Marc Goudreau, administrator of Clearwater Hospital, was puzzled by the prior month’s reports. “Every month, it’s anyone’s guess whether the lab will show a profit or a loss. Perhaps the only answer is to increase our lab fees again.”

“We can’t,” replied Rhoda Groves, the controller. “There are still a lot of complaints about the last increase, particularly from the insurance companies and government health units. They’re now paying only about 86% of what we bill. I’m beginning to think the problem is on the cost side.”

To determine if the Clearwater lab costs are in line with those of other hospital labs, Goudreau has asked you to evaluate the costs for the past month. Groves has provided you with the following information:

1. Two basic types of tests are performed in the lab—smears and blood tests. During the past month, 2,100 smears and 1,500 blood tests were performed in the lab.
2. Small glass plates are used in both types of tests. During the past month, the hospital purchased 22,000 plates at a cost of $71,808. This cost is net of a 4% purchase discount. A total of 1,200 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month.
3. During the past month, 1,760 hours of labour time were used in performing smears and blood tests. The cost of this labour time was $18,392.00.
4. The lab’s variable overhead cost last month totalled $11,000.
5. Fixed overhead cost last month totalled $14,000.

Clearwater Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs:

Required:

1. Compute the materials price variance for the plates purchased last month, and compute a materials quantity variance for the plates used last month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

2-a. Compute a labour rate variance and a labour efficiency variance for the lab. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round intermediate calculation and round your final answers to 1 decimal place.)

3-a. Compute the variable overhead spending and efficiency variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

4. Compute the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Carlsville Company, which began operations in 2017, invests its idle cash in trading securities. The following transactions are from its short-term investments in trading securities.

2017

2018

2019

Required:
Prepare journal entries to record these short-term investment activities for the years shown. On December 31 of each year, prepare the adjusting entry to record any necessary fair value adjustment for the portfolio of trading securities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows:

Parker Plastic had the following actual results for the past year:

Required:
1, 2, 3, & 4. Prepare the journal entry to record Parker Plastic's direct materials, direct labor, variable overhead, fixed overhead costs and related variances. Assume the company purchases raw materials as needed and does not maintain any ending inventories.

1. Record entry for direct materials costs and variances.

2. Record entry for direct labor costs and variances.

3. Record the entry for variable overhead costs and variances.

4. Record the entry for fixed overhead costs and variances.

Exercise 10-18

Pronghorn Company purchased an electric wax meter on April 30, 2017, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase.

Prepare the journal entries necessary to record this exchange, assuming that the exchange (a) has commercial substance, and (b) lacks commercial substance. Pronghorn’s fiscal year ends on December 31, and depreciation has been recorded through December 31, 2016. (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.)

Please find an organization that you are familiar with and determine if they are using a single or multiple-step income statement? Please name some key differences between the two formats.

ABC, Resource Drivers, Service Industry

Glencoe Medical Clinic operates a cardiology care unit and a maternity care unit. Colby Hepworth, the clinic’s administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care services are broadly defined as occupancy, feeding, and nursing care. A recent study, however, revealed several interesting outcomes. First, the demands patients place on daily care services vary with the severity of the case being treated. Second, the occupancy activity is a combination of two activities: lodging and use of monitoring equipment. Since some patients require more monitoring than others, these activities should be separated. Third, the daily rate should reflect the difference in demands resulting from differences in patient type. Separating the occupancy activity into two separate activities also required the determination of the cost of each activity. Determining the costs of the monitoring activity was fairly easy because its costs were directly traceable. Lodging costs, however, are shared by two activities: lodging cardiology patients and lodging maternity care patients. The total lodging costs for the two activities were $5,755,000 per year and consisted of such items as building depreciation, building maintenance, and building utilities. The cardiology floor and the maternity floor each occupy 21,100 square feet. Hepworth determined that lodging costs would be assigned to each unit based on square feet.

To compute a daily rate that reflected the difference in demands, patients were placed in three categories according to illness severity, and the following annual data were collected:

The demands associated with patient severity are also provided:

Required:

1. Suppose that the costs of daily care are assigned using only patient days as the activity driver (which is also the measure of output). Compute the daily rate using this unit-based approach of cost assignment. If required, round your answer to the nearest cent.
$ per day

2. Compute activity rates using the given activity drivers (combine activities with the same driver). If required, round your answers to the nearest cent.

3. Compute the charge per patient day for each patient type using the activity rates from Requirement 2 and the demands on each activity. Round your interim calculations and final answers to the nearest cent.

Williams-Santana, Inc., is a manufacturer of high-tech industrial parts that was started in 2006 by two talented engineers with little business training. In 2018, the company was acquired by one of its major customers. As part of an internal audit, the following facts were discovered. The audit occurred during 2018 before any adjusting entries or closing entries were prepared. The income tax rate is 40% for all years.

1. A five-year casualty insurance policy was purchased at the beginning of 2016 for $35,000. The full amount was debited to insurance expense at the time.
2. Effective January 1, 2018, the company changed the salvage values used in calculating depreciation for its office building. The building cost $600,000 on December 29, 2007, and has been depreciated on a straigh-tline basis assuming a useful life of 40 years and a salvage value of $100,000. Declining real estate values in the area indicate that the salvage value will be no more than $25,000.
3. On December 31, 2017, merchandise inventory was overstated by $25,000 due to a mistake in the physical inventory count using the periodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO at the end of 2018 for both financial statement and income tax purposes. The change will cause a $960,000 increase in the beginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $15,500 of sales commissions earned by employees during 2017. The expense was recorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at a cost of $720,000. Its useful life was estimated to be ten years with no salvage value. The machine has been depreciated by the double-declining balance method. Its book value on December 31, 2017, was $460,800. On January 1, 2018, the company changed to the straight-line method.
7. Warranty expense is determined each year as 1% of sales. Actual payment experience of recent years indicates that 0.75% is a better indication of the actual cost. Management effects the change in 2018. Credit sales for 2018 are $4,000,000; in 2017 they were $3,700,000.

Required:
For each situation:
1. Identify whether it represents an accounting change or an error. If an accounting change, identify the type of change. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a direct result of the change or error correction as well as any adjusting entry for 2018 related to the situation described. Any tax effects should be adjusted for through Income tax payable or Refund income tax.

Howarth Manufacturing Company purchased a lathe on June 30, 2014, at a cost of $80,000. The residual value of the lathe was estimated to be $5,000 at the end of a five-year life. The lathe was sold on March 31, 2018, for $17,000. Howarth uses the straight-line depreciation method for all of its plant and equipment. Partial-year depreciation is calculated based on the number of months the asset is in service.

1.Prepare a schedule to calculate the gain or loss on the sale.

2. Prepare the journal entry to record the sale.

3. Assuming that Howarth had instead used the sum-of-the-years'-digits depreciation method, prepare the journal entry to record the sale.

You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. This is a no nail, no screw, and no glue manufacturing ( no indirect materials used). You will be keeping track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet.

The cost of the direct materials that can be used to manufacture the table are as follows. These cost are on a per unit basis.

Table Top $1,000.00

Table Leg $ 150.00

Drawer $ 300.00

The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours.

The company estimates that there will be 12 direct labor hours worked during the month.

The estimated manufacturing overhead cost for the month is:

a. Factory supervisor salary per month $ 2,500.00

b. Rent for the factory per month $500.00

c. Depreciation of factory equipment per month $600.00

Total Estimated manufacturing overhead $ 3,600.00

What is the predetermined manufacturing overhead rate?

Step 2 The first order you received was to manufacture a table using a table top and four legs. This is your Job #1.

Step 3 The customer that has ordered Job #2, wants a table that is the same as Job #1, but wants to also add a drawer to the table.

Step 4 The following is a list of transactions that need to be recorded for the company for activity in the month of December. Record those in the "General Journal" tab of the excel file using the proper format. Please use the following accounts: Accounts Receivables, Raw materials, Work in process, Finished goods, Accumulated depreciation, Accounts payable, Salaries and wages payable, Sales revenue, Manufacturing overhead, Cost of goods sold, Salaries and wages expense, Advertising expenses, and Depreciation expense.

1-Dec Raw Materials purchased on account, $10,000.

5-Dec All Raw Materials needed for Job #1 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #1 Cost Sheet)

10-Dec The following employee costs were incurred but not paid during the month:

There are three assembly employees that spend 2 hours each, $20 per hour to make the table for Job #1. (After you journalize this entry please enter the information into Job #1 Cost Sheet)

Salary for supervisor of the factory $3,000.

Administrative Salary $2,000.

15-Dec All Raw Materials needed for Job #2 were requisitioned from the material storage for use during the month. Assume all materials are direct. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

16-Dec Rent for the month of December for the factory building incurred but not paid $500.

17-Dec Advertising costs incurred but not paid for the month was $1,200.

20-Dec Depreciation for the month of December was recorded on equipment was $750 ($150 for equipment used in the factory and the remainder for equipment used in selling and administrative activities).

22-Dec Manufacturing overhead cost was applied based on direct labor hours to Job #1 based on the POHR determined on the "Job Cost Sheet". (After you journalize this entry please enter the information into Job #1 Cost Sheet)

26-Dec Job #1 was completed and transferred to Finished Goods during the month.

28-Dec The completed table from Job #1 was sold on account to the customer for $15,000 during the month. (Hint: Make sure to account for the cost of the table that was sold using the cost from the job cost sheet.)

31-Dec Direct labor cost incurred but not paid for three employees to start manufacturing Job #2. The employees only worked one hour each, three hours total, $20 per hour during the month and they did not complete their work on the job. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

31-Dec Manufacturing overhead cost was applied based on direct labor hours to Job #2 based on the POHR. Only three direct labor hours were worked on Job #2 during the month. (After you journalize this entry please enter the information into Job #2 Cost Sheet)

31-Dec Any underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold.

Step 5 Post the journal entries that you recorded on the "General Journal" tab to the "T-accounts" tab. This is the company's first month of business, so there will not be any beginning balances. Compute the balance for each T-account after all of the entries have been posted.

Step 6 Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold on the "Schedule of COGM and COGS" tab for Job #1 and Job #2 that were worked on during the month by the company. Make sure to follow the format noted in your book (pg. 87). (Hint: This is the company's first month of operations and therefore the beginning balances will be zero.)

Step 7 Prepare an Income Statement for the month using the Traditional Format on the "Income Statement" tab.

Step 8 Answer the additional questions below

Check Figure: Cost of Goods Manufactured= $3,520, Net operating income=$6,730

What is the ending balance for raw materials?

What is the ending balance for work in process?

What is the ending balance for finished goods?

What is the actual manufacturing overhead cost incurred during December before adjustment?

What is the total applied manufacturing overhead cost during December before adjustment?

What is the unadjusted cost of goods sold?

Was the manufacturing overhead for the month of December overapplied/underapplied ?

What is the amount of Manufacturing overhead overapplied/underapplied?

What is the adjusted cost of goods sold?

What is gross margin?

What is the total prime cost for Job#1?

What is the total conversion cost for job #1?

What is the total product cost for job#1?

What was the period cost incurred for the month of December?

What is the total variable cost incurred for Job #1(assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)?

What is the contribution margin for Job #1 (assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)?

What would be the actual (not applied) total fixed manufacturing overhead cost incurred for the company for the month if the order in Job #1 is for five tables instead of one table assuming this cost is with in the relevant range?

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

a. Prepare the January income statement for Sorensen Manufacturing Company. Be sure to complete the statement heading. Refer to the list of Accounts, Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive.

b. Using the information given, determine the inventory balances at the end of the first month of operations.

From inception of operations to December 31, 2020, Metlock Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Metlock’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $114,400 (Cr.) at January 1, 2020. During 2020, credit sales totaled $7,920,000, the provision for doubtful accounts was determined to be $158,400, $79,200 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,200. Metlock installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.

Based on the review of collectibility of the account balances in the “prior to 1/1/20” aging category, additional receivables totaling $52,800 were written off as of December 31, 2020. The 80% uncollectible estimate applies to the remaining $79,200 in the category. Effective with the year ended December 31, 2020, Metlock adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting computations in good form. (Hint: In computing the 12/31/20 allowance, subtract the $52,800 write-off.)

Each type of business entity is affected by taxation. However, tax rates vary among the many different types of company structures, such as traditional C corporations, S Corporations, partnerships, and LLC. For example, corporations are generally taxed at higher tax rates than sole proprietors.

Respond to the following in a minimum of 175 words: 

Explain the differences in taxing of four different types of organizations. 

If you were going into business and had a choice of business structures to select from that would minimize your taxes, while yielding the highest profits, which would you choose and why? 

Tent Master produces two lines of tents sold to outdoor enthusiasts. The tents are cut to specifications in department A. In department B the tents are sewn and folded. The activities, costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Additional production information on the two lines of tents follows.

1. Using a plantwide overhead rate based on direct labor hours, compute the overhead cost that is assigned to each pup tent and each pop-up tent. (Round your intermediate calculations and final answers to 2 decimal places.)
  

2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $19 per pup tent and $22 per pop-up tent. (Round your intermediate calculations and answers to 2 decimal places.)
  

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Required information

[The following information applies to the questions displayed below.]

Tent Master produces two lines of tents sold to outdoor enthusiasts. The tents are cut to specifications in department A. In department B the tents are sewn and folded. The activities, costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Additional production information on the two lines of tents follows.

Complete the below table. (Round your intermediate calculations and answers to 2 decimal places.)
  

4. Using ABC, compute the total cost per unit for each tent if the direct labor and direct materials cost is $19 per pup tent and $22 per pop-up tent. (Round your intermediate calculations and final answers to 2 decimal places.)

5. Assume if the market price is $75 per pup tent and $150 per pop-up tent, determine the gross profit / loss per unit for each tent. (Round your intermediate calculations and answers to 2 decimal places.)

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 22 Direct labor $ 11 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 400,000 Fixed selling and administrative expenses $ 70,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $60 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2. b. Prepare an income statement for Year 1 and Year 2. 3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

ohnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $30,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $500,000, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 55,000. Required: 1. What was the balance in gross accounts receivable as of 12/31/2020? 2. What journal entry should Johnson record to recognize bad debt expense for 2021? 3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021. 4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?