Exercise 15-13 Adjusting factory overhead LO P4

The following information is available for Lock-Tite Company, which produces special-order security products and uses a job order costing system.
  

Determine whether there is over or underapplied overhead.
Prepare the journal entry to allocate (close) overapplied or underapplied overhead to Cost of Goods Sold.

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Preparing adjusting entries (annual)—depreciation LO4
Mean Beans, a local coffee shop, has the following assets on January 1, 2017. Mean Beans prepares annual financial statements and has a December 31, 2017 year-end.

On January 1, 2017, purchase equipment costing $15,000 with an estimated life of five years. Mean Beans will scrap the equipment after five years for $0.
On July 1, 2017, purchase furniture (tables and chairs) costing $12,000 with an estimated life of ten years. Mean Beans estimates that it can sell the furniture for $2,000 after ten years.
On January 1, 2015, Mean Beans had purchased a car costing $25,000 with an estimated life of eight years. Mean Beans estimates that it can sell the car for $5,000 after eight years.
Assume Mean Beans, uses Straight Line Method to depreciate the asset.

Required
For each transaction, calculate the annual depreciation expense and record the adjusting entry on December 31, 2017.
For the car, determine the accumulated depreciation as of December 31, 2017.
For the car, determine the carrying amount as of December 31, 2017.

A man is looking to purchase a home in the Cleveland Suburbs. He has enough for a 20% down payment and an income of $70,000 per year. His FICO Score is 660. The prime Interest Rate for 30-year Mortgages is 5%. He has a car payment of $400 per month and a Student Loan Payment of $200 per month. The home he finds has 70 Effective Property Tax Mills and Homeowner’s Insurance Costs $50 per month on every $100,000 of Home Value. How much can the man pay for the home? How large of a mortgage will the bank allow him take out?

Please write steps. thank you

Flounder Corporation leased equipment to Shamrock, Inc. on January 1, 2020. The lease agreement called for annual rental payments of $1,276 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $7,600, a book value of $5,600, and Flounder expects a residual value of $5,100 at the end of the lease term. Flounder set the lease payments with the intent of earning a 8% return, though Shamrock is unaware of the rate implicit in the lease and has an incremental borrowing rate of 10%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not of a specialized nature.

What is the amount of the rental payments used in the lease agreement?

Prepare the entries for Flounder for 2020.

How would Flounder’s accounting in part a change if it incurred legal fees of $900 to execute the lease documents and $600 in advertising expenses for the year in connection with the lease?

Please answer the following question:

research “survivor syndrome” and what specific companies have done to successfully

mitigate this response and regain full employee commitment. Provide two companies as examples and discuss your findings.

Selected information from Rockway, Inc.’s U.S. GAAP financial statements for the year ended December 31, included the following (in $):

Cash provided or used by operating activities (CFO) in the year 2005 was closest to:

Group of answer choices

A. $6,300,000.

B. $5,300,000.

C. $4,300,000.

Assume that credit sales "to be received in 90 days" are received in exactly 90 days and that EFT wage payments are made in exactly 7 days. Expected to pay income tax of 35%? And its journal entries CR and DR

1. Internal control procedures are important in every business. At what stage in the development of a business do they become especially critical? Is there one area of the business (cash, receivables, inventory) where the procedures are the most critical, and why do you think that area is the most important?

2. You are investing in a company. Would you rather invest in common stock, convertible preferred stock, non-cumulative preferred stock, or cumulative preferred stock? Please explain your choice.

3. A company can finance their company in many ways - short-term debt, long-term borrowing, selling bonds, issuing stock. What do you think is a good mix for the company to have, and why? What might influence the mix for a company?

McCullough Hospital uses a job-order costing system to assign costs to its patients. Its direct materials include a variety of items such as pharmaceutical drugs, heart valves, artificial hips, and pacemakers. Its direct labor costs (e.g., surgeons, anesthesiologists, radiologists, and nurses) associated with specific surgical procedures and tests are traced to individual patients. All other costs, such as depreciation of medical equipment, insurance, utilities, incidental medical supplies, and the labor costs associated with around-the-clock monitoring of patients are treated as overhead costs. Historically, McCullough has used one predetermined overhead rate based on the number of patient-days (each night that a patient spends in the hospital counts as one patient-day) to allocate overhead costs to patients. Recently a member of the hospital’s accounting staff has suggested using two predetermined overhead rates (allocated based on the number of patient-days) to improve the accuracy of the costs allocated to patients. The first overhead rate would include all overhead costs within the Intensive Care Unit (ICU) and the second overhead rate would include all Other overhead costs. Information pertaining to the hospital’s estimated number of patient-days, its estimated overhead costs, and two of its patients—Patient A and Patient B—is provided below: ICU Other Total Estimated number of patient-days 2,500 22,500 25,000 Estimated fixed overhead cost $ 4,122,500 $ 22,005,000 $ 26,127,500 Estimated variable overhead cost per patient-day $ 286 $ 117 Patient A Patient B Direct materials $ 5,000 $ 6,700 Direct labor $ 26,250 $ 37,000 Total number of patient-days (including ICU) 14 19 Number of patient-days spent in ICU 0 7 Required: 1. Assuming McCullough uses only one predetermined overhead rate, calculate: a. The predetermined overhead rate. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B. 2. Assuming McCullough calculates two overhead rates as recommended by the staff accountant, calculate: a. The ICU and Other overhead rates. b. The total cost, including direct materials, direct labor and applied overhead, assigned to Patient A and Patient B.

Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Balance Ending Balance Assets Cash $ 128,000 $ 128,000 Accounts receivable 333,000 490,000 Inventory 579,000 475,000 Plant and equipment, net 870,000 857,000 Investment in Buisson, S.A. 410,000 432,000 Land (undeveloped) 249,000 246,000 Total assets $ 2,569,000 $ 2,628,000 Liabilities and Stockholders' Equity Accounts payable $ 371,000 $ 337,000 Long-term debt 981,000 981,000 Stockholders' equity 1,217,000 1,310,000 Total liabilities and stockholders' equity $ 2,569,000 $ 2,628,000

Joel de Paris, Inc. Income Statement Sales $ 5,211,000 Operating expenses 4,481,460 Net operating income 729,540 Interest and taxes: Interest expense $ 115,000 Tax expense 201,000 316,000 Net income $ 413,540

The company paid dividends of $320,540 last year. The “Investment in Buisson, S.A.,” on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company’s margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2 decimal places.) 3. What was the company’s residual income last year?

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,400 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $88,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $33,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.80 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,900 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,900)?

Dividends

Keener Company has had 800 shares of 8%, $100 par preferred stock and 44,000 shares of $5 stated value common stock outstanding for the last 3 years. During that period, dividends paid totaled $5,400, $31,000, and $35,400 for each year, respectively.

Required:

Compute the amount of dividends that Keener must have paid to preferred shareholders and common shareholders in each of the 3 years, given the following 3 independent assumptions:
If an amount is zero, enter "0".

1. Preferred stock is nonparticipating and noncumulative.

2. Preferred stock is nonparticipating and cumulative.

3. Preferred stock is fully participating and cumulative.

Oxford Company has two divisions. Thames Division, which has an investment base of $81,000,000, produces and sells 910,000 units of a product at a market price of $149 per unit. Its variable costs total $40 per unit. The division also charges each unit $71 of fixed costs based on a capacity of 1,000,000 units.

Lakes Division wants to purchase 260,000 units from Thames. However, it is willing to pay only $82 per unit because it has an opportunity to accept a special order at a reduced price. The order is economically justifiable only if Lakes can acquire Thames’ output at a reduced price.

Division managers are evaluated using residual income using a 12 percent cost of capital

Required:

a. What is the residual income for Thames without the transfer to Lakes?

residual income

b. What is Thames’s residual income if it transfers 260,000 units to Lakes at $82 each?

residual income

c. What is the minimum transfer price for the 260,000-unit order that Thames would accept if it were willing to maintain the same residual income with the transfer as it would accept by selling its 910,000 units to the outside market? (Round your answer to 2 decimal places.)

minimum transfer price

Toy Story Factory hires six workers to produce toys in the three divisions: “Toddle Toy”, “Girl Toy” and “Boy Toy”. The major decision is the allocation of the workers among the three divisions, so as to maximize the amount of toy produced. The following table shows the amount (unit) of toys that will be produced in a division as a function of the number of workers deployed in the corresponding division. For instance, when 2 workers are sent to the Boy Toy division, a total of 66 units of toy will be produced there.

If the factory wants to maximize the amount of toy produced, the maximum output will be [Answer] units of toys in total. (Integer, please.)

Answer T or F

1. The ending merchandise inventory for 2005 is the as the beginning merchandise inventory or 2006.
2. In a multi-step income statement the dollar amount for income from operations is always the same as net income.
3. Net sales are equal to sales minus cost of merchandise sold.
4. Gross profit minus selling expenses equals net income.
5. The form on the balance sheet in which asserts, liabilities, and owner’s equity are presented in a downward sequence is called the report form.
6. On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.
7. The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are nor readily available.
8. Income that cannot be associated definitely with operations, such as gains from the sale of a fixed asset, is listed as Other Income on the multi-step income statement.
9. Under the perpetual inventory system, when a sale is made, both the retail and cost values are recorded.
10. Under perpetual inventory system, the cost of merchandise sold is recorded when sales are made.
11. If payment is due by the end of the month in which sale is made, the invoice terms are expressed as n/30.
12. When merchandise that was sold is returned, a credit to sales returns and allowances is made.
13. In perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is one to the accounts debited to record the transaction.
14. Sales return is a contra-revenue account.
15. Sales Discounts is a revenue account with a credit balance.
16. Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as credit sales.