Scobie Company began 2016 with a retained earnings balance of $142,400. During an examination of its accounting records on December 31, 2016, Scobie found it had made the following material errors, for both financial reporting and income tax reporting, during 2015.

Scobie’s net income after taxes during 2016 was $60,000. The company has been subject to a 30% income tax rate for the past several years. It declared and paid dividends of $13,000 during 2016.

Required:

General Journal

Shaded cells have feedback.

Prepare whatever journal entries are necessary to correct Scobie’s books for its previous errors. Make your corrections directly to the Retained Earnings account on December 31. Additional Instructions

How does grading work?

PAGE 1

GENERAL JOURNAL

Score: 82/101

Points:

16.24 / 20

Feedback

Check My Work

To correct a prior period that has been closed, adjust the book values of the assets and liabilities so that their balances reflect the correct amounts. An offsetting adjustment is made to Retained Earnings for the cumulative effect of the adjustments for prior periods. In this problem you are instructed to record two entries rather than a compound entry so your journal should contain four entries for this problem.

Balance Sheet

Shaded cells have feedback.

Prepare Scobie Company’s Statement of Retained Earnings for the year ended December 31, 2016. Additional Instructions

Score: 4/31

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

Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 17% each of the last three years. He has computed the cost and revenue estimates for each product as follows:

The company’s discount rate is 15%.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables.

Required:

1. Calculate the payback period for each product.

2. Calculate the net present value for each product.

3. Calculate the internal rate of return for each product.

4. Calculate the project profitability index for each product.

5. Calculate the simple rate of return for each product.

6a. For each measure, identify whether Product A or Product B is preferred.

6b. Based on the simple rate of return, Lou Barlow would likely:

Ida Sidha Karya Company is a family-owned company located in the village of Glanyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $990. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 240 Units sold 225 Units in ending inventory 15 Variable costs per unit: Direct materials $ 120 Direct labor $ 330 Variable manufacturing overhead $ 50 Variable selling and administrative $ 25 Fixed costs: Fixed manufacturing overhead $ 72,000 Fixed selling and administrative $ 27,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 222,750 Cost of goods sold 180,000 Gross margin 42,750 Selling and administrative expense 32,625 Net operating income $ 10,125 Required: 1. Determine how much of the ending inventory consists of fixed manufacturing overhead cost deferred in inventory to the next period. 2. Prepare an income statement for the year using variable costing.

Treyton sold an apartment building for $600,000. His basis in the building was $360,000 subject to $30,000 of depreciation recapture. Treyton received $150,000 in the year of sale, the buyer assumed Treyton’s mortgage payable of $240,000, and the buyer gave Treyton an 8% (the current Federal rate) note of $210,000 due in five years. The interest on the note was payable each June 30 beginning in the year following the year of the sale. Treyton incurred $30,000 of selling expenses which he paid for in the year of sale. Compute Treyton’s installment sales gain that should be reported in the year of sale.

Squash Delight Inc. has the following balance sheet:

The firm’s stock sells for $10 a share.

a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
  

b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
  

   
  
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?

Scribners Corporation produces fine papers in three production departments—Pulping, Drying, and Finishing. In the Pulping Department, raw materials such as wood fiber and rag cotton are mechanically and chemically treated to separate their fibers. The result is a thick slurry of fibers. In the Drying Department, the wet fibers transferred from the Pulping Department are laid down on porous webs, pressed to remove excess liquid, and dried in ovens. In the Finishing Department, the dried paper is coated, cut, and spooled onto reels. The company uses the weighted-average method in its process costing system. Data for March for the Drying Department follow:

No materials are added in the Drying Department. Pulping cost represents the costs of the wet fibers transferred in from the Pulping Department. Wet fiber is processed in the Drying Department in batches; each unit in the above table is a batch and one batch of wet fibers produces a set amount of dried paper that is passed on to the Finishing Department.

Required:

1. Compute the Drying Department's equivalent units of production for pulping and conversion in March.

2. Compute the Drying Department's cost per equivalent unit for pulping and conversion in March.

3. Compute the Drying Department's cost of ending work in process inventory for pulping, conversion, and in total for March.

4. Compute the Drying Department's cost of units transferred out to the Finishing Department for pulping, conversion, and in total in March.

5. Prepare a cost reconciliation report for the Drying Department for March.

The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods:

1. The gross margin is 25% of sales.

2. Actual and budgeted sales data:

3. Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.

4. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.

5. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at March 31 are the result of March purchases of inventory.

6. Monthly expenses are as follows: commissions, 12% of sales; rent, $2,800 per month; other expenses (excluding depreciation), 6% of sales. Assume that these expenses are paid monthly. Depreciation is $981 per month (includes depreciation on new assets).

7. Equipment costing $2,000 will be purchased for cash in April.

8. Management would like to maintain a minimum cash balance of at least $4,000 at the end of each month. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $20,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the preceding data:

1. Complete the schedule of expected cash collections.

2. Complete the merchandise purchases budget and the schedule of expected cash disbursements for merchandise purchases.

3. Complete the cash budget.

4. Prepare an absorption costing income statement for the quarter ended June 30.

5. Prepare a balance sheet as of June 30.

Sunrise Coffee Company roasts and packs coffee beans. The process begins in the Roasting Department. From the Roasting Department, the coffee beans are transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at December 31:

Required:

Prepare a cost of production report, using the average cost method, and identify the missing amounts for Work in Process—Roasting Department. If required, round your cost per equivalent unit answer to two decimal places.

Part A Accounting Standard Setting, Regulation and Disclosure ACCOUNTING STANDARD SETTING (i) Do your own research and critically explain how the Australian Accounting Standards Board take part in the global accounting standard setting process (i.e. in setting IFRS). Why is the IFRS set by the International Accounting Standards Board (IASB) not compulsory for the member countries of IASB? REPORTING ENTITY (ii) Do your own research and critically examine the concepts of small proprietary company, large proprietary company and reporting entity. What are the implications of being classified as either one of these three types of companies in terms of compliance and reporting requirements?

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $57,000 and $102,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.