Marine Supply Company manufactures boat products. Its products move through two departments: development and packaging. Production and cost data for the packaging department are as follows:

All materials are added at the beginning of the packaging process. Ending inventory consists of 24,000 units, 100% complete as to materials and 60% complete as to conversion.

Prepare a production cost report for the packaging department for March. Use the average cost method.

(Use either format shown in Chapter 18 or in my Chapter 18 HW solution.)

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information: Present Truck New Truck Purchase cost new $ 31,000 $ 36,000 Remaining book value $ 24,000 - Overhaul needed now $ 23,000 - Annual cash operating costs $ 22,000 $ 19,500 Salvage value-now $ 5,000 - Salvage value-five years from now $ 20,000 $ 12,000 If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above. The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 7% discount rate. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the net present value of the “keep the old truck” alternative? 2. What is the net present value of the “purchase the new truck” alternative? 3. Should Bilboa Freightlines keep the old truck or purchase the new one?

The Questor Corporation has experienced the following sales pattern over a 10-year period:

Complete the table using a first-order exponential smoothing model with a w=0.9w=0.9 to forecast sales in 2017.

Ocean World is considering purchasing a water park in Charlotte, North Carolina, for $2,100,000. The new facility will generate annual net cash inflows of $535,000 for eight years. Engineers estimate that the facility will remain useful for eight years and have no residual value. The company uses straight-line depreciation. Its owners want payback in less than five years and an ARR of 10% or more. Management uses a 12% hurdle rate on investments of this nature. Requirements Requirement 1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this investment Requirement 2. Recommend whether the company should invest in this project

On August 3, Cinco Construction purchased special-purpose equipment at a cost of $4,883,900. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $95,890.

a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention).

b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense.

c. Which of these two depreciation methods (straight-line or double-declining-balance) results in the highest net income for financial reporting purposes during the first two years of the equipment’s use?

Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for its excellent quality and innovation. Recently, the firm conducted a relevant cost analysis of one of its product lines that has only two products, T-1 and T-2. The sales for T-2 are decreasing and the purchase costs are increasing. The firm might drop T-2 and sell only T-1. Barbour allocates fixed costs to products on the basis of sales revenue. When the president of Barbour saw the income statements (see below), he agreed that T-2 should be dropped. If T-2 is dropped, sales of T-1 are expected to increase by 10% next year, but the firm’s cost structure will remain the same. T-1 T-2 Sales $ 280,000 $ 324,000 Variable costs: Cost of goods sold 86,000 162,000 Selling & administrative 12,000 66,000 Contribution margin $ 182,000 $ 96,000 Fixed expenses: Fixed corporate costs 76,000 91,000 Fixed selling and administrative 28,000 37,000 Total fixed expenses $ 104,000 $ 128,000 Operating income $ 78,000 $ (32,000 ) Required: 1. Find the expected change in annual operating income by dropping T-2 and selling only T-1. 2. By what percentage would sales from T-1 have to increase in order to make up the financial loss from dropping T-2? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).) 3. What is the required percentage increase in sales from T-1 to compensate for lost margin from T-2, if total fixed costs can be reduced by $52,500? (Enter your answer as a percentage rounded to 2 decimal places (i.e. 0.1234 should be entered as 12.34).)

Decker Manufacturing is preparing its master budget for the first quarter of the upcoming year. The following data pertain to Decker Manufacturing's operations 1: Data Table Current Assets as of December 31 (prior year): Cash $ 4,600 Accounts receivable, net $ 46,000 Inventory $ 15,500 Property, plant, and equipment, net $ 123,000 Accounts payable $ 43,000 Capital stock $ 124,000 Retained earnings $ 22,700 a. Actual sales in December were $71,000. Selling price per unit is projected to remain stable at $12 per unit throughout the budget period. Sales for the first five months of the upcoming year are budgeted to be as follows: January $ 99,600 February $ 118,800 March $ 115,200 April $ 108,000 May $ 103,200 b. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. c. Decker Manufacturing has a policy that states that each month's ending inventory of finished goods should be 10% of the following month's sales (in units). d. Of each month's direct material purchases, 20% are paid for in the month of purchase, while the remainder is paid for in the month following purchase. Three pounds of direct material is needed per unit at $2.00 per pound. Ending inventory of direct materials should be 20% of next month's production needs. e. Most of the labor at the manufacturing facility is indirect, but there is some direct labor incurred. The direct labor hours per unit is 0.05. The direct labor rate per hour is $9 per hour. All direct labor is paid for in the month in which the work is performed. The direct labor total cost for each of the upcoming three months is as follows: January $ 3,807 February $ 4,442 March $ 4,293 f. Monthly manufacturing overhead costs are $5,500 for factory rent, $2,900 for other fixed manufacturing expenses, and $1.10 per unit for variable manufacturing overhead. No depreciation is included in these figures. All expenses are paid in the month in which they are incurred. g. Computer equipment for the administrative offices will be purchased in the upcoming quarter. In January, Decker Manufacturing will purchase equipment for $5,000 (cash), while February's cash expenditure will be $12,200 and March's cash expenditure will be $16,600. h. Operating expenses are budgeted to be $1.25 per unit sold plus fixed operating expenses of $1,800 per month. All operating expenses are paid in the month in which they are incurred. No depreciation is included in these figures. i. Depreciation on the building and equipment for the general and administrative offices is budgeted to be $5,000 for the entire quarter, which includes depreciation on new acquisitions. j. Decker Manufacturing has a policy that the ending cash balance in each month must be at least $4,000. It has a line of credit with a local bank. The company can borrow in increments of $1,000 at the beginning of each month, up to a total outstanding loan balance of $150,000. The interest rate on these loans is 1% per month simple interest (not compounded). The company would pay down on the line of credit balance in increments of $1,000 if it has excess funds at the end of the quarter. The company would also pay the accumulated interest at the end of the quarter on the funds borrowed during the quarter. k. The company's income tax rate is projected to be 30% of operating income less interest expense. The company pays $10,000 cash at the end of February in estimated taxes. Requirement 1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in total Requirement 2. Prepare a production budget. (Hint: Unit sales = Sales in dollars / Selling price per unit.) Requirement 3. Prepare a direct materials budget. (Round your answers to the nearest whole dollar.) Requirement 4. Prepare a cash payments budget for the direct material purchases from Requirement 3. (Round your answers to the nearest whole dollar.) Requirement 5. Prepare a cash payments budget for direct labor. Requirement 6. Prepare a cash payments budget for manufacturing overhead costs. (Round your answers to the nearest whole dollar.) Requirement 7. Prepare a cash payments budget for operating expenses. (Round your answers to the nearest whole dollar.) Requirement 8. Prepare a combined cash budget. (If a box is not used in the table leave the box empty; do not enter a zero. Use parentheses or a minus sign for negative cash balances and financing payments.) Requirement 9. Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead is budgeted to be $0.80 per unit for the year). (Round your answer to the nearest cent Requirement 10. Prepare a budgeted income statement for the quarter ending March 31. (Hint: Cost of goods sold = Budgeted cost of manufacturing one unit x Number of units sold.) (Round your answers to the nearest whole dollar.)

Swanson & Hiller, Inc., purchased a new machine on September 1 of the current year at a cost of $130,000. The machine’s estimated useful life at the time of the purchase was five years, and its residual value was $10,000. The company reports on a calendar year basis. Required:

a-1. Prepare a complete depreciation schedule, beginning with the current year, using the straight-line method. (Assume that the half-year convention is used).

a-2. Prepare a complete depreciation schedule, beginning with the current year, using the 200 percent declining-balance method. (Assume that the half-year convention is used).

a-3. Prepare a complete depreciation schedule, beginning with the current year, using the 150 percent declining-balance, switching to straight-line when that maximizes the expense. (Assume that the half-year convention is used).

b. Which of the three methods computed in part a is most common for financial reporting purposes?

c. Assume that Swanson & Hiller sells the machine on December 31 of the fourth year for $29,500 cash. Compute the resulting gain or loss from this sale under each of the depreciation methods used in part a.

1. How can you determine the number of units necessary to attain a certain level of profit?
2. How can you determine total sales at the break even point?
3. Give 3 ways of stating break even: (relating items from the contribution income statement)

Weatherly Lumber Company process wood pulp for manufacturing various paper products. The company employs aa process costing system for its manufacturing operations, All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. This is the company's production schedule for My:

Work-in-Process Inventory, May 1 Tons of pulp 5,000 Materials 100% conversion 50%

Started during May Tons of pulp 18,000

Units to account for 23,000

Units from beginning Work-in-Process, which were completed and transferred out during May Tons of pulp, 5,000

Started and complete during May. 10,800

Work-in-Process Inventory, May 31 Tons of pulp 7,00 materials 100% Conversion 50%

Total units accounted for 23,000

Work-in-Process Inventory, May 1

Direct Materials $82,100

Conversion 61,342

Costs Incurred during May

Direct materials 283,140

Conversion 358,280

1. Calculate the equivalent units of direct materials and conversion during May. Use the FIFO method.

2. Calculate the cost per equivalent unit for both direct materials and conversion during May. Use the FIFO method.

Activity-Based Costing

Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given activity cost pools:

The following activity predictions were also made for the year:

It is assumed that the cost per unit of activity for a given activity does not vary between departments. Steampunk's president, Abner Punk, is trying to evaluate the company's product mix strategy regarding two of its product models, SW100 and SG150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of activity-based rates. The production manager has provided the following data for the production of a batch of 100 units for each of these models:

a. Determine the cost of one unit each of SW100 and SG150, assuming a company-wide overhead rate is used based on total machine hours.

Round rate to two decimal places.

Overhead rate based on total machine hours: $Answer per machine hour

Use rounded overhead rate calculated about for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places.

b. Determine the cost of one unit of SW100 and SG150, assuming department overhead rates are used. Overhead is assigned based on machine hours in both departments.

Round to two decimal places, if applicable.

Overhead rate based on machine hours for Fabrication Dept.: $Answer per machine hour.

Overhead rate based on machine hours for Finishing Dept.: $Answer per machine hour.

Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

c. Determine the cost of one unit of SW100 and SG150, assuming activity-based overhead rates are used for maintenance, materials handling, machine setup, and inspection activities.

Round rate to two decimal places, if applicable.

Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.

143) On January 2, 2010, Pannabaker Corporation issued $400,000, five-year, 10% bonds when the market rate of interest was 12%. The bonds pay interest annually on December 31. Pannabaker Corporation uses the effective-interest method of amortization and has a year-end of December 31.

(Note: present value tables required.)

a) Prepare the journal entry on January 2, 2010, to issue the bonds. b) Prepare the journal entry on December 31, 2010, to record the first annual interest payment and the amortization of the premium or discount.

144) Calculate the cash proceeds from the following issuances of bonds. All situations are independent of each other and all the bond issuances pay interest annually.

Note: present value tables required.

a) $100,000, five-year, 10% bonds issued when the market rate is 8% b)$50,000, 10-year, 8% bonds issued when the market rate is 12% c) $200,000, 10-year, 9% bonds issued when the market rate is $12% d) $100,000, five-year, 12% bonds issued when the market rate is 8%

145) Warren Corporation signs an agreement on January 2, 2010, to lease delivery equipment for a five-year period. The current market value of the delivery equipment on January 2, 2010, is $225,000. The lease agreement calls for annual payments of $50,040. The first payment is made on January 2, 2010, all other payments are made on December 31 of each year. The lease agreement calls for an 8% interest rate. The estimated remaining life of the delivery equipment is six years. Ownership of the delivery equipment will transfer to Warren Corporation at the end of the lease term.

Note: present value tables required.

a) Prepare the journal entry on January 2, 2010, to record the lease agreement and make the first lease payment. b) Prepare the entry on December 31, 2010, to record the second lease payment and the accrual of interest.

Exercise 5.2

Fred's Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Current sales are $500,000.

Complete the following table by forecasting sales for each of the next three years.

If sales in 2003 were $300,000 and they grew to $500,000 by 2007 (a four-year period), the actual annual compound growth rate was:

10.76%

13.62%

18.56%

Which of the following are some of the hazards of employing a constant rate of growth forecasting model? Check all that apply.

It assumes that there are no cyclical variations.

It ignores seasonal trends.

It is ill-suited to estimate secular trends.

Accounting for Share Transactions
The shareholders' equity section of the consolidated balance sheet of Wilson Industries appeared as follows at the beginning of the year:

The following events occurred sequentially during the year:

1. A 2-for-1 forward stock split was executed.
2. A ten percent stock dividend was distributed when the Wilson share price was $40 per share.
3. Treasury stock valued at $6,000,000 was repurchased when the Wilson share price was $25 per share.

Required

1. How many Class A common shares are outstanding following the above events?

Answer

2. What is the par value per share of the Class A common stock following the above events? Round to the nearest three decimal places.

$Answer

3. Prepare a spreadsheet to illustrate the financial effects associated with the above three share transactions.

Use a negative sign with answers to indicate a reduction in an account balance and with treasury stock repurchase and balance.

4. Calculate the total value of shareholders' equity following the above events.

$Answer