Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company’s common stock at the end of this year was $18. All of the company’s sales are on account.

Required:

Compute the following financial data for this year:

1. Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.)

2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

3. Inventory turnover. (Round your answer to 2 decimal places.)

4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.)

5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)

6. Total asset turnover. (Round your answer to 2 decimal places.)

Create a Fictitious balance sheet and income statement.

Required information

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

Laker Company reported the following January purchases and sales data for its only product.

The Company uses a perpetual inventory system. For specific identification, ending inventory consists of 410 units, where 380 are from the January 30 purchase, 5 are from the January 20 purchase, and 25 are from beginning inventory.

3. Determine the cost assigned to ending inventory and to cost of goods sold using FIFO.

The Terrence Co. manufactures two products, Baubles and Trinkets. The following are projections for the coming year:

How many Baubles will be sold at the break-even point, assuming that the facilities are jointly used with the sales mix remaining constant?

Jurvin Enterprises is a manufacturing company that had no beginning inventories. A subset of the transactions that it recorded during a recent month is shown below.

1. $75,100 in raw materials were purchased for cash.
2. $72,100 in raw materials were used in production. Of this amount, $66,900 was for direct materials and the remainder was for indirect materials.
3. Total labor wages of $151,600 were incurred and paid. Of this amount, $134,400 was for direct labor and the remainder was for indirect labor.
4. Additional manufacturing overhead costs of $125,200 were incurred and paid.
5. Manufacturing overhead of $120,600 was applied to production using the company’s predetermined overhead rate.
6. All of the jobs in process at the end of the month were completed.
7. All of the completed jobs were shipped to customers.
8. Any underapplied or overapplied overhead for the period was closed to Cost of Goods Sold.

Required:

1. Post the above transactions to T-accounts.
2. Determine the adjusted cost of goods sold for the period.

Complete the following balance sheet using the information:                                    

Cash

Accounts Receivables Inventory ________

Current Assets _________

Net Fixed Assets $1,000,000 _________

Total $1,300,000 =========

Current Ratio = 3.0

Inventory Turnover = 10.0

Debt Ratio = 30%

Accounts Payables                         $100,000

Long-term Debt

Total Liabilities

Common Equity

                                                           ________

Total                                                $1,300,000         

                                                          =========

Total Asset Turnover = 0.5

Average Collection Period = 45 days

Gross Profit Margin = 30%

Garham Company had $360,000 in sales on account last year. The beginning accounts receivable balance was $20,000 and the ending accounts receivable balance was $36,000. The company's average collection period (age of receivables) was closest to:

Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,666 $ 28,349 April 11,462 $ 28,296 May 11,994 $ 28,434 June 13,900 $ 28,930 July 11,726 $ 28,365 August 11,212 $ 28,231 September 12,006 $ 28,438 October 11,697 $ 28,357 November 11,845 $ 28,396 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice $1.95 per client-visit; $28,366 per month $.84 per client-visit; $18,258 per month $0.30 per client-visit; $24,811 per month $0.26 per client-visit; $25,316 per month

What are the requirements for a marital deduction?

Budget Performance Report

Genie in a Bottle Company (GBC) manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows:

At the beginning of July, GBC management planned to produce 620,000 bottles. The actual number of bottles produced for July was 669,600 bottles. The actual costs for July of the current year were as follows:

Enter all amounts as positive numbers.

a. Prepare the July manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for WBC, assuming planned production.

Feedback

Compare the actual costs with the standard cost at actual volume for direct labor, direct materials, and overhead. Identify the cost variance as favorable (actual less than standard) or unfavorable (actual greater than standard).

Review the concepts of favorable and unfavorable variances.

Learning Objective 2.

b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If required, round your answers to nearest cent.

Company A uses a heavily participative budgeting approach whereas at Company B, top management develops all budgets and imposes them on lower-level personnel. Which of the following statements is false?
A. A's employees will likely be more motivated to achieve budgetary goals than the employees of Company B.
B. B's employees may be somewhat disenchanted because although they will be evaluated against a budget, they really had little say in budget development.
C. Budget padding will likely be a greater problem at Company B.
D. Budget preparation time will likely be longer at Company A.
E. Ethical issues are more likely to arise at Company A, especially when the budget is used as a basis for performance appraisal.

1. The auditor's responsibility section of the standard unmodified opinion audit report under US GAAS states:

a) that the audit is designed to obtain reasonable assurance as to whether the financial statements are free of material misstatement whether due to fraud or error

b) that the procedures performed were specified by generally accepted auditing standards

c) that the financial statement audit includes procedures sufficient to express an opinion on whether the company's internal control over financial reporting is effective

d)all of the above

2. The standard unmodified opinion audit report under US GAAS must include the name of the audit partner responsible for issuing the audit report

True False

3. Which of the following are required to be included in an audit report under the Standards of the PCAOB?

a) the name of the audit partner responsible for the audit

b) the signature of the audit firm that issued the audit report

c) a statement that the firm is a member of the AICPA

d) all of the above

4. Which of the following statements regarding internal control over financial reporting (ICFR) for US public companies are correct?

a) management of all US public companies must assess and report on the effectiveness of their ICFR

b) certain of the largest US public companies must engage their auditor to audit and report on the effectiveness of the companies' ICFR

c) PCAOB Auditing Standard No. 5 requires that the audit of internal control be integrated with the audit of the financial statements

d) all of the above

5. The auditor identified a misstatement in the financial statements that was material but not pervasive. If management fails to correct the misstatement, the auditor's report on those financial statements should include:

a) a qualified opinion

b) an adverse opinion

c) a disclaimer of opinion

d) none of the above: the auditor is required to withdraw from the audit engagement

6. The auditor was unable to audit a portion of the financial statements that was very highly material. If the audit client insists that the auditor issue a report on those financial statements, the auditor should

a) qualify the opinion for a scope limitation

b) disclaim an opinion because of a scope limitation

c) qualify the opinion for a departure from GAAP

d) issue an unqualified opinion on the financial statements with an extra paragraph describing the reasons for the scope limitation

Financial Statement Creation – Use the information below to create B/S, I/S and Statement of Retained Earnings after adjusting for the four additional activities below

1. Consider the following information from a company's unadjusted trial balance at December 31, 2018. All accounts have normal balances.

At year-end, the company accountant realizes that the following transactions have to be recorded:

• November 5, purchase 100 shares for the Treasury at a cost of $8 per share
• Perform half of the work customers paid for in advance
• Dec 1, Issue 1,200 shares of common stock at issue price of $9 per share
• Dec 31, declare and pay a dividend to common stock outstanding of $.50 per share

Larry, Inc. produces two products that are purchased and consumed by upscale high-end gourmets. Larry harvests rotten-log fungi which grow in Larry’s rotten-log lot in the middle of the forest. The fungi are processed into pre-goop and pre-slop which are identified at the split off point and can be sold for $50 and $60 per pound, respectively. The joint costs are $360,000, and the joint process yielded 5,000 pounds of Goop and 3,000 pounds of Slop.

It costs $15 per pound to process pre-goop into Goop which sells for $60 per pound, and it costs $20 per pound to process pre-slop into Slop which sells for $90 per pound. Assume that there is the same weight of pre-goop and pre-slop as the finished products Goop and Slop.

Required:

1. To maximize profit, which product should be processed further and then sold? Which product should be sold at the split-off point? Show your work.

2. What amount of joint costs will be allocated to each product if the sales value at split off method is used?

3. The current joint costs of $360,000 consists of $120,000 fixed and $240,000 variable costs. The new environmental regulation will increase the joint cost in the next year by $80,000, which are all fixed. Does it affect your decision made in 1)?

16. Owen Company's unadjusted book balance at June 30 is $14,440. The company's bank statement reveals bank service charges of $120. Two credit memos are included in the bank statement: one for $1,490, which represents a collection that the bank made for Owen, and one for $200, which represents the amount of interest that Owen had earned on its interest-bearing account in June. Based on this information, Owen's true cash balance is:

Multiple Choice

$14,440.

$16,010.

$15,730.

$16,250.

17.

At March 31, Cummins Co. had a balance in its cash account of $10,600. At the end of March the company determined that it had outstanding checks of $1,145, deposits in transit of $710, a bank service charge of $40, and an NSF check from a customer for $225. The true cash balance at March 31 is:

Multiple Choice

$10,165

$10,335

$10,600

18. Duke Company's unadjusted bank balance at March 31 is $4,180. The bank reconciliation revealed outstanding checks amounting to $620 and deposits in transit of $460. Based on this information, Duke's true cash balance is:

Multiple Choice

$4,180.

$3,720.

$4,640.

$4,020.

19. On September 30, the bank statement of Fine Company showed a balance of $11,300. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records:

(1) deposits in transit amounted to $4,650

(2) outstanding checks amounted to $8,500

(3) a $700 check was incorrectly drawn on Fine's account

(4) NSF checks returned by the bank were $1,100

(5) bank service charge was $39

(6) credit memo for $150 for the collection of one of the company's account receivable

Based on the above information, the true cash balance was:

Multiple Choice

$8,150.

$8,261.

$7,161.

$8,911.

20. Rainey Company's true cash balance at October 31 is $4,040. The following information is available for the bank reconciliation:

Outstanding checks, $650

Deposits in transit, $490

Bank service charges, $100

The bank had collected an account receivable for Rainey Company, $1,100

The bank statement included an NSF check written by one of Rainey's customers for $660

Based on this information Rainey's unadjusted book balance at October 31 is:

Multiple Choice

$4,200.

$4,800.

$3,700.

$3,800.

21. The inventory records for Radford Co. reflected the following

Determine the amount of ending inventory assuming the FIFO cost flow method.

Multiple Choice

$11,010

$11,020

$10,260

$6,760

22. Rosewood Company made a loan of $8,400 to one of the company's employees on April 1, Year 1. The one-year note carried a 6% rate of interest. The amount of interest revenue that Rosewood would report during the years ending December 31, Year 1 and Year 2, respectively, would be:

Multiple Choice

$504 and $0

$0 and $504

$378 and $126

$126 and $378

23. On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $64,000 and $1,400, respectively. During the year Kincaid reported $155,000 of credit sales. Kincaid wrote off $1,250 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $166,700. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

The amount of uncollectible accounts expense recognized in the Year 2 income statement will be:

Multiple Choice

$1,550.

$640.

$1,667.

$1,700.

24. Poole Company purchased two identical inventory items. One of the items, purchased in January, cost $30. The other, purchased in February, cost $37. One of the items was sold in March at a selling price of $90. Assuming that Poole uses a LIFO cost flow, which of the following statements is correct?

Multiple Choice

The balance in ending inventory would be $37.

The amount of gross margin would be $53.

The amount of ending inventory would be $33.50.

The amount of cost of goods sold would be $30.

25. Glasgow Enterprises started the period with 75 units in beginning inventory that cost $2.00 each. During the period, the company purchased inventory items as follows. Glasgow sold 395 units after purchase 3 for $10.20 each.

Glasgow's ending inventory under LIFO would be:

Multiple Choice

$675.

$585.

$525.

$450.