Financial Statements

The following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y7. Padget Home Services began its operations on January 1, 20Y7.

2. Prepare a statement of stockholders’ equity for the year ending December 31, 20Y7. If your answer is zero enter "0".

Flip Flop Inc. (FFI) has a capacity to manufacture up to 100,000 flip flops annually in Canada. For next year, expected production and sales are 80,000 units with sale price of $10 per unit. The following costs are expected:

FFI received the following offers:

1.              Africa Imports (AI) would like to purchase 10,000 units for $8.70 $ sale price per unit.

2.              China Imports (CI) would like to purchase 20,000 units for $6.60 sale price per unit.

There will be no selling expenses on AI and CI orders. There will be no impact on regular sales in Canada.

a)              Calculate the impact on FFI operating income if AI order is accepted.

b)              Calculate the impact on FFI operating income if CI order is accepted.

c)              Which offer should FFI accept? Why?

d)              For the offer you recommend in c) above, mention and explain two qualitative factors FFI should consider before making the final decision.

1. Manufacturing Income Statement, Statement of Cost of Goods Manufactured

   Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December.

   	On Company		Off Company
   Materials inventory, December 1	$76,840		$102,970
   Materials inventory, December 31	(a)		116,360
   Materials purchased	195,170		(a)
   Cost of direct materials used in production	205,930		(b)
   Direct labor	289,690		231,680
   Factory overhead	89,900		115,330
   Total manufacturing costs incurred in December	(b)		666,220
   Total manufacturing costs	733,050		914,380
   Work in process inventory, December 1	147,530		248,160
   Work in process inventory, December 31	124,480		(c)
   Cost of goods manufactured	(c)		660,040
   Finished goods inventory, December 1	129,860		115,330
   Finished goods inventory, December 31	136,010		(d)
   Sales	1,132,620		1,029,700
   Cost of goods sold	(d)		666,220
   Gross profit	(e)		(e)
   Operating expenses	147,530		(f)
   Net income	(f)		228,590

   Required:

   1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

   Letter	On Company	Off Company
   a.	$fill in the blank 33b330f92fb1072_1	$fill in the blank 33b330f92fb1072_2
   b.	$fill in the blank 33b330f92fb1072_3	$fill in the blank 33b330f92fb1072_4
   c.	$fill in the blank 33b330f92fb1072_5	$fill in the blank 33b330f92fb1072_6
   d.	$fill in the blank 33b330f92fb1072_7	$fill in the blank 33b330f92fb1072_8
   e.	$fill in the blank 33b330f92fb1072_9	$fill in the blank 33b330f92fb1072_10
   f.	$fill in the blank 33b330f92fb1072_11	$fill in the blank 33b330f92fb1072_12

   2. Prepare On Company's statement of cost of goods manufactured for December.

   On Company
   Statement of Cost of Goods Manufactured
   For the Month Ended December 31
   			$fill in the blank e2405308c076f99_2
   Direct materials:
   	$fill in the blank e2405308c076f99_4
   	fill in the blank e2405308c076f99_6
   	$fill in the blank e2405308c076f99_8
   	fill in the blank e2405308c076f99_10
   		$fill in the blank e2405308c076f99_12
   		fill in the blank e2405308c076f99_14
   		fill in the blank e2405308c076f99_16
   Total manufacturing costs incurred			fill in the blank e2405308c076f99_17
   Total manufacturing costs			$fill in the blank e2405308c076f99_18
   			fill in the blank e2405308c076f99_20
   			$fill in the blank e2405308c076f99_22

   3. Prepare On Company's income statement for December.

   On Company
   Income Statement
   For the Month Ended December 31
   		$fill in the blank a97bcefff044f83_2
   Cost of goods sold:
   	$fill in the blank a97bcefff044f83_4
   	fill in the blank a97bcefff044f83_6
   	$fill in the blank a97bcefff044f83_8
   	fill in the blank a97bcefff044f83_10
   		fill in the blank a97bcefff044f83_12
   		$fill in the blank a97bcefff044f83_14
   		fill in the blank a97bcefff044f83_16
   		$fill in the blank a97bcefff044f83_18

Scooters plans to sell a standard scooter for $ 120 and a chrome scooter for $ 160. Steve's purchases the standard scooter for $ 30 and the chrome scooter for $ 40. Steve's expects to sell one standard scooter for every three chrome scooters. Steve's monthly fixed costs are $ 85,500.

1. How many of each type of scooter must Steve's Scooters sell each month to break​ even?

(Fixed costs + Target profit)/ Weighted-avg. CM per unit = Required sales in units

Standard Scooter formula: ______+_____/_____= required sales in units

Chrome Scooter formula: ______+_____/_____= required sales in units

Stevie's must sell ____ standard scooters and _____ Chrome scooters to break even.

2. How many of each type of scooter must Steve's Scooters sell each month to earn $ 67,500?

Standard Scooter formula: ______+_____/_____= required sales in units

Chrome Scooter formula: ______+_____/_____= required sales in units

Stevie's must sell ____ standard scooters and _____ Chrome scooters.

3. Suppose Steve's expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or​ decrease? Why?​ (Calculation not​ required.)

Each standard scooter contributes $____ to profits while each chrome scooter contributes$_____ to profit.Therefore, the increase in sales of standard scooters and decrease in chrome scooters woud cause the weighted average contribution margin to _______ and the break even point to _______.

I am stuck at how to find the weighted-avg. CM per unit.

Sequential Method

Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:

The company does not break overhead into fixed and variable components. The bases for allocation are power—machine hours; general factory—square feet; and purchasing—purchase orders.

The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Allocate the overhead costs to the producing departments using the sequential method. Carry out allocation ratios to four decimal places. Use these numbers for subsequent calculations. Round allocated costs to the nearest dollar. If an amount is zero, enter "0".

Allocation ratios:

Cost allocation:

2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)

Please answer the following questions:

a) What is confidentiality and privacy controls in accounting information system?

b) How to identify and classify information that to be protected and how to protect confidentiality using encryption?

c) What is privacy regulations and generally accepted privacy principles?

Service! Read through the discussion on service characteristics, service gaps and service recovery/failure in Chapter 13, then answer the following questions: Which of the four characteristics differentiating services from product do you think leads to the most service failures and why? Please be sure to briefly explain the characteristic that you select. You’ve heard the saying “the customer is always right.” Do you think that’s true? Why or why not? Provide a specific situation you (as a customer) have faced a service failure: What were your expectations going into the service situation… and how did the service provider fail to meet your expectations? Was the service failure a result of service heterogeneity/variability or was it a result of the employee not being empowered to properly assist you – please explain.

Building Your Skills Case [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10] You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price—$15 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual) 21,000 June (budget) 51,000 February (actual) 27,000 July (budget) 31,000 March (actual) 41,000 August (budget) 29,000 April (budget) 66,000 September (budget) 26,000 May (budget) 101,000 The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid $4.50 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: Variable: Sales commissions 4 % of sales Fixed: Advertising $ 250,000 Rent $ 23,000 Salaries $ 116,000 Utilities $ 9,500 Insurance $ 3,500 Depreciation $ 19,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $18,500 in new equipment during May and $45,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $18,750 each quarter, payable in the first month of the following quarter. The company’s balance sheet as of March 31 is given below: Assets Cash $ 79,000 Accounts receivable ($40,500 February sales; $492,000 March sales) 532,500 Inventory 118,800 Prepaid insurance 23,500 Property and equipment (net) 1,000,000 Total assets $ 1,753,800 Liabilities and Stockholders’ Equity Accounts payable $ 105,000 Dividends payable 18,750 Common stock 900,000 Retained earnings 730,050 Total liabilities and stockholders’ equity $ 1,753,800 The company maintains a minimum cash balance of $55,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $55,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $55,000. 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. 4. A budgeted balance sheet as of June 30

Waving Through the Window

You and your two roommates are starting a window washing service to help put yourself through college. There are two other well-established window washing services in your area.

• Should you set your price higher or lower than that of the competition? Justify your answer.

One roommate believes the most important objective in setting prices for the business is to generate a large profit, while keeping an eye on your competitors’ prices; the other roommate believes it is important to maximize sales and set prices according to what your customers expect to pay.

• Who is right and why?
• How do the number of competitors in the market in this situation affect YOUR pricing strategy?

Here are comparative statement data for Wildhorse Company and Sandhill Company, two competitors. All balance sheet data are as of December 31, 2022, and December 31, 2021.

(a)

Prepare a vertical analysis of the 2022 income statement data for Wildhorse Company and Sandhill Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)

(b1)

Compute the 2022 return on assets and the return on common stockholders’ equity for both companies. (Round all ratios to 1 decimal place, e.g. 2.5%.)

Use 3 paragraphs: Briefly describe and distinguish the 'planning' and 'control' aspects of management accounting. Give examples of how management accounting information is used for both planning and control purposes in your organization.

You set up your own business in merchandising sector. You lease a space of 6,000 square feet to open a luxury watch shop.

The following is minimum information regarding the business:

- Specific sub-sector: Merchandising sector.

-   Business model: buying and selling luxury watches.

-   Investment by owner: $1,000,000

- You hire a shop manager, two accounting staffs who also keep the merchandise, one security officer, and 8 full-time sales assistants.

-   Business costs/expenses should have at least the following: cost of merchandise sold, rent expense, salary, utilities expense, advertising expense, interest expense, and miscellaneous expenses.

-Capital structure: must have both Investment by owner ($1,000,000) and Bank loan.

Set up an effective Internal Control System for the business using 5 different internal control elements.

Activity-Based Costing for a Service Company Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: Activity Activity Rate Room and meals $237 per day Radiology $334 per image Pharmacy $53 per physician order Chemistry lab $90 per test Operating room $740 per operating room hour The activity usage information associated with the two patients is as follows: Abel Putin Cheryl Umit Number of days 3 days 11 days Number of images 4 images 5 images Number of physician orders 6 orders 8 orders Number of tests 3 tests 6 tests Number of operating room hours 4 hours 7 hours a. Determine the activity cost associated with each patient.

Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion Pineapple Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering using the multiple production department factory overhead rate method. The following factory overhead was budgeted for Pineapple: Assembly Department $220,000 Testing Department 809,600 Total $1,029,600 Direct machine hours were estimated as follows: Assembly Department 4,400 hours Testing Department 8,800 Total 13,200 hours In addition, the direct machine hours (dmh) used to produce a unit of each product in each department were determined from engineering records, as follows: Commercial Residential Assembly Department 0.50 dmh 1.00 dmh Testing Department 1.00 2.00 Total machine hours per unit 1.50 dmh 3.00 dmh a. Determine the per-unit factory overhead allocated to the Commercial and Residential motors under the single plantwide factory overhead rate method, using direct machine hours as the allocation base. Commercial Motor $ per unit Residential Motor $ per unit b. Determine the per-unit factory overhead allocated to the Commercial and Residential motors under the multiple production department factory overhead rate method, using direct machine hours as the allocation base for each department. Commercial Motor $ per unit Residential Motor $ per unit

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price—$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

The concentration of sales before and during May is due to Mother’s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $5.70 for a pair of earrings. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $24,500 in new equipment during May and $57,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $27,750 each quarter, payable in the first month of the following quarter.

The company’s balance sheet as of March 31 is given below:

The company maintains a minimum cash balance of $67,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $67,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:

1. a. A sales budget, by month and in total.

    b. A schedule of expected cash collections, by month and in total.

    c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

    d. A schedule of expected cash disbursements for merchandise purchases, by month and in total.

2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $67,000.

3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

4. A budgeted balance sheet as of June 30.