Stuart Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Stuart uses an activity-based costing system. The following are the relevant cost data for the previous month:

Stuart’s facility has the capacity to operate 3,600 machine hours per month.

   
Required

1. Compute the cost per unit for each product.

2. The current market price for products comparable to Model ZM is $121 and for DS is $89. If Stuart sold all of its products at the market prices, what was its profit or loss for the previous month?

3. A market expert believes that Stuart can sell as many cameras as it can produce by pricing Model ZM at $116 and Model DS at $40. Stuart would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product?

E13.10 Donated Long-Lived Assets

Angel Flights provides transportation to medical facilities for special needs children. At the beginning of the year, a donor gave Angel Flights a new airport facility, with a fair value of $5 million, to house its aircraft. The donor specified that the facility must be used by Angel Flights for at least five years. The facility has a useful life of 25 years.

Required

Prepare journal entries to record the events described for the current year. If an account affects net assets, indicate which category of net assets is affected.

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 $35 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 20,000 Units Per Year Direct materials $ 17 $ 340,000 Direct labor 11 220,000 Variable manufacturing overhead 3 60,000 Fixed manufacturing overhead, traceable 3 * 60,000 Fixed manufacturing overhead, allocated 6 120,000 Total cost $ 40 $ 800,000 *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 20,000 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 $200,000 per year. Given this new assumption, what would be the financial advantage (disadvantage) of buying 20,000 carburetors from the outside supplier? 4. Given the new assumption in requirement 3, should the outside supplier’s offer be accepted?

1.what is the challenge in budgeting if the business is a SKI resort and cash flows vary with the season. 2. as a new owner of an existing business what resources do you have to prepare a porforma cash budget. 3.Is there any volume limit that is impractical to achieve given the current fixed capital

P4-37A Push-Down Accounting LO 4-7

On December 31, 20X6, Print Corporation and Size Company entered into a business combination in which Print acquired all of Size’s common stock for $958,000. At the date of combination, Size had common stock outstanding with a par value of $118,000, additional paid in capital of $419,000, and retained earnings of $176,000. The fair values and book values of all Size’s assets and liabilities were equal at the date of combination, except for the following:

The buildings had a remaining life of 15 years, and the equipment was expected to last another 5 years. In accounting for the business combination, Print decided to use push-down accounting on Size’s books.

During 20X7, Size earned net income of $104,000 and paid a dividend of $58,000. All of the inventory on hand at the end of 20X6 was sold during 20X7. During 20X8, Size earned net income of $106,000 and paid a dividend of $58,000.

Required:
a. Record the acquisition of Size's stock on Print's books on December 31, 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Record any entries that would be made on December 31, 20X6, on Size’s books related to the business combination if push-down accounting is employed. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

c. Present all consolidating entries that would appear in the worksheet to prepare a consolidated balance sheet immediately after the combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

d. Present all entries that Print would record during 20X7 related to its investment in Size if Print uses the equity-method of accounting for its investment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

e. Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

f. Present all consolidating entries that would appear in the worksheet to prepare a full set of consolidated financial statements for the year 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

King City Specialty Bikes (KCSB) produces high-end bicycles. Costs to manufacture and market the bicycles at last year's volume level of 2,050 bicycles per month are shown in the following table:

KCSB expects to produce and sell 2,400 bicycles per month in the coming year. The bicycles sell for $610 each.

KCSB receives a proposal from an outside contractor who, for $160 per bicycle, will assemble 750 bicycles per month and ship them directly to KCSB's customers as orders are received from KCSB's sales force. KCSB would provide the materials for each bicycle, but the outside contractor would assemble, box, and ship the bicycles. The variable manufacturing costs would be reduced by 35% for the 750 bicycles assembled by the outside contractor, and variable nonmanufacturing costs for the 750 bicycles would be cut by 60%.

KCSB's marketing manager thinks that it could sell 85 specialty racing bicycles per month for $5,500 each, and its production manager thinks that it could use the idle resources to produce each of these bicycles for variable manufacturing costs of $4,400 per bicycle and variable nonmanufacturing costs of $300 per bicycle.

If KCSB accepts the proposal, it would be able to save $10,968 of fixed manufacturing costs; fixed nonmanufacturing costs would be unchanged.

REQUIRED [Note: Round unit cost computations to the nearest cent]

What is the difference in KCSB's monthly costs between accepting the proposal and rejecting the proposal?   (Note: If the costs of accepting the proposal are less than the costs of rejecting it, enter the difference as a positive number; if the accept costs are more than the reject costs, enter the difference as a negative number.)

Required: Prepare closing journal entries. given the following adjusted ledger balance:

            Cash                                                               100,000

            Accounts Rec.                                                 300,000

            Pre-paid expenses                                           50,000

            Land                                                                  100,000

            Equip.                                                                400,000

            Accum. Depr.                                                   175,000

            Accts. Pay.                                                       150,000

            Notes Pay.                                                         50,000

            STAR Capital                                                     100,000

            STAR Drawing                                                     25,000

            Income Summary                                                   0

            Sales                                                                 805,000

            Wage Exp.                                                       200,000

            Maint Exp.                                                          75,000

            Insr.Exp                                                              10,000

            Depr. Exp.                                                          20,000

University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to allocate maintenance costs on the basis of machine-hours in each department and personnel costs on the basis of labor-hours worked by the employees in each.

The following data appear in the company records for the current period:

Required:

Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

We provide you with the balance sheet of a Spanish company at the end of the year. The company carried out its accounting according to the PGC 2007. You have to analyse each of the items and specify which group of the Chart of Accounts they belong to and the specific coding that corresponds to it according to the Chart of Accounts of the General Accounting Plan to each entry.

Once all the accounts have been coded, create the closing entry for the company.

web> X Company is a merchandiser and prepares monthly financial statements. The following is its balance sheet at the beginning of July:

The following summary transactions occurred during July:

1. Sold stock to investors for $44,000.
2. Borrowed $28,000 from a bank and paid off a $10,000 bank loan.
3. Bought $8,424 of merchandise from suppliers, paying $3,293 and promising to pay the rest in August.
4. Bought equipment for $44,100 from a manufacturer, paying $4,700 and promising to pay the rest in September.
5. Paid $3,486 to suppliers that it bought merchandise from in June.
6. Sold merchandise, receiving $16,554 cash and promises from customers to pay $4,826; the merchandise that was sold cost $10,690 and was purchased earlier in July.
7. Paid $573 for rent in advance.
8. Received $3,419 from customers who purchased merchandise last month.
9. Paid wages and other miscellaneous expenses totaling $5,670.

Note: Ignore adjusting entries. 4. What was the cash balance on July 31?

5. What were total equities on July 31?

6. What was Net Income in July?

Linkin Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company’s current truck (not the least of which is that it runs). The new truck would cost $55,200. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,600. At the end of 8 years the company will sell the truck for an estimated $28,900. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset’s estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company’s cost of capital is 8%.

Click here to view PV table.

(a)

Compute the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125. Round answer for Payback period to 1 decimal place, e.g. 10.5. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Cash payback period ?

Net Present Value ?

Financial Statements of a Manufacturing Firm

The following events took place for Digital Vibe Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:

1. Purchased $67,700 of materials
2. Used $52,100 of direct materials in production.
3. Incurred $77,900 of direct labor wages.
4. Incurred $109,700 of factory overhead.
5. Transferred $182,100 of work in process to finished goods.
6. Sold goods for $325,600.
7. Sold goods with a cost of $144,900.
8. Incurred $83,300 of selling expenses.
9. Incurred $36,600 of administrative expense.

Using the information given, complete the following:

a. Prepare the January income statement for Digital Vibe Manufacturing Company.

b. Determine the Materials Inventory, Work in Process Inventory, and Finished Goods Inventory balances at the end of the first month of operations.

Making decisions often involves financial and nonfinancial factors. Provide a hypothetical example from your personal life of a situation in which you would consider both financial and nonfinancial factors. What factors would be considered?