 2)
16. An expenditure that extends the life of an asset or enhances its value is a(n) (Points : 2)
17. The systematic allocation of the cost of a patent to the periods that benefit from its use is (Points : 2)
18. Machinery with a cost of $150,000 and a book value of $52,500 was sold for $15,000 cash plus a note receivable of $27,500. What was the net effect of this sale on the financial statement items listed below?
Assets Net Income (Points : 2)
19. A bond is purchased at a discount. What will happen to the net carrying value of the bond on the balance sheet as its maturity date approaches? (Points : 2)
20. When companies have a temporary surplus of cash, they often invest it in (Points : 2)
Click here for the solution: Which of the following companies would be MOST likely to have an operating cycle longer than one year
1. Which of the following companies would be MOST likely to have an operating cycle longer than one year? (Points : 2)
2. Which of the following investments is NOT reported on the balance sheet at current market value? (Points : 2)
3. Marbella Company has an investment in stock, classified as available-for-sale, with the following information at December 31, 2007:
Cost = $240,000
Market value = $280,000
How would Marbella report this information? (Points : 2)
4. Cash received from the sale of long-term assets is reported as (Points : 2)
5. Emergent Markets Corporation purchased a machine for $200,000 on January 1, 2007. The estimated life is 10 years. What is the book value on the December 31, 2009 balance sheet assuming straight-line depreciation is used and estimated residual value is zero?(Points : 2)
6. The excess of cost over the fair market value of net assets acquired when one company purchases another company should be reported as a(n) (Points : 2)
7. Purple Company owns 25% of the common stock of Marroon after purchasing 45,000 shares of Marroon's stock at a price of $30 per share on January 1, 2007. At the end of the year, Marroon reported net income of $100,000 and paid dividends of $40,000. What is the book value of Purple Company's investment at year-end? (Points : 2)
8. Which statement below is true about a company's operating cycle? (Points : 2)
9. Investments in tangible assets by a company that are intended to be used in the future to manufacture and/or sell products are recorded in the books as (Points : 2)
10. The term "current assets" is usually used to refer to assets that (Points : 2)
11. Meteorite Company sells its Available-For-Sale stock investment at a price of $61 per share. It had originally been purchased at $20 per share and its most recent adjustment had been to a market value of $32 per share. What was the per share realized gain or loss on sale? (Points : 2)
12. Trading and available-for-sale securities are reported on the balance sheet at(Points : 2)
13. Which of the following is NOT an intangible asset? (Points : 2)
14. GAAP requires that intangibles other than goodwill be amortized over a period of: (Points : 2)
15. The "using-up" process or utilization of intangible assets is referred to as (Points : 2)
16. An expenditure that extends the life of an asset or enhances its value is a(n) (Points : 2)
17. The systematic allocation of the cost of a patent to the periods that benefit from its use is (Points : 2)
18. Machinery with a cost of $150,000 and a book value of $52,500 was sold for $15,000 cash plus a note receivable of $27,500. What was the net effect of this sale on the financial statement items listed below?
Assets Net Income (Points : 2)
19. A bond is purchased at a discount. What will happen to the net carrying value of the bond on the balance sheet as its maturity date approaches? (Points : 2)
20. When companies have a temporary surplus of cash, they often invest it in (Points : 2)
Click here for the solution: Which of the following companies would be MOST likely to have an operating cycle longer than one year
Tuesday, August 18, 2015
Suppose the realized rate of return on the market portfolio is one percentage point greater than its expected return
Suppose the realized rate of return on the market portfolio is one percentage point greater than its expected return. How would the realized rate of return compare with the expected return of a security with a beta of +2?
Click here for the solution: Suppose the realized rate of return on the market portfolio is one percentage point greater than its expected return
Click here for the solution: Suppose the realized rate of return on the market portfolio is one percentage point greater than its expected return
Friday, August 14, 2015
The following three one-year "discount" loans are available to you
1. The following three one-year "discount" loans are available to you:
Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate
a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?
Click here for the solution: The following three one-year "discount" loans are available to you
Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate
a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?
Click here for the solution: The following three one-year "discount" loans are available to you
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