On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 1,310,000 March 1, 2018 1,020,000 June 30, 2018 1,220,000 October 1, 2018 1,020,000 January 31, 2019 333,000 April 30, 2019 666,000 August 31, 2019 963,000 On January 1, 2018, the company obtained a $3,700,000 construction loan with a 12% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2018 and 2019 using the specific interest method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.

Identifying Relevant Costs and Revenues
The Village of Bomont operates a power plant on a river that flows through town. The village uses some of this generated electricity to operate a water treatment plant and sells the excess electricity to a local utility. The city council is evaluating two alternative proposals:

• Proposal A calls for replacing the generators used in the plant with more efficient generators that will produce more electricity and have lower operating costs. The salvage value of the old generators is higher than their removal cost.

• Proposal B calls for raising the level of the dam to retain more water for generating power and increasing the force of water flowing through the dam. This will significantly increase the amount of electricity generated by the plant. Operating costs will not be affected.

Required
Presented are a number of cost and revenue items. Indicate in the appropriate columns whether each item is relevant or irrelevant to proposals A and B.

On January 1, 2018, the Mason Manufacturing Company began construction of a building to be used as its office headquarters. The building was completed on September 30, 2019. Expenditures on the project were as follows: January 1, 2018 $ 1,310,000 March 1, 2018 1,020,000 June 30, 2018 1,220,000 October 1, 2018 1,020,000 January 31, 2019 333,000 April 30, 2019 666,000 August 31, 2019 963,000 On January 1, 2018, the company obtained a $3,700,000 construction loan with a 12% interest rate. The loan was outstanding all of 2018 and 2019. The company’s other interest-bearing debt included two long-term notes of $3,000,000 and $7,000,000 with interest rates of 8% and 10%, respectively. Both notes were outstanding during all of 2018 and 2019. Interest is paid annually on all debt. The company’s fiscal year-end is December 31. Required: 1. Calculate the amount of interest that Mason should capitalize in 2018 and 2019 using the specific interest method. 2. What is the total cost of the building? 3. Calculate the amount of interest expense that will appear in the 2018 and 2019 income statements.

Emmitt’s direct material cost is $9 per unit. The direct labor rate is $16 per hour and each units takes 1/4 hour to produce. Variable manufacturing overhead is $1 per unit and total budgeted fixed overhead is $7,800. A sales commission of $6 is paid on each unit. If Emmitt expects to produce 2,800 units and sell 1,160 units, what is the budget cost of goods sold per unit? Round your answer to the nearest 2 decimal places

Bertans has received a special order for 1,500 units of its product at a special price of $19. The product normally sells for $33 and has the following manufacturing costs:

Per unit

Direct materials $ 8

Direct labor $4

Variable manufacturing overhead $3

Fixed manufacturing overhead $2

Unit cost $17

Assume that Bertans' production is at full capacity. If Bertans accepts the order, what effect will the order have on the company’s short-term profit?

SEAT Inc. acquired the following assets in January of 2015. Equipment, estimated service life, 5 years; salvage value, $16,200 $503,700 Building, estimated service life, 30 years; no salvage value $648,000 The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2018, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 30 years to 40 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method.

(a) Prepare the journal entry to record depreciation expense for the equipment in 2018.

(b) Prepare the journal entry to record depreciation expense for the building in 2018

Samtech Manufacturing purchased land and building for $4 million. In addition to the purchase price, Samtech made the following expenditures in connection with the purchase of the land and building: Title insurance $ 25,000 Legal fees for drawing the contract 9,500 Pro-rated property taxes for the period after acquisition 45,000 State transfer fees 4,900 An independent appraisal estimated the fair values of the land and building, if purchased separately, at $3 and $2 million, respectively. Shortly after acquisition, Samtech spent $91,000 to construct a parking lot and $49,000 for landscaping. Required: 1. Determine the initial valuation of each asset Samtech acquired in these transactions. 2. Determine the initial valuation of each asset, assuming that immediately after acquisition, Samtech demolished the building. Demolition costs were $340,000 and the salvaged materials were sold for $5,500. In addition, Samtech spent $88,000 clearing and grading the land in preparation for the construction of a new building.

Brad Simpson is a farmer in the Moscow, Idaho area. Each year he tries to plant the crop that will make him the most money. He has a choice of three crops, barley, wheat or garbanzo beans. The amount he makes on each crop varies based on the amount of rain that comes during the season. A very rainy season is great for garbanzo beans (called garbos) but hurts the profit from barley. Wheat doesn’t vary much based on the rainfall. The estimated profit from each crop, based on the rainfall is in the following table:

Mr. Simpson only wants to plant one crop. Decide on the choice for him based on:

a) Maximin Strategy  

b) Maximax Strategy

c) Minimax Regret Strategy

d) Calculate the value of perfect information.  

Khalifa Computers has 3,000 shares of common stock outstanding. The company also has the following amounts in revenue and expense accounts.

Calculate:                                                                                                                   

1. Gross profits.
2. Operating profits.
3. Net profits after taxes (assume a 30 percent tax rate).
4. Calculate the depreciation using MACRS approach for an asset which costs $85,000 and is being depreciated using a 5-year normal recovery period (depreciation rate is as follows: 20%, 32%, 19%, 12%, 12% and 5%). Will the depreciation amount be difference in case of straight line method when the scrap value of the asset is $5,000?

Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 99,900 units at a price of $66 per unit during the current year. Its income statement for the current year is as follows: Sales $6,593,400 Cost of goods sold 3,256,000 Gross profit $3,337,400 Expenses: Selling expenses $1,628,000 Administrative expenses 1,628,000 Total expenses 3,256,000 Income from operations $81,400 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program that will permit an increase of $528,000 in yearly sales. The expansion will increase fixed costs by $52,800, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Enter the final answers rounded to the nearest dollar. Total variable costs $ Total fixed costs $ 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places. Unit variable cost $ Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. units 4. Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $81,400 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. units 6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. $ 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar. $ Income 8. Based on the data given, would you recommend accepting the proposal? In favor of the proposal because of the reduction in break-even point. In favor of the proposal because of the possibility of increasing income from operations. In favor of the proposal because of the increase in break-even point. Reject the proposal because if future sales remain at the current level, the income from operations will increase. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. Choose the correct answer. b

Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.70 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3:

The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter’s production needs. Some 38,400 grams of musk oil will be on hand to start the first quarter of Year 2.

Required:

Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

A partial trial balance of Julie Hartsack Corporation is as follows on December 31, 2018. Dr. Cr. Supplies $2,700 Salaries and wages payable $1,500 Interest Receivable 5,100 Prepaid Insurance 90,000 Unearned Rent 0 Interest Payable 15,000 Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2018, totaled $1,100. 2. Through oversight, the Salaries and Wages Payable account was not changed during 2018. Accrued salaries and wages on December 31, 2018, amounted to $4,400. 3. The Interest Receivable account was also left unchanged during 2018. Accrued interest on investments amounts to $4,350 on December 31, 2018. 4. The unexpired portions of the insurance policies totaled $65,000 as of December 31, 2018. 5. $28,000 was received on January 1, 2018, for the rent of a building for both 2018 and 2019. The entire amount was credited to rent revenue. 6. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 7. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.Pass the necessary adjusting entries for the following taking into account income tax effects (40% tax rate) and assuming that the books have been closed. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) 1. Depreciation on equipment for the year was erroneously recorded as $5,000 rather than the correct figure of $50,000. 2. A further review of depreciation calculations of prior years revealed that equipment depreciation of $7,200 was not recorded. It was decided that this oversight should be corrected by a prior period adjustment.

2016

2017

Required:
1-a. First, complete the table below to calculate the interest amount at December 31, 2016.
1-b. Use the calculated value to prepare your journal entries for 2016 transactions.
1-c. First, complete the table below to calculate the interest amounts.
1-d. Use those calculated values to prepare your journal entries for 2017 transactions.

The journal entries for 1 d are listed below:

Received Todd’s payment of principal and interest on the note dated December 16.

Accepted a $6,200, 7%, 90-day note dated this day in granting a time extension on the past-due account receivable from Midnight Co.

Accepted a $3,000, 30-day, 7% note dated this day in granting Ava Privet a time extension on her past-due account receivable.

Privet dishonored her note when presented for payment.

Midnight Co. refused to pay the note that was due to Ohlm Co. on May 31. Prepare the journal entry to charge the dishonored note plus accrued interest to Midnight Co.’s accounts receivable.

Received payment from Midnight Co. for the maturity value of its dishonored note plus interest for 46 days beyond maturity at 7%.

Accepted a $8,150, 90-day, 9% note dated this day in granting a time extension on the past-due account receivable of Mulan Co.

Accepted a $3,610, 60-day, 12% note dated this day in granting Noah Carson a time extension on his past-due account receivable.

Received payment of principal plus interest from Carson for the September 3 note.

Received payment of principal plus interest from Mulan for the August 7 note.

Wrote off the Privet account against Allowance for Doubtful Accounts.

Problem 10-2A The following are selected transactions of Blanco Company. Blanco prepares financial statements quarterly. Jan. 2 Purchased merchandise on account from Nunez Company, $21,600, terms 3/10, n/30. (Blanco uses the perpetual inventory system.) Feb. 1 Issued a 9%, 2-month, $21,600 note to Nunez in payment of account. Mar. 31 Accrued interest for 2 months on Nunez note. Apr. 1 Paid face value and interest on Nunez note. July 1 Purchased equipment from Marson Equipment paying $10,400 in cash and signing a 10%, 3-month, $70,800 note. Sept. 30 Accrued interest for 3 months on Marson note. Oct. 1 Paid face value and interest on Marson note. Dec. 1 Borrowed $27,600 from the Paola Bank by issuing a 3-month, 8% note with a face value of $27,600. Dec. 31 Recognized interest expense for 1 month on Paola Bank note.

Analyze each transaction.  Under each category in the accounting equation, indicate whether the transaction:

A. increases,

B. decreases, or

C. has no effect.  The item (a) is provided as an example.

1. Provided services to a customer on account.  (Revenue increases causing Stockholders’ Equity to increase, Assets increase, and no effect on Liabilities).

6.  Collected from customers for services provided on account.

7.  Incurred salaries for the month, will pay next week.

8.  Purchased office equipment and will pay vendor later.

9.     At the beginning of January, the balance in the Retained Earnings account is $210,000 for BMJ Corporation.  During the month of January, BMJ had the following external transactions.

$______________Determine ending Retained Earnings for January 31st.