Smith Enterprises manufactures tires for the Formula 1 motor racing circuit. For August 2017, it budgeted to manufacture and sell 3 comma 700 tires at a variable cost of $ 76 per tire and total fixed costs of $ 54 comma 000. The budgeted selling price was $ 108 per tire. Actual results in August 2017 were 3 comma 400 tires manufactured and sold at a selling price of $ 110 per tire. The actual total variable costs were $ 282 comma 200, and the actual total fixed costs were $ 50 comma 500.
1. Prepare a performance report that uses a flexible budget and a static budget.
2. Comment on the results in requirement 1.
In: Accounting
Statement of Cash Flows—Indirect Method
The comparative balance sheet of Olson-Jones Industries Inc. for December 31, 20Y2 and 20Y1, is as follows:
Dec. 31, 20Y2 | Dec. 31, 20Y1 | ||||
Assets | |||||
Cash | $200 | $66 | |||
Accounts receivable (net) | 114 | 82 | |||
Inventories | 72 | 45 | |||
Land | 164 | 186 | |||
Equipment | 92 | 72 | |||
Accumulated depreciation-equipment | (25) | (13) | |||
Total Assets | $617 | $438 | |||
Liabilities and Stockholders' Equity | |||||
Accounts payable (merchandise creditors) | $78 | $66 | |||
Dividends payable | 12 | - | |||
Common stock, $1 par | 41 | 21 | |||
Paid-in capital: Excess of issue price over par—common stock | 94 | 51 | |||
Retained earnings | 392 | 300 | |||
Total liabilities and stockholders' equity | $617 | $438 |
The following additional information is taken from the records:
a. Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash out flows, cash payments, decreases in cash, or any negative adjustments.
Olson-Jones Industries Inc. | ||
Statement of Cash Flows | ||
For the Year Ended December 31, 20Y2 | ||
Cash flows from operating activities: | ||
Net income | $ | |
Adjustments to reconcile net income to net cash flow from operating activities: | ||
Depreciation | ||
Gain on sale of land | ||
Changes in current operating assets and liabilities: | ||
Increase in accounts receivable | ||
Increase in inventories | ||
Increase in accounts payable | ||
Net cash flow from operating activities | $ | |
Cash flows from (used for) investing activities: | ||
Cash from sale of land | $ | |
Cash used for purchase of equipment | ||
Net cash flow from investing activities | ||
Cash flows from (used for) financing activities: | ||
Cash from sale of common stock | $ | |
Cash used for dividends | ||
Net cash flow from financing activities | ||
Increase in cash | $ | |
Cash at the beginning of the year | ||
Cash at the end of the year | $ |
Feedback
b. Was Olson-Jones Industries Inc.’s net cash
flow from operations more or less than net income?
Less
In: Accounting
Wolfpack Enterprises plans to issue $1,000,000, 5-year, bonds
payable with a stated
interest rate of 12%. The bonds pay interest semi-annually and the
market rate is 10%.
What amount of money can Wolfpack Enterprises expect to receive
when they sell their bonds?
In: Accounting
GPS Tracking: You work for a midsize freight delivery company that has been using text messaging as the primary communication channel between drivers and the central dispatch office. Drivers send a message to confirm the time and location whenever they’ve made a delivery or a pickup, and whenever dispatchers get an urgent request from a customer, they send messages to the trucks to find out who is nearby and available. This manual system is clumsy and prone to errors, and the company’s owners want to replace it with a fully computerized mapping system that uses the global positioning system (GPS) to automatically monitor the location of every truck in the fleet. Some drivers are in an uproar over the plan, saying it invades their privacy by tracking their every move all day long. Should the company proceed with the plan even though some drivers object? What are some of the issues to consider here?
In: Accounting
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s products is increasing and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data:
Product | Demand Next year (units) |
Selling Price per Unit |
Direct Materials |
Direct Labor |
|||
Debbie | 50,000 | $ | 16.70 | $ | 4.30 | $ | 6.40 |
Trish | 42,000 | $ | 7.50 | $ | 1.10 | $ | 4.00 |
Sarah | 35,000 | $ | 26.60 | $ | 6.44 | $ | 11.20 |
Mike | 40,000 | $ | 14.00 | $ | 2.00 | $ | 8.00 |
Sewing kit | 325,000 | $ | 9.60 | $ | 3.20 | $ | 3.20 |
The following additional information is available:
The company’s plant has a capacity of 130,000 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
The direct labor rate of $16 per hour is expected to remain unchanged during the coming year.
Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour.
All of the company’s nonmanufacturing costs are fixed.
The company’s finished goods inventory is negligible and can be ignored.
Required:
1. Assuming that the company has made optimal use of its 130,000 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?
In: Accounting
Briefly discuss each of these principles and explain why they are so important to accountants
1. Responsibilities –
2. The public interest
3. Integrity
4. Objectivity and independence
5. Due care
6. Scope and nature of services
In: Accounting
Activity-Based Supplier Costing
Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs because one or both of the components have failed the test and it is necessary to replenish component inventories. Activity cost information and other data needed for supplier costing are as follows:
I. Activity Costs Caused by Suppliers (testing failures and reordering as a result)
Activity | Costs |
Testing components | $1,200,000 |
Reordering components | 300,000 |
II. Supplier Data
Alpha Electronics | La Paz Company | ||||||||||||
125X | 30Y | 125X | 30Y | ||||||||||
Unit purchase price | $10 | $26 | $12 | $28 | |||||||||
Units purchased | 120,000 | 73,800 | 15,000 | 15,000 | |||||||||
Failed tests | 1,800 | 780 | 10 | 10 | |||||||||
Number of reorders | 60 | 40 | 0 | 0 |
Required:
Determine the cost of each supplier by using ABC. Round Test and Reorder rates to the nearest dollar, and final answers to the nearest cent.
Alpha Electronics | La Paz Company | ||||
125X | 30Y | 125X | 30Y | ||
Unit cost: | $ | $ | $ | $ |
In: Accounting
Delay in Posting of a Journal Entry
As assistant controller for a small firm, you are responsible for recording and posting of the daily cash receipts and disbursements to the ledger account. After you have posted the entries, your boss, the controller, prepares a trial balance and the financial statements. You make the following entries on June 30.
Cash 1,430
Account Receivable 1,950
Service Revenue 3,380
To record daily cash sales and sales on account
Advertising Exp 12,500
Utilities Exp 22,600
Rent Exp 24,000
Salary & Wage Exp 17,400
Cash 76,500
To record daily cash disbursement
The daily cash disbursements are much larger on June 30 than on any other day because many of the company's major bills are paid on the last day of the month. After you have recorded these two transactions and before you have posted them to the ledger accounts, your boss comes to you with the following request:
As you are aware, the first half of the year has been a tough one in the consulting industry and for our business. With first-half bonuses based on net income, I am wondering whether you or I will get a bonus this time around. However, I have a suggestion that should allow us to receive something for our hard work and at the same time not hurt anyone. Go ahead and post the June 30 cash receipts to the ledger, but don't bother to post that day's cash disbursements. Even though the treasurer writes checks on the last day of the month and you normally journalize the transaction on the same day, it is silly to bother posting entry to the ledger since it takes at least a week for the checks to clear the bank.
1. Recognize an ethical dilemma: Explain why the controller's request will result in an increase in net income. On the basis of your answer, what ethical dilemma(s) do you now face?
2. a. Do you agree with the controller that the omission of the journal entry on June 30 " will not hurt anyone"? Who may benefit from the omission of the entry? Who may be harmed?
b. How are they likely to benefit or be harmed?
c. What rights or claims may be violated?
d. What specific interest are in conflict?
e. What are your responsibilities and obligations?
3. As assistant controller, what are your options in dealing with the ethical dilemma(s) you identified in (1) above?
Which provide stockholders and other outsiders with information that is most relevant, most complete, most neutral, and most free from error?
4. Among the alternatives, which one would you select? explain why?
In: Accounting
(Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) The 8-year $1 comma 000 par bonds of Vail Inc. pay 12 percent interest. The market's required yield to maturity on a comparable-risk bond is 11 percent. The current market price for the bond is $ 1 comma 150. a. Determine the yield to maturity. b. What is the value of the bonds to you given the yield to maturity on a comparable-risk bond? c. Should you purchase the bond at the current market price? a. What is your yield to maturity on the Vail bonds given the current market price of the bonds? nothing% (Round to two decimal places.)
In: Accounting
After reviewing the following calculation, provide a brief analysis of each of the ratios. Also provide a brief evaluation regarding the company’s performance as it relates to the four categories listed above, plus the DuPont Equation. Finally, discuss how these ratios will help make appropriate financial decisions as they relate to the role as a financial manager, and also assist in achieving the firm’s financial management goals.
Gross Margin Percentage = Net Income/Sales
For 2018: Gross Profit is 58.26B, Sales 130.86B
Gross Margin Percentage = 58.26B/130.86B
= 0.44520861989
For 2017: Gross Profit 57.52B, Sales 126.03B
Gross Margin Percentage = 57.52B/126.03B
= 0.45639927001
EBIT Margin Percentage = EBIT/Sales
For 2018: EBIT Margin Percentage = 2.88B/130.86B
EBIT Margin Percentage =: 2.88B/130.86B
= 0.02200825309
For 2017: EBIT Margin Percentage = 23.45B/126.03B
EBIT Margin Percentage = 23.45B/126.03B
= 0.18606680949
Age of Inventory (Days’ of Inventory) = 365/Inventory Turnover
Inventory Turnover = COGS/Inventory
For 2018: COGS = 72.61B, Inventory = 1.34B
Age of Inventory = 365days/Inventory Turnover
Inventory Turnover = COGS/Inventory
= 54.1865671642
365/54.1865671642
= 6.73B
For 2017: COGS=68.51B, Inventory 1.03B
=68.51/1.03
=66.5145631068
365/66.5145631068
=5.48752007006
Age of Accounts Receivables = 365days / AR Turnover
AR Turnover = Sales / Receivables
For 2018: Sales=130.86B, Receivables=25.86B
130.86/25.86=
AR Turnover= 5.06032482599
365/ 5.06032482599
= 72.1297569921
For 2017: Sales=126.03B, Receivables=23.49B
126.03/23.49=
5.36526181354
365/ 5.36526181354
=68.0302308974
Age of Accounts Payable = 365 / AP Turnover
AP Turnover = Purchases / Payables
For 2018: Cost of Goods Sold- 72.61B
For 2017: Cost of Goods Sold- 68.51B
Inventory Purchases = (Ending Inventory – Beginning Inventory) + Cost of Goods Sold
For 2017: (1.03B – 1.2B) + 68.51
=68.34B
68.34B/7.06B
AP Turnover= 9.67988668555
365/9.67988668555
Age of AP = 37.70705297
For 2018: (1.03B-1.34B) + 72.61B
=72.3B/7.23B
=10B
365/10
=36.5
In addition, you have decided to evaluate the Return on Equity (ROE) of the company by calculating the DuPont Ratio, including the Profit Margin, Asset Turnover, and Financial Leverage Ratios.
Year 2017:
Return on Equity (DuPont Ratio) = Profit Margin x Total Asset Turnover x Financial Leverage
Profit Margin = Net Income / Net Sales
=30.1B/126.03B
= 0.238832024121241
Total Asset Turnover = Net Sales / Average Total Assets
Average total Assets= 2016 Total Assets + 2017 Total Assets / 2
(244.18B+257.14B) /2
=250.66
TAT= 126.03/250.66
TAT= 0.5027926274634964
Financial Leverage = Total Assets / Total Equity
257.14B/44.69B
= 5.75385992392034
Profit Margin x Total Asset Turnover x Financial Leverage
0.238832024121241 x 0.5027926274634964 x 5.75385992392034
Return on Equity (DuPont Ratio) =0.6909406515199963
In: Accounting
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
Fixed Element per Month |
Variable Element per Customer Served |
Actual Total for May |
||||
Revenue | $ | 5,700 | $ | 209,500 | ||
Employee salaries and wages | $ | 64,000 | $ | 1,100 | $ | 106,400 |
Travel expenses | $ | 560 | $ | 19,000 | ||
Other expenses | $ | 43,000 | $ | 40,700 | ||
When preparing its planning budget the company estimated that it would serve 35 customers per month; however, during May the company actually served 40 customers.
1. What amount of revenue would be included in Adger’s flexible budget for May?
2. What amount of employee salaries and wages would be included in Adger’s flexible budget for May?
3. What amount of travel expenses would be included in Adger’s flexible budget for May?
4. What amount of other expenses would be included in Adger’s flexible budget for May?
5. What net operating income would appear in Adger’s flexible budget for May?
6. What is Adger’s revenue variance for May? (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 is Adger’s employee salaries and wages spending variance for May? (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.)
8. What is Adger’s travel expenses spending variance for May? (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.)
14. What activity variance would Adger report in May with respect to its revenue? (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.)
In: Accounting
On January 1, 2019, the Julbeth Corporation grants its executives options to purchase 10,000 shares of the company’s $1 par common stock at a price of $25 per share. The options are exercisable beginning in two years and expire in four years. The fair value of the options is estimated to be $60,000 based on an appropriate option pricing model.
Required:
2. Create the journal entries to record the exercise of 7,000 options in 2019.
Requirement 1- Entry to record expense for both 12/31/19 and 12/31/20:
Requirement 2 - Entry to record exercise of options:
In: Accounting
OmniSport Inc. is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores. OmniSport has an enviable reputation for quality of its products. In fact, the demand for its products is so great that at times OmniSport cannot satisfy the demand and must delay or refuse some orders, in order to maintain its production quality. Additionally, OmniSport purchases some of its products from outside suppliers in order to meet the demand. These suppliers are carefully chosen so that their products maintain the quality image that OmniSport has attained. About 60 percent of OmniSport's products are purchased from other companies while the remainder of the products are manufactured by OmniSport. The company has a Plastics Department that is currently manufacturing the boot for in-line skates. OmniSport is able to manufacture and sell 5,000 pairs of skates annually, making full use of its machine capacity at available workstations. Presented below are the selling price and costs associated with OmniSport's skates.
Selling price per pair of skates $98
Costs per pair Molded plastic $8
Other direct materials 12
Machine time ($16/hr.) 24
Manufacturing overhead 18
Selling and admin. cost 15 77
Profit per pair $21
Because OmniSport believes it could sell 8,000 pairs of skates annually if it had sufficient manufacturing capacity, the company has looked into the possibility of purchasing the skates for distribution. Colcott Inc., a steady supplier of quality products, would be able to provide 6.000 pairs of skates per year at a price of $75 per pair delivered to OmniSport's facility. Jack Petrone, OmniSport's product manager, has suggested that the company could make better use of its Plastics Department by manufacturing snowboard bindings. To support his position, Petrone has a market study that indicates an expanding market for snowboards and a need for additional suppliers. Petrone believes that OmniSport could expect to sell 12,000 snowboard bindings annually at a price of $60 per binding. Petrone's estimate of the costs to manufacture the bindings is presented below.
Selling price per snowboard binding $60
Costs per binding Molded plastic $16
Other direct materials 4 Machine time ($16/hr.) 8
Manufacturing overhead 6
Selling and admin. cost 14 48
Profit per binding $12
Other information pertinent to OmniSport's operations is presented below. An allocated $6 fixed overhead cost per unit is included in the selling and administrative cost for all of the purchased and manufactured products. Total fixed and variable selling and administrative costs for the purchased skates would be $10 per pair. In the Plastics Department, OmniSport uses machine hours as the application base for manufacturing overhead. Included in the manufacturing overhead for the current year is $30,000 of fixed, factory-wide manufacturing overhead that has been allocated to the Plastics Department.
REQUIRED: To maximize OmniSport Inc.'s profitability, recommend which product or products should be manufactured and/or purchased. Prepare an analysis based on the data presented that will show the associated financial impact. Support your answer with appropriate calculations and strategic considerations
In: Accounting
For the past several years, Jeff Horton has operated a part-time consulting business from his home. As of April 1, 2019, Jeff decided to move to rented quarters and to operate the business, which was to be known as Rosebud Consulting, on a full-time basis. Rosebud Consulting entered into the following transactions during April:
Apr. | 1 | The following assets were received from Jeff Horton: cash, $20,000; accounts receivable, $14,700; supplies, $3,300; and office equipment, $12,000. There were no liabilities received. |
1 | Paid three months’ rent on a lease rental contract, $6,000. | |
2 | Paid the premiums on property and casualty insurance policies, $4,200. | |
4 | Received cash from clients as an advance payment for services to be provided, and recorded it as unearned fees, $9,400. | |
5 | Purchased additional office equipment on account from Smith Office Supply Co., $8,000. | |
6 | Received cash from clients on account, $11,700. | |
10 | Paid cash for a newspaper advertisement, $350. | |
12 | Paid Smith Office Supply Co. for part of the debt incurred on April 5, $6,400. | |
12 | Recorded services provided on account for the period April 1–12, $21,900. | |
14 | Paid receptionist for two weeks’ salary, $1,650. |
Record the following transactions on Page 2 of the journal:
Apr. | 17 | Recorded cash from cash clients for fees earned during the period April 1–17, $6,600. |
18 | Paid cash for supplies, $725. | |
20 | Recorded services provided on account for the period April 13–20, $16,800. | |
24 | Recorded cash from cash clients for fees earned for the period April 17–24, $4,450. | |
26 | Received cash from clients on account, $26,500. | |
27 | Paid receptionist for two weeks’ salary, $1,650. | |
29 | Paid telephone bill for April, $540. | |
30 | Paid electricity bill for April, $760. | |
30 | Recorded cash from cash clients for fees earned for the period April 25–30, $5,160. | |
30 | Recorded services provided on account for the remainder of April, $2,590. | |
30 | Jeff withdrew $18,000 for personal use. |
At the end of April, the adjustment data were assembled. Analyze and use these data to complete requirements (5)
• | Insurance expired during April is $350. |
• | Supplies on hand on April 30 are $1,225. |
• | Depreciation of office equipment for April is $400. |
• | Accrued receptionist salary on April 30 is $275. |
• | Rent expired during April is $2,000. |
• | Unearned fees on April 30 are $2,350. |
INSTRUCTIONS:
1. Journalize each transaction
2. Post to T-accounts/ four column accounts
3. Journalize and post the adjusting entries
4. Prepare an adjusted trial balance
Accounts in the Chart of Accounts for Rosebud Consulting Company: Cash, Accounts Receivable, Supplies, Prepaid Rent, Prepaid Insurance, Office Equipment, Accumulated Depreciation-Office Equipment, Accounts Payable, Salaries Payable, Service Revenue, Jeff Horton Capital, Jeff Horton Drawing, Unearned Revenue, Salary Expense, Supplies Expense, Rent Expense, Depreciation Expense, Insurance Expense, Advertising Expense, Utilities Expense, Telephone Expense
In: Accounting
Lisa earns $65,000 per year. She is married and claims three allowances. Assume that her employer uses wage bracket tables method. Use withholding allowance, wage bracket table and IRS Publication 15.
a.If she is paid weekly, what is her withholding per paycheck?
b.If she is paid monthly, what is her withholding per paycheck?
c.If she is paid biweekly, what is her withholding per paycheck?
d.If she is paid semimonthly, what is her withholding per paycheck?
In: Accounting