Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory

BE9-4 Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory. Required production for January and February of 2014 are 4,000 and 5,000 units, respectively. Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 25% of next month’s materials requirements. Prepare the direct materials budget for January.

Click here for the solution: Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory

On July 1, 20x1, Littleton Inc. loaned a key supplier of raw material $2,000,000 to construct a new processing facility

On July 1, 20x1, Littleton Inc. loaned a key supplier of raw material $2,000,000 to construct a new processing facility. The loan is due on July 1, 20x3 and pays interest each December 31 and June 30. The supplier insisted on a variable rate loan. The controller of Littleton wants to avoid the risk of variable rate fluctuation and entered into an interest rate swap in which it will pay the variable rate on $2,000,000 in exchange for a fixed rate of 8.3%. The swap is settled on the interest payment dates. Variable interest rates and the value of the swap on selected dates are as follow:

Variable rate Value of the swap
July1, 20x1 7.9%
December 31, 20x1 7.75% 10,400

Prepare all journal entries to record this hedge through December 20x1.

Click here for the solution: On July 1, 20x1, Littleton Inc. loaned a key supplier of raw material $2,000,000 to construct a new processing facility