(ACC 422 Week 4) Leontyne Price Company from time to time embarks on a research program when a special project seems to offer possibilities

E12-16 (Accounting for R&D Costs) Leontyne Price Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2006 the company expends $325,000 on a research project, but by the end of 2006 it is impossible to determine whether any benefit will be derived from it.

Instructions
(a) What account should be charged for the $325,000, and how should it be shown in the financial statements?
(b) The project is completed in 2007, and a successful patent is obtained. The R&D costs to complete the project are $110,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2007 total $16,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2007.
(c) In 2008, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2015. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2008.
(d) Additional engineering and consulting costs incurred in 2008 required to advance the design of a product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably. Discuss the proper accounting treatment for this cost.

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Ramirez Company manufactures goods to special order and uses a job order cost system

Job order cost; journal entries; ending work in process; inventory analysis

Problem 1-8 Ramirez Company manufactures goods to special order and uses a job order cost system. During its first month of operations, the following selected transactions took place:
a. Materials purchased on account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,000
b. Materials issued to the factory:
Job 101 $ 2,200
Job 102 5,700
Job 103 7,100
Job 104 1,700
For general use in the factory 1,350
c. Factory wages and salaries earned:
Job 101 $ 2,700
Job 102 6,800
Job 103 9,200
Job 104 2,100
For general work in the factory 2,250
d. Miscellaneous factory overhead costs on account . . . . . . . . . . . . . . . $ 2,400
e. Depreciation of $2,000 on the factory machinery recorded.
f. Factory overhead allocated as follows:
Job 101 $ 1,200
Job 102 2,000
Job 103 3,800
Job 104 1,000
g. Jobs 101, 102, and 103 completed.
h. Jobs 101 and 102 shipped to the customer and billed at $30,900.

Required:
1. Prepare a schedule reflecting the cost of each of the four jobs.
2. Prepare journal entries to record the transactions. (One control account is used for Work in Process.)
3. Compute the ending balance in Work in Process.
4. Compute the ending balance in Finished Goods.


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Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party

Exercise 13-4 (Evaluating a Special Order) Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given as gifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and its unit product cost is $149.00 as shown below:

Direct materials . . . . . . . . . . . . . . . . . . . . $ 84.00
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . 45.00
Manufacturing overhead . . . . . . . . . . . . . 20.00
Unit product cost . . . . . . . . . . . . . . . . . . . $149.00

Most of the manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $4.00 of the overhead is variable with respect to the number of bracelets produced. The customer who is interested in the special bracelet order would like special filigree applied to the bracelets. This filigree would require additional materials costing $2.00 per bracelet and would also require acquisition of a special tool costing $250 that would have no other use once the special order is completed. This order would have no effect on the company’s regular sales and the order could be fulfilled using the company’s existing capacity without affecting any other order.

Required:
What effect would accepting this order have on the company’s net operating income if a special price of $169.95 per bracelet is offered for this order? Should the special order be accepted at this price?


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Olsson Company uses special strapping equipment in its packaging business

P11-9 (Impairment) Olsson Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2007 for $8,000,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2008, new technology was introduced that would accelerate the obsolescence of Olsson’s equipment. Olsson’s controller estimates that expected future net cash flows on the equipment will be $5,300,000 and that the fair value of the equipment is $4,400,000. Olsson intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Olsson uses straight line depreciation.

Instructions
(a) Prepare the journal entry (if any) to record the impairment at December 31, 2008.
(b) Prepare any journal entries for the equipment at December 31, 2009. The fair value of the equipment at December 31, 2009, is estimated to be $4,600,000.
(c) Repeat the requirements for (a) and (b), assuming that Olsson intends to dispose of the equipment and that it has not been disposed of as of December 31, 2009.

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Cantu was hired as a special education teacher by the San Benito Consolidated Independent School District under a one-year contract for the 1990–91 school year

Cantu was hired as a special education teacher by the San Benito Consolidated Independent School District under a one-year contract for the 1990–91 school year. On August 18, 1990, shortly before the start of the school year, Cantu hand-delivered to her supervisor a letter of resignation, effective August 17, 1990. In this letter, Cantu requested that her final paycheck be forwarded to an address in McAllen, Texas, some 50 miles from the San Benito office where she tendered the resignation. The San Benito superintendent of schools, the only official authorized to accept resignations on behalf of the school district, received Cantu’s resignation on Monday, August 20. The superintendent wrote a letter accepting Cantu’s resignation the same day and deposited the letter, properly stamped and addressed, in the mail at approximately 5:15 PM that afternoon. At about 8:00 AM the next morning, August 21, Cantu hand-delivered to the superintendent’s office a letter withdrawing her resignation. This letter contained a San Benito return address. In response, the superintendent hand-delivered that same day a copy of his letter mailed the previous day to inform Cantu that her resignation had been accepted and could not be withdrawn. The dispute was taken to the state commissioner of education, who concluded that the school district’s refusal to honor Cantu’s contract was lawful, because the school district’s acceptance of Cantu’s resignation was effective when mailed, which resulted in the formation of an agreement to rescind Cantu’s employment contract. Cantu argued that the mailbox rule should not apply because her offer was made in person and the superintendent was not authorized to accept by using mail. Is this a good argument?

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