In two or three paragraphs explain the purpose of variance analysis and its benefits and drawbacks.

In the Illustrative Case in this chapter, payroll transactions for Brookins Company were analyzed, journalized, and posted for the third quarter of the fiscal year. In this problem, you are to record the payroll transactions for the last quarter of the firm's fiscal year. The last quarter begins on April 1, 20--. Narrative of Transactions: Apr. 1. Paid the treasurer of the union the amount of union dues withheld from workers' earnings during March. 15. Payroll: $8,310. All wages and salaries taxable. Withheld $890 for federal income taxes, $166.20 for state income taxes, and $140 for union dues. 15. Paid the treasurer of the state the amount of state income taxes withheld from workers' earnings during the first quarter. 15. Electronically transferred funds to remove the liability for FICA taxes and employees' federal income taxes withheld on the March payrolls. 29. Payroll: $7,975. All wages and salaries taxable. Withheld $815 for federal income taxes, $151.50 for state income taxes, and $135 for union dues. 29. Filed the Employer's Quarterly Federal Tax Return (Form 941) for the period ended March 31. No journal entry is required, since the FICA taxes and federal income taxes withheld have been timely paid. 29. Filed the state contribution return for the quarter ended March 31 and paid the amount to the state unemployment compensation fund. May 2. Paid the treasurer of the union the amount of union dues withheld from workers' earnings during April. 13. Payroll: $8,190. All wages and salaries taxable. Withheld $875 for federal income taxes, $160.05 for state income taxes, and $135 for union dues. 16. Electronically transferred funds to remove the liability for FICA taxes and federal income taxes withheld on the April payrolls. 31. Payroll: $8,755. All wages and salaries taxable. Withheld $971 for federal income taxes, $174.05 for state income taxes, and $140 for union dues. June 3. Paid the treasurer of the union the amount of union dues withheld from workers' earnings during May. 15. Payroll: $9,110. All wages and salaries taxable, except only $4,210 is taxable under FUTA and SUTA. Withheld $1,029 for federal income taxes, $187.15 for state income taxes, and $145 for union dues. 15. Electronically transferred funds to remove the liability for FICA taxes and federal income taxes withheld on the May payrolls. 30. Payroll: $8,960. All wages and salaries taxable, except only $2,280 is taxable under FUTA and SUTA. Withheld $988 for federal income taxes, $183.95 for state income taxes, and $145 for union dues. The following are the account balances forwarded as of April 1: (1) Union Due Payable: $100 (2) Employees SIT Payable: $546.92 (3) FICA Taxes Payable - OASDI: $1,068.88 (4) FICA Taxes Payable - HI: $249.98 (5) Employees FIT Payable: $1,124.00 (6) FUTA Taxes Payable: $149.16 (7) SUTA Taxes Payable: $571.78 (8) Cash: $57,673.56 (9) Wages and Salaries: $71,360.00 (10) Payroll Taxes: $6,846.74 Note: The SUTA tax rate is 2.3%. Analyze and journalize the transactions described in the narrative above. If an amount box does not require an entry, leave it blank or enter "0". If required, round your answers to the nearest cent. GENERAL JOURNAL PAGE 19 DATE DESCRIPTION DEBIT CREDIT 20-- Apr. 1-Union Dues Union Dues Payable 100 Cash 100 Apr. 15-Payroll Wages and Salaries FICA Taxes Payable-OASDI FICA Taxes Payable-HI Employees FIT Payable Employees SIT Payable Union Dues Payable Cash Apr. 15-Payroll Taxes Payroll Taxes FICA Taxes Payable-OASDI FICA Taxes Payable-HI FUTA Taxes Payable SUTA Taxes Payable Apr. 15-States Taxes Employees SIT Payable 546.92 Cash 546.92 Apr. 15-Federal Taxes FICA Taxes Payable-OASDI 1,068.88 FICA Taxes Payable-HI 249.98 Employees FIT Payable 1,124 Cash 2,442.86 Apr. 29-Payroll Wages and Salaries FICA Taxes Payable-OASDI FICA Taxes Payable-HI Employees FIT Payable Employees SIT Payable Union Dues Payable Cash Apr. 29-Payroll Taxes Payroll Taxes FICA Taxes Payable-OASDI FICA Taxes Payable-HI FUTA Taxes Payable SUTA Taxes Payable Apr. 29-SUTA SUTA Taxes Payable 571.78 Cash 571.78

P5-2B

Boone Hardware Store completed the following merchandising transactions in

the month of May. At the beginning of May, the ledger of Boone showed Cash of

$5,000 and Owner's Capital of $5,000.

May

1

Purchased merchandise on account from Adewale's Wholesale Supply

$4,200, terms 2/10, n/30.

2

Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the

merchandise sold was $1,300.

5

Received credit from Adewale's Wholesale Supply for merchandise

returned $300.

9

Received collections in full, less discounts, from customers billed on

sales of $2,100 on May 2.

10

Paid Adewale's Wholesale Supply in full, less discount.

11

Purchased supplies for cash $400.

12

Purchased merchandise for cash $1,400.

15

Received refund for poor quality merchandise from supplier on cash

purchase $150.

17

Purchased merchandise from Agbaje Distributors $1,300, FOB

shipping point, terms 2/10, n/30.

19

Paid freight on May 17 purchase $130.

24

Sold merchandise for cash $3,200. The merchandise sold had a cost of

$2,000.

25

Purchased merchandise from Somerhalder, Inc. $620, FOB destination,

terms 2/10, n/30.

27

Paid Agbaje Distributors in full, less discount.

29

Made refunds to cash customers for defective merchandise $70. The

returned merchandise had a fair value of $30.

31

Sold merchandise on account $1,000 terms n/30. The cost of the

merchandise sold was $560.

Boone Hardware's chart of accounts includes the following: No. 101 Cash, No.

112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201

Accounts Payable, No. 301 Owner's Capital, No. 401 Sales Revenue, No. 412

Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of

Goods Sold.

Instructions

(a)

Journalize the transactions using a perpetual inventory system.

(b)

Enter the beginning cash and capital balances and post the transactions.

(Use J1 for the journal reference.)

(c)

Prepare an income statement through gross profit for the month of May

2012.

Bank Organizer ​Printers, Inc., produces luxury checkbooks with three checks and stubs per page. Each checkbook is designed for an individual customer and is ordered through the​ customer's bank. The​company's operating budget for September 2017 included these​ data:

The budgeted amounts for September 2017 ​were:

The actual results for September 2017 were as​ follows:

The executive vice president of the company observed that the operating income for September was much lower than​ anticipated, despite a​ higher-than-budgeted selling price and a​ lower-than-budgeted variable cost per unit. As the​ company's management​ accountant, you have been asked to provide explanations for the disappointing September results. Bank Organizer develops its flexible budget on the basis of budgeted​ per-output-unit revenue and​ per-output-unit variable costs without detailed analysis of budgeted inputs.

Exercise 1 – Constructing the statement of cash flows:

You are the controller of the Frank Underwood Corporation. On January 1, 2018, after the 2017 fiscal year has ended, you have the following information in front of you:

During the fiscal year 2017, the following events occurred:

1. The company issued long-term debt in the amount of$1,200. Some of the debt at the beginning of the year was paidin 2017.
2. Depreciation expense was $2,000.
3. The company purchased new PP&E, in cash. The company did not sell any of its PP&E in 2017. There was no impairment of PP&E in 2017.
4. The company issued 20 shares with a par value of $0.1 per share. In return, the company received a total of $2,052 in cash.
5. The company declared and paid a $560 dividend during 2017.
6. Net income in 2017 was $________ (use the information provided to find out).

Required:

Prepare the statement of cash flows for the year ended December 31, 2017,using the indirect method. Specifically:

1. Fill out the worksheet below.
2. Compose a properlyformatted cash flow statement.

Journal Entries and Trial Balance

On October 1, 20Y6, Jay Pryor established an interior decorating business, Pioneer Designs. During the month, Jay completed the following transactions related to the business:

Enter the following transactions on Page 2 of the two-column journal:

Required:

1. Journalize each transaction in a two-column journal beginning on Page 1, referring to the following chart of accounts in selecting the accounts to be debited and credited. (Do not insert the account numbers in the journal at this time.) Journal entry explanations may be omitted. If an amount box does not require an entry, leave it blank.

Simmons Consulting Co. has the following accounts in its ledger: Cash; Accounts Receivable; Supplies; Office Equipment; Accounts Payable; Michael Short, Capital; Michael Short, Drawing; Fees Earned; Rent Expense; Advertising Expense; Utilities Expense; Miscellaneous Expense.

Journalize the selected transactions for October 20Y3. If an amount box does not require an entry, leave it blank.

Based on past experience, Leickner Company expects to purchase raw materials from a foreign supplier at a cost of 1,400,000 marks on March 15, 2018. To hedge this forecasted transaction, the company acquires a three-month call option to purchase 1,400,000 marks on December 15, 2017. Leickner selects a strike price of $0.62 per mark, paying a premium of $0.004 per unit, when the spot rate is $0.62. The spot rate increases to $0.624 at December 31, 2017, causing the fair value of the option to increase to $9,000. By March 15, 2018, when the raw materials are purchased, the spot rate has climbed to $0.64, resulting in a fair value for the option of $28,000.

1. Prepare all journal entries for the option hedge of a forecasted transaction and for the purchase of raw materials, assuming that December 31 is Leickner's year-end and that the raw materials are included in the cost of goods sold in 2018.

2. What is the overall impact on net income over the two accounting periods?

3. What is the net cash outflow to acquire the raw materials?

Smith Electronic Company’s chip-mounting production department had 300 units of unfinished product, each 50% completed on September 30. During October of the same year, this department put another 800 units into production and completed 900 units and transferred them to the next production department. At the end of October, 200 units of unfinished product, 70% completed, were recorded in the ending Work-in-Process Inventory. Smith Electronic introduces all direct materials when the production process is 50% complete. Direct labor and factory overhead (i.e., conversion) costs are added uniformly throughout the process.

Following is a summary of production costs incurred during October:

Required:

1. Calculate each of the following amounts using weighted-average process costing:
a. Equivalent units of direct materials and conversion.
b. Equivalent unit costs of direct materials and conversion.
c. Cost of goods completed and transferred out during the period.
d. Cost of Work-in-Process Inventory at the end of the period.

2. Prepare a production cost report for October using the weighted-average method.

3. Repeat requirement 1 using the FIFO method.

4. Repeat requirement 2 using the FIFO method.

Wonderland Post Office: Mail sorting time variance One of the operations in the Wonderland Post Office is a mechanical mail sorting operation. In this operation, handwritten letter mail is sorted at a rate of one letter per second. An operator sitting at a keyboard mechanically sorts the letter from a three-digit code. The manager of the mechanical sorting operation wishes to determine the number of temporary employees to hire for December. The manager estimates that there will be an additional 27,000,000 pieces of mail in December, due to the upcoming holiday season. Assume that the sorting operators are temporary employees. The union contract requires that temporary employees be hired for one month at a time. Each temporary employee is hired to work 125 hours in the month. a. How many temporary employees should the manager hire for December? 57 employees b. If each temporary employee earns a standard $13 per hour, what would be the direct labor time variance if the actual number of additional letters sorted in December was 26,208,000? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. $ 4,300 Unfavorable

Greenmount Ltd, an ASX listed consumer goods corporation aims to acquire a fashion business to generate new growth opportunities. Following a formal search process, external advisors have identified the following two businesses as best matching entitiesfor a potential take-over: Tallows Ltd and Bilgola Ltd. Only one will be selected. To move forward with the selection process, the external advisor has estimated that both firms have the same entity value of $2m based on a Discounted Cash Flow (DCF) model, i.e. acquisition price of $2 million (excluding advisor fees), which will be paid as cash consideration. The external advisor will charge $5,000 finder’s fee and $3,000 legal fees paid in cash to prepare all required due diligence.

You have been given access to the following information about the assets, liabilities, and shareholders’ equity for both potential target firms:

Tallows Ltd:

Additional information for Tallows Ltd: Taking into account current market information and historical data of the firm, you determine the following fair values: Accounts receivables: $18,000, Inventory: $180,000, Property Plant and Equipment: $1,000,000.

Additional information for Bilgola Ltd:

Considering current market prices and further historical information from the company, you determine the following fair values: Accounts receivable $200,000, Inventory $500,000, Property Plant and Equipment $2,000,000.

Nicholas Less, the CFO of Greenmount Ltd has been under pressure to increase the companies’earnings as soon as possible. He has to provide a recommendation on which firm to acquire at the next board of directors meeting in two weeks. In preparation for the meeting, Nicholas has asked you to prepare a fact sheet that evaluates the acquisition of the two potential target firms, Tallows Ltd and Bilgola Ltd from an accounting perspective.

1. You remember an in-class discussion from your studies about the use of fair value accounting versus historical cost accounting. Provide arguments for and against the use of both methods and explain the trade-off between the two methods in the context of the objective and fundamental characteristics of financial reporting.

Carlson Enterprises manufactures tires for the Formula 1 motor racing circuit. For August 2017​, it budgeted to manufacture and sell 3,300 tires at a variable cost of $70 per tire and total fixed costs of $53,500. The budgeted selling price was $107 per tire. Actual results in August 2017 were 3,200 tires manufactured and sold at a selling price of $109 per tire. The actual total variable costs were $249,600​, and the actual total fixed costs were $50,500.

Requirements

Begin with the actual​ results, then complete the flexible budget columns and the static budget columns. Label each variance as favorable or unfavorable.​ (For variances with a​ $0 balance, make sure to enter​ "0" in the appropriate field. If the variance is​ zero, do not select a​ label.)

Carla Vista Co. had a beginning inventory balance on July 1 of 410 units at a cost of $3.00 each. During the month, the following inventory transactions took place:

(a)

Correct answer iconYour answer is correct.

Calculate the cost of goods available for sale and the number of units of ending inventory.

eTextbook and Media

Attempts: 2 of 5 used

Using multiple attempts will impact your score.

20% score reduction after attempt 3

(b)

Correct answer iconYour answer is correct.

Assume Carla Vista uses FIFO periodic. Calculate the cost of ending inventory, cost of the goods sold, and gross profit.

eTextbook and Media

Attempts: 1 of 5 used

Using multiple attempts will impact your score.

20% score reduction after attempt 3

(c)

Correct answer iconYour answer is correct.

Assume Carla Vista uses FIFO perpetual. Calculate the cost of ending inventory, cost of goods sold, and gross profit.

eTextbook and Media

Attempts: 1 of 5 used

Using multiple attempts will impact your score.

20% score reduction after attempt 3

(d)

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare journal entries to record the July 10 purchase and the July 11 sale using (1) FIFO periodic and (2) FIFO perpetual. Assume both the sale and purchase were for cash. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

(1) FIFO periodic

(2) FIFO perpetual

1. Cash Budget

   The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following An accounting device used to plan and control resources of operational departments and divisions budget information:

   	June		July		August
   Sales	$160,000		$185,000		$200,000
   Manufacturing costs	66,000		82,000		105,000
   Selling and administrative expenses	40,000		46,000		51,000
   Capital expenditures	_		_		120,000

   The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent $12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.

   Current assets as of June 1 include cash of $42,000, marketable securities of $25,000, and accounts receivable of $198,000 ($150,000 from May sales and $48,000 from April sales). Sales on account in April and May were $120,000 and $150,000, respectively. Current liabilities as of June 1 include $13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $24,000 will be made in July. Mercury Shoes' regular quarterly dividend of $15,000 is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of $40,000.

   Required:

   1. Prepare a monthly cash budget and supporting schedules for June, July, and August. Enter all amounts as positive numbers except for Cash (decrease) and (deficiency). Use the minus sign to indicate an overall cash decrease and deficiency.

   Mercury Shoes Inc.
   Cash Budget
   For the Three Months Ending August 31
   	June	July	August
   Estimated cash receipts from:
   Cash sales	$	$	$
   Collection of accounts receivable
   Total cash receipts	$	$	$
   Estimated cash payments for:
   Manufacturing costs	$	$	$
   Selling and administrative expenses
   Capital expenditures
   Other purposes:
   Income tax
   Dividends
   Total cash payments	$	$	$
   Cash increase or (decrease)	$	$	$
   Cash balance at beginning of month
   Cash balance at end of month	$	$	$
   Minimum cash balance
   Excess or (deficiency)	$	$	$

A company manufactures 2 core trade items, A and B. Both products need manufacturing time in 3 stages which is shown below:

The chief plant officer (CPO) says that product A has a profit contribution (Price sold minus Variable Cost) of 20000 USD and product B of 16000 USD. The production capability is defined by the capacity of each stage. Questions: 1. If somebody could produce only product A, which could be the official contribution in the profits? 2. If the added time was used for production of product B, which could the total profit be? 3. Could you suggest to the CPO another production mix in order to achieve higher total profit and if yes which would be the percentage for each stage?