Garfun, Inc., owns all of the stock of Simon, Inc. For 2018, Garfun reports income (exclusive of any investment income) of $480,000. Garfun has 80,000 shares of common stock outstanding. It also has 5,000 shares of preferred stock outstanding that pay a dividend of $15,000 per year. Simon reports net income of $290,000 for the period with 80,000 shares of common stock outstanding. Simon also has a liability for 10,000 of $100 bonds that pay annual interest of $8 per bond. Each of these bonds can be converted into three shares of common stock. Garfun owns none of these bonds. Assume a tax rate of 30 percent. What amount should Garfun report as diluted earnings per share? (Round your intermediate percentage value to the nearest whole number and the final answer to 2 decimal places.)

Diluted earnings per share=

The following T-accounts represent September activity:

Required:

Compute the missing amounts indicated by the letters (a) through (i).

Materials Inventory
BB (9/1)	8,000
	(a)	4,900
		(b)
EB (9/30)	8,900

Work-In-Process Inventory
BB (9/1)	21,100
	180,700
	121,000
	99,200
EB (9/30)	18,500

Finished Goods Inventory
BB (9/1)	14,300
	(e)	(f)
EB (9/30)	(g)

Cost of Goods Sold
	396,400

Applied Overhead Control
		(d)

Manufacturing Overhead Control
	121,000
	4,900
	36,200
	30,100
	4,400

Wages Payable
		124,300
162,000		(c)
		36,200
		119,500	EB (9/30)

Accumulated Depreciation—Plant & Equipment
		204,500	BB (9/1)
		(h)
		234,600	EB (9/30)

Accounts Payable—Material Suppliers
		105,000

Prepaid Expenses
BB(9/1)	24,900
		(i)
EB(9/30)	20,500

What are the answers for:

Material Inventory

Work-In-Process Inventory

Finished Goods Inventory

Cost of Goods Sold

Applied Overhead Control

Manufacturing Overhead Control

Wages Payable

Accumulated Depreciation-Plant & Equipment

Accounts Payable - Material Suppliers

Prepaid Expenses

X Company is planning to stop the production and sale of Product Q, which lost $12,000 last year. If Product Q is dropped, two things will happen in each of the next four years: 1) last year's loss will be avoided, and 2) sales of Product R will be increased, contributing $12,000 to annual profits. In addition, if Product Q is dropped, the company will be able to sell some equipment immediately for $17,000. Assuming a discount rate of 4%, what is the net present value of stopping the production and sale of Product Q?

X Company must decide whether to continue using its current equipment or replace it with new, more efficient equipment. The following information is available for the current and new equipment:

Current equipment
Current sales value	$10,000
Final sales value	5,000
Operating costs	62,000
New equipment
Purchase cost	$49,000
Final sales value	5,000
Operating cost savings	9,000

Maintenance work will be necessary on the new equipment in Year 3, costing $2,500. The current equipment will last for six more years; the life of the new equipment is also six years. Assuming a discount rate of 4%, what is the net present value of replacing the current equipment?

On January 1, 2017, Alison, Inc., paid $70,500 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $224,500 and liabilities of $96,500. A patent held by Holister having a $13,300 book value was actually worth $41,800. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $51,500 and declared and paid dividends of $17,000. In 2018, it had income of $70,500 and dividends of $22,000. During 2018, the fair value of Allison’s investment in Holister had risen from $85,700 to $93,300.

a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?

b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018

X Company currently makes a part and is considering buying it next year from a company that has offered to supply it for $16.00 per unit. This year, total costs to produce 53,000 units were:

Direct materials			$307,400
Direct labor			222,600
Variable overhead			222,600
Fixed overhead			63,600

If X Company buys the part, it can avoid $23,532 of the fixed overhead. The resources that will become idle if they choose to buy the part can be used to increase production of another product, resulting in additional total contribution margin of $60,000.

The marketing manager is uncertain what demand will be next year. What level of demand will make the company indifferent between making the part and buying it?

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

Direct materials: 4 pounds at $10 per pound	$	40
Direct labor: 2 hours at $13 per hour		26
Variable overhead: 2 hours at $9 per hour		18
Total standard cost per unit	$	84

The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs:

1. Purchased 160,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production.

2. Direct laborers worked 59,000 hours at a rate of $14 per hour.

3. Total variable manufacturing overhead for the month was $564,040.

______________________________

5. If Preble had purchased 174,000 pounds of materials at $8.50 per pound and used 160,000 pounds in production, what would be the materials price variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

6. If Preble had purchased 174,000 pounds of materials at $8.50 per pound and used 160,000 pounds in production, what would be the materials quantity variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

7. What direct labor cost would be included in the company’s planning budget for March?

8. What direct labor cost would be included in the company’s flexible budget for March?

Vulcan Company’s contribution format income statement for June is as follows:

Vulcan Company Income Statement For the Month Ended June 30
Sales	$	900,000
Variable expenses		408,000
Contribution margin		492,000
Fixed expenses		455,000
Net operating income	$	37,000
Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded $400,000 in sales and $208,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $164,000 and $125,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories. The company is the exclusive distributor for two products—Paks and Tibs. Sales of Paks and Tibs totaled $150,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 70% for Tibs. Cost records show that $67,500 of the Northern Territory’s fixed expenses are traceable to Paks and $60,000 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line.

On February 1, Karin purchases real estate for $375,000. The annual property taxes of $5,040 are payable on
December 31. Realizing that she will pay the property taxes for the entire year, Karin remits $374,580 to the seller at
closing. Karin’s adjusted basis for the real estate is:

a. $374,580

b.

$375,000

c.

$375,420

d.

$379,620

Nat is a salesman for a real estate developer. His employer permits him to purchase a lot for $75,000. The
employer’s adjusted basis for the lot is $45,000, and its normal selling price is $90,000.

What is Nat’s recognized gain and his basis for the lot?

a. gain $0; basis $75,000

b. gain $0; basis $90,000

c. gain $15,000; basis $75,000

d. gain $15,000; basis $90,000

In 2014, Harold purchased a classic car that he planned to restore for $12,000. However, Harold is too busy to work
on the car and he gives it to his daughter Julia in 2018. At this time, the fair market value of the car has declined to
$10,000. Harold paid no gift tax on the transaction. Julia completes some of the restoration herself with out-of-pocket
costs of $5,000. She later sells the car for $30,000. What is Julia’s recognized gain or loss on the sale of the car?

a. $0

b. $13,000

c. $15,000

d. $18,000

Kelly inherits land which had a basis to the decedent of $95,000 and a fair market value of $50,000 on August 4,
2018, the date of the decedent’s death. The executor distributes the land to Kelly on November 12, 2018, at which
time the fair market value is $49,000. The fair market value on February 4, 2019, is $45,000. In filing the estate tax
return, the executor elects the alternate valuation date. Kelly sells the land on June 10, 2019, for $48,000. What is her
recognized gain or loss?

a. ($1,000)

b. ($2,000)

c. ($47,000)

d. $1,000

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

Direct materials: 4 pounds at $10 per pound	$	40
Direct labor: 2 hours at $13 per hour		26
Variable overhead: 2 hours at $9 per hour		18
Total standard cost per unit	$	84

The planning budget for March was based on producing and selling 29,000 units. However, during March the company actually produced and sold 34,000 units and incurred the following costs:

1. Purchased 160,000 pounds of raw materials at a cost of $8.50 per pound. All of this material was used in production.

2. Direct laborers worked 59,000 hours at a rate of $14 per hour.

3. Total variable manufacturing overhead for the month was $564,040.

_________________

9. What is the labor rate variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

10. What is the labor efficiency variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

11. What is the labor spending variance for March? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.). Input all amounts as positive values.)

12. What variable manufacturing overhead cost would be included in the company’s planning budget for March?

White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat grain being introduced in the Milling Department. From the Milling Department, the materials pass through the Sifting and Packaging departments, emerging as packaged refined flour.

The balance in the account Work in Process-Sifting Department was as follows on July 1:

Work in Process-Sifting Department
(1,000 units, 3/5 completed):
Direct materials (1,000 × $2.15)	$2,150
Conversion (1,000 × 3/5 × $0.40)	240
	$2,390

The following costs were charged to Work in Process-Sifting Department during July:

Direct materials transferred from Milling Department:
16,700 units at $2.25 a unit	$37,575
Direct labor	4,540
Factory overhead	3,056

During July, 16,600 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, 4/5 completed.

	Required:
1.	Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your cost per unit answers to the nearest cent and final answers to the nearest dollar amount.
2.	Journalize the entries for costs transferred from Milling to Sifting and the costs transferred from Sifting to Packaging. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Use the date July 31 for all journal entries.
3.	Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent.
4.	Discuss the uses of the cost of production report and the results of part (3).

CHART OF ACCOUNTSWhite Diamond Flour CompanyGeneral Ledger

	ASSETS
110	Cash
121	Accounts Receivable
125	Notes Receivable
126	Interest Receivable
131	Materials
141	Work in Process-Milling Department
142	Work in Process-Sifting Department
143	Work in Process-Packaging Department
151	Factory Overhead-Milling Department
152	Factory Overhead-Sifting Department
153	Factory Overhead-Packaging Department
161	Finished Goods
171	Supplies
172	Prepaid Insurance
173	Prepaid Expenses
181	Land
191	Factory
192	Accumulated Depreciation-Factory

	LIABILITIES
210	Accounts Payable
221	Utilities Payable
231	Notes Payable
236	Interest Payable
251	Wages Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Selling Expenses
532	Insurance Expense
533	Utilities Expense
534	Supplies Expense
540	Administrative Expenses
561	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

1. Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your cost per unit answers to the nearest cent and final answers to the nearest dollar amount.

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report-Sifting Department
For the Month Ended July 31
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
Units charged to production:
Inventory in process, July 1
Received from Milling Department
Total units accounted for by the Sifting Department
Units to be assigned costs:
Inventory in process, July 1 (3/5 completed)
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31 (4/5 completed)
Total units to be assigned costs

COSTS	Costs
	Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for July in Sifting Department
Total equivalent units	÷	÷
Cost per equivalent unit
Costs assigned to production:
Inventory in process, July 1
Costs incurred in July
Total costs accounted for by the Sifting Department
Costs allocated to completed and partially completed units:
Inventory in process, July 1-balance
To complete inventory in process, July 1
Cost of completed July 1 work in process
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31
Total costs assigned by the Sifting Department

2. Journalize the entries for costs transferred from Milling to Sifting and the costs transferred from Sifting to Packaging. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Use the date July 31 for all journal entries.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

3. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent.

Direct materials:
Conversion:

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between     and   . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Lana purchased for $1,410 a $2,000 bond when it was issued two years ago. Lana amortized $200 of the original
issue discount and then sold the bond for $1,800. Which of the following statements is correct?

a. Lana has $10 of long-term capital loss.

b. Lana has $190 of long-term capital gain.

c. Lana has no capital gain or loss.

d. Lana has $190 of long-term capital loss.

Ryan has the following capital gains and losses for 2018: $6,000 STCL, $5,000 28% gain, $2,000 25% gain, and
$6,000 0%/15%/20% gain. Which of the following is correct:

a. The net capital gain is composed of $1,000 25% gain and $6,000 0%/15%/20% gain.

b. The net capital gain is composed of $5,000 28% gain and $2,000 0%/15%/20% gain.

c. The net capital gain is composed of $3,000 28% gain, $2,000 25% gain, and $2,000 0%/15%/20% gain.

d. The net capital gain is composed of $1,000 28% gain and $6,000 0%/15%/20% gain.

In 2018, Satesh has $5,000 short-term capital loss, $13,000 0%/15%/20% long-term capital gain, and $7,000 qualified
dividend income. Satesh is single and has other taxable income of $15,000. Which of the following statements is
correct?

a. No more than $13,000 of Satesh’s taxable income is taxed at 0%.

b. No more than $7,000 of Satesh’s taxable income is taxed at 0%.

c. No more than $15,000 of Satesh’s taxable income is taxed at 0%.

d. None of Satesh’s taxable income is taxed at 0%.

Blue Company sold machinery for $45,000 on December 23, 2018. The machinery had been acquired on April 1,
2016, for $69,000 and its adjusted basis was $34,200. The § 1231 gain, § 1245 recapture gain, and § 1231 loss from
this transaction are:

a. $0 § 1231 gain, $10,800 § 1245 recapture gain, $0 § 1231 loss.

b. $0 § 1231 gain, $0 § 1245 recapture gain, $14,800 § 1231 loss.

c. $0 § 1231 gain, $34,200 § 1245 recapture gain, $0 § 1231 loss.

d. $0 § 1231 gain, $10,800 § 1245 recapture gain, $34,200 § 1231 loss.

Question a)

Louis is worried about how much tax he will have to pay this year and he is looking for anything that he might have missed that will decrease his Taxable Income. All of the following could decrease his Taxable Income, with the exception of:

	a credit for a charitable donation.
	a deduction for contributions to an RPP.
	application of a non capital loss carryforward.
	application of a net capital loss carryforward.

Question b)

With respect to charitable donations claimed by an individual:

	there are no income limits on the amount claimed for donations of Crown gifts.
	the donations made in a particular year must be claimed in that year if there is sufficient taxes payable.
	unused charitable donations may be carried back 3 year and carried forward 5 years.
	the limit on eligible amounts claimed in any given year is always limited to 75% of net income for tax purposes.

Question c)

Net capital losses may be applied against any type of income in the year of death or the immediately preceding year.

	True
	False

.Journal Entries for Purchases and Cash Payments: Note: One way to meet the 250-word minimum requirement for your primary post is to define the new terms that you are using. Review the preparation of journal entries in the Demonstration problem on pp. 418-421 and the demonstration video in the Unit 5 Resources explaining the preparation of journal entries for purchase transactions. Once you understand how these journal entries are prepared, please select one transaction from Problem 11-11B, on page 433 of the text, for Debbie's Doll House, and answer the questions below for that transaction. There are 12 journal entries in this problem, but each of you must select an entry that has not been completed by a classmate! If all of the journal entries have been prepared select an entry from the Chapter 10 discussion question. First come, first served! Please be sure to identify your entry by the date of the transaction and provide your response in your own words. Remember, the primary posting is a short answer essay that fully explains your responses. What happened? (Describe the transaction) Which accounts are affected by this transaction? Are they increased or decreased? What is the normal balance of each of these accounts? Which accounts are debited and by what amount? Explain how you arrived at that amount. Which accounts are credited and by what amount? Explain how you arrived at that amount.

PURCHASES AND CASH PAYMENTS TRANSACTIONS Debbie Mueller owns a small retail business called Debbie’s Doll House. The cash account has a balance of $20,000 on July 1. The following transactions occurred during July:

July	1	Issued Check No. 314 for July rent, $1,400.
	1	Purchased merchandise on account from Topper’s Toys, Invoice No. 211, $2,500, terms 2/10, n/30.
	3	Purchased merchandise on account from Jones & Company, Invoice No. 812, $2,800, terms 1/10, n/30.
	5	Returned merchandise purchased from Topper’s Toys receiving a credit memo on the amount owed, $400.
	8	Purchased merchandise on account from Downtown Merchants, Invoice No. 159, $1,600, terms 2/10, n/30.
	11	Issued Check No. 315 to Topper’s Toys for merchandise purchased on account, less return of July 5 and less 2% discount.
	13	Issued Check No. 316 to Jones & Company for merchandise purchased on account, less 1% discount.
	15	Returned merchandise purchased from Downtown Merchants receiving a credit memo on the amount owed, $600.
	18	Issued Check No. 317 to Downtown Merchants for merchandise purchased on account, less return of July 15 and less 2% discount.
	25	Purchased merchandise on account from Columbia Products, Invoice No. 468, $3,200, terms n/30.
	26	Purchased merchandise on account from Topper’s Toys, Invoice No. 395, $1,430, terms 2/10, n/30.
	29	Purchased merchandise on account from Jones & Company, Invoice No. 853, $2,970, terms 1/10, n/30.

The following were selected from among the transactions completed during the current year by Danix Co., an appliance wholesale company:

Jan. 13.		Sold merchandise on account to Black Tie Co., $40,800. The cost of goods sold was $24,480.
Mar. 10.		Accepted a 60-day, 6% note for $40,800 from Black Tie Co. on account.
May 9.		Received from Black Tie Co. the amount due on the note of March 10.
June 10.		Sold merchandise on account, terms 2/10, n/30, to Holen for $12,700. Record the sale net of the discount. The cost of goods sold was $7,620.
15.		Loaned $24,000 cash to Pioneer Co., receiving a 30-day, 8% note.
20.		Received from Holen the amount due on the invoice of June 10, less 2% discount.
July 15.		Received the interest due from Pioneer Co. and a new 60-day, 9% note as a renewal of the loan of June 15. (Record both the debit and the credit to the notes receivable account.)
Sept. 13.		Received from Pioneer Co. the amount due on its note of July 15.
13.		Sold merchandise on account toWycoff Co., $60,000. The cost of goods sold was $36,000.
Oct. 12.		Accepted a 60-day, 6% note for $60,000 from Wycoff Co. on account.
Dec. 11.		Wycoff Co. dishonored the note dated October 12.
26.		Received from Wycoff Co. the amount owed on the dishonored note, plus interest for 15 days at 12% computed on the maturity value of the note.

Required:

Journalize the entries to record the transactions. Assume 360 days in a year. For a compound entry, if an amount box does not require an entry, leave it blank. Assume this is a year in which February has 28 days.

Jan. 13-sale
Jan. 13-cost
Mar. 10
May 9
June 10-sale
June 10-cost
June 15
June 20
July 15
Sept. 13- note
Sept. 13-sale
Sept. 13-cost
Oct. 12
Dec. 11
Dec. 26