For each of the following costs, identify whether the item is:

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:

For the following investments identify whether they are

Exercise 17-1 (E17-1) (Investment Classifications) For the following investments identify whether they are:
1. Trading Securities
2. Available-for-Sale Securities
3. Held-to-Maturity Securities

Each case is independent of the other.
(a) A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold.
(b) 10% of the outstanding stock of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding stock.
(c) 10-year bonds were purchased this year. The bonds mature at the first of next year.
(d) Bonds that will mature in 5 years are purchased. The company would like to hold them until they mature, but money has been tight recently and they may need to be sold.
(e) Preferred stock was purchased for its constant dividend. The company is planning to hold the preferred stock for a long time.
(f) A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now.

Click here for the solution: For the following investments identify whether they are

The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier

ACC 560 Week 5 Assignment

P7-2A The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called WISCO, is a component of the company's finished product.

The following information was collected from the accounting records and production data for the year ending December 31, 2008.
1. 7,000 units of WISCO were produced in the Machining Department.
2. Variable manufacturing costs applicable to the production of each WISCO unit were: direct materials $4.80, direct labor $4.30, indirect labor $0.43, utilities $0.40.
3. Fixed manufacturing costs applicable to the production of WISCO were:
Cost Item Direct Allocated
Depreciation $2,100 $ 900
Property taxes 500 200
Insurance 900 600
$3,500 $1,700

All variable manufacturing and direct fixed costs will be eliminated if WISCO is purchased. Allocated costs will have to be absorbed by other production departments.

4. The lowest quotation for 7,000 WISCO units from a supplier is $70,000.
5. If WISCO units are purchased, freight and inspection costs would be $0.40 per unit, and receiving costs totaling $1,250 per year would be incurred by the Machining Department.

Hint: Make incremental analysis related to make or buy, consider opportunity cost, and identify nonfinancial factors.

Instructions
(a) Prepare an incremental analysis for WISCO. Your analysis should have columns for (1) Make WISCO, (2) Buy WISCO, and (3) Net Income Increase/(Decrease).
(b) Based on your analysis, what decision should management make?
(c) Would the decision be different if Borealis Company has the opportunity to produce $5,000 of net income with the facilities currently being used to manufacture WISCO? Show computations.
(d) What nonfinancial factors should management consider in making its decision?

Click here for the solution: The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier

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)

The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

E11-18 (Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future.

Instructions
(a) Prepare the journal entry (if any) to record the impairment at December 31, 2007.
(b) Where should the gain or loss (if any) on the write-down be reported in the income statement?
(c) At December 31, 2008, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value.
(d) What accounting issues did management face in accounting for this impairment?


Click here for the solution: The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence

Why is it important for a foreign national to ascertain whether he or she is a resident of the United States?

C:16-2 Why is it important for a foreign national to ascertain whether he or she is a resident of the United States?


Click here for the solution: Why is it important for a foreign national to ascertain whether he or she is a resident of the United States?

Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012

E15-18 Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:

2012 2011
Cash $ 58,000 $ 57,000
Short-term investments 31,000 —
Net receivables 110,000 132,000
Inventory 247,000 297,000
Total assets 585,000 535,000
Total current liabilities 255,000 222,000
Long-term note payable 46,000 48,000
Income from operations 180,000 153,000
Interest expense 52,000 39,000

Requirement
• 1.Compute the following ratios for 2012 and 2011:
o a.Current ratio
o b.Acid-test ratio
o c.Debt ratio
o d.Debt to equity ratio


Click here for the solution: Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012

Indicate whether each of the following statements is true or false

DO IT! 11-1

Indicate whether each of the following statements is true or false.

1. The corporation is an entity separate and distinct from its owners.
2. The liability of stockholders is normally limited to their investment in the corporation.
3. The relative lack of government regulation is an advantage of the corporate form of business.
4. There is no journal entry to record the authorization of capital stock.
5. No-par value stock is quite rare today.

Click here for the solution: Indicate whether each of the following statements is true or false

Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group

Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group or an affiliated group exists in each of the following independent situations. Circle Y for yes and N for no.

Situation Parent- Subsidiary Controlled Group? Affiliated Group?

Throughout the year, Parent owns 65% of the stock of SubCo. Y N Y N

Parent owns 70% of SubCo. The other 30% of SubCo stock is owned by Senior, a wholly owned subsidiary of Parent. Y N Y N

For 11 months, Parent owns 75% of the stock of SubCo. For the last month of the tax year, Parent owns 100% of the SubCo stock. Y N Y N

Click here for the solution: Apply the controlled and affiliated group rules to determine whether a parent-subsidiary controlled group

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should

E24-2 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company’s assets.
______ 5. Retirement of the company president.
______ 6. Issuance of a significant number of shares of common stock.
______ 7. Loss of a significant customer.
______ 8. Prolonged employee strike.
______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year’s litigation against the company.
______ 12. Merger with another company of comparable size.

Click here for the solution: For each of the following subsequent (post-balance-sheet) events, indicate whether a company should

The Management of Russel Inc. is trying to decide whether it can increase its dividend

BE13-11 The Management of Russel Inc. is trying to decide whether it can increase its dividend. During the current year, it reported net income of $875,000. It had cash provided by operating activities of $643,000, paid cash dividends of $80,000, and had capital expenditures of $280,000.

Compute the company’s free cash flow, and discuss whether an increase in the dividend appears warranted. What other factors should be considered?

Click here for the solution: The Management of Russel Inc. is trying to decide whether it can increase its dividend

Howell Auto Parts is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement

Lease versus purchase decision (LO4) Howell Auto Parts is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement. If the company purchases the asset, the cost will be $10,000. It can borrow funds for four years at 12 percent interest. The firm will use the three-year MACRS depreciation category (with the associated four-year write-off). Assume a tax rate of 35 percent.

The other alternative is to sign two operating leases, one with payments of $2,600 for the first two years, and the other with payments of $4,600 for the last two years. In your analysis, round all values to the nearest dollar.

a. Compute the aftertax cost of the leases for the four years.
b. Compute the annual payment for the loan (round to the nearest dollar).
c. Compute the amortization schedule for the loan. (Disregard a small difference from a zero balance at the end of the loan due to rounding.)
d. Determine the depreciation schedule (see Table 12–9).
e. Compute the aftertax cost of the borrow–purchase alternative.
f. Compute the present value of the aftertax cost of the two alternatives. Use a discount rate of 8 percent.
g. Which alternative should be selected, based on minimizing the present value of aftertax costs?

Click here for the solution: Howell Auto Parts is considering whether to borrow funds and purchase an asset or to lease the asset under an operating lease arrangement

Pack & Carry is debating whether to invest in new equipment to manufacture a line of high-quality luggage

Pack & Carry is debating whether to invest in new equipment to manufacture a line of high-quality luggage. The new equipment would cost $1,728,125, with an estimated five-year life and no salvage value. The estimated annual operating results with the new equipment are as follows:

Revenue from Sales of New Luggage $800,000

Expenses Other Than Depreciation $306,250

Depreciation (Straight-Line Basis) 345,625 651,875

Increase in Net Income from the New Line 148,125

All revenue from the new luggage line and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes. You are to compute the following for the investment in the new equipment to produce the new luggage line:

a. Annual cash flows.

b. Payback period.

c. Return on average investment.

d. Total present value of the expected future annual cash inflows, discounted at an annual rate of 10 percent.

e. Net present value of the proposed investment discounted at 10 percent.

Click here for the solution: Pack & Carry is debating whether to invest in new equipment to manufacture a line of high-quality luggage

ACC 421 Week 4 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should

ACC 421 Week 4

Exercise 24-2 (E24-2) (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company’s assets.
______ 5. Retirement of the company president.
______ 6. Prolonged employee strike.
______ 7. Loss of a significant customer.
______ 8. Issuance of a significant number of shares of common stock.
______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year’s litigation against the company.
______ 12. Merger with another company of comparable size.

Click here for the solution: ACC 421 Week 4 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should