A partially completed balance sheet for Blue Co., Inc., as of October 31, 2013, follows. Where amounts are shown for various items, the amounts are correct. Required: Using the following data, complete the balance sheet. a. Blue Co.'s records show that current and former customers owe the firm a total of $4,400; $650 of this amount has been due for more than a year from two customers who are now bankrupt. b. The automobile, which is still being used in the business, cost $17,400 new; a used car dealer's Blue Book shows that it is now worth $10,000. Management estimates that the car has been used for one-third of its total potential use. c. The land cost Blue Co. $11,000; it was recently assessed for real estate tax purposes at a value of $15,000. d. Blue Co.'s president isn't sure of the amount of the note payable, but he does know that he signed a note. e. Since Blue Co. was formed, net income has totaled $33,000, and dividends to stockholders have totaled $21,250. Loading...

Preparing an Income Statement and a Statement of Comprehensive Income

The following pretax amounts are taken from the adjusted trial balance of Avoca Auto Corp. at December 31, 2020, its annual year-end.

Sales Revenue $416,000

Cost of good sold 176,000

operating expenses 128,000

gain on debt retirement 32,000

interest expense 12,800

loss from discontinued operations. 80,000

retained earnings balance, December 31, 2019 48,000

dividends declared and paid 40,000

unrealized holding gain on debt investment securities, net of tax 6,400

Common stock, weighted average shares outstanding 16,000 Shares

Required

a. Prepare a single-step income statement. Assume an average 25% tax rate on all items. Include earnings per share disclosures.
b. Prepare a comprehensive income statement by showing a separate but consecutive statement of comprehensive income. Ignore earnings per share disclosures.
c. Compute the ending retained earnings balance at December 31, 2020.

• Enter revenues and gains and expenses and losses in the order of the largest dollar amount to the smallest dollar amount.
• Do not use negative signs with any of your answers.
• Round the per share amounts to two decimal places.

Explain one audit technique you would use to determine the existence of a material error on inventory account?

Alpha and Beta are divisions within the same company. The managers of both divisions are evaluated based on their own division’s return on investment (ROI). Assume the following information relative to the two divisions:

*Before any purchase discount.

Managers are free to decide if they will participate in any internal transfers. All transfer prices are negotiated. Required:

1. Refer to case 1 shown above. Alpha Division can avoid $4 per unit in commissions on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

2. Refer to case 2 shown above. A study indicates that Alpha Division can avoid $5 per unit in shipping costs on any sales to Beta Division.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division? b. What is the highest acceptable transfer price from the perspective of the Beta Division? c. What is the range of acceptable transfer prices (if any) between the two divisions? Would you expect any disagreement between the two divisional managers over what the exact transfer price should be? d. Assume Alpha Division offers to sell 72,000 units to Beta Division for $34 per unit and that Beta Division refuses this price. What will be the loss in potential profits for the company as a whole?

3. Refer to case 3 shown above. Assume that Beta Division is now receiving an 4% price discount from the outside supplier.

a. What is the lowest acceptable transfer price from the perspective of the Alpha Division?

b. What is the highest acceptable transfer price from the perspective of the Beta Division?

c. What is the range of acceptable transfer prices (if any) between the two divisions? Will the managers probably agree to a transfer?

d. Assume Beta Division offers to purchase 20,000 units from Alpha Division at $53.56 per unit. If Alpha Division accepts this price, would you expect its ROI to increase, decrease, or remain unchanged?

4. Refer to case 4 shown above. Assume that Beta Division wants Alpha Division to provide it with 64,000 units of a different product from the one Alpha Division is producing now. The new product would require $26 per unit in variable costs and would require that Alpha Division cut back production of its present product by 32,000 units annually. What is the lowest acceptable transfer price from Alpha Division’s perspective?

Accumulated earnings - Why do you think some 'tax experts' consider accumulated earnings an important issue to study?

The following information is from Remmer Company for the year 2017. Accounts Payable $145,000 Accounts Receivable 15,000 Cash (balance on January 1, 2017) 75,000 Cash (balance on December 31, 2017) Common Stock 100,000 Dividends 10,000 Equipment 755,000 Notes Payable 30,000 Office Expenses 95,000 Prepaid Rent 50,000 Retained Earnings (Jan 1 2017) 410,000 Retained Earnings (December 31, 2017) Salaries and Wages Expense 955,000 Salaries and Wages Payable 170,000 Sales Revenue 1,660,000 Supplies 25,000 Utilities Expense 530,000 Cash from Operating Activities 171,000 Cash from Investing Activities (40,000) Cash from Financing Activities (126,000) Required: 1. Using what you know about the relationship of the financial statements, solve for the ending Cash and ending Retained Earnings balances. 2. Prepare the four financial statements (Income Statement, Statement of Retained earnings, Balance Sheet and Statement of Cash Flows) for Remmer Company as of December 31, 2017. 3. Compute the following for Remmer Company: (Use year-end amounts as opposed to the averages for your calculations.) a. Return on Assets b. Profit Margin c. Asset Turnover d. Return on Equity 4. Do ratios alone provide enough information to gauge a company’s performance? What other information would help you to better utilize these ratios to make your decision about the company?

The following cost data describes the flow of costs for the year ending 31 December 2018 relates to Precise Manufacturing Ltd.

The company uses normal costing and the manufacturing overhead is applied at the rate of 120% of direct labour cost.

Required:

Determine the missing amounts in each of the divisions shown above.

Problem 9-6AA Entries for payroll transactions LO P2, P3, P5

Francisco Company has 10 employees, each of whom earns $3,100 per month and is paid on the last day of each month. All 10 have been employed continuously at this amount since January 1. On March 1, the following accounts and balances exist in its general ledger:

1. FICA—Social Security Taxes Payable, $3,844; FICA—Medicare Taxes Payable, $900. (The balances of these accounts represent total liabilities for both the employer's and employees' FICA taxes for the February payroll only.)
2. Employees' Federal Income Taxes Payable, $7,750 (liability for February only).
3. Federal Unemployment Taxes Payable, $372 (liability for January and February together).
4. State Unemployment Taxes Payable, $2,480 (liability for January and February together).

During March and April, the company had the following payroll transactions.

* FICA taxes are Social Security and Medicare, respectively.

Required:
Prepare journal entries to record the transactions and events for both March and April. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Two things can cause a budget variance; quantity and cost. Why is a flexible budget essential for managers? What departments are responsible for quantity variances? Cost variances?   As a manager why do you think it is necessary to differentiate these causes?

Sabel Co. purchased assembly equipment for $780,000 on January 1, Year 1. The equipment is expected to have a useful life of 260,000 miles and a salvage value of $26,000. Actual mileage was as follows: Year 1 72,000 Year 2 69,000 Year 3 58,000 Year 4 49,000 Year 5 16,000 Required Compute the depreciation for each of the five years, assuming the use of units-of-production depreciation. Assume that Sabel earns $236,000 of cash revenue during Year 1. Record the purchase of the equipment and the recognition of the revenue and the depreciation expense for the first year in the following financial statements model. Assume that Sabel sold the equipment at the end of the fifth year for $27,200. Calculate the amount of gain or loss on the sale.

Data Analysis: Risk Assessment Stage: Explain how and why data analysis is used at the risk assessment stage of the audit process.  Data Analysis: Determination of Sampling Method and Audit Universe: Explain how data analysis is used in the determination of sampling method and audit universe.

The partnership of Duro, Kemp and Roth is to be liquidated as soon as possible after December 31, 2016. All cash on hand except for a $20,000 contingency balance is to be distributed at the end of each month until the liquidation is completed. Profits and losses are shared 50%, 30% and 20% by Duro, Kemp and Roth, respectively. The partnership balance sheet at December 31, 2006 contains the following.

Assets                                                             Liabilities and Capital

Cash                                        240,000            Accounts payable                  300,000

Accounts receivable              280,000            Note payable                         200,000

Loan to Roth                         40,000            Loan from Kemp                   20,000

Inventories                             400,000            Duro Capital (50%)               340,000

Land                                       100,000            Kemp Capital (30%)             340,000

Equipment – net                   300,000            Roth Capital (20%)                200,000

Goodwill                                 40,000

A summary of liquidation events is as follows

January 2017

Goodwill is written off, $200,000 is collected on account, inventory items that cost $160,000 are sold for $200,000. The accounts payable and notes payable are paid and cash is distributed.

February 2017

Equipment with a book value of $80,000 is sold for $60,000, the remaining inventory items are sold for $180,000, liquidation expenses of $4,000 are paid, a liability of $8,000 is discovered and cash is distributed.

March 2017    

The land is sold for $150,000, liquidation expenses of $5,000 are paid and cash is distributed.

April 2017

The remaining equipment is sold for $150,000, remaining receivables are wWritten off and all cash is distributed in final liquidation

REQUIRED: Prepare a statement of liquidation including safe payment schedules as required.

Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following:

                                                                              Process base       Order base

Variable manufacturing cost per unit..................... Rs14.00         Rs.17.60

Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000

The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for     Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit.

Required:

1. CM ratio and variable expenses ratio. If Paste Corporation uses the:

1. Process base manufacturing method.

2. Order base manufacturing method.

   II.      Break-even point in units and amount by formula method. If Paste Corporation uses the:

                        1. Process base manufacturing method.

                        2. Order base manufacturing method.

3. Margin of safety. Assuming 250,000 units are actual sales for.

1. Process base manufacturing method.

2. Order base manufacturing method.

4. Degree or operating leverage at actual sales level for.

1. Process base manufacturing method.

2. Order base manufacturing method.

Flexible Budgeting and Variance Analysis

I Love My Chocolate Company makes dark chocolate and light chocolate. Both products require cocoa and sugar. The following planning information has been made available:

I Love My Chocolate Company does not expect there to be any beginning or ending inventories of cocoa or sugar. At the end of the budget year, I Love My Chocolate Company had the following actual results:

Required:

1. Prepare the following variance analyses for both chocolates and the total, based on the actual results and production levels at the end of the budget year:

     a. Direct materials price variance, direct materials quantity variance, and total variance.

     b. Direct labor rate variance, direct labor time variance, and total variance.

Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

2. The variance analyses should be based on the standard  amounts at actual  volumes. The budget must flex with the volume changes. If the actual  volume is different from the planned volume, as it was in this case, then the budget used for performance evaluation should reflect the change in direct materials and direct labor that will be required for the actual  production. In this way, spending from volume changes can be separated from efficiency and price variances.

What is the budgeting cycle and master budget? Why should companies use a master budget?