PREPARING JOURNAL ENTRIES

Part A

On January 2, 2017, Kesha Company purchased 10,000 shares of the stock of Petty Corp., and did not obtain significant influence.  The investment is intended as a long-term investment. The stock was purchased for $5 per share, and represents a 10% ownership stake. Petty Corp made $20,000 of net income in 2017, and paid dividends of $5,000 on December 15, 2017. On December 31, 2017, Petty Corp's stock was trading on the open market for $8 per share at the end of the year.  Use this information to prepare the General Journal entry(ies) for January 2 purchase and the December 15 & 31, 2017 record of income & gain/loss. If no entry is required then write "No Entry Required."

Part B

On January 1, 2017, Kesha Company purchased a significant influence shares investment in the Winehouse Company for $250,000.  This investment balance represents 40% of the equity of the Winehouse Company.  During 2017, Winehouse Company reported Net Income of $25,000 on November 15, 2017 Winehouse Company paid cash dividends of $10,000 to its shareholders. Use this information to prepare the January 1, November 15 and December 31, 2017 General Journal entry (without explanation.) If no entry is required, then write "No Entry Required."

Blue Bayou Middle School wants to raise money for a new sound system for its auditorium. The primary fund-raising event is a dance at which the famous disc jockey Kray Zee will play classic and not-so-classic dance tunes. Grant Hill, the music and theater instructor, has been given the responsibility for coordinating the fund-raising efforts. This is Grant’s first experience with fund-raising. He decides to put the eighth-grade choir in charge of the event; he will be a relatively passive observer. Grant had 500 unnumbered tickets printed for the dance. He left the tickets in a box on his desk and told the choir students to take as many tickets as they thought they could sell for $5 each. In order to ensure that no extra tickets would be floating around, he told them to dispose of any unsold tickets. When the students received payment for the tickets, they were to bring the cash back to Grant, and he would put it in a locked box in his desk drawer. Some of the students were responsible for decorating the gymnasium for the dance. Grant gave each of them a key to the money box and told them that if they took money out to purchase materials, they should put a note in the box saying how much they took and what it was used for. After 2 weeks, the money box appeared to be getting full, so Grant asked Lynn Dandi to count the money, prepare a deposit slip, and deposit the money in a bank account that Grant had opened. The day of the dance, Grant wrote a check from the account to pay Kray Zee. The DJ said, however, that he accepted only cash and did not give receipts. So Grant took $200 out of the cash box and gave it to Kray. At the dance, Grant had Dana Uhler working at the entrance to the gymnasium, collecting tickets from students and selling tickets to those who had not pre-purchased them. Grant estimated that 400 students attended the dance. The following day, Grant closed out the bank account, which had $250 in it, and gave that amount plus the $180 in the cash box to Principal Sanchez. Principal Sanchez seemed surprised that, after generating roughly $2,000 in sales, the dance netted only $430 in cash. Grant did not know how to respond. Identify as many internal control weaknesses as you can in this scenario, and suggest how each could be addressed.

PREPARING JOURNAL ENTRIES

Legend Company uses the straight-line method for amortization of all bond premium & discounts. During fiscal year 2018 Legend had the following bond payable transactions:

January 2, issued ten, $1,000 bonds at 101. These 5-year bonds are dated January 1, 2017. The contract interest rate is 6%.  Interest is payable semi-annual on January 1 and July 1.

July 1, Legend issued $400,000 of 10%, 10-year bonds.  The bonds are dated January 1, 2017 were issued at 90, and pay interest on July 1 and January 1.

October 1, Legend issued 10-year bonds $10,000 face value bonds for $10,860 cash. The bonds have a stated rate of 8%. Interest is payable on October 1 and April 1.

Use this information to prepare General Journal entries for the three bonds issued and any interest accruals and payments for the fiscal year 2018. (Round all calculations to nearest whole dollar.)

Selected information from the Blake Corporation accounting records for June follows:

Additional information for June follows:

• Labor wage rate was $20 per hour.
• During the month, sales revenue was $1,041,000, and selling and administrative costs were $242,000.
• This company has no indirect materials or supplies.
• The company applies manufacturing overhead on the basis of direct labor-hours.  

Required:

a. What was the cost of direct materials purchased in June?

b. What was the over- or underapplied manufacturing overhead for June?

c. What was the manufacturing overhead application rate in June?

d. What was the cost of products completed during June?

e. What was the balance of the Work-in-Process Inventory account at the beginning of June?

f. What was the operating profit (or loss) for June? (Negative amounts should be indicated by a minus sign.)

Forest Components makes aircraft parts. The following transactions occurred in July: Purchased $16,950 of materials on account. Issued $16,860 in direct materials to the production department. Issued $1,350 of supplies from the materials inventory. Paid for the materials purchased in transaction (1) using cash. Returned $2,010 of the materials issued to production in (2) to the materials inventory. Direct labor employees earned $31,000, which was paid in cash. Paid $17,270 for miscellaneous items for the manufacturing plant. Accounts Payable was credited. Recognized depreciation on manufacturing plant of $36,900. Applied manufacturing overhead for the month. Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $434,900. Estimated overhead for the year was $391,410. The following balances appeared in the inventory accounts of Forest Components for July: Beginning Ending Materials Inventory ? $ 12,510 Work-in-Process Inventory ? 10,660 Finished Goods Inventory $ 2,700 7,070 Cost of Goods Sold ? 74,400 Required: a. Prepare journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

SAS Computers owns a patent on a computer processor. The processor was developed and capitalized at a cost of €2,100,000 in the beginning of 2015. It was expected to be economically useful for 7 years and have no residual value. At the beginning of 2018, a new processor was developed, making the old processor worth €900,000 (independent appraiser) with €200,000 total cost to sell. The present value of the processor’s future cash flows, given the development of the newer processor, is estimated to be €870,000. At this point, it is expected to have a useful life of 4 years with no residual value. Is the processor impaired in 2018? If it is impaired, prepare the to record the loss. Also prepare the journal entry for amortization in 2018. Show your work.

Marcelino Co.'s March 31 inventory of raw materials is $81,000. Raw materials purchases in April are $590,000, and factory payroll cost in April is $386,000. Overhead costs incurred in April are: indirect materials, $57,000; indirect labor, $26,000; factory rent, $40,000; factory utilities, $20,000; and factory equipment depreciation, $58,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $645,000 cash in April. Costs of the three jobs worked on in April follow.

explain what "equivalent units" are and how this concept is useful when assigning cost to products manufactured in a process environment? Provide an example to illustrate your comments.

A department uses the FIFO method of process costing. All direct materials are added at the beginning of the process. This department has the following data for this month.

• 200 units in beginning WIP (51% complete with respect to conversion costs).
• 10,652 units started
• 123 units in ending WIP (36% complete with respect to conversion costs).
• $1,411 beginning WIP direct materials costs
• $2,481 beginning WIP conversion costs
• $107,056 current month direct materials costs
• $87,452 current month conversion costs

What is the department's direct material cost per equivalent unit for this month (round final answer to nearest cent if necessary)?

1. A department uses the FIFO method of process costing. All direct materials are added at the beginning of the process. This department has the following data for this month.

   • 166 units in beginning WIP (56% complete with respect to conversion costs).
   • 10,206 units started
   • 184 units in ending WIP (43% complete with respect to conversion costs).
   • $22 direct material cost per equivalent unit
   • $12 conversion cost per equivalent unit

   What is the department's total cost of ending WIP for this month (round final answer to nearest cent if necessary)?

Perrin Co has 2 divisions, A and B. Division A has limited skilled labour and is operating at full capacity making product Y. It has been asked to supply a different product, X to Division B. Division B currently sources this product externally for $700 per unit. The same grade of materials and labour is used in both products. The cost card is below :
Product Y.X
Selling price $600. -
materials ($50 per kg) - $200.$150
Labour ($20 per hr) - $80.$120
Fixed overhead ($15 per hr) - $60.$90

Using opportunity cost approach to transfer pricing, what is the minimum transfer price?

Please explain your answer with workings and the reasoning behind it.
Thanks.

Which form of stock is a better investment for shareholders -- common or preferred? State your reasons as if you were trying to inform someone which type of stock to invest in.

(TCO B) The following information pertains to Fox Inc.’s portfolio of marketable securities for the Year ended Dec 31, Year 1 and Dec 31, Year 2.

Note 1: Fox Inc. uses US GAAP
Note 2: Fox Inc. uses valuation accounts to record changes in the fair value of its marketable securities
Note 3: The Martin Co. security was purchase at par value
Note 4: The decline in the value of Martin Co. is considered to be other than temporary

Requirement:
Record the journal entries for the following marketable securities transactions based on the information given in the table.

• (1) Mark to market journal entry for the Smith Co security at 12/31 Year 1
• (2) Mark to market journal entry for the Williams Co security at 12/31 Year 1
• (3) Mark to market journal entry for the Smith Co security at 12/31 Year 2
• (4) Mark to market journal entry for the Williams Co security at 12/31 Year 2
• (5) Journal entry to record purchase of Martin Co. Investment
• (6) Journal entry to record the impairment of Martin Co. Investment

Six Measures of Solvency or Profitability.

The following data were taken from the financial statements of Gates Inc. for the current fiscal year.

Assuming that total assets were $4,705,000 at the beginning of the current fiscal year, determine the following. When required, round to one decimal place.

Four years ago, Travis, a single taxpayer, acquired stock in a corporation that qualified as a small business corporation under § 1244, at a cost of $60,000. Travis wants to give his son, Jaden, $20,000 to help finance Jaden’s college education. The stock is currently worth $20,000. Travis is considering selling the stock in the current year for $20,000 and giving the cash to Jaden. As an alternative, Travis could give the stock to Jaden and let Jaden sell it for $20,000. Which alternative should Travis choose?