Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.
|
Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31 |
||||||
| Sales (28,200 units) | $ | 1,128,000 | ||||
| Variable expenses: | ||||||
| Variable cost of goods sold | $ | 468,120 | ||||
| Variable selling and administrative | 193,170 | 661,290 | ||||
| Contribution margin | 466,710 | |||||
| Fixed expenses: | ||||||
| Fixed manufacturing overhead | 265,600 | |||||
| Fixed selling and administrative | 221,110 | 486,710 | ||||
| Net operating loss | $ | ( 20,000) | ||||
Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.
At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:
| Units produced | 33,200 | |||
| Units sold | 28,200 | |||
| Variable costs per unit: | ||||
| Direct materials | $ | 7.30 | ||
| Direct labor | $ | 7.40 | ||
| Variable manufacturing overhead | $ | 1.90 | ||
| Variable selling and administrative | $ | 6.85 | ||
Required:
1. Complete the following:
a. Compute the unit product cost under absorption costing.
b. What is the company’s absorption costing net operating income (loss) for the quarter?
c. Reconcile the variable and absorption costing net operating income (loss) figures.
3. During the second quarter of operations, the company again produced 33,200 units but sold 38,200 units. (Assume no change in total fixed costs.)
a. What is the company’s variable costing net operating income (loss) for the second quarter?
b. What is the company’s absorption costing net operating income (loss) for the second quarter?
c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.
In: Accounting
Preparing a Trial Balance, Closing Journal Entry, and Post-Closing Trial Balance. The following information applies to the questions displayed below.] Starbooks Corporation provides an online bookstore for electronic books. The following is a simplified list of accounts and amounts reported in its accounting records. The accounts have normal debit or credit balances. Assume the year ended on September 30, 2018.
Accounts Payable $ 602
Accounts Receivable 302
Accumulated Depreciation 902
Cash 302
Common Stock 202
Deferred Revenue 202
Depreciation Expense 302
Equipment 3,202
Income Tax Expense 302
Interest Revenue 102
Notes Payable (long-term) 202
Notes Payable (short-term) 502
Prepaid Rent 102
Rent Expense 402
Retained Earnings 1,502
Salaries and Wages Expense 2,202
Service Revenue 6,206
Supplies 502
Supplies Expense 202
Travel Expense 2,602
How to prepare an adjusted trial balance at September 30, 2018?
Is the Retained Earnings balance of $1,502 the amount that would be reported on the balance sheet as of September 30, 2018? Yes or No??
In: Accounting
Harry’s Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an acceptable three-month financial plan for January through March. The following are actual and forecast sales figures: Actual Forecast Additional Information November $240,000 January $320,000 April forecast $360,000 December 260,000 February 360,000 March 370,000 Of the firm’s sales, 60 percent are for cash and the remaining 40 percent are on credit. Of credit sales, 30 percent are paid in the month after sale and 70 percent are paid in the second month after the sale. Materials cost 30 percent of sales and are purchased and received each month in an amount sufficient to cover the following month’s expected sales. Materials are paid for in the month after they are received. Labor expense is 40 percent of sales and is paid for in the month of sales. Selling and administrative expense is 15 percent of sales and is paid in the month of sales. Overhead expense is $22,000 in cash per month. Depreciation expense is $10,200 per month. Taxes of $8,200 will be paid in January, and dividends of $3,000 will be paid in March. Cash at the beginning of January is $84,000, and the minimum desired cash balance is $79,000.
a. Prepare a schedule of monthly cash receipts for January, February, and March.
b. Prepare a schedule of monthly cash payments for January, February, and March.
c. Prepare a monthly cash budget with borrowings and repayments for January, February, and March. (Negative amounts should be indicated by a minus sign. Assume the January beginning loan balance is $0.)
In: Accounting
what are the different types of dividends? What are the accounting issues?
In: Accounting
2 Ollie Mace is the controller of SDC, an automotive parts manufacturing firm. Its four major operating divisions are heat treating, extruding, small parts stamping, and machining. Last year’s sales from each division ranged from $150,000 to $3 million. Each division is physically and managerially independent, except for the constant surveillance of Sam Dilley, the firm’s founder.
The AIS for each division evolved according to the needs and abilities of its accounting staff. Mace is the first controller to have responsibility for overall financial management. Dilley wants Mace to improve the AIS before he retires in a few years so that it will be easier to monitor division performance. Mace decides to redesign the financial reporting system to include the following features:
It should give managers uniform, timely, and accurate reports of business activity. Monthly reports should be uniform across divisions and be completed by the fifth day of the following month to provide enough time to take corrective actions to affect the next month’s performance. Company-wide financial reports should be available at the same time.
Reports should provide a basis for measuring the return on investment for each division. Thus, in addition to revenue and expense accounts, reports should show assets assigned to each division.
The system should generate meaningful budget data for planning and decision-making purposes. Budgets should reflect managerial responsibility and show costs for major product groups.
Mace believes that a new chart of accounts is required to accomplish these goals. He wants to divide financial statement accounts into major categories, such as assets, liabilities, and equity. He does not foresee a need for more than 10 control accounts within each of these categories. From his observations to date, 100 subsidiary accounts are more than adequate for each control account.
No division has more than five major product groups. Mace foresees a maximum of six cost centers within any product group, including both the operating and nonoperating groups. He views general divisional costs as a non-revenue-producing product group. Mace estimates that 44 expense accounts plus 12 specific variance accounts would be adequate.
Design a chart of accounts for SDC. Explain how you structured the chart of accounts to meet the company’s needs and operating characteristics. Keep total account code length to a minimum, while still satisfying all of Mace’s desires. (CMA Examination, adapted)
In: Accounting
Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $66,000. Meg works part-time at the same university. She earns $31,800 a year. The couple does not itemize deductions. Other than salary, the Comers’ only other source of income is from the disposition of various capital assets (mostly stocks). (Use the tax rate schedules ,Dividends and Capital Gains Tax Rates.) (Round final answers to the nearest whole dollar amount.)
rev: 10_18_2018_QC_CS-144256
b. What is the Comers’ tax liability for 2018
if they report the following capital gains and losses for the
year?
| Short-term capital gains | $ | 1,500 | |
| Short-term capital losses | 0 | ||
| Long-term capital gains | 11,600 | ||
| Long-term capital losses | (10,160 | ) | |
In: Accounting
Alt Corporation enters into an agreement with Yates Rentals Co.
on January 1, 2011 for the purpose of leasing a machine to be used
in its manufacturing operations. The following data pertain to the
agreement:
(a) The term of the noncancelable lease is 3 years with no renewal
option. Payments of $155,213 are due on December 31 of each
year.
(b) The fair value of the machine on January 1, 2011, is $400,000.
The machine has a remaining economic life of 10 years, with no
salvage value. The machine reverts to the lessor upon the
termination of the lease.
(c) Alt depreciates all machinery it owns on a straight-line
basis.
(d) Alt's incremental borrowing rate is 10% per year. Alt does not
have knowledge of the 8% implicit rate used by Yates.
(e) Immediately after signing the lease, Yates finds out that Alt
Corp. is the defendant in a suit which is sufficiently material to
make collectibility of future lease payments doubtful.
Question: 1.what is the amount of the reduction in the lease liability for Alt Corp in the second full year of the lease if Alt Corp accounts for the lease as a finance lease.
2.If the leased machine has a $350,000 cost to Yates, the profit Yates get from the lease should be ?
In: Accounting
Karla Tanner opens a Web consulting business called Linkworks
and completes the following transactions in its first month of
operations.
| April | 1 | Tanner invested $115,000 cash along with office equipment valued at $27,600 n the company in exchange for common stock. | ||
| 2 | The company prepaid $7,200 cash for 12 months’ rent for office space. (Hint: Debit Prepaid Rent for $7,200.) | |||
| 3 | The company made credit purchases for $13,800 in office equipment and $2,760 in office supplies. Payment is due within 10 days. | |||
| 6 | The company completed services for a client and immediately received $2,000 cash. | |||
| 9 | The company completed a $9,200 project for a client, who must pay within 30 days. | |||
| 13 | The company paid $16,560 cash to settle the account payable created on April 3. | |||
| 19 | The company paid $6,000 cash for the premium on a 12-month insurance policy. (Hint: Debit Prepaid Insurance for $6,000.) | |||
| 22 | The company received $7,360 cash as partial payment for the work completed on April 9. | |||
| 25 | The company completed work for another client for $2,640 on credit. | |||
| 28 | The company paid $6,200 cash in dividends. | |||
| 29 | The company purchased $920 of additional office supplies on credit. | |||
| 30 | The company paid $700 cash for this month’s utility bill. |
Required:
1. Prepare general journal entries to record these
transactions using the following titles: Cash (101); Accounts
Receivable (106); Office Supplies (124); Prepaid Insurance (128);
Prepaid Rent (131); Office Equipment (163); Accounts Payable (201);
Common Stock (307); Dividends (319); Services Revenue (403); and
Utilities Expense (690).
2. Post the journal entries from part 1 to the
ledger accounts.
3. Prepare a trial balance as of April 30.
In: Accounting
Anderson, Martin, and Bryant have capital balances of $24,000, $36,000, and $60,000, respectively. The partners share profits and losses as follows:
a. The first $50,000 is divided based on the partners' capital balances.
b. The next $50,000 is based on service, shared equally by Anderson and Bryant. Martin does not receive a salary allowance.
c. The remainder is divided equally.
Compute each partner's share of the $121,000 net income for the year. (Complete all answer boxes. For amounts that are $0, make sure to enter "0" in the appropriate column.)
In: Accounting
Furtastic manufactures imitation fur garments. On June 1, 2018,
Furtastic made a sale to Willett’s Department Store under terms
that require Willett to pay $170,000 to Furtastic on June 30, 2018.
In a separate transaction on June 15, 2018, Furtastic purchased
brand advertising services from Willett for $16,000. The fair value
of those advertising services is $7,000. Furtastic expects that 2%
of all sales will prove uncollectible.
Required:
1. to 3. Prepare the journal entries to record the
transactions above. (If no entry is required for a
transaction/event, select "No journal entry required" in the first
account field.)
1. Record the Furtastic’s sale on June 1, 2018.
2. Record the Furtastic’s purchase of advertising services from Willett on June 15, 2018. Assume all of the advertising services are delivered on June 15, 2018.
3. Record the Furtastic’s receipt of $170,000 from Willett on June 30, 2018.
In: Accounting
Budget Performance Reports for A decentralized unit in which the department or division manager has responsibility for the control of costs incurred and the authority to make decisions that affect these costs.Cost Centers
Partially completed budget performance reports for Garland Company, a manufacturer of light duty motors, follow:
| Garland Company Budget Performance Report—Vice President, Production For the Month Ended November 30 |
||||||||
| Plant | Budget | Actual | Over Budget | Under Budget | ||||
| Eastern Region | $483,500 | $483,500 | $0 | |||||
| Central Region | 348,100 | 344,600 | (3,500) | |||||
| Western Region | (g) | (h) | (i) | |||||
| $(j) | $(k) | $(l) | $(3,500) | |||||
| Garland Company Budget Performance Report—Manager, Western Region Plant For the Month Ended November 30 |
||||||||
| Department | Budget | Actual | Over Budget | Under Budget | ||||
| Chip Fabrication | $(a) | $(b) | $(c) | |||||
| Electronic Assembly | 90,190 | 91,360 | 1,170 | |||||
| Final Assembly | 143,400 | 142,250 | $(1,150) | |||||
| $(d) | $(e) | $(f) | $(1,150) | |||||
| Garland Company Budget Performance Report—Supervisor, Chip Fabrication For the Month Ended November 30 |
||||||||
| Cost | Budget | Actual | Over Budget | Under Budget | ||||
| Factory wages | $23,070 | $24,680 | $1,610 | |||||
| Materials | 62,400 | 61,960 | $(440) | |||||
| Power and light | 3,870 | 4,610 | 740 | |||||
| Maintenance | 6,240 | 6,830 | 590 | |||||
| $95,580 | $98,080 | $2,940 | $(440) | |||||
a. Complete the budget performance reports by determining the correct amounts for the lettered spaces (a-l) as marked above.
| a. $ | g. $ |
| b. $ | h. $ |
| c. $ | i. $ |
| d. $ | j. $ |
| e. $ | k. $ |
| f. $ | l. $ |
b. Complete the following memo to Cassandra Reid, vice president of production for Garland Company, explaining the performance of the production division for November.
MEMO
To: Cassandra Reid, Vice President of Production
The
In: Accounting
Sole Purpose Shoe Company
Sole Purpose Shoe Company is owned and operated by Sarah Charles. The company manufactures casual shoes, with manufacturing facilities in your state. Sarah began the business this year, and while she has a great deal of experience in manufacturing popular and comfortable shoes, she needs some help in evaluating her results for the year, and asks for your help.
Direct Materials
Under normal conditions, Sarah spends $8.40 per unit of materials, and it will take 3.60 units of material per pair of shoes. During July, Sole Purpose Shoe Company incurred actual direct materials costs of $61,321 for 6,890 units of direct materials in the production of 2,200 pairs of shoes.
Complete the following table, showing the direct materials variance relationships for July for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.
| Actual Cost | Standard Cost | |||||||||
| Actual Quantity |
X | Actual Price |
Actual Quantity |
X | Standard Price |
Standard Quantity |
X | Standard Price |
||
| X | $ | X | $ | X | $ | |||||
| = $ | = $ | = $ | ||||||||
| Unfavorable Direct Materials Price Variance: |
Favorable Direct Materials Quantity Variance: |
|||||||||
| $ | $ | |||||||||
| Favorable Total Direct Materials Cost Variance: |
||||||||||
| $ | ||||||||||
Direct Labor
Under normal conditions, Sarah pays her employees $8.50 per hour, and it will take 2.80 hours of labor per pair of shoes. During August, Sole Purpose Shoe Company incurred actual direct labor costs of $65,610 for 7,290 hours of direct labor in the production of 2,300 pairs of shoes.
Complete the following table, showing the direct labor variance relationships for August for Sole Purpose Shoe Company. If required, round your answers to two decimal places. When entering variances, use a negative number for a favorable variance, and a positive number for an unfavorable variance.
| Actual Cost | Standard Cost | |||||||||
| Actual Hours |
X | Actual Rate |
Actual Hours |
X | Standard Rate |
Standard Hours |
X | Standard Rate |
||
| X | $ | X | $ | X | $ | |||||
| = $ | = $ | = $ | ||||||||
| Unfavorable Direct Labor Rate Variance: |
Unfavorable Direct Labor Time Variance: |
|||||||||
| $ | $ | |||||||||
| Unfavorable Total Direct Labor Cost Variance: |
||||||||||
| $ | ||||||||||
Budget Performance Report
Sarah has learned a lot from you over the past two months, and has compiled the following data for Sole Purpose Shoe Company for September using the techniques you taught her. She would like your help in preparing a Budget Performance Report for September. The company produced 3,500 pairs of shoes that required 12,250 units of material purchased at $8.20 per unit and 9,450 hours of labor at an hourly rate of $8.90 per hour during the month. Actual factory overhead during September was $28,350. When entering variances, use a negative number for a favorable cost variance, and a positive number for an unfavorable cost variance.
Use the data in the following table to prepare the Budget Performance Report for Sole Purpose Shoe Company for September.
Manufacturing Costs |
Standard Price |
Standard Quantity |
Standard Cost Per Unit |
| Direct materials | $8.40 per unit | 3.60 units per pair | $30.24 |
| Direct labor | $8.50 per hour | 2.80 hours per pair | 23.80 |
| Factory overhead | $2.70 per hour | 2.80 hours per pair | 7.56 |
| Total standard cost per pair | $61.60 |
| Sole Purpose Shoe Company Budget Performance Report For the Month Ended September 30 |
|||
Manufacturing Costs |
Actual Costs |
Standard Cost at Actual Volume |
Cost Variance - (Favorable) Unfavorable |
| Direct materials | $ | $ | $ |
| Direct labor | |||
| Factory overhead | |||
| Total manufacturing costs | $ | $ | $ |
In: Accounting
Adams Manufacturing Inc. buys $11.9 million of materials (net of
discounts) on terms of 2/10, net 50; and it currently pays after 10
days and takes the discounts. Adams plans to expand, which will
require additional financing. If Adams decides to forgo discounts,
how much additional credit could it obtain? Assume 365 days in year
for your calculations. Do not round intermediate calculations.
Round your answer to the nearest cent.
$
What would be the nominal and effective cost of such a credit?
Assume 365 days in year for your calculations. Do not round
intermediate calculations. Round your answer to two decimal
places.
Nominal cost: %
Effective cost: %
If the company could receive the funds from a bank at a rate of
8.2%, interest paid monthly, based on a 365-day year, what would be
the effective cost of the bank loan? Do not round intermediate
calculations. Round your answer to two decimal places.
%
In: Accounting
|
Château Beaune is a family-owned winery located in the Burgundy region of France, headed by Gerard Despinoy. The harvesting season in early fall is the busiest time of the year for the winery, and many part-time workers are hired to help pick and process grapes. Despinoy is investigating the purchase of a harvesting machine that would significantly reduce the amount of labour required in the picking process. The harvesting machine is built to straddle grapevines, which are laid out in low-lying rows. Two workers are carried on the machine just above ground level, one on each side of the vine. As the machine slowly crawls through the vineyard, the workers cut bunches of grapes from the vines, and the grapes fall into a hopper. The machine separates the grapes from the stems and other woody debris. The debris is then pulverized and spread behind the machine as a rich ground mulch. Despinoy has gathered the following information relating to the decision of whether to purchase the machine (the French currency is the euro, denoted by €): |
|
| a. |
The winery would save €190,000 per year in labour costs with the new harvesting machine. In addition, the company would no longer have to purchase and spread ground mulch—at an annual savings of €10,000. |
| b. |
The harvesting machine would cost €480,000. It would have an estimated 12-year useful life and zero salvage value. The winery uses straight-line depreciation. |
| c. |
Annual out-of-pocket costs associated with the harvesting machine would be insurance, €1,000; fuel, €9,000; and a maintenance contract, €12,000. In addition, two operators would be hired and trained for the machine, and they would be paid a total of €70,000 per year, including all benefits. |
| d. | Despinoy feels that the investment in the harvesting machine should earn at least a 16% rate of return. |
|
Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. |
| Required: | |
| (Ignore income taxes.) | |
| 1. |
Determine the annual net savings in cash operating costs that would be realized if the harvesting machine were purchased. |
| 2. |
Compute the SRR expected from the harvesting machine. (Hint: This is a cost reduction project.) (Round your answer to 1 decimal place (i.e., 0.123 should be considered as 12.3%).) |
| 3-a. | Compute the payback period on the harvesting machine. (Round your answer to 1 decimal place.) |
| 3-b. |
Despinoy will not purchase equipment unless it has a payback period of five years or less. Under this criterion, should the harvesting machine be purchased? |
||||
|
| 4-a. |
Compute (to the nearest whole percent) the IRR promised by the harvesting machine. (Round discount factor(s) to 3 decimal place and final answer to the nearest whole number (i.e., 0.123 should be considered as 12%).) |
| 4-b. |
On the basis of this computation, does it appear that the SRR is an accurate guide in investment decisions? |
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|
In: Accounting
discuss the purposes for planning the audit and identify the steps that are performed during this phase of the engagement? A couple of paragraphs about this third phase. Accounting audit
In: Accounting