Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:
Wheeling Company Balance Sheet September 30 |
||
Assets | ||
Cash | $ | 74,800 |
Accounts receivable | 114,000 | |
Inventory | 48,600 | |
Buildings and equipment, net of depreciation | 309,000 | |
Total assets | $ | 546,400 |
Liabilities and Stockholders’ Equity | ||
Accounts payable | $ | 213,900 |
Common stock | 216,000 | |
Retained earnings | 116,500 | |
Total liabilities and stockholders’ equity | $ | 546,400 |
The company is in the process of preparing a budget for October and has assembled the following data:
Sales are budgeted at $360,000 for October and $370,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.
The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month’s cost of goods sold.
All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.
Selling and administrative expenses for October are budgeted at $80,600, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,090 for the month.
Required:
1. Using the information provided, calculate or prepare the following:
a. The budgeted cash collections for October.
b. The budgeted merchandise purchases for October.
c. The budgeted cash disbursements for merchandise purchases for October.
d. The budgeted net operating income for October.
e. A budgeted balance sheet at October 31.
2. Assume the following changes to the underlying budgeting assumptions:
(1) 50% of a month’s credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month’s cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following:
a. The budgeted cash collections for October.
b. The budgeted merchandise purchases for October.
c. The budgeted cash disbursements for merchandise purchases for October.
d. Net operating income for the month of October.
e. A budgeted balance sheet at October 31.
In: Accounting
The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
Units to be produced | 11,400 | 10,400 | 12,400 | 13,400 |
Each unit requires 0.30 direct labor-hours and direct laborers are paid $12.50 per hour.
In addition, the variable manufacturing overhead rate is $1.50 per direct labor-hour. The fixed manufacturing overhead is $94,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $34,000 per quarter.
Required:
1. Calculate the company’s total estimated direct labor cost for each quarter of the upcoming fiscal year and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.
2&3. Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the upcoming fiscal year and for the year as a whole.
In: Accounting
Projected growth rate 20% Tax rate 21% Operating capacity 93% Sales $198,000,000 Cost of goods sold 128,600,000 Other expenses 31,500,000 Depreciation 10,500,000 EBIT $27,400,000 Interest 4,350,000 EBT $23,050,000 Taxes (21%) 4,840,500 Net income $18,209,500 Dividends $9,500,000 Additions to retained earnings 8,709,500 Assets Liabilities & Equity Current assets Current liabilities Cash $1,358,000 Accounts payable $2,400,000 Accounts receivable 4,180,000 Notes payable 5,830,000 Inventory 8,753,000 Total $8,230,000 Total $14,291,000 Long-term debt $67,500,000 Owners' equity Fixed assets Common stock and paid-in surplus $8,000,000 Net plant and equipment $125,580,000 Accumulated retained earnings 56,141,000 Total $64,141,000 Total assets $139,871,000 Total liabilities and owners' equity $139,871,000
Prepare the pro forma financial statements and calculate the EFN.
In: Accounting
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:
The finished goods inventory on hand at the end of each month must equal 4,000 units of Supermix plus 25% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 21,250 units.
The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 105,375 cc of solvent H300.
The company maintains no work in process inventories.
A monthly sales budget for Supermix for the third and fourth quarters of the year follows.
Budgeted Unit Sales | |
July | 69,000 |
August | 74,000 |
September | 84,000 |
October | 64,000 |
November | 54,000 |
December | 44,000 |
Required:
1. Prepare a production budget for Supermix for the months July, August, September, and October.
3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.
In: Accounting
Discuss the economic impact of the Tax Cuts and Jobs Act of 2017 (TCJA) on:
1. U.S. corporations.
2. U.S. economy
3. Other countries including tax havens
In: Accounting
The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:
Current assets as of March 31: | ||
Cash | $ |
7,100 |
Accounts receivable | $ |
18,400 |
Inventory | $ |
37,200 |
Building and equipment, net | $ |
122,400 |
Accounts payable | $ |
22,050 |
Common stock | $ |
150,000 |
Retained earnings | $ |
13,050 |
The gross margin is 25% of sales.
Actual and budgeted sales data:
March (actual) | $ | 46,000 |
April | $ | 62,000 |
May | $ | 67,000 |
June | $ | 92,000 |
July | $ | 43,000 |
Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.
One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.
Monthly expenses are as follows: commissions, 12% of sales; rent, $1,900 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $918 per month (includes depreciation on new assets).
Equipment costing $1,100 will be purchased for cash in April.
Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required:
Using the preceding data:
1. Complete the schedule of expected cash collections.
2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.
3. Complete the cash budget.
4. Prepare an absorption costing income statement for the quarter ended June 30.
5. Prepare a balance sheet as of June 30.
In: Accounting
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Per Unit 13,000 Units per Year Direct materials $ 13 $ 169,000 Direct labor 9 117,000 Variable manufacturing overhead 3 39,000 Fixed manufacturing overhead, traceable 3 * 39,000 Fixed manufacturing overhead, allocated 6 78,000 Total cost $ 34 $ 442,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. Assuming the company has no alternative use for the facilities that are now being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 2. Should the outside supplier’s offer be accepted? 3. Suppose that if the carburetors were purchased, Troy Engines, Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be $130,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?
In: Accounting
In: Accounting
Garfun, Inc., owns all of the stock of Simon, Inc. For 2018, Garfun reports income (exclusive of any investment income) of $480,000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a dividend of $15,000 per year. Simon reports net income of $290,000 for the period with 80,000 shares of common stock outstanding. Simon also has a liability for 10,000 of $100 bonds that pay annual interest of $8 per bond. Each of these bonds can be converted into three shares of common stock. Garfun owns none of these bonds. Assume a tax rate of 30 percent. What amount should Garfun report as diluted earnings per share? (Round your intermediate percentage value to the nearest whole number and the final answer to 2 decimal places.)
Diluted earnings per share=
In: Accounting
The following T-accounts represent September activity:
Required:
Compute the missing amounts indicated by the letters (a) through (i).
Materials Inventory | |||
BB (9/1) | 8,000 | ||
(a) | 4,900 | ||
(b) | |||
EB (9/30) | 8,900 |
Work-In-Process Inventory | |||
BB (9/1) | 21,100 | ||
180,700 | |||
121,000 | |||
99,200 | |||
EB (9/30) | 18,500 |
Finished Goods Inventory | |||
BB (9/1) | 14,300 | ||
(e) | (f) | ||
EB (9/30) | (g) |
Cost of Goods Sold | ||||
396,400 | ||||
Applied Overhead Control | ||||
(d) | ||||
Manufacturing Overhead Control | ||||
121,000 | ||||
4,900 | ||||
36,200 | ||||
30,100 | ||||
4,400 |
Wages Payable | |||
124,300 | |||
162,000 | (c) | ||
36,200 | |||
119,500 | EB (9/30) |
Accumulated Depreciation—Plant & Equipment | |||
204,500 | BB (9/1) | ||
(h) | |||
234,600 | EB (9/30) |
Accounts Payable—Material Suppliers | ||||
105,000 | ||||
Prepaid Expenses | |||
BB(9/1) | 24,900 | ||
(i) | |||
EB(9/30) | 20,500 |
What are the answers for:
Material Inventory
Work-In-Process Inventory
Finished Goods Inventory
Cost of Goods Sold
Applied Overhead Control
Manufacturing Overhead Control
Wages Payable
Accumulated Depreciation-Plant & Equipment
Accounts Payable - Material Suppliers
Prepaid Expenses
In: Accounting
X Company is planning to stop the production and sale of Product Q, which lost $12,000 last year. If Product Q is dropped, two things will happen in each of the next four years: 1) last year's loss will be avoided, and 2) sales of Product R will be increased, contributing $12,000 to annual profits. In addition, if Product Q is dropped, the company will be able to sell some equipment immediately for $17,000. Assuming a discount rate of 4%, what is the net present value of stopping the production and sale of Product Q?
In: Accounting
X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:
Current equipment | |
Current sales value | $10,000 |
Final sales value | 5,000 |
Operating costs | 62,000 |
New equipment | |
Purchase cost | $49,000 |
Final sales value | 5,000 |
Operating cost savings | 9,000 |
Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 4%, what is the net present value of replacing the current equipment?
In: Accounting
On January 1, 2017, Alison, Inc., paid $70,500 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $224,500 and liabilities of $96,500. A patent held by Holister having a $13,300 book value was actually worth $41,800. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $51,500 and declared and paid dividends of $17,000. In 2018, it had income of $70,500 and dividends of $22,000. During 2018, the fair value of Allison’s investment in Holister had risen from $85,700 to $93,300.
a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018
In: Accounting
X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $16.00 per unit. This year, total costs to produce 53,000 units were:
Direct materials | $307,400 | ||
Direct labor | 222,600 | ||
Variable overhead | 222,600 | ||
Fixed overhead | 63,600 |
If X Company buys the part, it can avoid $23,532 of the fixed
overhead. The resources that will become idle if they choose to buy
the part can be used to increase production of another product,
resulting in additional total contribution margin of $60,000.
The marketing manager is uncertain what demand will be next year.
What level of demand will make the company indifferent between
making the part and buying it?
In: Accounting
Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:
Direct materials: 4 pounds at $10 per pound | $ | 40 |
Direct labor: 2 hours at $13 per hour | 26 | |
Variable overhead: 2 hours at $9 per hour | 18 | |
Total standard cost per unit | $ | 84 |
The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs:
Direct laborers worked 59,000 hours at a rate of $14 per hour.
Total variable manufacturing overhead for the month was $564,040.
______________________________
5. If Preble had purchased 174,000 pounds of materials at $8.50 per pound and used 160,000 pounds in production, what would be the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)
6. If Preble had purchased 174,000 pounds of materials at $8.50 per pound and used 160,000 pounds in production, what would be the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)
7. What direct labor cost would be included in the company’s planning budget for March?
8. What direct labor cost would be included in the company’s flexible budget for March?
In: Accounting