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?

1. Prior to liquidating their partnership, Craig and Jenny had capital accounts of $74,060 and $125,920, respectively. The partnership assets were sold for $242,930. The partnership had $27,060 of liabilities. Craig and Jenny share income and losses equally.

Determine the amount received by Jenny as a final distribution from liquidation of the partnership.

2. Emerson and Dakota formed a partnership dividing income as follows:

1. Annual salary allowance to Emerson of $39,600
2. Interest of 10% on each partner's capital balance on January 1
3. Any remaining net income divided equally.

Emerson and Dakota had $20,000 and $126,400, respectively, in their January 1 capital balances. Net income for the year was $222,400.

How much net income should be distributed to Dakota?

3. Malcolm has a capital balance of $63,200 after adjusting to fair market value. Celeste contributes $39,200 to receive a 25% interest in a new partnership with Malcolm.

Determine the amount and recipient of the partner bonus

4.A company had stock outstanding as follows during each of its first three years of operations: 4,000 shares of 9%, $100 par, cumulative preferred stock and 45,000 shares of $10 par common stock. The amounts distributed as dividends are presented below. Determine the total and per-share dividends for each class of stock for each year by completing the schedule. Round dividends per share to the nearest cent. Enter "0" if no dividends are paid.

What happens if an asset is partway through the useful life and an expenditure is made that significantly extends the estimated useful life?

Classifying Costs Assume you are going to become an entrepreneur and start your own business. Think about your talents and interests and come up with an idea for a small business venture that provides a unique product or service to local customers.

Pool Building Company

a) What would the major costs of your business be? Try to classify the costs into the areas of direct materials; direct labor; manufacturing overhead; and selling, general, and administrative expenses. (Hint: Not all businesses will have all of these cost classifications.)

b) Why would you need to determine the cost of providing your product or service to individual customers? In other words, what types of decisions would you expect to make based on job order cost information?

c) In general, would you expect your company’s indirect (overhead) costs to be less or more than the direct costs (direct labor and materials)? What allocation base do you think you would use to charge overhead costs to individual customers? How much do you think the overhead rate would need to be?

The Personnel Department at Hernandez Bros. is centralized and provides services to the two operating units: Miami and New York. The Miami unit is the original unit of the company and is well established. The New York unit is new, much like a start-up company. The costs of the Personnel Department are allocated to each unit based on the number of employees in order to determine unit profitability. The current rate is $560 per employee. Data for the fiscal year just ended show the following.

Miami New York

Number of employees 1,260 360

Number of new hires 16 26

Number of employees departing 14 24

Orlando, the manager of the New York unit, is unhappy with the results of the controller’s study. He asks the controller to develop separate rates for fixed and variable costs in the Personnel Department. The controller reports back to Orlando that the rates would be as follows:

Allocation based on Variable Rate Fixed Rate Total Rate

Employees $ 80 per employee $ 180 per employee $ 260 per employee

Transitions $ 2,060 per transition $ 4,015 per transition $ 6,075 per transition

Required: a. Orlando argues that New York should only be allocated the variable costs from this system, because the company would have to pay the fixed costs even if New York did not exist. Compute the cost allocated to each unit using the approach Orlando prefers.

2.

Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow.

Production at the plant is automated and any labor cost is included in overhead. Data on manufacturing overhead at the plant follow.

Required:

a. Compute the unit costs for the two products V-1 and V-2 using the current costing system at Upriver (using machine hours as the allocation basis). (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. Compute the unit costs for the two products V-1 and V-2 using the proposed ABC system at Upriver.

On February 1, 2018, Cromley Motor Products issued 7% bonds, dated February 1, with a face amount of $60 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $60,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Choose a cost in your organization (or personal life). Now identify what drives that cost. Keep in mind that the cost driver is something that can be counted!

For instance, if I choose gasoline cost, my cost driver is the number of miles I drive to meet at clients' offices. At home, the cost driver for my electric bill is the number of people-days at my house - i.e. some months everyone is gone (low bill), and other times many houseguests makes for a high electric bill. What are your examples?

Impairment Loss

On July 1, 2015, Karen Company purchased equipment for $325,000; the estimated useful life was 10 years and the expected salvage value was $40,000. Straight-line depreciation is used. On July 1, 2019, economic factors cause the market value of the equipment to decrease to $90,000. On this date, Karen evaluates if the equipment is impaired and estimates future cash flows relating to the use and disposal of the equipment to be $195,000.

a. Is the equipment impaired at July 1, 2019?

b. If the equipment is impaired at July 1, 2019, calculate the amount of the impairment loss.
Impairment loss = $

c. If the equipment is impaired at July 1, 2019, prepare the journal entry to record the impairment loss.

Required information

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

Exercise 9-10 Computing return on investment and residual income; investing decision LO A1

1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?
2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?
3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?

Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?

Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?

Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?

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 $40 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 18,000 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 $180,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 18,000 carburetors from the outside supplier?

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

1. The Cromwell Company sold equipment for $35,000. The equipment, which originally cost $100,000 and had an estimated useful life of 10 years and no salvage value, was depreciated for five years using the straight-line method. What is the gain or loss on the sale? the correct answer is $15,000
2. Weston Company purchased a tooling machine on January 3, 2007 for $1,000,000.The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with no salvage value. At the beginning of 2014, the company paid $250,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years (15 years total). What should be the depreciation expense recorded for the machine in 2014? the correct answer is $68,750

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

7. What will be used to identify clients in default of trading terms?

8. What are the standards that you will need to adhere to when contacting clients in default of trading terms promptly and courteously to make satisfactory arrangements for the payment of their outstanding monies?

9. Discuss an organisational policy/procedures that could be implemented for monies owing that constitute breach of organisational credit policy

10. What types of information could be obtained from a review of the previous activities and of communication with clients?

(1)

On January 1, Alan King decided to deposit $58,800 in a savings account that will provide funds four years later to send his son to college. The savings account will earn 8% annually. Any interest earned will be added to the fund at year-end (rather than withdrawn). (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Required:

1. How much will be available in four years?

2. Assume that Alan King follows GAAP. Prepare the journal entry that Alan should make on January 1.

3. What is the total interest for the four years?

4. Assume that Alan King follows GAAP. Prepare the journal entry that Alan should make on December 31 of the first year and December 31 of the second year.

(2)

At the end of each year, you plan to deposit $2,000 in a savings account. The account will earn 9% annual interest, which will be added to the fund balance at year-end. The first deposit will be made at the end of Year 1. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)

Required:

1. Assume you follow GAAP. Prepare the required journal entry at the end of Year 1.

2. What will be the balance in the savings account at the end of the 10th year (i.e., after 10 deposits)?

3. What is the interest earned on the 10 deposits?

4. How much interest revenue did the fund earn in the second year? In the third year?

5. Assume you follow GAAP. Prepare the all required journal entries at the end of the second and third years.

Question 1

1. <Budget & Schedule>

   	Budget	Start Week	End Week
   Task1	93,019	1	10
   Task2	140,853	1	10
   Task3	183,921	1	10
   Task4	205,017	1	10

   <Cost Loaded Schedule>

   	Week1	Week2	Week3	Week4	Week5
   Task1	10% of Budget	10% of Budget	10% of Budget	10% of Budget	10% of Budget
   Task2	10% of Budget	10% of Budget	10% of Budget	15% of Budget	15% of Budget
   Task3	10% of Budget	10% of Budget	10% of Budget	15% of Budget	15% of Budget
   Task4	15% of Budget	15% of Budget	5% of Budget	5% of Budget	5% of Budget

   <Percentage of Completion>

   	Week1	Week2	Week3	Week4	Week5
   Task1	8% of Budget	10% of Budget	10% of Budget	15% of Budget	15% of Budget
   Task2	10% of Budget	10% of Budget	10% of Budget	15% of Budget	15% of Budget
   Task3	10% of Budget	10% of Budget	10% of Budget	20% of Budget	20% of Budget
   Task4	20% of Budget	20% of Budget	10% of Budget	10% of Budget	10% of Budget

   <Actual Cost of Work Performed>

   	Week1	Week2	Week3	Week4	Week5
   Task1	8% of Budget	12% of Budget	14% of Budget	18% of Budget	30% of Budget
   Task2	9% of Budget	10% of Budget	9% of Budget	15% of Budget	14% of Budget
   Task3	10% of Budget	10% of Budget	10% of Budget	20% of Budget	15% of Budget
   Task4	20% of Budget	25% of Budget	15% of Budget	20% of Budget	20% of Budget

   What is BCWP of the project at the end of week 2 (BCWP accumulated from the beginning of the project)?