tica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller’s staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool:

The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM:

Required:

a. The current cost accounting system charges overhead to products based on machine-hours. What unit product costs will be reported for the two products if the current cost system continues to be used? (Round intermediate calculations and "Per unit cost" answers to 2 decimal places.)

b. A consulting firm has recommended using an activity-based costing system, with the activities based on the cost pools identified by the cost accountant. What are the cost driver rates for the four cost pools identified by the cost accountant? (Round your answers to 2 decimal places.)

c. What unit product costs will be reported for the two products if the ABC system suggested by the cost accountant’s classification of cost pools is used? (Round intermediate calculations and final answers to 2 decimal places.)

d. If management should decide to implement an activity-based costing system, what benefits should it expect?

Net Present Value Method, Present Value Index, and Analysis for a service company

Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows:

Required:

1. Assuming that the desired rate of return is 12%, prepare a net present value analysis for each proposal. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value. If required, round to the nearest dollar.

2. Determine a present value index for each proposal. If required, round your answers to two decimal places.

3. The ________________ has the largest present value index. Although _________________ has the largest net present value, it returns less present value per dollar invested than does the _______________________ , as revealed by the present value indexes. The present value index for the ______________ is less than 1, indicating that it does not meet the minimum rate of return standard.

Talk briefly about the sections of statement of cash flows.

Question 29:

Knight Co. owned 80% of the common stock of Stoop Co. Stoop had 50,000 shares of $5 par value common stock and 2,000 shares of preferred stock outstanding. Each preferred share received an annual per share dividend of $2 and is convertible into four shares of common stock. Knight did not own any of Stoop's preferred stock. Stoop also had 600 bonds outstanding, each of which is convertible into ten shares of common stock. Stoop's annual after-tax interest expense for the bonds was $2,000. Knight did not own any of Stoop's bonds. There are no excess amortizations or intra-entity transactions associated with this consolidation. Stoop reported net income of $300,000 for 2018. Knight has 100,000 shares of common stock outstanding and reported net income of $400,000 for 2018.

What would Knight Co. report as consolidated basic earnings per share (rounded)?

$7.00

$6.40

$5.68

$6.37

$6.00

The marketing director of a small private university is considering launching an advertising campaign-the first in the university's history-to boost student enrollment. She favored a mix of television, radio, and print advertising; recently, however, she read an article on the growing importance of inbound marketing. She has turned to you for advice on the relative merits of outbound marketing versus inbound marketing. What do you tell her? Can you provide any recommendations about what she should do for her campaign?

STOCHOS INC.      

STATEMENT of FINANCIAL POISTION                            

June 30, 2018

ASSETS                                                      LIABILITIES

Cash                               $222,000             Accounts Payable                $150,000

Accounts Rec.                     58,000             Mortgage Payable                  500,000

Inventory                              4,000           

Supplies                                 6,000              TOTAL LIABILITIES                    $650,000                           

Land                                  210,000

Buildings      $900,000                                STOCKHOLDER EQUITY

    Acc. Depr. <200,000> 700,000        

Equipment        260,000                             Common Stock $5 Par       $500,000

    Acc. Depr    <60,000> 200,000              Excess                                 $100,000

                                                                     Retained Earnings               $150,000

                                                                     TOTAL EQUITY                            $750,000            

TOTAL ASSETS      $1,400,000            TOTAL LIAB. & EQUITY         $1,400,000

July 1 Sold 220,000 shares of common stock for $6,600,000.

July 3 Purchased on account $100,000 of inventory for resale to customers.

July 5   Purchased a 2-year insurance policy for $4,800 in cash. Effective date is July 1.

July 7   Paid cash for $100,000 in inventory acquired July 3.

July 10 Sales revenue generated was $400,000. Cash received this date was $75,000 the

             balance would be received later in the year.

July 30 Paid $40,000 in wages for the month of July.

July 30 Acquired $800,000 of equipment. Useful life is 10 years. Signed a note (12%)

             for the full amount.

July 31 Paid $20,000 July monthly mortgage payment. The rate of interest on this

             mortgage is 7 per cent.

Aug. 1 Stochos declared a dividend of $1 per share. Shareholders who owned shares on

           August 15 would be paid the dividends in October.

Aug. 9 Stochos borrowed $180,000, and signed a note for this amount at 11 per cent.

Aug. 15 Customers returned $80,000 of items they acquired on July 10.

Aug. 18 Stochos sold 100,000 shares for $80 per share.

Aug. 30 Paid August wages – the $40,000 was paid in cash.

Aug. 31 Paid the August mortgage payment of $20,000.

Aug. 30 Paid $30,000 on the equipment note entered into on July 30 of this year.

Aug. 30 Received full amount due from the July 10 sale.

Sept. 30 Supply inventory valued at $200.

Sept. 30 Sales on account to customers amounted to $135,000. Stochos Inc. received

                $33,000 in cash on this date from customers.

Sept. 30 Wages were accrued this day in the amount of $40,000. Stochos Inc. informed

               their employee that their checks would be available October 5^th.

OTHER INFORMATION

1. Tax rate is 20%.

2. Building has a 20-year useful life from date of purchase.

3. All equipment has a useful life of ten years.

4. Inventory at the end of the quarter was $10,000.

PREPARE THE FOLLOWING:

1. INCOME STATEMENT

2. STATEMENT OF RETAINED EARNINGS

3. STATEMENT OF FINANCIAL POSTION [AKA] BALANCE SHEET

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Sold all inventory for $80,000 cash.
2. Paid $14,700 in liquidation expenses.
3. Paid $64,000 of the partnership’s liabilities.
4. Collected $84,000 of the accounts receivable.
5. Distributed safe payments of cash; the partners anticipate no further liquidation expenses.
6. Sold remaining accounts receivable for 35 percent of face value.
7. Sold land, building, and equipment for $41,000.
8. Paid all remaining liabilities of the partnership.
9. Distributed cash held by the business to the partners.

Alta Ski Company's inventory records contained the following information regarding its latest ski model. The company uses a periodic inventory system.

Required:
1a. Which method, FIFO or LIFO, will result in the highest cost of goods sold figure for January 2018?
1b. Which method will result in the highest ending inventory balance?
2. Compute cost of goods sold for January and the ending inventory using both the FIFO and LIFO methods.

Required information

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

Comparative financial statements for Weaver Company follow:

During this year, Weaver sold some equipment for $18 that had cost $30 and on which there was accumulated depreciation of $10. In addition, the company sold long-term investments for $13 that had cost $6 when purchased several years ago. Weaver paid a cash dividend this year and the company repurchased $39 of its own stock. This year Weaver did not retire any bonds.

2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts.)

Compare short- and long-run pricing decisions and provide examples of each. What are two alternative approaches to long-run pricing decisions?

The following information is available for Sunland Company for the year ended December 31, 2017.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

The following information for July and August were extracted from the costing records of Venus CC:

                                                     July                                    August

Production and sales (units)        12 000                                 10 000

                                                         R                                        R

Costs:

Direct material                             270 000                                225 000

Direct labour                                360 000                                300 000

Factory overhead                         360 000                              331 500

Marketing expenses                     93 000                               87 000

Administrative expenses             153 000                               144 000

At the beginning of September it was estimated that production for that month would be either 13 000 or 14 000 units.

REQUIRED

1. Draw up the flexible budget for September based on

   13 000 and 14 000 units.   

2. At the end of September the cost records revealed that the

   Following costs/expenses were incurred in producing and selling

   13 500 units:

                                                                                       R

            Direct material                                                302 400

            Direct labour                                                   400 500

            Factory overhead                                                        425 250

            Marketing expenses                                        108 450

            Administrative expenses                                 180 900

Draw up a variance analysis report for September and indicate next to each variance whether it is favourable or unfavourable.  

Below are the transactions for September.

September 1                 The owner contributed $20,000 to the business to start the operations.

September 2                 Purchased a fully equipped hotdog cart for $15,000. Paid $5,000 upfront and put the remainder of the balance on account.

September 3                 Purchased hotdogs, sodas and consumable supplies for $500.

September 3                 Purchased 3 months of advertising services from the HB Times newspaper for $300.

September 4                 Sold $200 worth of hot dogs to customers for cash.

September 5                 Sold $300 worth of hot dogs to customers for cash.

September 6                 Sold $100 worth of hotdogs the HBPD on account.

September 8                 The HB surfing contest company asked me to supply hotdogs for their contests and paid $600 in advance for a total of 6 contests.

September 9                 Hired a person to help with the surf contest sales. Paid that person $100 for services performed.

September 10               Purchased hotdogs, sodas and consumable supplies for $500.

September 12               Sold $200 worth of hot dogs to customers for cash.

September 18               The city of HB requested that you provide $500 worth of food for an event they are holding at the pier this coming weekend. The job was completed. The city of HB paid $200 and you billed the difference.

September 25               HBPD paid the balance on account due from September 6.

September 26               Received propane (utility) bill, $100, which was put on account.

September 30               Took out a small business loan from the bank for $15,000 to expand the business. The bank approved the loan due one year from today.

September 30               The owner withdrew $200 in the form of dividends.

Adjustments

1. Expired advertising.
2. Provided hotdogs for 3 surfing contests
3. Depreciation of hotdog cart, $300.

Instructions

1. Journalize and post adjusted journal entries based on the adjustments data provided.

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 275,400 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 459,000 units; third quarter, 493,000 units; and fourth quarter, 208,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 60% of the next quarter's budgeted sales.

Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.

Ajax Products, Inc., reported an excess of warranty expense over warranty deductions of $72,000 for the year ended December 31, 2020. This temporary difference will reverse in equal amounts of $24,000 in years 2021, 2022, and 2023. The enacted tax rates are as follows: 2020: 40%; 2021: 25%; 2022: 21%; 2023: 20%. The reporting for this temporary difference at December 31, 2020, would be a

Question 4 options: