We are learning about notes receivables in my Intermediate Accounting class, and I am trying to understand the terms. My textbook states "When the interest stated on an interest-bearing note equals the effective (market) rate of interest, the note sells at face value.13 When the stated rate differs from the market rate, the cash exchanged (present value) differs from the face value of the note."
If someone could break this down in layman's terms I would really appreciate it. This is our first dip into this material, so no amount of over-simplification is too much.
In: Accounting
Problem 16-7AA FIFO: Process cost summary, equivalent units, cost estimates LO C2, C3, C4, P4
[The following information applies to the questions
displayed below.]
Dengo Co. makes a trail mix in two departments: roasting and
blending. Direct materials are added at the beginning of each
process, and conversion costs are added evenly throughout each
process. The company uses the FIFO method of process costing.
During October, the roasting department completed and transferred
26,000 units to the blending department. Of the units completed,
4,900 were from beginning inventory and the remaining 21,100 were
started and completed during the month. Beginning work in process
was 100% complete with respect to direct materials and 30% complete
with respect to conversion. The company has 4,300 units (100%
complete with respect to direct materials and 70% complete with
respect to conversion) in process at month-end. Information on the
roasting department’s costs of beginning work in process inventory
and costs added during the month follows.
| Cost | Direct Materials | Conversion | ||||
| Of beginning work in process inventory | $ | 11,800 | $ | 114,390 | ||
| Added during the month | 340,360 | 1,487,160 | ||||
Problem 16-7A Part 1
Required:
1. Prepare the roasting department's process cost
summary for October using the FIFO method. (Round "Cost per
EUP" to 2 decimal places.)
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Problem 16-7A Part 2
2. Prepare the journal entry dated October 31 to transfer the cost of completed units to the blending department. (Do not round your intermediate calculations.)
In: Accounting
|
Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow: |
| • |
Sales are budgeted at $290,000 for December and $260,000 for January, terms 1/eom, n/60. |
| • |
Collections are expected to be 50% in the month of sale and 48% in the month following the sale. Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sales. Bad debts expense is included as part of operating expenses. |
| • |
Gross margin is 30% of sales. |
| • |
All accounts receivable are from credit sales. Bad debts are written off against the allowance account at the end of the month following the month of sale. |
| • |
Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the end of each month. Payment for merchandise is made in the month following the month of purchase. |
| • |
Other monthly operating expenses to be paid in cash total $23,200. |
| • |
Annual depreciation is $204,000, one-twelfth of which is reflected as part of monthly operating expenses. |
|
Goldberg Company’s statement of financial position at the close of business on November 30 follows: |
| GOLDBERG COMPANY | |||
| Statement of Financial Position | |||
| November 30, 2016 | |||
| Assets | |||
| Cash | $ | 24,000 | |
| Accounts receivable (net of $4,000 allowance for doubtful accounts) | 68,000 | ||
| Inventory | 162,400 | ||
| Property, plant, and equipment (net of $640,000 accumulated depreciation) | 1,020,000 | ||
| Total assets | $ | 1,274,400 | |
| Liabilities and Stockholders’ Equity | |||
| Accounts payable | $ | 144,000 | |
| Common stock | 800,000 | ||
| Retained earnings | 330,400 | ||
| Total liabilities and equity | $ | 1,274,400 | |
| Required: | |
| 1. |
What is the total of budgeted cash collections for December? (Do not round intermediate calculations.) |
| 2. |
How much is the book value of accounts receivable at the end of December? (Do not round intermediate calculations.) |
| 3. |
How much is the income (loss) before income taxes for December? (Do not round intermediate calculations.) |
| 4. |
What is the projected balance in inventory on December 31, 2016? (Do not round intermediate calculations.) |
| 5. |
What are budgeted purchases for December? (Do not round intermediate calculations.) |
| 6. |
What is the projected balance in accounts payable on December 31, 2016? (Do not round intermediate calculations.) |
In: Accounting
Sell or Process Further Abica Coffee Company produces Columbian coffee in batches of 4,300 pounds. The standard quantity of materials required in the process is 4,300 pounds, which cost $6 per pound. Columbian coffee can be sold without further processing for $9 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $12 per pound. The processing into Decaf Columbian requires additional processing costs of $9,013 per batch. The additional processing also causes a 5% loss of product due to evaporation. a. Prepare a differential analysis dated October 6 on whether to sell regular Columbian (Alternative 1) or process further into Decaf Columbian (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Regular Columbian (Alt. 1) or Process Further into Decaf Columbian (Alt. 2) October 6 Sell Regular Columbian (Alternative 1) Process Further into Decaf Columbian (Alternative 2) Differential Effect on Income (Alternative 2) Revenues $ $ $ Costs Income (Loss) $ $ $ b. Should Abica sell Columbian coffee or process further and sell Decaf Columbian? c. Determine the price of Decaf Columbian that would cause neither an advantage nor a disadvantage for processing further and selling Decaf Columbian. Round your answer to two decimal places. $ per pound
In: Accounting
Kiss the sky enterprises has bonds on th market making annual payments, with 11 years to maturity and selling for 790. At this price, the bonds yield 10 percent. What must the coupon rate be on the bonds 6.77 6.87 13.53 10.00 8.57
In: Accounting
Complete the problems below on variance analysis.
Morgan Clay Products manufactures clay molded pottery on an
assembly line. Its standard costing system uses two cost
categories, direct materials and conversion costs. Each product
must pass through the Molding Department and the Finishing
Department. Direct materials are added at the beginning of the
production process. Conversion costs are allocated evenly
throughout production.
Data for the Assembly Department for August 2017 are:
Work in process, beginning inventory: 2600 units
Direct materials (100% complete)
Conversion costs (35% complete)
Units started during August 715 units
Work in process, ending inventory: 520 units
Direct materials (100% complete)
Conversion costs (55% complete)
Costs for August:
Standard costs for Assembly:
Direct materials $18 per unit
Conversion costs $35.50 per unit
Work in process, beginning inventory:
Direct materials $12,600
Conversion costs $8250
Part 2A: Variance Problem
Castleton Corporation manufactured 36,000 units during March. The
following fixed overhead data relates to March:
Actual Static Budget
Production 36,000 units 34,000 units
Machine-hours 6,960 hours 6,800 hours
Fixed overhead costs for March $164,700 $156,400
Compute the fixed overhead variances.
Part 2B: Variance Problem
Russo Corporation manufactured 21,000 air conditioners during
November. The overhead cost-allocation base is $34.50 per
machine-hour. The following variable overhead data pertain to
November:
Actual Budgeted
Production 21,000 units 23,000 units
Machine-hours 12,700 hours 13,800 hours
Variable overhead cost per machine-hour:
$34.00 $34.50
Compute the variable overhead variances.
In: Accounting
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know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Our division’s return on investment (ROI) has led the company for three years, and I don’t want any letdown.” |
|
Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROIs. Operating results for the company’s Office Products Division for the most recent year are given below: |
| Sales | $ | 22,000,000 |
| Variable expenses | 13,500,000 | |
| Contribution margin | 8,500,000 | |
| Fixed expenses | 6,000,000 | |
| Net operating income | $ | 2,500,000 |
| Divisional operating assets | $ | 4,443,500 |
|
The company had an overall return on investment (ROI) of 16.00% last year (considering all divisions). The Office Products Division has an opportunity to add a new product line that would require an additional investment in operating assets of $2,289,300. The cost and revenue characteristics of the new product line per year would be: |
| Sales | $ 9,155,000 |
| Variable expenses | 65% of sales |
| Fixed expenses | $ 2,543,950 |
| Required: | |
| 1. |
Compute the Office Products Division’s ROI for the most recent year; also compute the ROI as it would appear if the new product line is added. (Do not round intermediate calculations. Round your Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) |
| 2. |
If you were in Dell Havasi’s position, would you accept or reject the new product line? |
||||
|
| 3. |
Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? |
||||
|
| 4. |
Suppose that the company’s minimum required rate of return on operating assets is 13.00% and that performance is evaluated using residual income. |
| a. |
Compute the Office Products Division’s residual income for the most recent year; also compute the residual income as it would appear if the new product line is added. (Enter your Minimum Required Rate as a whole percentage (i.e., 0.12 should be entered as 12).) |
| b. |
Under these circumstances, if you were in Dell Havasi’s position, would you accept or reject the new product line? |
||||
|
In: Accounting
Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$25 par value, 50,000 shares authorized, 33,000 shares issued and outstanding $ 825,000 Paid-in capital in excess of par value, common stock 66,000 Retained earnings 350,000 Total stockholders’ equity $ 1,241,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 3,300 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,320 of its treasury shares at $30 cash per share. Aug. 27 Sold 1,650 of its treasury shares at $20 cash per share. Sept. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. Oct. 22 Paid the dividend declared on September 9. Dec. 31 Closed the $55,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
Required: 1. Prepare journal entries to record each of these transactions for 2017. 2. Prepare a statement of retained earnings for the year ended December 31, 2017. 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.
In: Accounting
The following information is provided to assist you in evaluating the performance of the production operations of Studio Company: Units produced (actual) 57,000 Master production budget Direct materials $127,380 Direct labor 108,080 Overhead 167,910 Standard costs per unit Direct materials $1.65 × 2 gallons per unit of output Direct labor $14 per hour × 0.2 hour per unit Variable overhead $12.50 per direct labor-hour Actual costs Direct materials purchased and used $150,960 (81,600 gallons) Direct labor 134,231 (9,980 hours) Overhead 177,200 (61% is variable) Variable overhead is applied on the basis of direct labor-hours. Required: Calculate all variable production cost price and efficiency variances and fixed production cost price and production volume variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
In: Accounting
Required information
Problem 3-4A Weighted average: Process cost summary, equivalent units, cost estimates LO C2, C3, P4
[The following information applies to the questions
displayed below.]
Tamar Co. manufactures a single product in one department. All
direct materials are added at the beginning of the manufacturing
process. Conversion costs are added evenly throughout the process.
During May, the company completed and transferred 22,700 units of
product to finished goods inventory. Its 3,100 units of beginning
work in process consisted of $19,900 of direct materials and
$226,440 of conversion costs. It has 2,450 units (100% complete
with respect to direct materials and 80% complete with respect to
conversion) in process at month-end. During the month, $483,100 of
direct material costs and $1,992,960 of conversion costs were
charged to production.
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In: Accounting
(Weighted average cost of capital) Crypton Electronics has a capital structure consisting of
3939
percent common stock and
6161
percent debt. A debt issue of
$1 comma 0001,000
par value,
6.36.3
percent bonds that mature in
1515
years and pay annual interest will sell for
$974974.
Common stock of the firm is currently selling for
$29.8429.84
per share and the firm expects to pay a
$2.252.25
dividend next year. Dividends have grown at the rate of
4.94.9
percent per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's tax rate is
3030
percent?
a. The after-tax cost of debt is
(Round to two decimal places.)
b. The cost of common equity is
(Round to two decimal places.)
c. Crypton's cost of capital is
(Round to three decimal places.)
In: Accounting
(Individual or component costs of capital) Compute the cost of capital for the firm for the following:
a. Currently bonds with a similar credit rating and maturity as the firm's outstanding debt are selling to yield
7.237.23
percent while the borrowing firm's corporate tax rate is
3434
percent.
b. Common stock for a firm that paid a
$1.041.04
dividend last year. The dividends are expected to grow at a rate of
5.75.7
percent per year into the foreseeable future. The price of this stock is now
$24.5824.58.
c. A bond that has a
$1 comma 0001,000
par value and a coupon interest rate of
11.411.4
percent with interest paid semiannually. A new issue would sell for
$1 comma 1491,149
per bond and mature in
2020
years. The firm's tax rate is
3434
percent.
d. A preferred stock paying a dividend of
7.47.4
percent on a
$9090
par value. If a new issue is offered, the shares would sell for
$83.0783.07
per share.
In: Accounting
What are the four ways to test internal Controls?
In: Accounting
Imperial Jewelers manufactures and sells a gold bracelet for $405.00. The company’s accounting system says that the unit product cost for this bracelet is $261.00 as shown below:
| Direct materials | $ | 142 | |
| Direct labor | 86 | ||
| Manufacturing overhead | 33 | ||
| Unit product cost | $ | 261 | |
The members of a wedding party have approached Imperial Jewelers about buying 26 of these gold bracelets for the discounted price of $365.00 each. The members of the wedding party would like special filigree applied to the bracelets that would require Imperial Jewelers to buy a special tool for $454 and that would increase the direct materials cost per bracelet by $11. The special tool would have no other use once the special order is completed.
To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $12.00 of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding party’s order using its existing manufacturing capacity.
Required:
1. What is the financial advantage (disadvantage) of accepting the special order from the wedding party?
2. Should the company accept the special order?
The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:
| Total | Dirt Bikes |
Mountain Bikes | Racing Bikes |
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| Sales | $ | 918,000 | $ | 261,000 | $ | 401,000 | $ | 256,000 | ||||
| Variable manufacturing and selling expenses | 481,000 | 117,000 | 206,000 | 158,000 | ||||||||
| Contribution margin | 437,000 | 144,000 | 195,000 | 98,000 | ||||||||
| Fixed expenses: | ||||||||||||
| Advertising, traceable | 70,200 | 9,000 | 40,600 | 20,600 | ||||||||
| Depreciation of special equipment | 44,200 | 20,600 | 7,700 | 15,900 | ||||||||
| Salaries of product-line managers | 115,200 | 40,200 | 38,600 | 36,400 | ||||||||
| Allocated common fixed expenses* | 183,600 | 52,200 | 80,200 | 51,200 | ||||||||
| Total fixed expenses | 413,200 | 122,000 | 167,100 | 124,100 | ||||||||
| Net operating income (loss) | $ | 23,800 | $ | 22,000 | $ | 27,900 | $ | (26,100) | ||||
*Allocated on the basis of sales dollars.
Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.
Required:
1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
2. Should the production and sale of racing bikes be discontinued?
3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.
In: Accounting
Related to Checkpoint 13.5) (Real options and capital budgeting) You are considering introducing a new Tex-Mex-Thai fusion restaurant. The initial outlay on this new restaurant is
$6.96.9
million and the present value of the free cash flows (excluding the initial outlay) is
$5.35.3
million, such that the project has a negative expected NPV of
$1.61.6
million. Upon closer examination, you find that there is a
5555
percent chance that this new restaurant will be well received and will produce annual cash flows of
$805 comma 000805,000
per year forever (a perpetuity), while there is a
4545
percent chance of it producing a cash flow of only
$199 comma 000199,000
per year forever (a perpetuity) if it isn't received well. The required rate of return you use to discount the project cash flows is
10.110.1
percnet. However, if the new restaurant is successful, you will be able to build
1515
more of them and they will have costs and cash flows similar to the successful restaurant's costs and cash flows.
a. In spite of the fact that the first restaurant has a negative NPV, should you build it anyway? Why or why not?
b. What is the expected NPV for this project if only one restaurant is built but isn't well received? What is the expected NPV for this project assuming
1515
more are built if the first restaurant is well received? (Ignore the fact that there would be a time delay in building additional new restaurants.)
In: Accounting