Blendit (BLD) just developed new universal titanium replacement mixer blades. These replacement blades can be used in most mixers currently on the market. BLD is selling these blades with a right of return for 30 days. On January 15, management believes it is probable that 10% of the titanium blades sold will be returned. This belief is based on significant experience in estimating returns on other mixer blades BLD has developed and sold in the past. BLD estimates the cost of processing any returned blades will be insignificant. On January 15,Chef's Toolbox (CTX0 purchases and pays for 40 blades at a cost of $20 each. The cost to manufacture each blade was $14. On January 31, BLD's assessment of potential returns had not changed from its assessment on January 15. Requirements: · Review ASC 606-10-05-04, ASC 606-10-32-2 through 12, ASC 606-10-55-22 through 28 · Prepare a detailed explanation of each of the five steps of revenue recognition. Include references to the guidance to support your proposed accounting. Show any calculations you make to support your journal entries. · Record all accounting entries for BLD for the month of January based on the new guidance on revenue recognition in ASC 606

The following is the Easton Company adjusted Trial Balance. Easton Company Adjusted Trial Balance December 31, 2018 Account Title Debit Credit Cash $88,665 Accounts Receivable 232,400 Supplies 17,000 Equipment 395,000 Accumulated Depreciation $224,260 Accounts Payable 72,555 Capital Stock 220,000 Retained Earnings 127,145 Service Revenue 881,105 Interest Income 5,500 Dividends 9,000 Rent Expense 59,500 Wages Expense 529,000 Supplies Expense 42,000 Utilities Expense 8,000 Depreciation Expense 150,000 ________ Totals $1,530,565 $1,530,565 Use this information to prepare the Single-Step Income Statement for the fiscal year. There are additional lines in the formatted income statement form to allow for authorized alternate presentations.

The following is the Easton Company's adjusted Trial Balance. Easton Company Adjusted Trial Balance December 31, 2018 Account Title Debit Credit Cash $88,665 Accounts Receivable 232,000 Supplies 17,000 Equipment 395,000 Accumulated Depreciation $224,260 Accounts Payable 72,555 Capital Stock 220,000 Retained Earnings 127,145 Service Revenue 877,105 Interest Income 5,500 Dividends 7,000 Rent Expense 59,900 Wages Expense 529,000 Supplies Expense 40,000 Utilities Expense 8,000 Depreciation Expense 150,000 ________ Totals $1,526,565 $1,526,565 Use this information to prepare the Balance Sheet for the fiscal year. There are additional lines in the formatted Balance Sheet form to allow for authorized alternate presentations.

Michael Company uses job-order costing. The company has gathered the following data:

Direct materials purchased for cash                   $60,000

Direct materials requisitioned                            $50,000

Direct labor costs incurred                                  $90,000

Factory overhead costs incurred                         $60,000

Cost of goods completed                                   $180,000

Cost of goods sold                                             $170,000

Sales for cash                                                    $300,000

Factory overhead applied                                             ?

Factory overhead costs are applied at 90% of direct labor costs.

Required:

1. A) Prepare the required journal entries for the above transactions.
2. B) Prepare the journal entry to dispose of the overhead variance using the immediate write-off method.

Lanco Corporation, an accrual-method corporation, reported taxable income of $2,380,000 this year. Included in the computation of taxable income were the following items:

• MACRS depreciation of $232,500. Straight-line depreciation would have been $152,000.
• A net capital loss carryover of $12,000 from last year.
• A net operating loss carryover of $28,600 from last year.
• $65,850 capital gain from the distribution of land to the company’s sole shareholder (see below).

Not included in the computation of taxable income were the following items:

• Tax-exempt income of $7,150.
• Life insurance proceeds of $349,000.
• Excess current-year charitable contribution of $4,100 (to be carried over to next year).
• Tax-deferred gain of $23,100 on a like-kind exchange.
• Federal income tax refund from last year of $41,700.
• Nondeductible life insurance premium of $4,000.
• Nondeductible interest expense of $1,200 on a loan used to buy tax-exempt bonds.

Lanco's accumulated E&P at the beginning of the year was $2,820,000. During the year, Lanco made the following distributions to its sole shareholder, Luigi (Lug) Nutt:

• June 30: $67,500.
• September 30: Parcel of land with a fair market value of $77,750. Lanco’s tax basis in the land was $11,900. Lug assumed an existing mortgage on the property of $24,000.

Required:

1. Compute Lanco’s current E&P.
2. Compute the amount of dividend income reported by Lug Nutt this year as a result of the distributions. Answer: 121,250
3. Compute Lanco’s accumulated E&P at the beginning of next year.

Novak Corporation sells one product, with information for July as follows:

Novak uses the FIFO cost formula. All purchases and sales are on account. Ignore any estimated returns on purchases and sales.

A. Assume Novak uses a periodic system. Prepare all journal entries needed, including the end-of-month adjusting entry to record cost of goods sold. A physical count indicates that the ending inventory for July is 110 units. (Credit account titles are automatically indented when the 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. Record journal entries in the order presented in the problem.)

B. Calculate gross profit using the periodic system.

C. Assume Novak uses a perpetual system. Prepare all July journal entries

D. Calculate gross profit using the perpetual system.

A list of possible accounts is as follows:

“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $20 per drum, we would be paying $4.25 less than it costs us to manufacture the drums in our own plant. Since we use 75,000 drums a year, that would be an annual cost savings of $318,750.” Antilles Refining’s current cost to manufacture one drum is given below (based on 75,000 drums per year): Direct materials $ 11.10 Direct labor 6.00 Variable overhead 1.60 Fixed overhead ($2.80 general company overhead, $1.75 depreciation, and, $1.00 supervision) 5.55 Total cost per drum $ 24.25 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $225,000 per year. Alternative 2: Purchase the drums from an outside supplier at $20 per drum. The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 25%. The old equipment has no resale value. Supervision cost ($75,000 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipment’s capacity would be 125,000 drums per year. The company’s total general company overhead would be unaffected by this decision. (Round all intermediate calculations to 2 decimal places.) Required: 1. To assist the managing director in making a decision, prepare an analysis showing the total cost and the cost per drum for each of the two alternatives given above. Assume that 75,000 drums are needed each year. a. What will be the total relevant cost of 75,000 drums if they are manufactured internally as compared to being purchased? b. What would be the per unit cost of each drum manufactured internally? (Round your answer to 2 decimal places.) c. Which course of action would you recommend to the managing director? Purchase from the outside supplier Manufacture internally Indifferent between the two alternatives 2a-1. What will be the total relevant cost of 93,750 drums if they are manufactured internally? 2a-2. What would be the per unit cost of drums? 2 a-3. What course of action would you recommend if 93,750 drums are needed each year? Indifferent between the two alternatives Manufacture internally Purchase from the outside supplier 2b-1. What will be the total relevant cost of 125,000 drums if they are manufactured internally? 2b-2. What would be the per unit cost of drums? (Round your answer to 2 decimal places.) 2b-3. What course of action would you recommend if 125,000 drums are needed each year? Manufacture internally Purchase from the outside supplier Indifferent between the two alternatives

Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 44,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 15 $ 660,000 Direct labor 6 264,000 Variable manufacturing overhead 3 132,000 Fixed manufacturing overhead 9 396,000 Variable selling expense 2 88,000 Fixed selling expense 6 264,000 Total cost $ 41 $ 1,804,000 The Rets normally sell for $46 each. Fixed manufacturing overhead is constant at $396,000 per year within the range of 37,000 through 44,000 Rets per year. Required: 1. Assume that due to a recession, Polaski Company expects to sell only 37,000 Rets through regular channels next year. A large retail chain has offered to purchase 7,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chain’s name on the 7,000 units. This machine would cost $14,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. Determine the impact on profits next year if this special order is accepted. 2. Refer to the original data. Assume again that Polaski Company expects to sell only 37,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 7,000 Rets. The Army would pay a fixed fee of $2.00 per Ret, and it would reimburse Polaski Company for all costs of production (variable and fixed) associated with the units. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. If Polaski Company accepts the order, by how much will profits increase or decrease for the year? 3. Assume the same situation as that described in (2) above, except that the company expects to sell 44,000 Rets through regular channels next year. Thus, accepting the U.S. Army’s order would require giving up regular sales of 7,000 Rets. If the Army’s order is accepted, by how much will profits increase or decrease from what they would be if the 7,000 Rets were sold through regular channels?

Profits have been decreasing for several years at Pegasus Airlines. In an effort to improve the company’s performance, consideration is being given to dropping several flights that appear to be unprofitable. A typical income statement for one round-trip of one such flight (flight 482) is as follows: Ticket revenue (105 seats × 40% occupancy × $65 ticket price) $ 2,730 100.0 % Variable expenses ($15.00 per person) 630 23.1 % (rounded) Contribution margin 2,100 76.9 % (rounded) Flight expenses: Salaries, flight crew $ 300 Flight promotion 660 Depreciation of aircraft 370 Fuel for aircraft 165 Liability insurance 150 Salaries, flight assistants 720 Baggage loading and flight preparation 175 Overnight costs for flight crew and assistants at destination 70 Total flight expenses 2,610 Net operating loss $ (510) The following additional information is available about flight 482: a. Members of the flight crew are paid fixed annual salaries, whereas the flight assistants are paid based on the number of round trips they complete. b. One-third of the liability insurance is a special charge assessed against flight 482 because in the opinion of the insurance company, the destination of the flight is in a "high-risk" area. The remaining two-thirds would be unaffected by a decision to drop flight 482. c. The baggage loading and flight preparation expense is an allocation of ground crews' salaries and depreciation of ground equipment. Dropping flight 482 would have no effect on the company's total baggage loading and flight preparation expenses. d. If flight 482 is dropped, Pegasus Airlines has no authorization at present to replace it with another flight. e. Aircraft depreciation is due entirely to obsolescence. Depreciation due to wear and tear is negligible. f. Dropping flight 482 would not allow Pegasus Airlines to reduce the number of aircraft in its fleet or the number of flight crew on its payroll. Required: 1. Prepare an analysis showing what impact dropping flight 482 would have on the airline's profits. (Any losses/ reductions should be indicated by a minus sign.)

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year-end.
2. Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments.

1.) On August 1,2018, the Corporation issued P 5,000,000, 8% bonds dated March 1,2018 and maturing on February 28, 2030, for a total consideration of P 4,458,429 which includes accrued interest. The bonds pay interest annually every February 28. The issue price provides a yield of 10%. Corporation closes its books annually every December 31.

REQUIRED:

(a)Prepare all entries in the books of Corporation for the years 2018 and 2019, including year-end adjustments.

(b) How much is interest expense for years 2018 and 2019?

(c)At what amount should the bonds payable be shown on the statement of financial position at December 31,2018 and December 31,2019?

2.) On December 1,2018, the Corporation issued five-year, non-convertible P 5,000,000 face value 12% bonds for P 5,386,072, a price that yields 10%. Interest is payable semi- annually on June 1 and December 1.

On August 1,2021, the Corporation retired P 3,000,000 of the bonds at 105 plus accrued interest. The accounting period for the Corporation is the calendar year.

REQUIRED:

(a) Carrying value of the bonds on December 31,2019

(b)Interest expense for the year ended December 31, 2019

(c)Carrying value of the bonds retired on August 1, 2021

(d)Gain or loss on redemption of the bonds on August 1,2021

(e)Carrying value of the bonds on December 31,2021

(f)Interest expense for the years ended December 31, 2021 and 2022

3.) On January 1, 2018, the Corporation issued P 8,000,000 bonds. The bonds pay interest annually at 12% on the outstanding balance. The face value of the bonds is payable in installments of P 2,000,000 every December 31, starting December 31, 2018. The bonds were sold at a price that yields 8%.

REQUIRED: Determine the following:

(a) Determine the issue price of the bonds on January 1,2018.

(b) Prepare an amortization table using the effective interest method.

(c)Prepare entries in the books of Corporation for years 2018 through 2021 related to the bonds.

4.) Company issued P 10,000,000 bonds on bond issue date, December 31,2018. The bonds pay interest annually at 8% on the outstanding bond balance. The face value of the ends is payable in installments of P 2,000,000 every December 31, starting December 31, 2019. The bonds were sold at a price that yields 12%.

REQUIRED: Determine the following:

(a) Determine the issue price of the bonds on December 31,2018.

(b) Prepare an amortization table using the effective interest method.

(c)Prepare entries in the books of Company for years 2019 through 2021 related to the bonds.

5.) Company issued P 4,000,000 of 8 ½%, 5- year bonds on March 1,2018. Interest payment dates are March 1 and September 1. With a market interest rate of 9%, the bonds were sold for P 3,926,000.

Company retired all of the bonds on September 30,2021 at 101 plus accrued interest.

REQUIRED: Determine the following:

(a) What is the amount of interest expense and discount amortization that company will record on September 1,2018, the first semi- annual interest payment date?

(b) What is the carrying amount of the bonds on the December 31, 2019 statement of financial position, after all year-end adjustments are made?

(c) What amount of cash was paid for the retirement of bonds and payment of accrued interest on May 31, 2021?

What is the gain or loss on retirement of the bonds?

6.) On January 2,2018, Company issued P 10 million of 12% bonds for P 12,734,120 due December 31,2024. Legal and other costs of P 50,000 were incurred in connection with the issue. Interest on the bonds is payable annually each December 31.

Using a financial calculator, the effective interest rate on the these bonds was computed to be 8%, after considering the bond issued cost of P 50,000.

The bonds are callable at 110, and on December 31,2021, after paying the periodic interest, company called P 4,000,000 face amount of the bonds and retired them.

REQUIRED: Determine the following:

(a) Amortization of the premium for the year ended December 31,2018

(b)Carrying value of the bonds on December 31,2021

(c)Gain or loss on retirement of the bonds on December 31, 2021

(d)Interest expense for the year ended December 31, 2022

Carrying value of the bonds on December 31,2022

Exercise 5-12

Presented below is the trial balance of Stellar Corporation at December 31, 2020.

Prepare a balance sheet at December 31, 2020, for Stellar Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)

Create comprehensive audit programs for the Sales and Receivables So each audit program would include the following components:

• Audit steps for tests of controls, balances, transactions, analytical procedures, etc. as well as other considerations such as sample size and sample methodology.