During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

* $3 per unit variable; $248,000 fixed each year.

The company’s $33 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Questions:

1. Using variable costing, what is the unit product cost for both years?

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

On 1 July the Winter Shoe Store paid $6,000 to Ace Realty for 6 month’s rent beginning 1 July. Prepaid Rent was debited for the full amount. If financial statements are prepared on 31 July, the adjusting entry to be made by the Winter Shoe Store is:

Select one:

a. Debit Rent expense, $6,000; Credit Prepaid rent, $6,000

b. Debit Prepaid rent, $1,000; Credit Rent expense, $1,000

c. Debit Rent expense, $1,000; Credit Prepaid rent, $1,000

d. Debit Rent expense, $6,000; Credit Prepaid rent, $6,000

e. None of the above

Sleep Master, Inc. manufactures bedding sets. The budgeted production is for 57,000 comforters in 2017. Each comforter requires 6 yards of material. The estimated January 1, 2017, beginning inventory is 31,000 yards. The desired ending balance is 27,000 yards of material. If the material costs $1.50 per yard, determine the materials budget for 2017.

The City of Sweetwater maintains an Employees’ Retirement Fund, a single employer defined benefit plan that provides annuity and disability benefits. The fund is financed by actuarially determined contributions from the city’s General Fund and by contributions from employees. Administration of the retirement fund is handled by General Fund employees, and the retirement fund does not bear any administrative expenses. The Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of July 1, 2016, is shown here:

During the year ended June 30, 2017, the following transactions occurred:

1. The interest receivable on investments was collected in cash.
2. Member contributions in the amount of $276,500 were received in cash. The city’s General Fund also contributed $810,000 in cash.
3. Annuity benefits of $738,000 and disability benefits of $166,000 were recorded as liabilities.
4. Accounts payable and accrued expenses in the amount of $959,000 were paid in cash.
5. Interest income of $246,000 and dividends in the amount of $30,500 were received in cash. In addition, bond interest income of $54,000 was accrued at year-end.
6. Refunds of $88,000 were made in cash to terminated, nonvested participants.
7. Common stocks, carried at a fair value of $509,000, were sold for $485,000. That $485,000, plus an additional $314,000, was invested in stocks.
8. At year-end, it was determined that the fair value of stocks held by the pension plan had decreased by $50,000; the fair value of bonds had increased by $43,000.
9. Nominal accounts for the year were closed.

Required:

1. Record the transactions on the books of the Employees’ Retirement Fund.
2. Prepare a Statement of Changes in Fiduciary Net Position for the Employees’ Retirement Fund for the year ended June 30, 2017.
3. Prepare a Statement of Fiduciary Net Position for the Employees’ Retirement Fund as of June 30, 2017.

Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2019 follow:

The firm expects the average wage rate to be $25 per hour in 2019. Spring Manufacturing uses direct labor hours to apply overhead. Each year the firm determines the overhead application rate for the year based on budgeted direct labor hours for the year. The firm maintains negligible Work-in-Process Inventory and expects the cost per unit for both beginning and ending inventories of finished products to be identical.

The effective income tax rate for the company is 30%.

Required:

1. Prepare the Sales budget for 2019.

2. Prepare the Production budget for 2019.

3. Prepare the Direct materials purchases budget (units and dollars) for 2019.

4. Prepare the Direct labor budget for 2019.

5. Prepare the Factory overhead budget for 2019.

6. Prepare the Cost of goods sold and ending finished goods inventory budgets for 2019.

7. Prepare the Selling and administrative expense budget, broken down into two components: Selling Expenses, and Administrative Expenses for 2019.

8. Prepare the Budgeted income statement, the last item of which is labeled After-tax Operating Income for 2019.

the segmented income statement for XYZ Company for the year ended December 31, 2016, follows: XYZ COMPANY Segmented Income Statement For the Year Ended December 31, 2016 Total Company Product A Product B Product C Sales $ 592,000 $ 297,000 $ 118,000 $ 177,000 Variable expenses 273,000 154,000 49,000 70,000 Contribution margin $ 319,000 $ 143,000 $ 69,000 $ 107,000 Fixed expenses 283,000 165,000 47,000 71,000 Operating income $ 36,000 $ (22,000 ) $ 22,000 $ 36,000 The company is concerned about the performance of product A, and you have been asked to analyze the situation and recommend to the president whether to continue or discontinue the product. During your investigation, you discover that certain fixed expenses are traceable directly to each product line as indicated here: Total Company Product A Product B Product C Direct fixed expenses $102,000 $74,000 $9,000 $19,000 The remaining fixed expenses are considered to be corporate-wide expenses that have been allocated to each product line based on sales revenue. Required: What will be the effect of the decision to discontinue product A on operating income, assume that product A is discontinued. Prepare a segmented income statement for the remaining products. Allocate corporate-wide fixed expenses as described, round intermediate calculations to 2 decimal places, Starting with the segmented income statement, use the information you discovered during your investigation to present a more appropriately designed segmented income statement.

SAM does not keep a full set of double entry accounts.

Summarised Bank Account:-
Debit entries: Receipts from customers 60500
: Sale of Non current asset 750

Credit entries : Payments to suppliers 34900
: Wages 15000
: Heating 2500
: Drawings   5000
: Purchase of Non current asset 8000
: General Expenses 6000

Additional Information:
1 May 2017 30 April 2018
Bank 100 cr ?
Inventory 5250 11000
Trade Receivables 9750 8400
Trade Payables 10500 9300
Non current assets (book value) 40000 42000
Heating 600 prepaid 250 accrued
6% Bank Loan 20000 20000
Capital 25000 ?

The Non current asset sold during the year had a book value of $1000

Prepare

(i) An Income Statement for the year ended 30 April 2018
(ii) A Statement of Financial Position as at 30 April 2018

Patty Banyan is a single taxpayer, age 27 (birthdate May 18, 1992) living at 543 Space Drive, Houston, TX 77099. Her Social Security number is 466-33-1234. For 2019, Patty has no dependents, and received a W-2, from her job at a local restaurant where she parks cars. These wages are Patty's only income for 2019.

Required:
Complete Form 1040 for Patty Banyan for the 2019 tax year. If there is an over-payment, she would like a refund.

• She wants to donate $3 to the Presidential Election Campaign Fund. The election to donate does not affect tax liability in any way.
• Patty has health care coverage for the full year.
• Enter all amounts as positive numbers.
• If an amount box requires no entry or the amount is zero, enter "0".
• If required, round amounts to the nearest dollar.

ABC Company produces Product X, Product Y, and Product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 2,130 hours per month. ABC Company wants to determine the product mix that should be achieved to meet the high demand for each product and provide the maximum profit. Following is information about each product: Product X Product Y Product Z Selling price $ 149 $ 121 $ 35 Variable costs 104 60 27 Machine time per unit 3 hours 3 hours 1 hour Monthly demand (units) 430 280 755

Determine how the 2,130 hours of machine time should be allocated to the three products to provide the most profitable product mix. (Do not round intermediate calculations.)

Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below:

In preparing these statements, the intern determined that Toxaway’s only variable selling and administrative expense is a 10% sales commission on all sales. The company’s total fixed expenses include $75,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $66,000 of fixed expenses that would be avoided if the Commercial segment is dropped, and $44,000 of fixed expenses that would be avoided if the Residential segment is dropped.

Required:

1. Do you agree with the intern’s decision to use an absorption format for her segmented income statement?

2. Based on a review of the intern’s segmented income statement:

a. How much of the company’s common fixed expenses did she allocate to the Commercial and Residential segments?

b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin?

3. Do you agree with the intern’s decision to allocate the common fixed expenses to the Commercial and Residential segments?

4. Redo the intern’s segmented income statement using the contribution format.

5. Compute the companywide break-even point in dollar sales.

6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division.

7. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $19,000 and $38,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division.

Jen & Berry’s sold 100,000 pints of ice cream last month according to the following contribution format income statement

Total Per Unit

SALES    $330,000    $3.30

VARIABLE COSTS 200,000 2.00

CONTRIBUTION MARGIN $ 130,000 $ 1.30

FIXED COSTS 50,000

NET INCOME $ 80,000

A competing company, Un-Friendly’s, also sold 100,000 pints of ice cream last month according to the following contribution format income statement:

Total Per Unit

SALES $255,000 $2.55

VARIABLE COSTS 100,000 1.00

CONTRIBUTION MARGIN $ 155,000 $ 1.55

FIXED COSTS 75,000

NET INCOME $ 80,000

Both companies sold the same amount of ice cream and had the same Net Income but have different price and cost structures. Jen & Berry’s uses higher quality ingredients (variable cost) and charges a higher price than its competitor. Un-Friendly’s spends more on advertising (fixed cost) and sells at a lower price than Jen & Berry’s.

5.Using last month’s income statements on page 2, calculate the safety margin in units (pints of ice cream) for each company.

6.Jen & Berry’s is considering two options to increase sales next month (and hopefully profit):

Option #1:

Double the pints sold next month by decreasing the price by 15 cents to $3.15.

Option #2:

Double the pints sold next month by spending an additional $20,000 next month

(fixed cost) on advertising. Price of ice cream remains at $3.30 per pint.

Which option should Jen & Berry’s choose?? Explain your answer by showing calculations for both options.

7.Un-Friendly’s is considering the same two options to increase sales next month (and hopefully profit):

Option #1:

Double the pints sold next month by decreasing the price by 15 cents to $2.40.

Option #2:

Double the pints sold next month by spending an additional $20,000 next month

(fixed cost) on advertising. Price of ice cream remains at $2.55 per pint.

Which option should Un-Friendly’s choose?? Explain your answer by showing calculations for both options.

The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall Inc. common stock was $ 53 on December 31, 20Y2.

Required:

Determine the following measures for 20Y2, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.

Cost of goods sold $223,110 Salaries and wages expense $55,720 Delivery expense 6,320 Sales discounts 7,320 Insurance expense 12,760 Sales returns and allowances 11,820 Rent expense 18,640 Sales revenue 366,400 Prepare the necessary closing entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.

Selected information for Muffin’s Muffins Inc. for 2018 is presented below. All amounts are pretax. The effective tax rate is 30%.

Loss from operations of discontinued line of business                                   $   420,000

Inventory                                                                                                         3,185,000

Administrative expenses                                                                                      479,000

Retained earnings, beg balance                                                                     2,749,600

Interest expense                                                                                                  101,600     

Accounts receivable, net                                                                                     573,200

Unrealized holding loss on available-for-sales securities                                  118,800     

Dividends declared and paid                                                                                241,750

Cumulative decrease in income for change in depreciation method                  197,000

Bonds Payable                                                                                               1,380,000

Gain on disposal of discontinued line of business                                             174,000

Sales                                                                                                                4,700,000

Loss due to flooding                                                                                           319,200

Accumulated depreciation                                                                              2,943,700

Cumulative decrease in income of change from FIFO to weighted average       87,900

Gain on sale of land                                                                                             267,000

Cumulative increase in income for reduced estimate for bad debts

     from 4% to 2.5%                                                                                               81,000

Selling expenses                                                                                                  326,700

Foreign currency translation gain                                                                        103,900

Common stock, 240,000 shares                                                                     8,641,000     

Accumulated other comprehensive income, beg balance (CR)                       693,470

Failed to recognize interest on investment in 2017                                             136,000

Dividend Income                                                                                                    91,000

Cost of goods sold                                                                                          2,745,000

Based on the above information, answer the following questions.

(HINT: Prepare a multi-step income statement and retained earnings statement

1. What amount would be reported for operating income?
2. What amount would be reported in a 2018 income statement for income tax?

Fast forward a few months...Your friend asks you how your business is doing and you are unsure how exactly to answer. In fact, you are not necessarily sure how your business is going since you are so new to this! This part will help you organize your thoughts and come up with a more formalized process and financial reporting can help you demonstrate your success (or lack thereof!).

For your cart, come up with a way to determine profit and financial position. Expand your Excel spreadsheet from part 1 by adding an additional tab. There is no specific format for this. Data should be reasonable based on your projections from Part 1 and include all expenses. Your grade is not dependent on whether you are making a profit.

Use the momentum from the discussion forums from week's 6-7 where we collectively brainstormed methods of (a) if the business was profitable and (b) how to measure profitability in a professional format.

Include an analysis that summarizes your findings in a professional manner.

This part of the project should be approximately 2 - 4 pages including the financials.