The Filling Department of Eve Cosmetics Company had 3,300 ounces in beginning work in process inventory (50% complete). During the period, 37,000 ounces were completed. The ending work in process inventory was 2,600 ounces (50% complete).

What are the total equivalent units for conversion costs?

If required, round to the nearest unit.

a. Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow:

				Proportion of Services Used by
Department	Direct Costs			Maintenance		Cafeteria		Machining		Assembly
Machining	$	98,000
Assembly		74,400
Maintenance		46,000		—		0.2		0.6		0.2
Cafeteria		37,000		0.6		—		0.1		0.3

Exercise 11-27 (Algo) Cost Allocation: Direct Method (LO 11-2)

Required:

Compute the allocation of service department costs to producing departments using the direct method. (Do not round intermediate calculations.)

b. Assume that both Machining and Assembly work on just two jobs during the month of August: CM-22 and CM-23. Costs are allocated to jobs based on machine-hours in Machining and labor-hours in Assembly. The number of labor- and machine-hours worked in each department are as follows:

		Machining		Assembly
Job CM-22:	Machine-hours	230		60
	Labor-hours	20		20
Job CM-23:	Machine-hours	20		40
	Labor-hours	30		100

Required:
How much of the service department costs allocated to Machining and Assembly in the direct method should be allocated to Job CM-22? How much should be allocated to Job CM-23?

Part #4: E Company has budgeted sales revenues of $160,000 for May, $210,000 for June, $235,000 for July, and $172,000 for August. To prepare a cash budget, the company must determine the budgeted cash collections from sales. Generally the trend has been 55 percent collected in the month of sale, 25 percent collected in the month following sale, 18 percent collected in the second month following sale, and 2 percent uncollectible. Also, E Company grants a 2 percent cash discount to customers who pay in the month of sale (so they only collect 98 percent of the total amount for those sales instead of the usual 100 percent). Prepare a schedule of cash collections for the month of July only. Part #5: At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October, November, December, and January are 8,000 units and 10,200 units and 13,600 units and 7,400 units respectively. L Company wants to have sufficient units on hand at the end of each month to meet 20 percent of the following month’s budgeted sales. Prepare a Production Budget with columns for October, November, December and Total 4th Quarter.Part #6: H Company’s Direct Labor Budget indicates the number of direct labor hours to be used in July, August, and September are 20,000 and 19,100 and 22,900 respectively. Variable overhead is expected to be $0.80 per direct labor hour. Fixed overhead per month is expected to be $6,200. Prepare an Overhead Budget with columns for July, August, September, and Total 3rd Quarter.   

Part #5: At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October, November, December, and January are 8,000 units and 10,200 units and 13,600 units and 7,400 units respectively. L Company wants to have sufficient units on hand at the end of each month to meet 20 percent of the following month’s budgeted sales. Prepare a Production Budget with columns for October, November, December and Total 4^th Quarter.

Part #6: H Company’s Direct Labor Budget indicates the number of direct labor hours to be used in July, August, and September are 20,000 and 19,100 and 22,900 respectively. Variable overhead is expected to be $0.80 per direct labor hour. Fixed overhead per month is expected to be $6,200. Prepare an Overhead Budget with columns for July, August, September, and Total 3^rd Quarter.

1. Lessee enters into a four-year lease of equipment and concludes that the agreement is a finance lease because the lease contains an option for Lessee to purchase the equipment at the end of the lease and the Lessee is reasonably certain to exercise that option. The arrangement provides the following:

Lease term	Four years, with the first payment due at lease commencement and the remainder annually at the lease anniversary date thereafter
Annual payments, beginning at lease commencement and annually thereafter	Commencement – $50,000 Year 2 – $53,000 Year 3 – $55,000 Year 4 -- $60,000
Discount rate	4.5%
PV of lease payments	$204,577

Complete the following schedule to show the impact on the income statement and balance sheet.

	Initial	Year 1	Year 2	Year 3	Year 4
Cash lease payments
Income statement:
Lease expense recognized:
Interest expense
Amortization expense
Total periodic expense
Balance sheet:
ROU asset
Lease liability

• Prepare the journal entries at the time of the lease commencement and for Year 1 of the lease term.

Southwestern Wear Inc. has the following balance sheet:

Current assets	$1,875,000		Accounts payable	$   375,000
Fixed assets	1,875,000		Notes payable	750,000
			Subordinated debentures	750,000
			Total debt	$1,875,000
			Common equity	1,875,000
Total assets	$3,750,000		Total liabilities and equity	$3,750,000

The trustee's costs total $290,500, and the firm has no accrued taxes or wages. Southwestern has no unfunded pension liabilities. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.3 million is received from sale of the assets? Round your answers for monetary values to the nearest dollar and for percentage values the nearest whole number. If your answer is zero, enter “0”. Enter your answers as positive values.

Distribution of proceeds on liquidation:

Proceeds from the sale of assets	$
Less:
1. First mortgage (paid from the sale of assets)
2. Fees and expenses of bankruptcy
3. Wages due to workers within 3 months of bankruptcy
4. Taxes due to federal, state, and local governments
5. Unfunded pension liabilities
Funds available for distribution to general creditors	$

Distribution to general creditors:

General Creditors’ Claims (1)	Amount of Claim (2)	Application of 100% Distribution (3)	Distribution after Subordination Adjustment (4)	Percentage of Original Claim Received (5)
Notes payable	$	$	$	%
Accounts payable
Subordinated debentures
Total	$	$	$

Round your answer for monetary value to the nearest dollar and for percentage value to two decimal places.

The remaining $   will go to the common stockholders. They will receive only   % of the amount of equity on the balance sheet.

[The following information applies to the questions displayed below.]
  
On January 1, 2021, Red Flash Photography had the following balances: Cash, $25,000; Supplies, $9,300; Land, $73,000; Deferred Revenue, $6,300; Common Stock $63,000; and Retained Earnings, $38,000. During 2021, the company had the following transactions:

1.		February		15		Issue additional shares of common stock, $33,000.
2.		May		20		Provide services to customers for cash, $48,000, and on account, $43,000.
3.		August		31		Pay salaries to employees for work in 2021, $36,000.
4.		October		1		Purchase rental space for one year, $25,000.
5.		November		17		Purchase supplies on account, $35,000.
6.		December		30		Pay dividends, $3,300.

The following information is available on December 31, 2021:

1. Employees are owed an additional $5,300 in salaries.
2. Three months of the rental space has expired.
3. Supplies of $6,300 remain on hand.
4. All of the services associated with the beginning deferred revenue have been performed.

Required:

1. Record the transactions that occurred during the year. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
  

2. Record the adjusting entries at the end of the year. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.)
  

3. Prepare an adjusted trial balance.

4. Prepare an income statement, statement of stockholders’ equity, and classified balance sheet.

5. Prepare closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following formulas, where q is the number of labor-hours worked in a month:

	Cost Formulas
Direct labor	$16.30q
Indirect labor	$4,100 + $1.80q
Utilities	$5,100 + $0.90q
Supplies	$1,700 + $0.40q
Equipment depreciation	$18,100 + $2.60q
Factory rent	$8,300
Property taxes	$2,400
Factory administration	$13,200 + $0.70q

The Production Department planned to work 4,300 labor-hours in March; however, it actually worked 4,100 labor-hours during the month. Its actual costs incurred in March are listed below:

	Actual Cost Incurred in March
Direct labor	$	68,410
Indirect labor	$	11,020
Utilities	$	9,360
Supplies	$	3,630
Equipment depreciation	$	28,760
Factory rent	$	8,700
Property taxes	$	2,400
Factory administration	$	15,440

Required:

1. Prepare the Production Department’s planning budget for the month.

2. Prepare the Production Department’s flexible budget for the month.

3. Prepare the Production Department’s flexible budget performance report for March, including both the spending and activity variances.

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Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense).

	Required:
1.	Calculate the number of helmets Head-First must sell to earn operating income of $81,900.
2.	Check your answer by preparing a contribution margin income statement based on the number of units calculated.

	April	May	June	July
Sales	600,000	900,000	500,000	400,000
Cost of Goods sold	420,000	630,000	350,000	280,000
Gross Margin	180,000	270,000	150,000	120,000
Selling and admin expenses
selling expense	79,000	120,000	62,000	51,000
administrative	45,000	52,000	41,000	38,000
total selling and administrative expenses	124,000	172,000	103,000	89,000
net operating income	56,000	98,000	47,000	31,000

a. sales are 20% for cash and 80% on account

b. sales on account are collected over a three month period with 10% collected in the month of sale: 70% in the first month following the sale, and the remaining 20% collected in the second month following the sale. Feb. sales were 200,000 and march was 300,000

c. Inventory purchases are paid within 15 days therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable on March 31 for the month of March was 126,000

d. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. the merchandise inventory at march 31 was 84,000

e. dividends of 49,000 will be declared and paid in April

f. Land costing 16,000 will be purchased for cash in May

g. The cash balance at March 31 is 52,000 the company must maintain a cash balance of at least 40,000 at the end of each month.

h. 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 200,000. The interest rate on these loans is 1% each 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 each quarter.

1. Prepare a merchandise purchase budget for April, May and June.

2. Prepare a schedule of expected cash disbursements for merchandise purchases for April, May and June and for the quarter in total.

3. Prepare a cash budget for the month of May

On January 1, 2017, Skysong Company purchased 11% bonds, having a maturity value of $274,000, for $295,314.87. The bonds provide the bondholders with a 9% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest received on January 1 of each year. Skysong Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale category. The fair value of the bonds at December 31 of each year-end is as follows.

2017		$293,000		2020		$284,700
2018		$283,700		2021		$274,000
2019		$282,800

Q		Prepare the journal entry to record the recognition of fair value for 2018.

Dec 31, 2018	Unrealized Holding Gain or Loss-Equity	?
	Fair Value Adjustment		?

Part #1: K Company is planning its cash disbursements for the upcoming months. In June, it anticipates $72,000 in Purchases, $130,000 in Payroll, and $40,000 in Loan Payments. In July, it anticipates $77,000 in Purchases, $140,000 in Payroll, and $35,000 in Loan Payments. In August, it anticipates $84,000 in Purchases, $150,000 in Payroll, and $30,000 in Loan Payments. Purchases are usually paid half in the current month and half in the following month. Payroll is paid 70 percent in the current month and 30 percent in the following month. Loan Payments are paid in the month due. Prepare a schedule of cash disbursements for the month of July only.

Part #2: Q Company anticipates production for its second quarter to be 18,000 units in April, 28,400 units in May, and 36,000 units in June. Each unit of finished product requires four pounds of raw materials. Q Company maintains raw materials inventories equal to 25 percent of the following month’s pounds needed for production. The April 1 inventories are in line with Q Company’s inventory policy. The anticipated cost per pound in April is $6 while the anticipated cost per pound in May is $6.25. Prepare a Direct Materials Purchases Budget with columns for April and May only.

Part #3: F Company’s Production Budget indicates that 13,000 units will be produced in April and 12,300 units in May. Workers are paid $19 per hour. It generally takes a worker 15 minutes (which is .25 hours) to make a unit. Prepare a Direct Labor Budget with columns for April and May only.

Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting Department, where carpet backing is added at the beginning of the process and the process is completed. On January 1, Port Ormond Carpet Company had the following inventories:

Finished Goods	$8,400
Work in Process-Spinning Department	1,600
Work in Process-Tufting Department	2,100
Materials	4,500

Departmental accounts are maintained for factory overhead, and both have zero balances on January 1. Manufacturing operations for January are summarized as follows:

Jan.	1	Materials purchased on account, $84,300
	2	Materials requisitioned for use:
		Fiber-Spinning Department, $42,600
		Carpet backing-Tufting Department, $34,500
		Indirect materials-Spinning Department, $4,000
		Indirect materials-Tufting Department, $2,500
	31	Labor used:
		Direct labor-Spinning Department, $27,200
		Direct labor-Tufting Department, $18,600
		Indirect labor-Spinning Department, $12,200
		Indirect labor-Tufting Department, $11,800
	31	Depreciation charged on fixed assets:
		Spinning Department, $5,300
		Tufting Department, $3,300
	31	Expired prepaid factory insurance:
		Spinning Department, $1,200
		Tufting Department, $1,000
	31	Applied factory overhead:
		Spinning Department, $23,100
		Tufting Department, $18,150
	31	Production costs transferred from Spinning Department to Tufting Department, $86,000
	31	Production costs transferred from Tufting Department to Finished Goods, $150,000
	31	Cost of goods sold during the period, $154,500

	Required:
1.	Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations. Refer to the Chart of Accounts for exact wording of account titles.
2.	Compute the January 31 balances of the inventory accounts.*
3.	Compute the January 31 balances of the factory overhead accounts.*
	*Enter your amounts in positive value.

Required information

[The following information applies to the questions displayed below.]
  
Laker Company reported the following January purchases and sales data for its only product.
  

Date		Activities	Units Acquired at Cost								Units sold at Retail
Jan.	1	Beginning inventory	210	units	@	$	13.50	=	$	2,835
Jan.	10	Sales										160	units	@	$	22.50
Jan.	20	Purchase	150	units	@	$	12.50	=		1,875
Jan.	25	Sales										160	units	@	$	22.50
Jan.	30	Purchase	320	units	@	$	12.00	=		3,840
		Totals	680	units					$	8,550		320	units

For specific identification, ending inventory consists of 360 units, where 320 are from the January 30 purchase, 5 are from the January 20 purchase, and 35 are from beginning inventory.

Required:

1. Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,950, and that the applicable income tax rate is 40%.

2. Which method yields the highest net income?

3. Does net income using weighted average fall above, between, or below that using FIFO and LIFO?

4. If costs were rising instead of falling, which method would yield the highest net income?

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3
• Required 4

Prepare comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are $1,950, and that the applicable income tax rate is 40%. (Round your average cost per unit to 2 decimal places.)

	LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Average FIFO LIFO Sales $7,200.00 $7,200.00 $7,200.00 $7,200.00 Cost of goods sold Gross profit $7,200.00 $7,200.00 $7,200.00 $7,200.00 Expenses Income before taxes $7,200.00 $7,200.00 $7,200.00 $7,200.00 Income tax expense Net income $7,200.00 $7,200.00 $7,200.00 $7,200.00

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current year:

Preferred 2% Stock, $100 par (60,000 shares authorized, 30,000 shares issued)	$3,000,000
Paid-In Capital in Excess of Par—Preferred Stock	600,000
Common Stock, $25 par (600,000 shares authorized, 220,000 shares issued)	5,500,000
Paid-In Capital in Excess of Par—Common Stock	720,000
Retained Earnings	20,818,000

During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:

1. Issued 60,000 shares of common stock at $28, receiving cash.
2. Issued 15,000 shares of preferred 2% stock at $120.
3. Purchased 36,000 shares of treasury common for $26 per share.
4. Sold 18,000 shares of treasury common for $29 per share.
5. Sold 12,000 shares of treasury common for $24 per share.
6. Declared cash dividends of $2.00 per share on preferred stock and $0.06 per share on common stock.
7. Paid the cash dividends.

Required:

Journalize the entries to record the transactions.

For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Issued 60,000 shares of common stock at $28, receiving cash.

b. Issued 15,000 shares of preferred 2% stock at $120.

c. Purchased 36,000 shares of treasury common for $26 per share..

d. Sold 18,000 shares of treasury common for $29 per share.

e. Sold 12,000 shares of treasury common for $24 per share.

f. Declared cash dividends of $2 per share on preferred stock and $0.06 per share on common stock.

g. Paid the cash dividends.

Designer Frames makes bicycle frames in two processes, tubing and welding. The tubing process has a capacity of 125,000 units per year; welding has a capacity of 150,000 units per year. Cost information follows:

Design of product and process costs	$100,000
Inspection and testing costs	42,500
Scrap cost per unit (all in the tubing dept.)	34.00

The company enjoys high demand for its products. Designer Frames can sell whatever output it can produce for the market price of $55 per frame. Designer Frames can start only 125,000 units into production in the tubing department because of capacity constraints on the tubing machines. The company scraps all defective units produced in the tubing department. Of the 125,000 units started in the tubing operation, 12,500 units (10 percent) are scrapped at the end of the production process. Scrap costs, based on total (fixed and variable) manufacturing costs incurred in the tubing operation, equal $34.00 per unit as follows:

Direct materials (variable)	$17.50
Direct manufacturing, setup, and materials handling labor (variable)	6.50
Depreciation, rent, and other overhead (fixed)	10.00
	$34.00

The “$10 fixed cost” is the portion of the total fixed costs of $1,250,000 allocated to each unit, whether good or defective. The good units from the tubing department are sent to the welding department. Variable manufacturing costs in the welding department are $2.00 per unit. There is no scrap in the welding department. Therefore, Designer Frames’ total sales quantity equals the tubing department’s output. Designer Frames incurs no other variable costs. Designer Frames’ designers have discovered that using a different type of material in the tubing operation would reduce scrap to zero, but it would increase the variable costs per unit in the tubing department by $2.25. Recall that only 125,000 units can be started each year.

Required:

1. What is the additional direct materials cost of implementing the new method?

The additional direct material cost for implementing the new method would be $2.25 per unit and a total of $281,250.

b. What is the additional benefit to Designer Frames from using the new material and improving quality?

c. Should Designer Frames use the new materials?

d. Draft brief note to management describing other nonfinancial and qualitative factors should Designer Frames consider in making the decision?