Useful Art Inc. creates and manufactures objects that are characterized by both utility and artistry. One of its most popular products is the trivet (a 3-legged hot plate). The top of each trivet is a unique, handmade ceramic tile. Useful Art buys the tiles from artists and the trivet legs from a metal-working company, then assembles the trivets in-house. Towards the end of 2015, Useful Art prepares monthly budgets for 2016 using the following assumptions and data:
2015 actual sales:
Jan 300 u
Apr 350 u
Feb 325 u
May 345 u
Mar 275 u
Jun 370 u
Selling price per unit 50 $/u
Useful Art plans to launch a marketing campaign in 2016 that should increase sales (units) by 10% over 2015 sales as long as the selling price remains unchanged. Because each trivet is unique, management wants to have a substantial number of trivets on hand at all times so that customers can choose from among many options. So management plans to have 20% of next month's sales (units) on hand at the end of each month. The artists from whom Useful Art purchases the ceramic tiles do great work, but are sometimes a bit unreliable as to when they deliver the tiles. So management wants to have 30% of next month's production needs (tiles) on hand at the end of each month. The metal-working supplier is very reliable, so management wants to have just 15% of next month's production needs (legs) on hand at the end of each month Useful Art pays $35 per tile. • Useful Art pays $.45 per leg. • Useful Art has collected the following data related to cash inflows from sales: 20% of sales revenues are collected in the month of sale 70% of sales revenues are collected in the month after the sale 10% of sales revenues are collected two months after the sale
REQUIRED: Prepare the following budgets on a monthly basis for Useful Art for 2016: 1. Sales Budget (first two quarters of 2016) 2. Production Budget (first quarter of 2016) 3. Materials Purchases Budget (tiles) (first quarter of 2016) 4. Materials Purchases Budget (legs) (first quarter of 2016) 5. Cash Receipts (AKA Cash Collections) Budget (second quarter of 2016)
In: Accounting
Black Mountain Ski Resort has been granted a 20 - year permit to develop and operate a skiing operation in a national park. After 20 years the site must be returned to its original condition. The roads may remain, as they can be used for fire prevention purposes. In the spring and summer before the ski hill opened, the following transactions and events occurred:
You must use the following Long-Lived asset accounts
Ski Lift
Ski Chalet
Land improvement
Roads
Parking lot
Using Straight Line Depreciation record the depreciation for the first year of operations on the Long-Lived assets and site restoration costs. Put all the depreciation expense in one account and then create accumulated depreciation accounts for each asset that requires depreciation.
Allocate the interest expense on the site restoration costs for the first three years
Using the table below prepare the balance sheet presentation of all the accounts involved in this question for the end of the third year of operations.
Cost |
Accumulated Depreciation |
Net Carrying Amount |
|
Property Plant and Equipment |
|||
Ski Lift |
|||
Ski Chalet |
|||
Land Improvement |
|||
Roads |
|||
Parking Lot |
|||
Site Restoration Costs |
|||
Total Property Plant and Equipment |
Long Term Liabilities
Obligation for future restoration =
At the end of the project the actual cost of restoring the site is $43,000,000, as originally estimated. Prepare the journal entry to record the payment of these costs at the end of the project
Date |
Explanation/ Account |
Debit |
Credit |
what would be the total expenses associated with the site restoration in the first, second and 20th year?
Year |
Depreciation of Site Restoration Costs |
Interest expense accrual on obligation for future site restoration |
Total Expense relating to site restoration |
1 |
|||
2 |
|||
20 |
Calculations
In: Accounting
Nonsense Pty Ltd has 6 shareholders, each of whom is a director involved in a day to day operations of the company. Nonsense Pty Ltd has only 8 full time employees each of whom has direct personal contract with the directors.
The financial statements of Nonsense Pty Ltd for the year ended
30 June 2019 show:
- GROSS ASSETS OF $40,000,000
a LIABILITY OF 9000,000 owed entirely to a public sector bank
and
- Gross revenues of $60000,000
Explain, justifying your answer, if Nonesence Pty Ltd is required
by the Corporations Act 2001 to produce an annual report according
to AASB accounting standards for the year ending 30 June 2019?
In: Accounting
For the year ended December 31, 2018, Fidelity Engineering reported pretax accounting income of $980,000. Selected information for 2018 from Fidelity’s records follows: Interest income on municipal bonds $ 32,600 Depreciation claimed on the 2018 tax return in excess of depreciation on the income statement 55,900 Carrying amount of depreciable assets in excess of their tax basis at year-end 86,500 Warranty expense reported on the income statement 26,450 Actual warranty expenditures in 2018 16,300 Fidelity's income tax rate is 40%. At January 1, 2018, Fidelity's records indicated balances of zero and $12,240 in its deferred tax asset and deferred tax liability accounts, respectively. Required: 1. Determine the amounts necessary to record income taxes for 2018 and prepare the appropriate journal entry. 2. What is Fidelity’s 2018 net income?
For the year ended December 31, 2018, Fidelity Engineering
reported pretax accounting income of $980,000. Selected information
for 2018 from Fidelity’s records follows:
Interest income on municipal bonds | $ | 32,600 |
Depreciation claimed on the 2018 tax return in excess of depreciation on the income statement |
55,900 | |
Carrying amount of depreciable assets in excess of their tax basis at year-end |
86,500 | |
Warranty expense reported on the income statement | 26,450 | |
Actual warranty expenditures in 2018 | 16,300 | |
Fidelity's income tax rate is 40%. At January 1, 2018, Fidelity's
records indicated balances of zero and $12,240 in its deferred tax
asset and deferred tax liability accounts, respectively.
Required:
1. Determine the amounts necessary to record
income taxes for 2018 and prepare the appropriate journal
entry.
2. What is Fidelity’s 2018 net income?
In: Accounting
Exercise 21-12 Direct materials and direct labor variances LO P2
Reed Corp. has set the following standard direct materials and
direct labor costs per unit for the product it
manufactures.
Direct materials (15 lbs. @ $3 per lb.) | $45 | |||
Direct labor (3 hrs. @ $14.00 per hr.) | 42 | |||
During June the company incurred the following actual costs to
produce 8,500 units.
Direct materials (130,400 lbs. @ $2.75 per lb.) | $ | 358,600 | ||
Direct labor (29,900 hrs. @ $14.15 per hr.). | 423,085 | |||
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
(1) Compute the direct materials price and
quantity variances.
(2) Compute the direct labor rate variance and the
direct labor efficiency variance. Indicate whether each variance is
favorable or unfavorable.
Complete this question by entering your answers in the tabs below.
Required 1
Compute the direct materials price and quantity variances and classify it as favorable or unfavorable.
Actual Cost
1)
2)
3)
$
___________
1)
2)
3)
Standard Cost
1)
2)
3)
$
________________
________________
_________________
Required 2
Compute the direct labor rate variance and the direct labor efficiency variance. Indicate whether each variance is favorable or unfavorable.
Actual Cost
1)
2)
3)
$
__________________
1)
2)
3)
Standard Cost
1)
2)
3)
$
______________
______________
_______________
In: Accounting
Problem 3-5A Preparing financial statements from the adjusted trial balance and computing profit margin LO P3, A1 [The following information applies to the questions displayed below.] The adjusted trial balance for Chiara Company as of December 31, 2018, follows. Debit Credit Cash $ 30,000 Accounts receivable 52,000 Interest receivable 18,000 Notes receivable (due in 90 days) 168,000 Office supplies 16,000 Automobiles 168,000 Accumulated depreciation—Automobiles $ 50,000 Equipment 138,000 Accumulated depreciation—Equipment 18,000 Land 78,000 Accounts payable 96,000 Interest payable 20,000 Salaries payable 19,000 Unearned fees 30,000 Long-term notes payable 138,000 Common stock 20,000 Retained earnings, December 31, 2017 235,800 Dividends 46,000 Fees earned 484,000 Interest earned 24,000 Depreciation expense—Automobiles 26,000 Depreciation expense—Equipment 18,000 Salaries expense 188,000 Wages expense 40,000 Interest expense 32,000 Office supplies expense 34,000 Advertising expense 58,000 Repairs expense—Automobiles 24,800 Totals $ 1,134,800 $ 1,134,800 Problem 3-5A Part 1 Required: 1(a) Prepare the income statement for the year ended December 31, 2018. 1(b) Prepare the statement of retained earnings for the year ended December 31, 2018. 1(c) Prepare Chiara Company's balance sheet as of December 31, 2018.
In: Accounting
Income Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:
Sales (15,500 units) | $2,170,000 | ||||
Production costs (20,000 units): | |||||
Direct materials | $1,036,000 | ||||
Direct labor | 498,000 | ||||
Variable factory overhead | 248,000 | ||||
Fixed factory overhead | 166,000 | 1,948,000 | |||
Selling and administrative expenses: | |||||
Variable selling and administrative expenses | $301,900 | ||||
Fixed selling and administrative expenses | 116,900 | 418,800 |
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
Shawnee Motors Inc. | |
Absorption Costing Income Statement | |
For the Month Ended August 31 | |
$ | |
$ | |
$ |
b. Prepare an income statement according to the variable costing concept.
Shawnee Motors Inc. | ||
Variable Costing Income Statement | ||
For the Month Ended August 31 | ||
$ | ||
$ | ||
$ | ||
Fixed costs: | ||
$ | ||
$ |
c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)?
Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher income from operations than will the variable costing income statement.
In: Accounting
Choco Company had the following capital structure at January 1, 2018:
Outstanding
Ordinary shares, 600,000 shares $7,200,000
10% stated interest rate convertible bonds issued at par;
each $1,000 bond is convertible into 80 ordinary shares $5,000,000
During 2018, Choco had the following share transactions:
May 1 Issued 50,000 ordinary shares for $30 per share.
Sep. 1 Redeemed 100,000 ordinary shares at $35 per share.
Nov. 1 Converted $2,000,000 of bonds. Net income for 2018 was $1,900,000.
The income tax rate was 32%.
Required: Compute the basic and diluted earnings per share for Choco for 2018 (Round to 2 decimal places).
In: Accounting
. Come up with a merchandise company scenario, where this company performed four purchasing transactions and two sales transactions. Then, calculate the balance of ending inventory and cost of goods sold after each sales transaction, assuming the company used the FIFO, Moving Average Cost. Use the following table to answer.
Date |
Purchase |
Sales (COGS) |
Ending inventory |
In: Accounting
Airnova Inc. has two types of bonds, Bond D and Bond F. Both have 8 percent coupons, make semiannual payments, and are priced at par value. Bond D has 2 years to maturity. Bond F has 15 years to maturity.
Airnova Inc. is considering four different types of stocks. They each have a required return of 20 percent and a dividend of $3.75 for share. Stocks, A, B, and C are expected to maintain constant growth rates in dividends for the near future of 10 percent, 0 percent, and -5 percent, respectively. Stock D is a growth stock and will increase its dividend by 30 percent for the next four years and then maintain a constant 12 percent growth rate after that.
What is the dividend yield for each of the four stocks?
What is the expected capital gains yield?
Discuss the relationship among the various returns that you find for each of the stocks.
In: Accounting
Profit-Linked Productivity Measurement
In 20x2, Choctaw Company implements a new process affecting labor and materials.
Choctaw Company provides the following information so that total productivity can be valued:
20x1 | 20x2 | |
Number of units produced | 540,000 | 450,000 |
Labor hours used | 108,000 | 112,500 |
Materials used (lbs.) | 2,160,000 | 1,500,000 |
Unit selling price | $20 | $22 |
Wages per labor hour | $12 | $14 |
Cost per pound of material | $3.40 | $3.50 |
Required:
1. Calculate the cost of inputs in 20x2, assuming no productivity change from 20x1 to 20x2.
Cost of labor | $ |
Cost of materials | |
Total PQ cost | $ |
2. Calculate the actual cost of inputs for 20x2.
Cost of labor | $ |
Cost of materials | |
Total current cost | $ |
What is the net value
of the productivity changes?
$
How much profit change is attributable to each input's productivity change? If an item is negative, use a minus (-) sign to indicate.
Labor productivity change | $ |
Materials productivity change | $ |
3.
What if a manager wants to know how much
of the total profit change from 20x1 to 20x2 is attributable to
price recovery? Calculate the total profit change.
$
Calculate the
price-recovery component.
$
In: Accounting
1. Angelo uses the equity method to account for its investment in Fischer on January 1. On the date of acquisition, Fischer’s land and buildings were undervalued on its balance sheet. During the year following the acquisition, how do these excesses of fair values over book values affect Angelo's Equity Income from Fischer?
a. Building, Decrease; Land, No Effect
b. Building, Decrease; Land, Decrease
c. Building, Increase; Land, Increase
d. Building, Increase; Land, No Effect
2. On January 2, 2020, Campbell, Inc. purchased a 20% interest in Renner Corp. for $2,000,000 cash. During 2020, Renner's net income was $2,500,000 and it paid dividends of $750,000.
Equity Investment balance should Campbell report at December 31, 2020?
a. $2,500,000
b. $ 500,000
c. $2,350,000
d. $2,150,000
3. On December 31, 2020, Park Inc. paid $500,000 for all of the common stock of Smith Corp. On that date, Smith had assets and liabilities with book values of $400,000 and $100,000; and fair values of $450,000 and $125,000, respectively.
What amount of goodwill will be reported on the December 31, 2020 balance sheet?
a. $ 50,000
b. $100,000
c. $200,000
d. $175,000
4. Francis, Inc. acquired 40% of Park's voting stock on January 1, 2020 for $420,000. During 2020, Park earned $120,000 and paid dividends of $60,000. During 2021, Park earned $160,000 and paid dividends of $50,000 on April 1 and $40,000 on December 1. On July 1, 2021, Francis sold half of its stock in Park for $275,000 cash.
The Equity Investment balance at December 31, 2020 is:
a. $420,000
b. $444,000
c. $408,000
d. $492,000
5. On January 1, 2020, Cracker Co. purchased 40% of Dallas Corp.'s common stock at book value of net assets. The balance in Cracker's Equity Investment account was $820,000 at December 31, 2020. Dallas reported net income of $500,000 for the year ended December 31, 2020, and paid dividends totaling $150,000 during 2020.
How much did Cracker pay for its 40% interest in Dallas?
a. $680,000
b. $500,000
c. $560,000
d. $760,000
In: Accounting
The Frost Company has accumulated the following information relevant to its 2018 earnings per share. 1. Net income for 2018, $150,000. 2. Bonds payable: On January 1, 2018, the company had issued 10%, $200,000 bonds. Each $1,000 bond is currently convertible into 20 shares of ordinary share. To date, no bonds have been converted. 3. Bonds payable: On January 31, 2018, the company had issued $540,000 of 5.8% bonds. Each $1,000 bond is currently convertible into 11 shares of ordinary share. To date, no bonds have been converted. 4. Preference share: On July 1, 2017, the company had issued 3,800 shares of $7.5 preference share at $108 per share. Each share of preference share is currently convertible into 2.45 shares of ordinary share. To date, no preference share has been converted and no additional shares of preference share have been issued. The current dividends have been paid. 5. Ordinary share: At the beginning of 2018, 25,000 shares were outstanding. On July 1, 7,000 additional shares were issued. On September 1, a 20% bonus issue was declared and issued. On November 1, 2,000 shares were repurchased by the company. 6. Share options: Options to acquire ordinary share at a price of $33 per share were outstanding during all of 2018. Currently, 4,000 shares may be acquired. TO date, No options have been exercised. 7. Miscellaneous: Stock market prices on ordinary share averaged $41 per share during 2018, and the 2018 ending stock market price was $40 per share. The corporate income tax rate is 30%. Required: Compute the basic and diluted earnings per share for 2018 (Round to 2 decimal places).
In: Accounting
Auditing
Identify deficiencies in your client's system of internal control according to GAAS and PCAOB:
Stock compensation expense is 2.2 million understated because the Diector of SEC reporting in Alququerque made incorrect assumptions in the Black Shoes Model, she did not check her work and it was not reviewed by anyone else.
Deficiencies include IPE (information produced by the entity) errors, year-ended inventory count errors, errors, errors in the capitalization of fixed assets, and errors in the conclusion of the entity's Black Sholes model that is used to calculate stock computation
Are these significant deficiencies or material weaknesses?
In: Accounting
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company’s inventory balances were as follows:
Raw materials | $ | 74,000 | |
Work in process | $ | 31,800 | |
Finished goods | $ | 52,200 | |
The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company’s predetermined overhead rate of $14.50 per direct labor-hour was based on a cost formula that estimated $580,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:
1.What is the cost of goods available for sale during the year?
2. What is the journal entry to record the cost of goods sold referred to in item h above?
3. What is the ending balance in Finished Goods?
4. Assuming that the company closes its underapplied or overapplied overhead to Cost of Goods Sold, what is the adjusted cost of goods sold for the year?
In: Accounting