Variable Costing Income Statement On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept: Sales (24,000 units) $1,224,000 Cost of goods sold: Cost of goods manufactured $971,500 Less ending inventory (5,000 units) 167,500 Cost of goods sold 804,000 Gross profit $420,000 Selling and administrative expenses 136,000 Income from operations $284,000 a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $87,000 and the variable selling and administrative expenses were $62,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar. Rhys Company Income Statement-Variable Costing For the Month Ended July 31 $ Variable cost of goods sold: $ $ $ Fixed costs: $ Income from operations $ b. Reconcile the absorption costing income from operations of $284,000 with the variable costing income from operations determined in (a). Reconciliation of Absorption and Variable Costing Income Absorption costing income from operations $ Variable costing income from operations Difference $ Check My Work PreviousNext

Silver Lake Resort opened for business on July 1 with eight air-conditioned units. Its trial balance before adjustment on December 31 in as follows.

Other data for the adjustments (assuming no monthly adjustments before the fiscal year end):

Prepare adjusting journal entries for the following items.

1. Prepaid insurance of $6,000 was recorded on Sep 1, 2014 and the Insurance expires at the rate of $500 per month

2. A count of supplies on December 31 shows $1,000 on hand.

3. Depreciation for the period is $4,500 on buildings and $2,400 on equipment.

4. Unearned rent revenue of $4,000 out of previous balance $7,400 was now earned for services performed prior to December 31.

5. Salaries of $1,000 were unpaid at December 31.

6. Rentals of $3,000 were due from tenants at December 31 (use Accounts Receivables) [not yet received].

Prepare the adjusted trial balance, income statement, statement of retained earnings, and balance sheet. (you may use a separate sheet)

Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding.

Relevant data shown below:

1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission.

11/1/21: Little Co. paid common dividends totaling $10,000 12/31/21: Little Co. stock trading at $20/share

4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission

11/1/22: Little Co. paid dividends totaling $10,000

12/31/22: Little Co stock trading at $19/share 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less $10 commission. Assume Big uses FIFO to account for their investment in these shares. Required: Prepare entries to record the preceding transactions, and answer the following questions.

Questions:

1. What is the total cost recorded as the "investment" on 1/1/21?

2. How much of an unrealized gain or loss is reported on the 2021 statement of comprehensive income ("xx,xxx gain" or "xx,xx loss")?

3. How much is received as dividends on 11/1/22?

4. What is the balance in the "investment in Little" account at 12/31/22?

5. What is our TOTAL unrealized gain or loss at 12/31/22? ("xx,xxx gain" or "xx,xxx loss")

6. How much of an unrealized gain or loss is reported on the 2022 statement of comprehensive income ("xx,xxx gain" or "xx,xxx loss")?

7. What was the gain or loss on sale of the shares on 3/1/23 ("xx,xxx gain" or "xx,xxx loss")?

Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market value and adjusted basis. FMV Adjusted Basis Inventory $ 20,000 $ 11,000 Building 250,000 100,000 Land 530,000 300,000 Total $ 800,000 $ 411,000 The corporation also assumed a mortgage of $500,000 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation? THE ANSWER IS NOT 0.

Brooks Corp. is a medium sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks had a policy of investing idle cash in equity securities. In particular Brooks has made periodic investments in the company’s principal supplier, Norton Industries. Brooks does not have significant influence over the operations of Norton Industries.

            Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2014 year-end adjusting entries for the accounts that are valued by “Fair Value” rule for financial reporting purposes. Thomas has gathered the following information about Brooks’ accounts.

            1)    Brooks has trading securities related to Delaney Motors and Patrick Electric. During the fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; These shares currently have a fair value of $1,600,000. Brooks’ investment in Patrick has not been profitable and the company is looking for ways to disinvest; The Company acquired 50,000 shares of Patrick in April 2014 at $20 per share, a purchase that has a value of $720,000.

            2) Prior to 2014, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. The investment in Norton was valued at $21,500,000 on  December 31, 2013. Brooks’s 13% ownership in Norton has a current fair value of 22,2500,000.

Required:

(a)  Prepare the appropriate adjusting entries for Brooks as of December 31, 2014 under the fair value method. (6 points)

(b) Prepare the entries for the Norton Investment, assuming that Brooks owns 25% of Norton’s shares. Norton reported income of $500,000 in 2014 and paid cash dividends of $100,000. ( 6 Points)

Question 1

1. The city of Charleston had the following sales of water for the selected months of 2017:

   Month	Sales
   February	$60,000
   March	45,000
   April	60,000
   May	42,500
   June	100,000
   July	120,000

   All sales are on credit. Historically, 60 percent is collected in the month of sale, 30 percent during the first month following the sale, and 10 percent in the second month following the sale.

   Water purchases by month are as follows:

   Month
   February	$60,000
   March	40,000
   April	45,000
   May	59,750
   June	52,500
   July	90,000

   Water is purchased in the month of sale. All purchases are paid during the month following the purchase.

   Operating costs are $18,000 and everything is paid in cash except for depreciation, which totals $8,000 a month.

   The city plans on purchasing some new equipment in May for $25,000 in exchange for a note payable.

   The April 1 cash balance is expected to be $5,000.

   The city must maintain a minimum cash balance of $10,500, and money can be borrowed from a local bank in increments of $1,000. The city borrows money at the beginning on the first day of the month and repays loans and interest on the last day of the month. The bank charges the city an annual interest rate of 15%.

   Required:

   Prepare a cash budget for April, May, June and in for the quarter, and based on your answer complete the following table:

   Round to the nearest dollar and DO NOT enter decimals, or commas and if a zero needs to be entered, enter "0".

1. Change in Accounting Principle. In keeping with a modernization of corporate statutes in its home state, in 2019 UMC Corporation discontinued accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired. To implement this change, existing treasury shares were reclassified as retired stock. At December 31, 2018, UMC’s balance sheet reported the following shareholders’ equity:

(In $Millions)

Common Stock ($1 par)                                            $80

Paid-in-capital; excess of par                                 1,120

Retained earnings                                                   1,425

Treasury Stock, at cost (6 million shares)             (150)

            Total Shareholders’ Equity                        $2,475

1. Prepare the journal entry to be recorded to adjust the equity accounts as of the beginning of 2019 to affect the reclassification of the treasury shares as retired shares.
2. What other steps should UMC take related to this change in accounting principle.

Walton Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles:

During 2017, Walton planned to produce 32,000 drip candles. Production lagged behind expectations, and it actually produced only 25,000 drip candles. At year-end, direct materials purchased and used amounted to 43,900 pounds at a unit price of $0.56 per pound. Direct labor costs were actually $6.40 per hour and 24,900 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $150,000. Overhead is applied to products using a predetermined overhead rate based on estimated units.

Required

1. a.&b. Compute the standard cost per candle for direct materials, direct labor, overhead and also the total standard cost for one drip candle.

2. c.&d. Compute the actual cost per candle for direct materials, direct labor, overhead and also the total actual cost per candle.

3. e. Compute the price and usage variances for direct materials and direct labor.

4. f. Compute the fixed cost spending and volume variances.

Talkington Electronics issues a $400,000, 8%, 15-year mortgage note on December 31, 2019. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide for annual installment payments, exclusive of real estate taxes and insurance, of $59,612. Payments are due on December 31.

Prepare installment payments schedule and journal entries for a mortgage note payable.

Instructions

1. Prepare an installment payments schedule for the first 4 years.
2. Prepare the entries for (1) the loan and (2) the first installment payment.
3. Show how the total mortgage liability should be reported on the balance sheet at December 31, 2020.

Please show all work!

Issuing Stock

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 100,000 shares of preferred 3% stock, $65 par and 700,000 shares of $10 par common stock. The following selected transactions were completed during the first year of operations:

Journalize the transactions.

Feb. 5. Issued 105,000 shares of common stock at par for cash.

Feb. 5. Issued 400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Apr. 9. Issued 18,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $33,000, $179,000, and $40,000, respectively.

If an amount box does not require an entry, leave it blank.

June 14. Issued 35,000 shares of preferred stock at $76 for cash.

If an amount box does not require an entry, leave it blank.

On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $450,000 and will incur cash outflows of $341,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 10%.

The following data were drawn from the records of Jordan Corporation.

Required

1. Prepare a materials variance information table showing the standard price, the actual price, the standard quantity, and the actual quantity.
2. Calculate the materials price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
3. Prepare a labor variance information table showing the standard price, the actual price, the standard hours, and the actual hours.
4. Calculate the labor price and usage variances. Indicate whether the variances are favorable (F) or unfavorable (U).
5. Calculate the predetermined overhead rate, assuming that Jordan uses the number of units as the allocation base.
6. Calculate the fixed cost spending variance. Indicate whether the variance is favorable (F) or unfavorable (U).
7. Calculate the fixed cost volume variance. Indicate whether the variance is favorable (F) or unfavorable (U).

What set of standards does a company use when it operates in multiple countries? For example, for a US company, can they use both GAAP and IFRS? Do they need to choose one?

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2021 ($ in thousands): sales revenue, $17,500; cost of goods sold, $7,300; selling expenses, $1,410; general and administrative expenses, $910; interest revenue, $160; interest expense, $290. Income taxes have not yet been recorded. The company’s income tax rate is 25% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2021 ($ in thousands). All transactions are material in amount.

1. Investments were sold during the year at a loss of $330. Schembri also had an unrealized gain of $400 for the year on investments in debt securities that qualify as components of comprehensive income.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,400.
3. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $540 in 2021 prior to the sale, and its assets were sold at a gain of $1,600.
4. In 2021, the company’s accountant discovered that depreciation expense in 2020 for the office building was understated by $310.
5. Negative foreign currency translation adjustment for the year totaled $340.

Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2021, including earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 800,000 shares were issued on July 1, 2021.
2. Prepare a separate statement of comprehensive income for 2021.