Long-Term Performance Report

Nabors Company had actual quality costs for the year ended June 30, 20x5, as given below.

At the zero-defect state, Nabors expects to spend $500,000 on quality engineering, $100,000 on vendor certification, and $65,000 on packaging inspection. Assume sales to be $2,400,000.

Required:

1. Prepare a long-range performance report for 20x5. Enter all answers as positive amounts. If the budget variance amount is unfavorable select "Unfavorable" in the last column of the table. Select "Favorable" if it is favorable. Round percentage answers to two decimal places, if rounding is required. For example, 5.789% would be entered as "5.79". Enter "0" as the target cost amount if there would be no cost at the zero-defect state.

2. Why are quality costs still present for the zero-defect state?

ndicate how each of the following events should be classified in a statement of cash flows for the current calendar year. Use the following code: O = operating activities, I = investing activities, and

F = financing activities If the event does not involve a cash flow that should be included in the statement of cash flows, use an X. ____

(a) Declared a dividend to be paid early next year. ____

(b) Recorded depreciation expense for the current year. ____

(c) At year-end, paid rent in advance for the next six months. ____

(d) Issued capital stock for cash; management plans to use this cash to invest in marketable securities. ____

(e) Sold a parcel of unused land at a loss. ____

(f) Collected principal amount due on a note receivable. ____

(g) Used the cash received in d, above, to purchase marketable securities. ____

(h) Collected interest due on note receivable described in f, above. ____

(i) Made an adjusting entry to accrue interest payable at year-end. ____

(j) Collected account receivable from a customer who made a large credit purchase in a prior period.

Towing Company manufactures and sells a single product for $40 per unit.
Variable costs are $30 per unit and fixed costs total $168,000. During
2019, the company sold 26,500 units of this product to customers. In
order to improve profitability, the president of Towing Company believes
the following changes should be made in 2020:

1. decrease the selling price of the product by 10%

2. automate a portion of the production process which will reduce
   variable costs by 5% per unit but will add an additional fixed
   cost of $16,310 per year

3. increase advertising by $49,420

Assume these changes are made. 
A) Calculate the number of units that Towing Company must sell in 2020 in order to earn a net income that is 20% greater than the net income earned in 2019.

B) Calculate the number of units that Towing Company must sell in 2020 in order to earn a target profit equal to 12% of sales.

Quest Quality Sportswear (QQS) is an athletic wear company, which manufactures boys, girls, men, and women's clothing. The company is located in NC. QQS is a private company. Therefore, audited financial statements are not available to external users on the company website.

At Quest Quality Sportswear, the following changes took place on the company's balance sheet last year:

Note I is for increase and D is for decrease.

Other information:

• Long-term investments that cost the company $6 were sold during the year for $16
• Land that cost $15 was sold for $9.
• The company declared and paid $30 in cash dividends during the year.
• Besides the sale of land, no other sales or retirements of plant and equipment took place during the year.
• QQS did not retire any bonds during the year or issues any new common stock.
• QQS's beginning cash balance was $90.
• QQS's ending cash balance was $85.

QQS's income statement for the year follows:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

2. Prepare a statement of cash flows for the year.

Be sure to show your work. Not doing so will result in deductions and/or no credit given

Victory Company uses weighted-average process costing to account for its production costs. Direct labor is added evenly throughout the process. Direct materials are added at the beginning of the process. During November, the company transferred 700,000 units of product to finished goods. At the end of November, the goods in process inventory consists of 180,000 units that are 30% complete with respect to labor. Beginning inventory had $420,000 of direct materials and $139,000 of direct labor cost. The direct material cost added in November is $2,220,000, and the direct labor cost added is $3,254,000. Beginning work in process consisted of 60,000 units that were 100% complete with respect to direct materials and 80% complete with respect to conversion. Of the units completed, 60,000 were from beginning work in process and 640,000 units were started and completed during the period.

1. Determine the equivalent units of production with respect to (a) direct materials and (b) conversion
2. Compute both the direct material cost and the conversion cost per equivalent unit
3. Compute the direct material cost and the conversion cost assigned to (a) units completed and transferred out and (b) ending work in process inventory

14.9.1

On February 1, 2018, Cromley Motor Products issued 6% bonds, dated February 1, with a face amount of $55 million. The bonds mature on January 31, 2022 (4 years). The market yield for bonds of similar risk and maturity was 8%. Interest is paid semiannually on July 31 and January 31. Barnwell Industries acquired $55,000 of the bonds as a long-term investment. The fiscal years of both firms end December 31. (FV of $1, PV of $1, FVA of $1 and PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. Determine the price of the bonds issued on February 1, 2018
2. a. Prepare amortization schedules that indicate Cromley’s effective interest expense for each interest period during the term to maturity.

b. Prepare amortization schedules that indicate Barnwell’s effective interest revenue for each interest paid during the term to maturity.

3.    Prepare the journal entries to record the issuance of the bonds by Cromly and Barnwell’s    investment on February 1, 2018.

4. Prepare the journal entries by both firms to record all subsequent events related to the bonds through January 31, 2020.

Determine the price of the bonds issued on February 1, 2018. (Enter your answer in whole dollars.)

Price of the bonds =__________________

Prepare amortization schedules that indicate Cromley’s effective interest expense for each period during the term to maturity. (Enter your answers in whole dollars.)

Adelphi Company purchased a machine on January 1, 2017, for $50,000. The machine was estimated to have a service life of ten years with an estimated residual value of $5,000. Adelphi sold the machine on January 1, 2021 for $24,000. Adelphi uses the double declining method for depreciation. Using this information, how much is the gain or (loss) for the equipment sale entry made on January 1, 2021. Enter a loss as a negative number.

2.
A. How do companies use benchmarking to make important decision?

B. Describe takt time as a tool to implement lean production efficinecy?

Three years ago, Vincent Chow completed his college degree. The economy was in a depressed

state at the time, and Vincent managed to get an offer of only $25,000 per year as a bookkeeper. In

addition to its relatively low pay, this job had limited advancement potential. Since Vincent was an

enterprising and ambitious young man, he instead started a business of his own. He was convinced

that because of changing lifestyles, a drive-through coffee establishment would be profitable. He

was able to obtain backing from his parents to open such an establishment close to the industrial

park area in town. Vincent named his business The Cappuccino Express and decided to sell only

two types of coffee: cappuccino and decaffeinated.

As Vincent had expected, The Cappuccino Express was very well received. Within three

years, Vincent had added another outlet north of town. He left the day-to-day management of each

site to a manager and turned his attention toward overseeing the entire enterprise. He also hired an

assistant to do the record keeping and other selected chores.

REQUIRED

a. Develop an organization chart for The Cappuccino Express.

b. What factors can be expected to have a major impact on the success of The Cappuccino

Express?

c. What major tasks must Vincent undertake in managing The Cappuccino Express?

d. What are the major costs of operating The Cappuccino Express?

e. Vincent would like to monitor the performance of each site manager. What measure(s) of

performance should he use?

f. If you suggested more than one measure, which of these should Vincent select if he could use

only one?

g. Suppose that last year, the original site had yielded total revenues of $146,000, total costs

of $122,000, and hence, a profit of $24,000. Vincent had judged this profit performance to

be satisfactory. For the coming year, Vincent expects that due to factors such as increased

name recognition and demographic changes, the total revenues will increase by 20 percent to

$175,200. What amount of profit should he expect from the site? Discuss the issues involved

in developing an estimate of profit.

Magnetic-Optical Corporation offers a variety of share-based compensation plans to employees. Under its restricted stock unit plan, the company on January 1, 2018, granted restricted stock units (RSUs) representing 5 million of its $1 par common shares to various division managers. The shares are subject to forfeiture if employment is terminated within three years. The common shares have a market price of $30.00 per share on the grant date. Management’s policy is to estimate forfeitures. Required: 1. Determine the total compensation cost pertaining to the RSUs. 2. & 3. Prepare the appropriate journal entries. 4. Suppose Magnetic-Optical expected a 10% forfeiture rate on the RSUs prior to vesting. Determine the total compensation cost.

1. A firm is assumed to use perpetual system which separately determined inventory under FIFO and LIFO and then compare the results.

i) In each space below, place the correct sign (< / > / =) for each comparison by assuming periods of rising prices.

a. FIFO supplies                      ____________ LIFO supplies

b. FIFO cost of sales              ____________ LIFO cost of sales

c. FIFO net profit                    ____________ LIFO net profit

d. FIFO taxable income        ____________ LIFO taxable income

ii) Why the use of LIFO is more preferable by a management compared to FIFO in period of rising prices?

(5)

(Total: 15 marks)

Carmen Company is a corporation that has issued both preferred and common stock. As of January 1, it had 50,000 shares of 2.75%, $100 par, preferred stock outstanding and 250,000 shares of $10 par common stock outstanding.

a. On January 31, the board of directors issues a requirement to purchase 5,000 shares of its common stock at market price. The shares are purchased at a market price of $22 per share.

Journalize the purchase utilizing the cost concept.

b. On March 15, Carmen declares a dividend on preferred stock of $2.75 per share. The date of record is March 25 and the date of payment is March 31.

Journalize these events. If no entry is required, select "No Entry Required" and leave the amount boxes blank.

c. On December 1, Carmen declares a cash dividend on common stock of $0.12 per share. The date of record is December 15 and the date of payment is December 21.

Journalize these events. If no entry is required, select "No Entry Required" and leave the amount boxes blank.

d. On December 27, the board orders that 2,500 shares of the treasury stock purchased in (a) be sold. The sale price is $25 per share.

Journalize this event. If an amount box does not require an entry, leave it blank.

1. Identify the situation below that will result in a favorable variance.

Multiple Choice

• Actual revenue is higher than budgeted revenue.

• Actual revenue is lower than budgeted revenue.

• Actual income is lower than expected income.

• Actual costs are higher than budgeted costs.

• Actual expenses are higher than budgeted expenses.

2 Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock’s labor rate variance for August?

Multiple Choice

• $2,000 favorable.

• $2,104 unfavorable.

• $2,104 favorable.

• $4,160 favorable.

• $2,000 unfavorable.

A flexible budget may be prepared:

Multiple Choice

• Before the operating period only.

• After the operating period only.

• During the operating period only.

• At any time in the planning period.

• Only when the company encounters excessive costs.

Which department is often responsible for the direct materials price variance?

Multiple Choice

• The accounting department.

• The production department.

• The purchasing department.

• The finance department.

• The budgeting department.

Grant Co. uses the following standard to produce a single unit of its product: Variable overhead (2 hrs. per unit @ $4/hr.) Actual data for the month show total variable overhead costs of $190,000, and 23,000 units produced. The total variable overhead variance is:

Multiple Choice

• $6,000F.

• $6,000U.

• $78,000U.

• $78,000F.

• $0.

Using the information below, compute the manufacturing cycle time:

Multiple Choice

• 7.5 hours.

• 6.5 hours.

• 8.0 hours.

• 80.0 hours.

• 7.1 hours.

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $7,377,200. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $10,940.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.

c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?