Changes in Accounting Principle

Gaubert Inc. decided in March 2017 to change from FIFO to weighted-average inventory pricing. The company reported 2017 income as $30,000. Gaubert’s pre-tax income, using the new weighted-average method in 2015 would have been $35,000 ($5k higher than reported).

In 2016, if the new inventory method had been used, Income would have been $27,000 ($3k higher than reported).

What is the proper disclosure of this event?

Changes in Accounting Estimate

Arcadia HS, purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on a straight-line basis. In 2017 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time.

Calculate the depreciation expense for 2017

Correction of Errors

In 2018, Hillsboro Co. determined that it incorrectly overstated its accounts receivable and sales revenue by $100,000 in 2017. In 2018, what is the adjusting journal entry in order to correct for this error (ignore income taxes)?

Comparative Statements of Retained Earnings for Renn-Dever Corporation were reported as follows for the fiscal years ending December 31, 2019, 2020, and 2021.

At December 31, 2018, paid-in capital consisted of the following:

No preferred stock or potential common shares were outstanding during any of the periods shown.

Required:
Compute Renn-Dever’s earnings per share as it would have appeared in income statements for the years ended December 31, 2019, 2020, and 2021. (Negative amounts should be indicated by a minus sign.)

Jarvene Corporation uses the FIFO method in its process costing system. The following data are for the most recent month of operations in one of the company’s processing departments:

The cost of beginning inventory according to the company’s costing system was $7,887 of which $4,867 was for materials and the remainder was for conversion cost. The costs added during the month amounted to $178,496. The costs per equivalent unit for the month were:

Required:

1. Compute the total cost per equivalent unit for the month.

2. Compute the equivalent units of material and conversion in the ending inventory.

3. Compute the equivalent units of material and conversion that were required to complete the beginning inventory.

4. Compute the number of units started and completed during the month.

5. Compute the cost of ending work in process inventory for materials, conversion, and in total for the month.

6. Compute the cost of the units transferred to the next department for materials, conversion, and in total for the month.

Use the income statement and balance sheets below to prepare the following ratios for Miller Corporation for the year 2020.

Jack loaned his friend Nill $29,000 three years ago. Nill signed a note and made payments on the loan. Last year, when the remaining balance was $26,100, Nill filed for bankruptcy and notified Jack that he would be unable to pay the balance on the loan. Jack treated the $26,100 as a nonbusiness bad debt. Last year, before considering the tax implications of the nonbusiness bad debt, Jack had capital gains of $10,440 and taxable income of $35,000. During the current year, Nill paid Jack $23,490 in satisfaction of the debt. Determine Jack's tax treatment for the $23,490 received in the current year. The nonbusiness bad debt of $26,100 would have been reported as a short-term capital loss, and $_________ would be included in Jack's gross income.

[The following information applies to the questions displayed below.] The following transactions apply to Ozark Sales for Year 1:

1. The business was started when the company received $48,500 from the issue of common stock.

2. Purchased equipment inventory of $175,500 on account.

3. Sold equipment for $203,000 cash (not including sales tax). Sales tax of 6 percent is collected when the merchandise is sold. The merchandise had a cost of $128,000.

4. Provided a six-month warranty on the equipment sold. Based on industry estimates, the warranty claims would amount to 5 percent of sales.

5. Paid the sales tax to the state agency on $153,000 of the sales.

6. On September 1, Year 1, borrowed $19,000 from the local bank. The note had a 5 percent interest rate and matured on March 1, Year 2.

7. Paid $5,700 for warranty repairs during the year.

8. Paid operating expenses of $55,500 for the year.

9. Paid $125,400 of accounts payable.

10. Recorded accrued interest on the note issued in transaction no. 6.

c-1. Prepare the income statement for Year 1. (Round your answers to the nearest dollar amount.)

c-2. Prepare the balance sheet for Year 1. (Round your answers to the nearest dollar amount.)

c-3. Prepare the statement of cash flows for Year 1. (Amounts to be deducted and losses should be indicated with minus sign. Round your answers to the nearest dollar amount.)

d. What is the total amount of current liabilities at December 31, Year 1? (Round your answer to the nearest dollar amount.) Total current liabilities

Please make sure answers are legible if writing by hand. I would prefer if an EXCEL spreadsheet was used for this for each requirement.

Koontz Company manufactures a number of products. The standards relating to one of these products are shown below, along with actual cost data for May. Standard Cost per Unit Actual Cost per Unit Direct materials: Standard: 1.80 feet at $1.00 per foot $ 1.80 Actual: 1.75 feet at $1.40 per foot $ 2.45 Direct labor: Standard: 0.90 hours at $15.00 per hour 13.50 Actual: 0.95 hours at $14.60 per hour 13.87 Variable overhead: Standard: 0.90 hours at $6.00 per hour 5.40 Actual: 0.95 hours at $5.60 per hour 5.32 Total cost per unit $ 20.70 $ 21.64 Excess of actual cost over standard cost per unit $ 0.94 The production superintendent was pleased when he saw this report and commented: “This $0.94 excess cost is well within the 5 percent limit management has set for acceptable variances. It's obvious that there's not much to worry about with this product." Actual production for the month was 10,000 units. Variable overhead cost is assigned to products on the basis of direct labor-hours. There were no beginning or ending inventories of materials. Required: 1. Compute the following variances for May: a. Materials price and quantity variances. b. Labor rate and efficiency variances. c. Variable overhead rate and efficiency variances. 2. How much of the $0.94 excess unit cost is traceable to each of the variances computed in (1) above. 3. How much of the $0.94 excess unit cost is traceable to apparent inefficient use of labor time?

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department.

The following incomplete Work in Process account is available for the Refining Department for March:

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,100; direct labor, $3,300; and overhead, $21,300.

Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,300; and overhead cost applied to production, $98,000.

Required:

1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below.

1. Raw materials used in production.
2. Direct labor costs incurred.
3. Manufacturing overhead costs incurred for the entire factory, $696,000. (Credit Accounts Payable.)
4. Manufacturing overhead was applied to production using a predetermined overhead rate.
5. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $672,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $750,000.
7. Completed units were sold on account, $1,340,000. The Cost of Goods Sold was $640,000.

2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department’s Work in Process is given in the T-account shown above.)

Vitex, Inc. manufactures a popular consumer product and it has provided the following data excerpts from its standard cost system:

*Applied to Work in Process during the period.

The company's manufacturing overhead cost is applied to production on the basis of direct labor-hours. All of the materials purchased during the period were used in production. Work in process inventories are insignificant and can be ignored.

Required:

1. How many units were produced last period?

2. How many pounds of direct material were purchased and used in production?

3. What was the actual cost per pound of material? (Round your answer to 2 decimal places.)

4. How many actual direct labor-hours were worked during the period?

5. What was the actual rate paid per direct labor-hour? (Round your answer to 2 decimal places.)

6. How much actual variable manufacturing overhead cost was incurred during the period?

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,040 hours each month to produce 2,080 sets of covers. The standard costs associated with this level of production are: Total Per Set of Covers Direct materials $ 40,560 $ 19.50 Direct labor $ 7,280 3.50 Variable manufacturing overhead (based on direct labor-hours) $ 4,160 2.00 $ 25.00 During August, the factory worked only 600 direct labor-hours and produced 1,800 sets of covers. The following actual costs were recorded during the month: Total Per Set of Covers Direct materials (5,000 yards) $ 34,200 $ 19.00 Direct labor $ 6,660 3.70 Variable manufacturing overhead $ 4,140 2.30 $ 25.00 At standard, each set of covers should require 2.5 yards of material. All of the materials purchased during the month were used in production. Required: 1. Compute the materials price and quantity variances for August. 2. Compute the labor rate and efficiency variances for August. 3. Compute the variable overhead rate and efficiency variances for August.

Mwanamaida Ltd, a company located in Lusaka light industrial area, manufactures plastic containers for the pharmaceutical and cosmetic industries. The plant, in which the company undertakes all of its production, has two production departments – ‘Cutting’ and ‘Shaping’, and two service departments – ‘Stores’ and ‘Maintenance’.

The information provided below has been extracted from the company’s budget for the next financial year which ends on 31st December 2019.

Allocated Production Overhead Costs K

Cutting department 140,000

Shaping department 160,000

Stores department 35,000

Maintenance department 28,000

Apportioned Production Overheads K

Factory rent 525,000

Factory building insurance 70,000

Plant & machinery insurance 39,000

Plant & machinery depreciation 58,500

Canteen subsidy 150,000

The following additional information is also provided:

Cutting Shaping Stores Maintenance

Dept Dept Dept Dept

Floor area (square metres) 18,000 12,000 3,000 2,000

Value of plant & machinery (K) 300,000 50,000 25,000 15,000

Number of stores requisitions 1,000 500

Maintenance hours required 2,700 2,000 300

Number of employees 34 60 4 2

Machine hours 12,000 2,000

Labour hours 9,000 15,000

Required:

(a) Prepare an overhead analysis sheet based on the above information, clearly state the basis used for any apportionments.

(b) Re-apportion the service department costs and calculate the most appropriate overhead rate for each department (rate should be calculated to two decimal places

(c) During the year ended 31 December 2019 the following hours were actually worked and the following actual incurred:

Department Labour hours Machine hours Overhead costs Incurred

Cutting 8,000 14,000 K531,500

Shaping 16,000 3,000 K405,500

Calculate the over/under absorbed overhead for each of the two department for the year ended 31st December 2019. (Total: 20 marks)

Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 148,400 units at a price of $135 per unit during the current year. Its income statement is as follows:

The division of costs between variable and fixed is as follows:

Management is considering a plant expansion program for the following year that will permit an increase of $1,620,000 in yearly sales. The expansion will increase fixed costs by $216,000, 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.

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.

3. Compute the break-even sales (units) for the current year.
fill in the blank 5 units

4. Compute the break-even sales (units) under the proposed program for the following year.
fill in the blank 6 units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $7,254,000 of income from operations that was earned in the current year.
fill in the blank 7 units

6. Determine the maximum income from operations possible with the expanded plant.
$fill in the blank 8

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?
$fill in the blank 9 Income

8. Based on the data given, would you recommend accepting the proposal?

1. In favor of the proposal because of the reduction in break-even point.
2. In favor of the proposal because of the possibility of increasing income from operations.
3. In favor of the proposal because of the increase in break-even point.
4. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
5. 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

Moss Exports is having a bad year. Net income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss’s accounts receivable are ballooning. The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company’s financial statements. Moss’s bank closely examines cash flow from operating activities. Daniel Peavey, Moss’s controller, suggests reclassifying the receivables from the slow-paying clients as long-term. He explains to the board that removing the $80,000 increase in accounts receivable from current assets will increase net cash provided by operations. This approach may help Moss get the loan. Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better? Under what condition would the reclassification of the receivables be ethical? Unethical

? Remember: your initial post must be between 150-500 words. In order to earn all 10 points you must make a substantive comment on another student's post. You don't have to stay inside your alpha groups to comment. You may post a comment on the other question.