Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department.

The following incomplete Work in Process account is available for the Refining Department for March:

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,700; direct labor, $4,300; and overhead, $21,700.

Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,000; and overhead cost applied to production, $103,000.

Required:

1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below.

1. Raw materials used in production.
2. Direct labor costs incurred.
3. Manufacturing overhead costs incurred for the entire factory, $646,000. (Credit Accounts Payable.)
4. Manufacturing overhead was applied to production using a predetermined overhead rate.
5. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $672,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $800,000.
7. Completed units were sold on account, $1,430,000. The Cost of Goods Sold was $630,000.

2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department’s Work in Process is given in the T-account shown above.)

The Square Foot Grill, Inc. issued $187,000 of 10-year, 5 percent bonds on January 1, 2018, at 102. interest is payable in cash annually on December 31. The straight-line method is used for amortization.

Required

1. Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2018, bond issue and (2) the December 31, 2018, recognition of interest expense, including the amortization of the premium and the cash payment, affects the company’s financial statements. Use + for increase, − for decrease, and if there is no effect, leave the cell blank.

2. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.

3. Determine the amount of interest expense reported on the 2018 income statement.

4. Determine the carrying value of the bond liability as of December 31, 2019.

5. Determine the amount of interest expense reported on the 2019 income statement.

Periodic Inventory by Three Methods; Cost of Merchandise Sold The units of an item available for sale during the year were as follows: Jan. 1 Inventory 50 units @ $90 Mar. 10 Purchase 50 units @ $100 Aug. 30 Purchase 10 units @ $104 Dec. 12 Purchase 90 units @ $110 There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the inventory cost and the cost of merchandise sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar. Cost of Merchandise Inventory and Cost of Merchandise Sold Inventory Method Merchandise Inventory Merchandise Sold First-in, first-out (FIFO) $ $ Last-in, first-out (LIFO) Weighted average cost

The Foundational 15 [LO6-1, LO6-2, LO6-3, LO6-4, LO6-5]

Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions.

Variable costs per unit: Manufacturing: Direct materials $ 24

Direct labor $ 14

Variable manufacturing overhead $ 2

Fixed costs per year: Fixed manufacturing overhead $ 800,000

Fixed selling and administrative expense $ 496,000

The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

11. What would have been the company’s absorption costing net operating income (loss) if it had produced and sold 35,000 units? You do not need to perform any calculations to answer this question.

13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

14. Diego is considering eliminating the West region because an internally generated report suggests the region’s total gross margin in the first year of operations was $50,000 less than its traceable fixed selling and administrative expenses. Diego believes that if it drops the West region, the East region's sales will grow by 5% in Year 2. Using the contribution approach for analyzing segment profitability and assuming all else remains constant in Year 2, what would be the profit impact of dropping the West region in Year 2?

15. Assume the West region invests $30,000 in a new advertising campaign in Year 2 that increases its unit sales by 20%. If all else remains constant, what would be the profit impact of pursuing the advertising campaign?

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.