1. Accounting information can be considered the heart of business. Decision making is never without accurate and reliable information. The users of accounting information can be internal and external. They use accounting information with different goals. Explain how basic knowledge of accounting can benefits the managers, executives, or the entrepreneur.
In: Accounting
Andretti Company has a single product called a Dak. The company normally produces and sells 82,000 Daks each year at a selling price of $56 per unit. The company’s unit costs at this level of activity are given below:
| Direct materials | $ | 8.50 | |
| Direct labor | 9.00 | ||
| Variable manufacturing overhead | 2.50 | ||
| Fixed manufacturing overhead | 6.00 | ($492,000 total) | |
| Variable selling expenses | 4.70 | ||
| Fixed selling expenses | 4.00 | ($328,000 total) | |
| Total cost per unit | $ | 34.70 | |
A number of questions relating to the production and sale of Daks follow. Each question is independent.
Required:
1-a. Assume that Andretti Company has sufficient capacity to produce 106,600 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 30% above the present 82,000 units each year if it were willing to increase the fixed selling expenses by $140,000. What is the financial advantage (disadvantage) of investing an additional $140,000 in fixed selling expenses?
1-b. Would the additional investment be justified?
2. Assume again that Andretti Company has sufficient capacity to produce 106,600 Daks each year. A customer in a foreign market wants to purchase 24,600 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $1.70 per unit and an additional $22,140 for permits and licenses. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. What is the break-even price per unit on this order?
3. The company has 600 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price?
4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 35% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period.
a. How much total contribution margin will Andretti forgo if it closes the plant for two months?
b. How much total fixed cost will the company avoid if it closes the plant for two months?
c. What is the financial advantage (disadvantage) of closing the plant for the two-month period?
d. Should Andretti close the plant for two months?
5. An outside manufacturer has offered to produce 82,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?
In: Accounting
1. Differentiate historical cost concept from the fair value cost concept of measurement. State clearly their advantages and disadvantages.
In: Accounting
Preparation of Balance Sheet
Conlon Corporation's December 31 post-closing trial balance contains the following normal account balances:
| Cash | $2,200 |
| Accounts payable | 14,300 |
| Building | 308,000 |
| Long-term notes payable | 1,045,000 |
| Common stock | 440,000 |
| Retained earnings | 388,300 |
| Accumulated depreciation-Equipment | 143,000 |
| Land | 1,240,800 |
| Accounts receivable | 23,100 |
| Accumulated depreciation-Building | 77,000 |
| Interest payable | 26,400 |
| Patent (net of amortization) | 55,000 |
| Notes payable (short term) | 88,000 |
| Inventory | 150,700 |
| Equipment | 292,600 |
| Allowance for doubtful accounts | 1,100 |
| Accumulated depreciation-Leasehold improvements | 24,200 |
| Leasehold improvements | 154,000 |
| Trademark (net of amortization) | 20,900 |
Required
Prepare a December 31 classified balance sheet for Conlon Corporation.
Do not use negative signs with any of your answers.
In: Accounting
11. What is the difference between a repurchase agreement and a reverse repurchase agreement?
18. Who are the major issuers of and investors in money market securities?
7. You can purchase a T-bill that is 95 days from maturity for $9,965. The T-bill has a face value of $10,000.
Calculate the T-bill’s quoted yield.
Calculate the T-bill’s bond equivalent yield.
Calculate the T-bill’s EAR.
In: Accounting
4. On January 1 of Year 1, Congo Express Airways issued $4,600,000 of 7%, bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $4,280,000 and the market rate of interest for similar bonds is 9%. The bond premium or discount is being amortized using the straight-line method at a rate of $10,000 every 6 months. The life of these bonds is:
9. Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $132,000; Chris, $92,000; and Molly, $112,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $172,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:
14. Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $132,000; Chris, $92,000; and Molly, $112,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $172,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:
16. Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $286,000, and Atkins' beginning partnership capital balance for the current year is $167,000. The partnership had net income of $172,000 for the year. Barber withdrew $57,000 during the year and Atkins withdrew $45,000. What is Atkins's return on equity?
In: Accounting
The Company P produces doors and windows. The company produces 4 windows per door. In each window the company uses half an hour of direct labor and for each door uses one hour. The prime costs of making doors are $ 20 and $ 16 for the windows. Labor represents 60% of the prime costs. The indirect costs estimated for this production total $ 330,000. The company distributes indirect costs through the use of machine hours. The labor cost used in the production of the windows is $ 240,000. A door requires 2 hours of machinery and sales need one hour. Required determine the cost per unit and total of doors and windows under premise a and answer the required b: a. The company distributes the indirect costs using machine hours b. If the actual indirect costs are $ 210,000 determine the effect of this on the cost per unit of each product
In: Accounting
Figaro Company had the following information regarding a five-year bond that it issued on January 1, 2019.
|
Cash |
Interest |
Amount |
Carrying |
||||||
|
Paid |
Expense |
Amortized |
Value |
||||||
|
Date |
3% |
4% |
|||||||
|
1/1/19 |
$643,249 |
||||||||
|
7/1/19 |
$21,000 |
$25,729.96 |
$4,729.96 |
$647,978.86 |
|||||
|
1/1/20 |
$21,000 |
$25,919.15 |
$4,919.15 |
$652,898.01 |
|||||
|
7/1/20 |
$21,000 |
$26,115.92 |
$5,115.92 |
$658,013.93 |
|||||
|
1/1/21 |
$21,000 |
$26,320.56 |
$5,320.56 |
$663,334.49 |
|||||
|
7/1/21 |
$21,000 |
$26,533.38 |
$5,533.38 |
$668,867.87 |
|||||
|
1/1/22 |
$21,000 |
$26,754.71 |
$5,754.71 |
$674,622.58 |
|||||
|
7/1/22 |
$21,000 |
$26,984.90 |
$5,984.90 |
$680,607.49 |
|||||
|
1/1/23 |
$21,000 |
$27,224.30 |
$6,224.30 |
$686,831.78 |
|||||
|
7/1/23 |
$21,000 |
$27,473.27 |
$6,473.27 |
$693,305.06 |
|||||
|
1/1/24 |
$21,000 |
$27,732.20 |
$6,732.20 |
$700,037.26 |
Required:
In: Accounting
Oriole Company sells outdoor grilling products, providing gas and charcoal grills, accessories, and installation services for custom patio grilling stations. Respond to the requirements related to the following independent revenue arrangements for Oriole products and services. Oriole offers contract MG100 which is comprised of a free-standing gas grill for small patio use plus installation to a customer’s gas line for a total price $1,150. On a standalone basis, the grill sells for $800 (cost $400), and Oriole estimates that the fair value of the installation service (based on cost-plus estimation) is $200. Oriole signed 30 MG100 contracts on May 30, 2021, and customers paid the contract price in cash. The grills were delivered and installed on June 15, 2021.
1- Prepare journal entries for Oriole for MG100 in May and June 2021
2-Oriole sells its specialty combination gas/wood-fired grills to local restaurants. Each grill is sold for $1,600 (cost $610) on credit with terms 3/20, net/60. Prepare the journal entries for the sale of 35 grills on August 1, 2021, and upon payment, assuming the customer paid on (1) August 20, 2021, and (2) September 29, 2021. Assume the company records sales net.
In: Accounting
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
| Driver and guard wages | $ | 920,000 |
| Vehicle operating expense | 350,000 | |
| Vehicle depreciation | 230,000 | |
| Customer representative salaries and expenses | 260,000 | |
| Office expenses | 120,000 | |
| Administrative expenses | 420,000 | |
| Total cost | $ | 2,300,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel | Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
Required:
Complete the first stage allocations of costs to activity cost pools.
|
In: Accounting
Required information [The following information applies to the questions displayed below.] OFC Company of Kansas City prints business forms and other specialty paper products, such as writing paper, envelopes, note cards, and greeting cards. Its Business Services division offers inventory management services and desktop delivery on request. The division uses an activity-based costing (ABC) system. The budgeted usage of each activity cost driver and cost-driver rates for January 2019 for the Business Services division are:
| Activity | Cost Driver | Budgeted Activity | Cost-Driver Rate | ||||
| Storage | Cartons in inventory | 550,000 | $ | 0.5120 | /carton/month | ||
| Requisition handling | Requisitions | 60,000 | 12.50 | ||||
| Pick packing | Lines | 875,000 | 1.70 | ||||
| Data entry | Lines | 875,000 | 0.80 | ||||
| Requisitions | 45,000 | 1.26 | |||||
| Desktop delivery | Per delivery | 19,500 | 44.00 | ||||
For the month, the division expects to make 11,400 deliveries to deliver 1,140,000 cartons to customers.
OFC Company has decided to implement a kaizen (continuous-improvement) program to enhance operational efficiency. After a careful study, management and employees agree that the firm will be able to reduce cost rates for batch-level activities by 2% and unit-level activities (other than Storage) by 1% per month during the first year of the program starting February 2019. The firm has decided to delay the implementation of the program for customer-sustaining and facility-level activities until 2020. The firm expects the amount of cost-driver usage in each of the next two months to be the same as those in January.
Required:
1. Identify unit-level and batch-level activities.
2. What are the total budgeted costs for each activity and for the division as a whole in February and March?
1
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2
|
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In: Accounting
Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work such as removal of asbestos insulation around heating pipes in older homes and nonroutine work such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $3.20 to determine the bid price. Since our average cost is only $2.81 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.”
To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow:
| Activity Cost Pool | Activity Measure | Total Activity | |||
| Removing asbestos | Thousands of square feet | 850 | thousand squarefeet | ||
| Estimating and job setup | Number of jobs | 400 | jobs | ||
| Working on nonroutine jobs | Number of nonroutine jobs | 100 | nonroutine jobs | ||
| Other (costs of idle capacity
and organization-sustaining costs) |
None | ||||
Note: The 100 nonroutine jobs are included in the total of 400 jobs. Both nonroutine jobs and routine jobs require estimating and setup.
| Costs for the Year | |||
| Wages and salaries | $ | 440,000 | |
| Disposal fees | 824,000 | ||
| Equipment depreciation | 108,000 | ||
| On-site supplies | 64,000 | ||
| Office expenses | 340,000 | ||
| Licensing and insurance | 540,000 | ||
| Total cost | $ | 2,316,000 | |
Distribution of Resource Consumption Across Activities
| Removing Asbestos | Estimating and Job Setup | Working on Nonroutine Jobs | Other | Total | |||||||||||||||||
| Wages and salaries | 50 | % | 10 | % | 30 | % | 10 | % | 100 | % | |||||||||||
| Disposal fees | 70 | % | 0 | % | 30 | % | 0 | % | 100 | % | |||||||||||
| Equipment depreciation | 40 | % | 5 | % | 20 | % | 35 | % | 100 | % | |||||||||||
| On-site supplies | 60 | % | 30 | % | 10 | % | 0 | % | 100 | % | |||||||||||
| Office expenses | 15 | % | 35 | % | 20 | % | 30 | % | 100 | % | |||||||||||
| Licensing and insurance | 30 | % | 0 | % | 60 | % | 10 | % | 100 | % | |||||||||||
Required:
1. Perform the first-stage allocation of costs to the activity cost pools.
2. Compute the activity rates for the activity cost pools.
3. Using the activity rates you have computed, determine the total
cost and the average cost per thousand square feet of each of the
following jobs according to the activity-based costing system.
(Round the "Average cost" to 2 decimal
places.)
a. A routine 1,000-square-foot asbestos removal job.
b. A routine 2,000-square-foot asbestos removal job.
c. A nonroutine 2,000-square-foot asbestos removal
job.
In: Accounting
CONTRACT LAW:
Please Answer these questions as detailed as possible
5. Which of the following involve frustrating events and which do not?
a. A famous comedian dies just before he is due to appear on stage.
b. A plumber is contracted to fit central heating in a house. He underestimates the days needed to complete the work and as a result, he will lose profit on the price agreed.
c. A car I had contracted to buy is destroyed when an explosion sets fire to it.
d. As a lecturer, I have contracted personally to take 15 students on a trip to court. An Act is passed requiring teaching and lecturing staff to take no more than 10 students per one member of staff on educational visits.
e. In a contract to supply a Far Eastern state with machinery, one clause stipulates what happens in the event of war. In fact, war is declared after the making of the contract.
In: Accounting
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Comprehensive Ratio Analysis The Jimenez Corporation's forecasted 2019 financial statements follow, along with some industry average ratios. Jimenez Corporation: Forecasted Balance Sheet as of December 31, 2019
Jimenez Corporation: Forecasted Income Statement for 2019
Calculate Jimenez's 2019 forecasted ratios, compare them with the industry average data, and comment briefly on Jimenez's projected strengths and weaknesses. Assume that there are no changes from the prior period to any of the operating balance sheet accounts. Do not round intermediate calculation. Round DSO to the nearest whole number. Round the other ratios to one decimal place.
So, the firm appears to be -Select- managed. The "Comment" section column is blank. |
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In: Accounting
5. On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options
to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The
options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the
grantee was still an employee of the company. The options expired 5 years from the date of grant.
The option price was set at $35, and the fair value option-pricing model determines the total
compensation expense to be $450,000.
All of the options were exercised during the year 2022: 20,000 on February 23 when the market
price was $46, and 30,000 on August 8 when the market price was $85 a share.
a. Prepare the journal entries relating to the stock option plan for the years 2019, 2020, and 2021.
Assume that the employee performs services equally in 2019, 2020, and 2021.
b. Prepare the journal entries that record the two events of exercising the options in 2022.
In: Accounting