I am going to work for a hospital, which is a not-for-profit organization

Exercise 3-16 “I am going to work for a hospital, which is a not-for-profit organization. Because there are no profits, I will not be able to apply any CVP analysis in my work.” Do you agree with this statement? Why or Why not?


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On September 25, 2010 a hurricane destroyed the work in process inventory of Biloxi Corporation

Cost Accounting Foundations and Evolutions 8e Kinney and Raiborn

On September 25, 2010 a hurricane destroyed the work in process inventory of Biloxi Corporation. At the time, the company was in the process of manufacturing two custom jobs (B325 and Q428). Although all of Biloxi’s on site accounting records were destroyed, the following information is available from some backup off site records.

• Biloxi Corp. applies overhead at the rate of 85 percent of direct labor cost.
• The cost of goods sold for the company average 75 percent of selling price. Sales from January 1 to the date of the hurricane totaled 1,598,000.
• The company wages rate for production employees is $12.90 per hour. A total 25,760 direct labor hours were recorded from January 1 through September 25.
• As of September 25, $21,980 of direct material and 128 hours of direct labor had been recorded for Job B325. Also at that time, $14,700 of direct material and 240 hours of direct labor had been recorded for Job Q428.
• As of January 1, 2010, inventories were follows $19,500 of Raw Material and $68,900 of Finished Goods. Raw Materials purchased during 2010 totaled $843,276.
• The amount of Work in Process Inventory at January 1, 2010 was $14,600. Jobs B325 and Q428 were not in process on January 1.
• One job, R91, was completed and in the warehouse awaiting shipment on September 25. The total cost of this job was $165,600.

Determine the following amounts:
a. Cost of goods sold for the year
b. Cost of goods manufactured during the year
c. Amount of applied overhead for each job in WIP Inventory
d. Cost of WIP Inventory destroyed by the hurricane
e. Cost of RM Inventory destroyed by the hurricane.


Click here for the solution: On September 25, 2010 a hurricane destroyed the work in process inventory of Biloxi Corporation

Assume that you recently graduated with a degree in finance and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc

Assume that you recently graduated with a degree in finance and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle Dellatorre, a professional tennis player who has just come to the United States from Chile. Dellatorre is a highly ranked tennis player who would like to start a company to produce and market apparel that she designs. She also expects to invest substantial amounts of money through Balik and Kiefer. Dellatorre is also very bright, and, therefore, she would like to understand, in general terms, what will happen to her money. Your boss has developed the following set of questions which you must ask and answer to explain the U.S. financial system to Dellatorre.

a.Why is corporate finance important to all managers?
b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.
c. How do corporations go public and continue to grow?
d.What should be the primary objective of managers?
e.What three aspects of cash flows affect the value of any investment?
f. What are free cash flows
g. What is the weighted average cost of capital?

AND SO ON


p. Briefly explain mortgage securitization and how it contributed to the global economic crisis.


Click here for the solution: Assume that you recently graduated with a degree in finance and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc

Conda Products Company implemented a JIT work environment in its trowel division eight months ago, and the division has been operating at near capacity since then

E 12. Conda Products Company implemented a JIT work environment in its trowel division eight months ago, and the division has been operating at near capacity since then. At the beginning of May, Work in Process Inventory and Finished Goods Inventory had zero balances. The following transactions took place last week:

May 28 Ordered, received, and used handles and sheet metal costing $11,340.
29 Direct labor costs incurred, $5,400.
29 Overhead costs incurred, $8,100.
30 Completed trowels costing $24,800.
31 Sold trowels costing $24,000.

Using backflush costing, calculate the ending balance in the Work in Process Inventory and Finished Goods Inventory accounts


Click here for the solution: Conda Products Company implemented a JIT work environment in its trowel division eight months ago, and the division has been operating at near capacity since then

Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years

P6-15 (Fair Value Estimate) Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years. According to state environmental laws, Murphy must restore the mine site to its original natural prairie state after it ceases mining operations at the site. To properly account for the mine, Murphy must estimate the fair value of this asset retirement obligation. This amount will be recorded as a liability and added to the value of the mine on Murphy's books. (You will learn more about these asset retirement obligations in Chapters 10 and 13.)

There is no active market for retirement obligations such as these, but Murphy has developed the following cash flow estimates based on its prior experience in mining-site restoration. It will take 3 years to restore the mine site when mining operations cease in 10 years. Each estimated cash outflow reflects an annual payment at the end of each year of the 3-year restoration period.

Restoration Estimated Cash Outflow
Probability Assessment
$15,000 10%
22,000 30%
25,000 50%
30,000 10%

Instructions
(a) What is the estimated fair value of Murphy's asset retirement obligation? Murphy determines that the appropriate discount rate for this estimation is 5%. Round calculations to the nearest dollar.
(b) Is the estimate developed for part (a) a Level 1 or Level 3 fair value estimate? Explain.

Click here for the solution: Murphy Mining Company recently purchased a quartz mine that it intends to work for the next 10 years

In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract

E18-5 (Analysis of Percentage-of-Completion Financial Statements) In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Steinrotter uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2010, follow.

Balance Sheet
Accounts receivable-construction contract billings $18,000
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500

Income Statement
Income (before tax) on the contract recognized in 2010 $19,500

Instructions
(a) How much cash was collected in 2010 on this contract?
(b) What was the initial estimated total income before tax on this contract?

Click here for the solution: In 2010, Steinrotter Construction Corp. began construction work under a 3-year contract

You have just started work for Warren Co. as part of the controller’s group involved in current financial reporting problems

(Issues Raised about Investment Securities) You have just started work for Warren Co. as part of the controller’s group involved in current financial reporting problems. Jane Henshaw, controller for Warren, is interested in your accounting background because the company has experienced a series of financial reporting surprises over the last few years. Recently, the controller has learned from the company’s auditors that there is authoritative literature that may apply to its investment in securities. She assumes that you are familiar with this pronouncement and asks how the following situations should be reported in the financial statements

Situation 1
Trading securities in the current assets section have a fair value that is $4,200 lower than cost.
Situation 2
A trading security whose fair value is currently less than cost is transferred to the available-for-sale category.
Situation 3
An available-for-sale security whose fair value is currently less than cost is classified as noncurrent but is to be reclassified as current.
Situation 4
A company’s portfolio of available-for-sale securities consists of the common stock of one company. At the end of the prior year, the fair value of the security was 50% of original cost, and this reduction in fair value was reported as an other than temporary impairment. However, at the end of the current year the fair value of the security had appreciated to twice the original cost.
Situation 5
The company has purchased some convertible debentures that it plans to hold for less than a year. The fair value of the convertible debentures is $7,700 below its cost.

Instructions
What is the effect upon carrying value and earnings for each of the situations above? Assume that these situations are unrelated.

Click here for the solution: You have just started work for Warren Co. as part of the controller’s group involved in current financial reporting problems

(Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract

ACC 421 Week 3

Exercise 18-5 (E18-5) (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth Botsford uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow.
Balance Sheet
Accounts receivable—construction contract billings $21,500
Construction in progress $65,000
Less: Contract billings 61,500
Cost of uncompleted contract in excess of billings 3,500
Income Statement
Income (before tax) on the contract recognized in 2007 $18,200

Instructions
(a) How much cash was collected in 2007 on this contract?
(b) What was the initial estimated total income before tax on this contract?

Click here for the solution: (Analysis of Percentage-of-Completion Financial Statements) In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract