Questions
Buffalo Corporation is preparing the comparative financial statements for the annual report to its shareholders for...

Buffalo Corporation is preparing the comparative financial statements for the annual report to its shareholders for fiscal years ended May 31, 2017, and May 31, 2018. The income from operations for the fiscal year ended May 31, 2017, was $1,800,000 and income from continuing operations for the fiscal year ended May 31, 2018, was $2,500,000. In both years, the company incurred a 10% interest expense on $2,400,000 of debt, an obligation that requires interest-only payments for 5 years. The company experienced a loss from discontinued operations of $600,000 on February 2018. The company uses a 40% effective tax rate for income taxes.

The capital structure of Buffalo Corporation on June 1, 2016, consisted of 1,000,000 shares of common stock outstanding and 20,000 shares of $50 par value, 6%, cumulative preferred stock. There were no preferred dividends in arrears, and the company had not issued any convertible securities, options, or warrants.

On October 1, 2016, Buffalo sold an additional 500,000 shares of the common stock at $20 per share. Buffalo distributed a 20% stock dividend on the common shares outstanding on January 1, 2017. On December 1, 2017, Buffalo was able to sell an additional 800,000 shares of the common stock at $22 per share. These were the only common stock transactions that occurred during the two fiscal years.

1.) Identify whether the capital structure is simple or complex and explain why

2.) Determine the Weighted-Average number of share used in calculating earnings per share for:
May 31, 2017:
May 31, 2018:

3.)Prepare a comparitive income statement beginning with income from operations for both the fiscal years .

In: Accounting

On January 1, NewTune Company exchanges 18,688 shares of its common stock for all of the...

On January 1, NewTune Company exchanges 18,688 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $35,250 in stock registration and issuance costs in connection with the merger.

Several of On-the-Go’s accounts’ fair values differ from their book values on this date:

Book Values Fair Values
Receivables $ 51,750 $ 49,150
Trademarks 96,000 267,750
Record music catalog 84,500 240,500
In-process research and development 0 265,500
Notes payable (72,000 ) (63,750 )

Precombination book values for the two companies are as follows:

NewTune On-the-Go
Cash $ 70,000 $ 41,000
Receivables 140,000 51,750
Trademarks 418,000 96,000
Record music catalog 931,000 84,500
Equipment (net) 333,000 138,000
Totals $ 1,892,000 $ 411,250
Accounts payable $ (113,000 ) $ (38,250 )
Notes payable (467,000 ) (72,000 )
Common stock (400,000 ) (50,000 )
Additional paid-in capital (30,000 ) (30,000 )
Retained earnings (882,000 ) (221,000 )
Totals $ (1,892,000 ) $ (96,000 )
  1. Assume that this combination is a statutory merger so that On-the-Go’s accounts will be transferred to the records of NewTune. On-the-Go will be dissolved and will no longer exist as a legal entity. Prepare a postcombination balance sheet for NewTune as of the acquisition date.
  2. Assume that no dissolution takes place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of the combination date.

In: Accounting

Paintball is now played around the world. The process of making paintballs is actually quite similar...

Paintball is now played around the world. The process of making paintballs is actually quite similar to the process used to make certain medical pills. In fact, paintballs were previously often made at the same factories that made pharmaceuticals.

Instructions

a. Describe in sequence the primary steps used to manufacture paintballs.

b. Explain the costs incurred by the company that would fall into each of the following categories: materials, labor, and overhead. Of these categories, which do you think would be the greatest cost in making paintballs?

c. Discuss whether a paintball manufacturer would use job order costing or process costing.

In: Accounting

Aurora Company is considering the purchase of a new machine. The invoice price of the machine...

Aurora Company is considering the purchase of a new machine. The invoice price of the machine is $140,000, freight charges are estimated to be $4,000, and installation costs are expected to be $6,000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years. Existing equipment could be retained and used for an additional 5 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would have to be scrapped. Aurora’s accountant, Lisah Huang, has accumulated the following data regarding annual sales and expenses with and without the new machine.

1. Without the new machine, Aurora can sell 12,000 units of product annually at a per unit selling price of $100. If the new machine is purchased, the number of units produced and sold would increase by 10%, and the selling price would remain the same.
2. The new machine is faster than the old machine, and it is more efficient in its usage of materials. With the old machine the gross profit rate will be 25% of sales, whereas the rate will be 30% of sales with the new machine.
3. Annual selling expenses are $180,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.
4. Annual administrative expenses are expected to be $100,000 with the old machine, and $113,000 with the new machine.
5. The current book value of the existing machine is $36,000. Aurora uses straight-line depreciation.



With the class divided into groups, prepare an incremental analysis for the 5 years. (Ignore income tax effects.) (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Retain Old Machine Purchase New Machine Net Income Increase
(Decrease)
Sales $ $ $
Costs and expenses
Cost of goods sold
Selling expenses
Administrative expenses
Purchase price
Total costs and expenses
Net income $ $ $



Should Aurora keep the existing machine or buy the new machine?

Aurora should                                                           keep the existing machine or buy the new machine?

In: Accounting

Q1- A. What is a bank reconciliation and why is it important for companies to do...

Q1-

A. What is a bank reconciliation and why is it important for companies to do it periodically?

B. Prepare a Bank Reconciliation Statement for Rana company that has:

  • Bank statement of $8,000.
  • Cash account of $7,200.

Additional information for the reconciliation:

  • Deposit in transit.
  • NSF Check.
  • Outstanding check.
  • Collections made by the bank.

Required: provide an amount of each information to bring the adjusted balances to be equal.

In: Accounting

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services,...

Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $23.55 per hundred square feet. However, there is some question about whether the company is actually making any money on jobs for some customers—particularly those located on remote ranches that require considerable travel time. The owner’s daughter, home for the summer from college, has suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of four activity cost pools. The activity cost pools and their activity measures appear below: Activity Cost Pool Activity Measure Activity for the Year Cleaning carpets Square feet cleaned (00s) 12,500 hundred square feet Travel to jobs Miles driven 287,500 miles Job support Number of jobs 1,800 jobs Other (organization-sustaining costs and idle capacity costs) None Not applicable ________________________________________ The total cost of operating the company for the year is $359,000 which includes the following costs: Wages $ 144,000 Cleaning supplies 28,000 Cleaning equipment depreciation 8,000 Vehicle expenses 39,000 Office expenses 59,000 President’s compensation 81,000 Total cost $ 359,000 ________________________________________ Resource consumption is distributed across the activities as follows: Distribution of Resource Consumption Across Activities Cleaning Carpets Travel to Jobs Job Support Other Total Wages 73 % 13 % 0 % 14 % 100 % Cleaning supplies 100 % 0 % 0 % 0 % 100 % Cleaning equipment depreciation 71 % 0 % 0 % 29 % 100 % Vehicle expenses 0 % 81 % 0 % 19 % 100 % Office expenses 0 % 0 % 63 % 37 % 100 % President’s compensation 0 % 0 % 31 % 69 % 100 % ________________________________________ Job support consists of receiving calls from potential customers at the home office, scheduling jobs, billing, resolving issues, and so on. Required: 1. Prepare the first-stage allocation of costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. 3. The company recently completed a 200 square foot carpet-cleaning job at the Flying N Ranch—a 59-mile round-trip journey from the company’s offices in Bozeman. Compute the cost of this job using the activity-based costing system. 4. The revenue from the Flying N Ranch was $47.10 (200 square feet @ $23.55 per hundred square feet). Calculate the customer margin earned on this job.

In: Accounting

What is the present value of $907 per year for 9 years if the required return...

What is the present value of $907 per year for 9 years if the required return is 6 percent.

In: Accounting

The following data, presented in alphabetical order, are taken from the records of Wildhorse Corporation. Accounts...

The following data, presented in alphabetical order, are taken from the records of Wildhorse Corporation.

Accounts payable $239,400
Accounts receivable 139,300
Accumulated depreciation—buildings 180,300
Accumulated depreciation—equipment 51,800
Allowance for doubtful accounts 6,500
Bonds payable (10%, due 2028) 499,400
Buildings 949,200
Cash 41,900
Common stock ($10 par value; 501,200 shares authorized, 149,600 shares issued) 1,496,000
Dividends payable 80,200
Equipment 275,600
Goodwill 200,400
Income taxes payable 119,800
Inventory 169,900
Investment in Mara common stock (30% ownership), at equity 379,900
Investment in Sasse common stock, at fair value 278,200
Land 390,400
Notes payable (due 2021) 69,400
Paid-in capital in excess of par—common stock 134,900
Premium on bonds payable 39,900
Prepaid insurance 15,000
Retained earnings 103,200
Short-term investments, at fair value 181,000


The investment in Sasse common stock is considered to be a long-term security.

Prepare a classified balance sheet at December 31, 2020. (List assets in order of liquidity. List Property, plant and equipment list in order of land, buildings and equipment.)

In: Accounting

Kalp Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system...

Kalp Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Finishing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

Machining Finishing
Machine-hours 19,000 12,000
Direct labor-hours 2,000 8,000
Total fixed manufacturing overhead cost $136,800 $69,600
Variable manufacturing overhead per machine-hour $ 1.80
Variable manufacturing overhead per direct labor-hour $ 3.20

During the current month the company started and finished Job K928. The following data were recorded for this job:

Job K928: Machining Finishing
Machine-hours 90 10
Direct labor-hours 30 50
Direct materials $775 $ 415
Direct labor cost $630 $1,050

1. The predetermined overhead rate for the Machining Department is closest to:

Multiple Choice

  • $7.20 per machine-hour

  • $9.00 per machine-hour

  • $21.38 per machine-hour

  • $1.80 per machine-hour

2. The amount of overhead applied in the Machining Department to Job K928 is closest to:

Multiple Choice

  • $783.00

  • $810.00

  • $162.00

  • $171,000.00

3. The total amount of overhead applied in both departments to Job K928 is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

  • $1,405

  • $2,000

  • $810

  • $595

4. The total job cost for Job K928 is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

  • $810

  • $4,275

  • $2,060

  • $2,215

In: Accounting

Alton Corp. purchased ten $ 1000 7​% bonds of Galvan Corporation when the market rate of...

Alton Corp. purchased ten $ 1000 7​% bonds of Galvan Corporation when the market rate of interest was 14​%. Interest is paid​ semiannually, and the bonds will mature in five year.

Alton paid

$

on the bond investment.

I need the Present value of the bonds?

In: Accounting

Required information Problem 14-3A Schedule of cost of goods manufactured and income statement; inventory analysis LO...

Required information

Problem 14-3A Schedule of cost of goods manufactured and income statement; inventory analysis LO P2, A1

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

The following calendar year-end information is taken from the December 31, 2019, adjusted trial balance and other records of Leone Company.
   

Advertising expense $ 33,800 Direct labor $ 690,000
Depreciation expense—Office equipment 11,500 Income taxes expense 259,300
Depreciation expense—Selling equipment 9,700 Indirect labor 58,400
Depreciation expense—Factory equipment 37,500 Miscellaneous production costs 10,400
Factory supervision 115,900 Office salaries expense 62,000
Factory supplies used 9,500 Raw materials purchases 986,000
Factory utilities 35,000 Rent expense—Office space 23,000
Inventories Rent expense—Selling space 27,200
Raw materials, December 31, 2018 154,400 Rent expense—Factory building 80,800
Raw materials, December 31, 2019 178,000 Maintenance expense—Factory equipment 38,000
Work in process, December 31, 2018 15,000 Sales 4,465,600
Work in process, December 31, 2019 19,100 Sales salaries expense 398,700
Finished goods, December 31, 2018 163,400
Finished goods, December 31, 2019 137,800

Problem 14-3A Part 2

2. Prepare the company’s 2019 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
  

In: Accounting

Pronghorn Corporation issued 392 shares of $10 par value common stock and 128 shares of $50...

Pronghorn Corporation issued 392 shares of $10 par value common stock and 128 shares of $50 par value preferred stock for a lump sum of $17,424. The common stock has a market price of $20 per share, and the preferred stock has a market price of $90 per share.

Prepare the journal entry to record the issuance.

In: Accounting

Culver, Inc. began work on a $6,391,000 contract in 2017 to construct an office building. During...

Culver, Inc. began work on a $6,391,000 contract in 2017 to construct an office building. During 2017, Culver, Inc. incurred costs of $1,867,020, billed its customers for $1,209,000, and collected $908,000. At December 31, 2017, the estimated additional costs to complete the project total $3,178,980.

Prepare Culver’s 2017 journal entries using the percentage-of-completion method.

In: Accounting

Problem 7-26 Restructuring a Segmented Income Statement [LO7-4] Millard Corporation is a wholesale distributor of office...

Problem 7-26 Restructuring a Segmented Income Statement [LO7-4]

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

Sales Region

West Central East
Sales $ 312,000 $ 797,000 $ 695,000
Regional expenses (traceable):
Cost of goods sold 98,000 237,000 317,000
Advertising 103,000 242,000 243,000
Salaries 58,000 58,000 113,000
Utilities 9,100 15,800 13,800
Depreciation 23,000 33,000 29,000
Shipping expense 18,000 33,000 44,000
Total regional expenses 309,100 618,800 759,800
Regional income (loss) before corporate expenses 2,900 178,200 (64,800 )
Corporate expenses:
Advertising (general) 17,000 42,000 36,000
General administrative expense 21,000 21,000 21,000
Total corporate expenses 38,000 63,000 57,000
Net operating income (loss) $ (35,100 ) $ 115,200 $ (121,800 )

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

3. Prepare a new contribution format segmented income statement for May. (Round percentage answers to 1 decimal place.)

In: Accounting

Ethical Issues Jeremiah Wedgewood, the CFO, is adamant that the company needs to move ahead with...

Ethical Issues

Jeremiah Wedgewood, the CFO, is adamant that the company needs to move ahead with the new line. While Josey also thinks that the new line is a good idea, she is a little worried about how it is going to affect their financial statements in the short run. After carefully considering what was likely to happen, Josey scheduled an appointment to visit with Jeremiah about her concerns.

"Josey!" Jeremiah said as she came into his office. "How are you doing today?" Josey smiled. Nothing ever seemed to really bother Jeremiah.

"I'm doing well, thanks, Uncle Jerry. Just a little worried about our new line."

"Worried?" Jeremiah asked. "About what?"

"Well, let me just start by saying that I agree that adding these new candles is a great idea. I think we have a really good idea of how much we can charge for them to break into the market and stay competitive in the long run. I also think while our costs will be high while we get the new line started, they will come down over time as we get settled. But I'm a little concerned about what the line will do to our profits for the next couple of years. The profits won't be nearly as good as they are for our traditional candles for at least two years."

"Well, Josey," Jeremiah replied, "keep in mind that this is a family-owned business, so that's not going to be a big deal. I mean, we don't have investors messing up our stock prices with every little piece of news. However," he paused, looking out his window for a moment as he thought about the changes. "We did just open up a new line of credit with our bank and our interest rate is contingent on maintaining profitability in each segment. Shoot! I didn't think about the new line when I signed that deal. They offered such a low rate that I wanted to make sure I locked it in." He looked at Josey. "We don't have to show a large profit, just a profit. What do you think our chances are of just being above zero with the new line?"

Josey shook her hand back and forth. "About 50-50, at least for the first year."

"That's not good enough," Jeremiah said, shaking his head. "What is we adjust the overhead allocation so that both lines show a profit?" Josey frowned. "Now, don't write me off as a bad guy, Josey. This wouldn't be right if we were a public company because we would be misleading investors, but, as I said, we don't have any investors, just the family.

"What about the bank?" Josey asked.

"Well think about it," Jeremiah said, a smile again forming on his lips. "They really just want to make sure that we pay them back, or that we have the cash to pay them back. What I'm talking about won't affect our cash flows at all. We're just shifting overhead from one line to another. Companies do that all the time."

Josey looked at Jeremiah and pondered. She was confident that the new line would be profitable soon, probably in just a year or two. And overhead is applied on a somewhat arbitrary basis, especially when using a single, plant-wide rate, or departmental rates. She chose all of those numbers anyway, after all. There was no way to really know if the amount of overhead being applied to any product was the "real" amount. Activity- based costing would get them closer to an actual cost, but she hadn't had time to get into that yet. And Jeremiah was certainly right; the last thing they needed now was for the bank to raise the interest rates over a bookkeeping technicality. Perhaps they could make a change to their overhead allocations...

Questions

1. Make a list of pros and cons of applying overhead strictly on the basis of specific departmental rates versus "adjusting" the allocations to keep each line profitable.

2. Review the four principles and four standards of the IMA's Statement of Ethical Professional Practice. Based on these principles and standards, do you believe that there are any ethical violations in Jeremiah's proposal? Explain which, if any, of the principles and/or standards Jeremiah's suggestion will violate. Does it matter that this is a family-owned company instead of one with outside investors? If there were no bank loan and Jeremiah wanted to do this just for internal reporting, would it change your answer?

In: Accounting