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:

1. 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.

2. 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.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

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.

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

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

The gross margin is 25% of sales.

Actual and budgeted sales data:

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.

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?

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=

The following T-accounts represent September activity:

Required:

Compute the missing amounts indicated by the letters (a) through (i).

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

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?

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:

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?

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

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:

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?

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:

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:

1. Purchased 160,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production.

2. Direct laborers worked 59,000 hours at a rate of $14 per hour.

3. 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?

Vulcan Company’s contribution format income statement for June is as follows:

On February 1, Karin purchases real estate for $375,000. The annual property taxes of $5,040 are payable on
December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,580 to the seller at
closing. Karin’s adjusted basis for the real estate is:

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The
employer’s adjusted basis for the lot is $45,000, and its normal selling price is $90,000.

What is Nat’s recognized gain and his basis for the lot?

In 2014, Harold purchased a classic car that he planned to restore for $12,000. However, Harold is too busy to work
on the car and he gives it to his daughter Julia in 2018. At this time, the fair market value of the car has declined to
$10,000. Harold paid no gift tax on the transaction. Julia completes some of the restoration herself with out-of-pocket
costs of $5,000. She later sells the car for $30,000. What is Julia’s recognized gain or loss on the sale of the car?

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,
2018, the date of the decedent’s death. The executor distributes the land to Kelly on November 12, 2018, at which
time the fair market value is $49,000. The fair market value on February 4, 2019, is $45,000. In filing the estate tax
return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2019, for $48,000. What is her
recognized gain or loss?

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:

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:

1. Purchased 160,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production.

2. Direct laborers worked 59,000 hours at a rate of $14 per hour.

3. Total variable manufacturing overhead for the month was $564,040.

_________________

9. What is the labor rate 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.)

10. What is the labor efficiency 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.)

11. What is the labor spending 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.)

12. What variable manufacturing overhead cost would be included in the company’s planning budget for March?