Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:

During the year, Ravenna paid a $14,100 cash dividend and it sold a piece of equipment for $7,050 that had originally cost $16,800 and had accumulated depreciation of $11,200. The company did not retire any bonds or repurchase any of its own common stock during the year.

a.What is the amount and direction (+ or −) of the accounts receivable adjustment to net income in the operating activities section of the statement of cash flows?

b.What does this adjustment represent?

c.If the company debited cost of goods sold and credited inventory for $940,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account?

d.What is the total amount of the debits recorded in the Accounts Payable T-account during the year?

e.What does the amount of these debits represent?

In this milestone, you will move through the next phase of the accounting cycle by creating the trial balance, adjusting entries, and adjusted trial balance. Completing the adjusting entries implements the matching, timing, and periodicity of the generally accepted accounting principles. Omission of this step will show a higher net income than there actually is, which could cause users of the financial statements to make an incorrect decision and suffer financially. Prompt: You will find the provided data for your second milestone in the appendix at the end of this document. The data have been separated from the prompt so that you can more easily view the full scope of this assignment. Links have been provided to help you locate the information. Specifically, the following critical elements must be addressed: I. Incorporate the feedback that you received from your Milestone One submission on Steps 1–4. A. Step One: Complete the “July Journal Entries” tab in your workbook using the Step One data in the appendix. B. Step Two: Complete the “August Journal Entries” tab in your workbook using the Step Two data in the appendix. C. Step Three: Complete the “September Journal Entries” tab in your workbook using the Step Three data and updated scenario information in the appendix. Note that there was an additional line of products added this month, so you must first complete the “Inventory Valuation” tab in your workbook and copy the journal entries from the inventory evaluation page into your journal for this month to ensure the impact of merchandising is reflected in your reporting. D. Step Four: Transfer posted entries to T accounts. II. Apply the accrual basis of accounting to correctly create adjusting entries in the preparation of financial statements: A. Step Five: Prepare the unadjusted trial balance. Note that you should use the T account balances completed in the previous step to prepare the unadjusted trial balance portion of the “Trial Balance” tab in your workbook. B. Step Six: Complete the “Adjusting Entries” tab in your workbook using the Step Six data in the appendix. Note that you should take the adjusting entries from this worksheet and enter them into the “Trial Balance” tab in your workbook. C. Step Seven: Apply adjusting entries to create the adjusted trial balance. Note that the adjusting entries from Step Six will apply to affected accounts in the unadjusted trial balance to arrive at the adjusted trial balance. Rubric Guidelines for Submission: Your completed accounting workbook should have all tabs fully and accurately populated in the provided Excel template. Critical Elements Evident (100%) Not Evident (0%) Value Incorporate the Feedback Fully incorporates feedback from Milestone One on Steps 1–4 of the workbook Fails to incorporate feedback from Milestone One on Steps 1– 4 of the workbook 25 Apply the Accrual Basis of Accounting: Step Five Prepares the unadjusted trial balance Does not prepare the unadjusted trial balance 25 Apply Accrual Basis of Accounting: Step Six Prepares the adjusting entries Does not prepare the adjusting entries 25 Apply Accrual Basis of Accounting: Step Seven Prepares the adjusted trial balance Does not prepare the adjusted trial balance 25 Total 100% Appendix: Workbook Data for Milestone Two Step One Data (Click on the link to return to the prompt.) The following events occur in July, 2018: July 1: You take $10,000 from your personal savings account and buy common stock in Peyton Approved. July 1: Purchase $6,500 in baking supplies from vendor, on account. July 3: Your parents lend the company $10,000 cash in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity. July 7: Enter into a lease agreement for bakery space. The agreement is for 1 year. The rent is $1,500 per month, and the last month’s rent payment of $1,500 is required at time of lease agreement. The payment was made in cash. Lease period is effective July 1, 2018, through June 30, 2019. July 10: Pay $375 to the county for a business license. July 11: Purchase a cash register for $250 (deemed to be not material enough to qualify as depreciable equipment—use misc. exp.). July 13: You have baking equipment, including an oven and mixer, which you have been using for your home-based business and will now start using in the bakery. You estimate that the equipment is currently worth $6,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life. July 13: Pay $200 for business cards/flyers/posters/ads to use for advertising. July 14: Pay $300 for office supplies. July 15: Hire part-time helper to be paid $12 per hour. Pay periods are the 1st through the 15th and 16th through the end of the month, with paydays being the 20th for the first pay period and the 5th of the following month for the second pay period. (No entry is required on this date; it is here for informational purposes only.) July 30: Received telephone bill for July in amount of $75. Payment is due on August 10. July 31: Pay $2,400 for a 12-month insurance policy. Policy effective dates are August 1, 2018, through July 31, 2019. July 31: Accrue wages earned for employee for period of 16th through 31st of July (Wage calculations table provided below). July 31: Total July bakery sales were $15,000. $5,000 of these sales are on accounts receivable. Step Two Data (Click on the link to return to the prompt.) The following events occur in August, 2018: August 5: Paid employee for period ending 7/31. August 8: Receive payments from customers towards accounts receivable in amount of $3,800. August 10: Paid July telephone bill. August 15: Purchase additional baking supplies in amount of $5,000 from vendor, on account. August 15: Accrue wages earned for employee from period of 1st through 15th of August (Wage calculations table provided below). August 15: Pay rent on bakery space. August 18: Receive payments from customers towards accounts receivable in amount of $3,000. August 20: Paid $8,500 toward baking supplies vendor payable. August 20: Pay employee for period ending 8/15. August 22: $300 in office supplies purchased. August 31: Received telephone bill for August in amount of $75. Payment is due on September 10. August 31: Accrue wages earned for employee for period of August 16th through August 31st (Wage calculations table provided below). August 31: August bakery sales total $20,000. $7,500 of this total is on accounts receivable. Step Three (Click on the link to return to the prompt.) Updated Scenario: Many customers have been asking for more hypoallergenic products, so in September you start carrying a line of hypoallergenic shampoos on a trial basis. The following information relates to the purchase and sales of the shampoo:  You use the perpetual inventory method. You are uncertain as to which valuation method to use—FIFO, LIFO, or weighted average, so you calculate inventory using all three and then decide which one you would like to choose. Data: The following events occur in September, 2018: September 1: Paid dividends to self in amount of $10,000. September 5: Pay employee for period ending 8/31. September 7: Purchase merchandise for resale. See “Inventory Valuation” tab for details. September 8: Receive payments from customers toward accounts receivable in amount of $4,000. September 10: Pay August telephone bill. September 11: Purchase baking supplies in amount of $7,000 from vendor on account. September 13: Paid on supplies vendor account in amount of $5,000. September 15: Accrue employee wages for period of September 1 through September 15. September 15: Pay rent on bakery space: $1,500. September 15: Record merchandise sales transaction. See “Inventory Valuation” tab for details. September 15: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 20: Pay employee for period ending 9/15. September 20: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 24: Record sales of merchandise to customers. See “Inventory Valuation” tab for details. September 24: Record impact of sales transaction on COGS and the inventory asset. See “Inventory Valuation” tab for details. September 30: Purchase merchandise inventory for resale to customers. See “Inventory Valuation” tab for details. September 30: Accrue employee wages for period of September 16th through September 30th September 30: Total September bakery sales are $20,000. $6,000 of these sales are on accounts receivable. Step Six Data (Click on the link to return to the prompt.) On September 30, the following adjustments must be made:  [Note: This is a sample.] Depreciation of baking equipment transferred to company on 7/13. Assume a half month of depreciation in July using the straight-line method.  Accrue interest for note payable. Assume a full month of interest for July. (6% annual interest on $10,000 loan from parents.)  Record insurance used for the year.  Actual baking supplies on-hand as of September 30 are $1,100.  Office supplies on-hand as of September 30 are $50. Wage calculation data: Month Hours Rate Pay 31 Jul. 10 12 120 15 Aug. 40 12 480 31 Aug. 35 12 420 15 Sep. 38 12 456 30 Sep. 40 12 480

In service organisations different costing systems may be appropriate for different types of services. Provide an example of a service organisation that may be suited to each of the following costing systems, and in each case, explain your choice: i) job costing ii) process costing iii) some form of hybrid costing

15. How can you encourage and support individuals and work groups to become more efficient?

Sales and Production Budget II You have been assigned to prepare the cash budget, which is one portion of the master budget for Marble Company. According to a credit agreement with the company’s bank, Marble Company promises to have a minimum cash balance of $65,000 at each month-end. In return, the bank has agreed that the company can borrow up to $175,000 at a monthly interest rate of 2%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $40,000 on the last day of each month. The company has a cash balance of $60,000 and a loan balance of $125,000 at January 1. Marble Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year.

1. Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated should be indicated in parentheses “( )”.)
2. If the cash receipts and payments changed to the values shown in the table below, how would the budget change?

3. Cash Receipts		Cash Payments
   January February March	$500,000    $475,000 $500,000	$450,000 $375,000 $525,000

4. Write a business letter to the CEO analyzing the cash budgets of this company and state your recommendations based on the initial cash receipts and cash payments and on the cash receipts and cash payments changes.

Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2017 are as follows.

For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2017, 100,000 machine hours are budgeted.

Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolan’s request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steve’s request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways.

Correct answer iconYour answer is correct.

Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (Round answer to 2 decimal places, e.g. 12.25.)

Correct answer iconYour answer is correct.

What is the manufacturing cost per stairway under traditional costing? (Round answer to 2 decimal places, e.g. 12.25.)

Correct answer iconYour answer is correct.

Calculate activity-based overhead rate for each activity. (Round answers to 2 decimal places, e.g. 12.25.)

Incorrect answer iconYour answer is incorrect.

Caluclate total overhead assigned under ABC.

eTextbook and Media

Incorrect answer iconYour answer is incorrect.

What is the manufacturing cost per stairway under the proposed activity-based costing? (Round answer to 2 decimal places, e.g. 12.25.)

7. What are some potential opportunities you might recognise associated with introducing cloud computing?

On July 1, MTC Wholesalers had a cash balance of $245,000 and accounts payable of $138,600. Actual sales for May and June, and budgeted sales for July, August, September, and October are:

All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $39,200 each month and are paid during the month incurred.

Required
Prepare purchases and cash budgets for July, August, and September.

Do not use a negative sign with your answers.

Do not use a negative sign with your answers.

5. Direct labor variances - Find the missing information:

6. Chuck makes Supersized Chucky-Puffs. Chuck determined the standards for each unit (bag) of Chucky-Puff produced requires 1.5 gallons of ingredients (direct materials) and 0.75 direct labor hours. Chuck expects to pay $2 per gallon of ingredients and his employees a rate of $10 per hour. Based on the company’s forecasts, Chuck is expecting to sell 15,000 units (bags) during the year. At the end of year, Chuck actually sold 16,000 units (bags) and used 20,000 gallons of ingredients and paid $1.9 per gallon. Further, Human resources informed Chuck that he incurred $80,000 in direct labor costs from 10,000 direct labor hours (assume no overtime is used).

a. What is the material price variance?

b. What is the material quantity variance?

c.What is the labor rate variance?

d. What is the labor usage variance?

7. Responsibility Accounting:

a. What is a cost center? Give an example of a cost center ____________________________________________________________________________________________________________________________________________________________

b. What is a Profit center? Give an example of a profit center ____________________________________________________________________________________________________________________________________________________________

c. What is an investment center? Give an example of an investment center ____________________________________________________________________________________________________________________________________________________________

d. What is management by exception: __________________________________________________________________________________________________________________________________________________________________________

e. The Mega Division of Green Corporation is an investment center. It has $1,000,000 of operating assets. During 2018, the Mega Division earned operating income of $300,000 on $6,000,000 of sales. Green’s companywide return on investment or desired rate of return is approximately 10% SHOW WORK FOR CREDIT!

1. What is the ROI?______________________

2. What is the margin? ____________________

3. What is the turnover? _____________________

4. What is the residual income? _______________

10. Why should you prioritise the introduction of cloud computing?

FUTURE OF REVENUE RECOGNITION

I. Do the new standards increase comparability across industries and capital

markets?

II. Do the new standards provide better disclosure, so investors and other

users of financial statements better understand the economics behind the

numbers?

III. Possibility of Fraud with new FASB standards

Direct Materials Variances Bellingham Company produces a product that requires 8 standard pounds per unit. The standard price is $5.5 per pound. If 3,400 units required 26,700 pounds, which were purchased at $5.66 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) total direct materials cost variance? Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Dawes​, Vickerman​, and Wrester are liquidating their partnership. Before selling the assets and paying the​ liabilities, the capital balances are Dawes $46,000​; Vickerman​, $25,000​; and Wrester​, $23,000. The​ profit-and-loss-sharing ratio has been 3​:1​:1 for Dawes​, Vickerman​, and Wrester​, respectively. The partnership has $84,000 cash, $ 41,000 ​non-cash assets, and $31,000 accounts payable.

Requirements:

1. Assuming the partnership sells the​ non-cash assets for $45,000​, record the journal entries for the sale of​ non-cash assets, allocation of gain or loss on​ liquidation, the payment of the outstanding​ liabilities, and the distribution of remaining cash to partners. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)

-Journalize the sale of the​ non-cash assets for $45,000.

-Journalize the allocation of the gain or loss to the​ partners' capital accounts.

-Journalize the payment of the liabilities.

-Journalize the distribution of remaining cash to the partners.

2. Assuming the partnership sells the​ non-cash assets for $19,000​, record the journal entries for the sale of​ non-cash assets, allocation of gain or loss on​ liquidation, the payment of the outstanding​ liabilities, and the distribution of remaining cash to partners.  ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)

-Journalize the sale of the​ non-cash assets for $19,000.

-Journalize the allocation of the gain or loss to the​ partners' capital accounts.

-Journalize the payment of the liabilities.

-Journalize the distribution of remaining cash to the partners.

Statement of cash flows

Natasha Bush operates Natasha’s Cafe as a sole trader. Although she is not legally required to, she wants to prepare a statement of cash flows for her business from the following ledger account balances as at 31 March 2019 and 31 March 2018:

Additional information

• During the year shop equipment that had cost $5,000 and accumulated depreciation of $3,200 was sold for $1,500. New equipment was purchased.
• During the current financial period, Natasha sold the cafe’s delivery van for $19,800. A new, more economical, hybrid van was purchased for $40,000.
• Other expenses includes depreciation expense.
• You are not required to account for taxes.

Tasks

1. Give two reasons why you think Natasha wants to prepare a statement of cash flows.
2. Using the information provided, prepare a statement of cash flows for the year ended 31 March 2019.
3. Discuss whether or not you think Natasha would be happy with what the cash flow statement shows her about her business.

If a company excluded the tax refund from taxable income, and did not record an unrecognized tax benefit, what must the company believe about whether the IRS and tax courts will challenge and allow this exclusion? Explain using the language of FIN 48.