The following balance sheets are taken from the records of Golding Company (numbers are expressed in thousands):

Additional information is as follows:

Required:

Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company’s major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim’s board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement.

Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings.

1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic areas on the basis of the ratio of the variable costs expended to total variable costs.

2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be the ratio of units produced per product line (or per geographical area) to the total number of units produced.

3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation.

4. The division managers were able to provide reliable sales percentages for their product lines by geographical are

Murphy prepared the following product-line income statement based on the data presented above

Required:

1. Prepare a segmented income statement for Pacific Rim Industries based on the company’s geographical areas. The statement should show the operating income for each segment. (Do not round your intermediate calculations and round your final answers to the nearest dollar amount.)

Matheson Electronics has just developed a new electronic device that it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the following information:

1. New equipment would have to be acquired to produce the device. The equipment would cost $318,000 and have a six-year useful life. After six years, it would have a salvage value of about $18,000.
2. Sales in units over the next six years are projected to be as follows:

3. Production and sales of the device would require working capital of $62,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released at the end of the project’s life.
4. The devices would sell for $35 each; variable costs for production, administration, and sales would be $15 per unit.
5. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $169,000 per year. (Depreciation is based on cost less salvage value.)
6. To gain rapid entry into the market, the company would have to advertise heavily. The advertising costs would be:

7. The company’s required rate of return is 8%.

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years.

2-a. Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment.

2-b. Would you recommend that Matheson accept the device as a new product?

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $53,000 and $101,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,100 units of B300 at a price of $21 per unit and 12,800 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $57,000 and $101,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments

Fastraq Inc. is in the business of design and manufacture of bike chains for both professional and amateur cyclists. Two new titanium chain sets were introduced during the year – the Smooth and Extreme. They are currently selling for $110 and $155 respectively. The following data summarise the cost structure for the two chain sets:

The company adopts an absorption costing system. Overhead is applied to the two products based on direct labour hours using a flexible budget to calculate the overhead rate prior the commencement of the financial year.

Fastraq budgeted (and produced) 43,000 Smooth and 55,000 Extreme chain sets. Fixed manufacturing overhead was budgeted at $1,650,000 and variable manufacturing overhead was estimated to be $1.75 per direct labour hour. Actual overhead incurred for the year amounted to $2,100,000. Any over- or under-absorbed overhead is written off to cost of goods sold.

(e) Calculate how much of manufacturing overhead will be charged to the income statement if in the following year, Fastraq incurs total manufacturing overhead of $2,300,000 and sells off all of the brought forward inventory from the current year, under (i) absorption costing and (ii) variable costing.

The city of Belle collects property taxes for other local governments—Beau County and the Landis Independent School District (LISD). The city uses a Property Tax Collection Custodial Fund to account for its collection of property taxes for itself, Beau County, and LISD. Prepare journal entries to record the following transactions and events for Belle’s Custodial Fund during calendar year 2019.

1. During 2019, property taxes were levied for Belle ($2,000,000), Beau County ($1,000,000) and LISD ($3,000,000). Assume taxes collected by the Custodial Fund will be paid to Belle’s General Fund.

2. Property taxes in the amount of $4,500,000 are collected. The percentage collected for each entity is in the same proportion as the original levy.

3. The amount owed to the city of Belle, Beau County, and LISD is recognized. The city of Belle charges an administrative fee to Beau County ($20,000) and LISD ($60,000) to collect the taxes, which reduces the amount owed to Beau County and LISD.

4. The Custodial Fund distributes the amount owed to the three governments.

the decision to sell to extend credit to customers will decrease wage costs
True
False

On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,015,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $800,000, retained earnings of $350,000, and a noncontrolling interest fair value of $435,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing.

During the next two years, Smashing reported the following:

Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 30 percent of the current year purchases remain in Smashing's inventory.

A) Prepare Journal entries for G*, S, A, I, D, E, TI, G. with debit and credits to each account.

4. Briefly discuss the amending of receipts entered into manual accounts receivable system

5. Why is it important to verify bad and doubtful debt status through liaison with debtors?

6. Explain the importance of completing the reporting procedures and required documentation for bad and doubtful debts

Arrange the following items in proper balance sheet presentation: (Amounts to be deducted should be indicated with parentheses or a minus sign.)
  

Break even analysis accompany fixed operating cost are 430000 its variable costs are 2.95 per unit and the product sales prices is 4.50 what is the company break even point that is at what unit sales volume will its income equal its cost

With zero-based budgeting, each expenditure item must be justified for the new budget period.” Explain.

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 $32 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally:

*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 17,000 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 $170,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 17,000 carburetors from the outside supplier?

4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?