Manning Co. manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 18,000 trophies each month; current monthly production is 15,300 trophies. The company normally charges $141 per trophy. Cost data for the current level of production are shown below:
Direct materials 948,600
Direct Labor 290,700
Selling and administrative 41,310
Fixed Cost manufacturing 579,870
Selling administrative 134,640
The company has just received a special one-time order for 900 trophies at $73 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs. Required: Should the company accept this special order? Why?
Click here for the solution: Manning Co. manufactures and sells trophies for winners of athletic and other events
Saturday, August 22, 2015
Ivy Enterprises Inc. manufactures bathroom fixtures
Ivy Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Ivy Enterprises Inc., with balances on January 1, 2010, are as follows:
AND SO ON
The following selected transactions occurred during the year:
Jan. 7. Paid cash dividends of $0.18 per share on the common stock. The dividend had been properly recorded when declared on November 30 of the preceding fiscal year for $66,600.
Feb. 9. Issued 50,000 shares of common stock for $600,000
May 21. Sold all of the treasury stock for $300,000
July 1. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $13 per share.
Aug. 15. Issued the certificates for the dividend declared on July 1
Sept. 30. Purchased 10,000 shares of treasury stock for $100,000
Dec. 27. Declared a $0.20-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $485,000.
31. Closed the two dividends accounts to Retained Earnings.
Instructions
1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.
2. Journalize the entries to record the transactions, and post to the eight selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 2010.
4. Prepare the Stockholders’ Equity section of the December 31, 2010, balance sheet.
Check: Total stockholders’ equity $ 11,853,400
Click here for the solution: Ivy Enterprises Inc. manufactures bathroom fixtures
AND SO ON
The following selected transactions occurred during the year:
Jan. 7. Paid cash dividends of $0.18 per share on the common stock. The dividend had been properly recorded when declared on November 30 of the preceding fiscal year for $66,600.
Feb. 9. Issued 50,000 shares of common stock for $600,000
May 21. Sold all of the treasury stock for $300,000
July 1. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $13 per share.
Aug. 15. Issued the certificates for the dividend declared on July 1
Sept. 30. Purchased 10,000 shares of treasury stock for $100,000
Dec. 27. Declared a $0.20-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $485,000.
31. Closed the two dividends accounts to Retained Earnings.
Instructions
1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.
2. Journalize the entries to record the transactions, and post to the eight selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 2010.
4. Prepare the Stockholders’ Equity section of the December 31, 2010, balance sheet.
Check: Total stockholders’ equity $ 11,853,400
Click here for the solution: Ivy Enterprises Inc. manufactures bathroom fixtures
Frank Lou had recently been promoted to construction manager at a development firm
Fraud Case 14-1 Frank Lou had recently been promoted to construction manager at a development firm. He was responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for the new high-rise. Times were tough, several contractors had gone under recently, and the ones left standing were viciously competitive. That morning, four bids were sitting on Frank’s desk. The deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely, was a tough but personable character that Frank had known for years. Frank had lunch with him today, and after a few beers, Bo hinted that if Frank "inadvertently" mentioned the amount of the lowest bid, he'd receive a "birthday card" with a gift of cash. After lunch, Frank carefully unsealed the bids and noticed that another firm had underbid Bo's company by a small margin. Frank took Bo's bid envelope, wrote the low bid amount in pencil on it, and carried it downstairs where Bo's son William was waiting. Later that afternoon, a new bid came in from Bo's company. The next day, Bo's company got the job, and Frank got a birthday card in his mailbox.
Requirements
• Was Frank's company hurt in any way by this fraudulent action?
• How could this action hurt Frank?
• How can a business protect against this kind of fraud?
Click here for the solution: Frank Lou had recently been promoted to construction manager at a development firm
Requirements
• Was Frank's company hurt in any way by this fraudulent action?
• How could this action hurt Frank?
• How can a business protect against this kind of fraud?
Click here for the solution: Frank Lou had recently been promoted to construction manager at a development firm
Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications
Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications. Upon completion of the engines, Winston has agreed to lease them for a period of 10 years and to assume all costs and risks of ownership. The lease is non-cancelable, becomes effective on January 1, 2011, and requires annual rental payments of $413,971 each January 1, starting January 1, 2011. Winston’s incremental borrowing rate is 10%. The implicit interest rate used by Ewing Inc. and known to Winston is 8%. The total cost of building the three engines is $2,600,000. The economic life of the engines is estimated to be 10 years, with residual value set at zero. Winston depreciates similar equipment on a straight-line basis. At the end of the lease, Winston assumes title to the engines. Collectibility of the lease payments is reasonably certain; no uncertainties exist relative to un-reimbursable lessor costs.
(Round all numbers to the nearest dollar.)
(a) Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor.
(b) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Winston Industries.
(c) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Ewing Inc.
(d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2011.
(e) Prepare the journal entries for both the lessee and lessor to record interest expense (revenue) at December 31, 2011. (Prepare a lease amortization schedule for 2 years.)
(f) Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2011, for both the lessee and the lessor.
Click here for the solution: Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications
(Round all numbers to the nearest dollar.)
(a) Discuss the nature of this lease transaction from the viewpoints of both lessee and lessor.
(b) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Winston Industries.
(c) Prepare the journal entry or entries to record the transaction on January 1, 2011, on the books of Ewing Inc.
(d) Prepare the journal entries for both the lessee and lessor to record the first rental payment on January 1, 2011.
(e) Prepare the journal entries for both the lessee and lessor to record interest expense (revenue) at December 31, 2011. (Prepare a lease amortization schedule for 2 years.)
(f) Show the items and amounts that would be reported on the balance sheet (not notes) at December 31, 2011, for both the lessee and the lessor.
Click here for the solution: Winston Industries and Ewing Inc. enter into an agreement that requires Ewing Inc. to build three diesel-electric engines to Winston’s specifications
You have the following information for Bernelli Diamonds
P6-6A You have the following information for Bernelli Diamonds. Bernelli Diamonds uses the periodic method of accounting for its inventory transactions. Bernelli only carries one brand and size of diamonds—all are identical. Each batch of diamonds purchased is carefully coded and marked with its purchase cost.
March 1 Beginning inventory 150 diamonds at a cost of $300 per diamond.
March 3 Purchased 200 diamonds at a cost of $350 each.
March 5 Sold 180 diamonds for $600 each.
March 10 Purchased 350 diamonds at a cost of $375 each.
March 25 Sold 400 diamonds for $650 each.
Instructions
(a) Assume that Bernelli Diamonds uses the specific identification cost flow method.
(1) Demonstrate how Bernelli Diamonds could maximize its gross profit for the month by specifically selecting which diamonds to sell on March 5 and March 25.
(2) Demonstrate how Bernelli Diamonds could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25.
(b) Assume that Bernelli Diamonds uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would Bernelli Diamonds report under this cost flow assumption?
(c) Assume that Bernelli Diamonds uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?
(d) Which cost flow method should Bernelli Diamonds select? Explain.
Click here for the solution: You have the following information for Bernelli Diamonds
March 1 Beginning inventory 150 diamonds at a cost of $300 per diamond.
March 3 Purchased 200 diamonds at a cost of $350 each.
March 5 Sold 180 diamonds for $600 each.
March 10 Purchased 350 diamonds at a cost of $375 each.
March 25 Sold 400 diamonds for $650 each.
Instructions
(a) Assume that Bernelli Diamonds uses the specific identification cost flow method.
(1) Demonstrate how Bernelli Diamonds could maximize its gross profit for the month by specifically selecting which diamonds to sell on March 5 and March 25.
(2) Demonstrate how Bernelli Diamonds could minimize its gross profit for the month by selecting which diamonds to sell on March 5 and March 25.
(b) Assume that Bernelli Diamonds uses the FIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would Bernelli Diamonds report under this cost flow assumption?
(c) Assume that Bernelli Diamonds uses the LIFO cost flow assumption. Calculate cost of goods sold. How much gross profit would the company report under this cost flow assumption?
(d) Which cost flow method should Bernelli Diamonds select? Explain.
Click here for the solution: You have the following information for Bernelli Diamonds
An Alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is currently 5% above the existing market price
15-37 (Accounting Estimates) An Alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is currently 5% above the existing market price. In addition, the co-op has agreed to pay the farmers interest at 2% for each month delivery is delayed beyond December 31, 2009. Management expects that at least 14,500 tons will be delivered sometime after the balance sheet date.
Required
A. What factors should be considered in making an estimate of the loss accrual?
B. Assuming the amount of the purchase commitment is material, what information should management disclose in the footnotes to the financial statements concerning this purchase commitment?
Click here for the solution: An Alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is currently 5% above the existing market price
Required
A. What factors should be considered in making an estimate of the loss accrual?
B. Assuming the amount of the purchase commitment is material, what information should management disclose in the footnotes to the financial statements concerning this purchase commitment?
Click here for the solution: An Alfalfa co-op has an agreement with its farmers to purchase alfalfa at a price that is currently 5% above the existing market price
An audit client is being sued for $500,000 for discriminatory hiring practices
15-32 (Contingencies) An audit client is being sued for $500,000 for discriminatory hiring practices.
Required:
Indicate the appropriate action the auditor should take for each of the following independent responses to the letter of audit inquiry:
a. The lawyer stated that the client had a meritorious defense.
b. The lawyer stated that there is only a remote chance that the client will lose. The client did not accrue any contingent loss or disclose this situation.
c. The lawyer stated the client will probably lose, and the amount of the loss could be anywhere between $250,000 and $500,000, with no amount within that range being more likely than another. The client disclosed this situation but did not accrue a loss.
d. The lawyer stated that there is a reasonable possibility that the client will lose. The client disclosed this situation but did not accrue a loss.
e. The lawyer stated the client will probably lose between $250,000 and $500,000, but most likely will lose $400,000. The client accrued a $250,000 contingent loss and disclosed the situation.
Click here for the solution: An audit client is being sued for $500,000 for discriminatory hiring practices
Required:
Indicate the appropriate action the auditor should take for each of the following independent responses to the letter of audit inquiry:
a. The lawyer stated that the client had a meritorious defense.
b. The lawyer stated that there is only a remote chance that the client will lose. The client did not accrue any contingent loss or disclose this situation.
c. The lawyer stated the client will probably lose, and the amount of the loss could be anywhere between $250,000 and $500,000, with no amount within that range being more likely than another. The client disclosed this situation but did not accrue a loss.
d. The lawyer stated that there is a reasonable possibility that the client will lose. The client disclosed this situation but did not accrue a loss.
e. The lawyer stated the client will probably lose between $250,000 and $500,000, but most likely will lose $400,000. The client accrued a $250,000 contingent loss and disclosed the situation.
Click here for the solution: An audit client is being sued for $500,000 for discriminatory hiring practices
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