Exercise 9-13 Revenue and Spending Variances [LO9-3]

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,000 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.10 per car washed.

The actual operating results for August are as follows:

Required:

Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

pronghorn Inc. reported income from continuing operations before taxes during 2017 of $790,900. Additional transactions occurring in 2017 but not considered in the $790,900 are as follows. 1. The corporation experienced an uninsured flood loss in the amount of $98,500 during the year. 2. At the beginning of 2015, the corporation purchased a machine for $73,800 (salvage value of $12,300) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2015, 2016, and 2017, but failed to deduct the salvage value in computing the depreciation base. 3. Sale of securities held as a part of its portfolio resulted in a loss of $62,300 (pretax). 4. When its president died, the corporation realized $159,800 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $43,910 (the gain is nontaxable). 5. The corporation disposed of its recreational division at a loss of $106,680 before taxes. Assume that this transaction meets the criteria for discontinued operations. 6. The corporation decided to change its method of inventory pricing from average-cost to the FIFO method. The effect of this change on prior years is to increase 2015 income by $57,320 and decrease 2016 income by $21,450 before taxes. The FIFO method has been used for 2017. The tax rate on these items is 40%. Prepare an income statement for the year 2017 starting with income from continuing operations before taxes.

Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 128,280 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.

Develop a hypothetical company. Discuss and describe in detail what costs the product would entail, as well as the type of costing system you would use.

Greenlands, Inc. began the year with three units of finished goods inventory that cost $6 each to manufacture. Greenlands also established a $6 per unit standard product cost for the upcoming accounting period. The company actually incurred unit costs of $4 for direct materials, $2 for direct labor, and $1 for factory overhead for the ten units it produced in the current period. Greenlands sold 11 units at $10 each during the accounting period. The firm accounted for inventory on a first-in, first-out (FIFO) basis.

Required: Compute Greenlands’ cost of goods manufactured, cost of goods sold, and gross profit.

Cost of Goods Manufactured

Cost of Goods Sold

Income Statement

Balance Sheet

a.-b. Merchandise Inventory, before adjustment, has a balance of $6,500. The newly counted inventory balance is $7,000. Unearned Seminar Fees has a balance of $5,000, representing prepayment by customers for five seminars to be conducted in June, July, and August 2019. Two seminars had been conducted by June 30, 2019. Prepaid Insurance has a balance of $6,000 for six months’ insurance paid in advance on May 1, 2019. Store equipment costing $19,840 was purchased on March 31, 2019. It has a salvage value of $400 and a useful life of six years. Employees have earned $150 that has not been paid at June 30, 2019. The employer owes the following taxes on wages not paid at June 30, 2019: SUTA, $4.50; FUTA, $0.90; Medicare, $2.18; and social security, $9.30. Management estimates uncollectible accounts expense at 1 percent of sales. This year’s sales were $1,000,000. Prepaid Rent has a balance of $5,100 for six months’ rent paid in advance on March 1, 2019. The Supplies account in the general ledger has a balance of $300. A count of supplies on hand at June 30, 2019, indicated $100 of supplies remain. The company borrowed $10,600 from First Bank on June 1, 2019, and issued a four-month note. The note bears interest at 6 percent. Required: Based on the information above, record the adjusting journal entries that must be made for Sufen Consulting on June 30, 2019. The company has a June 30 fiscal year-end. Analyze: After all adjusting entries have been journalized and posted, what is the balance of the Prepaid Rent account? Based on the above information, record the adjusting journal entries that must be made for Sufen Consulting on June 30, 2019. The company has a June 30 fiscal year-end. (Round your final answers to 2 decimal places.)

Journal entry worksheet

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Note: Enter debits before credits.

The following relate to an operating lease agreement:

1. The lease term is 3 years, beginning January 1, 2018.
2. The leased asset cost the lessor $850,000 and had a useful life of eight years with no residual value. The lessor uses straight-line depreciation for its depreciable assets.
3. Annual lease payments at the beginning of each year were $144,500.
4. Incremental costs of negotiating costs of negotiating and consummating the completed lease transaction incurred by the lessor were $3,150.

Required:
Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease term. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the cash received. (Jan 1, 2018)

2. Record the payment of initial direct costs. (Jan 1, 2018)

3. Record the cost of the lease. (Dec 31, 2018)

4. Record the depreciation expense. (Dec 31, 2018)

5. Record the rent revenue. (Dec 31, 2018)

6. Record the cash received. (Jan 1, 2019)

7. Record the cost of the lease. (Dec 31, 2019)

8. Record the depreciation expense. (Dec 31, 2019)

9. Record the rent revenue. (Dec 31, 2019)

10. Record the cash received. (Jan 1, 2020)

11. Record the cost of the lease. (Dec 31, 2020)

12. Record the depreciation expense. (Dec 31, 2020)

13. Record the rent revenue. (Dec 31, 2020)

Identify and explain the key principles and practices of corporate governance

Identify and explain the key principles and practices of statistical analysis and measures of variance

Debate the following statement: "Correlation means Causation." Determine whether this statement is true or false, and provide reasoning for your determination, using a Possible Relationships Between Variables table if one is available.

Required information [The following information applies to the questions displayed below.] Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows. Purchased raw materials on credit, $200,000. Materials requisitions record use of the following materials for the month. Job 136 $49,500 Job 137 32,500 Job 138 20,000 Job 139 23,200 Job 140 7,200 Total direct materials 132,400 Indirect materials 21,000 Total materials used $153,400 Paid $15,250 cash to a computer consultant to reprogram factory equipment. Time tickets record use of the following labor for the month. These wages were paid in cash. Job 136 $12,100 Job 137 10,600 Job 138 37,700 Job 139 39,400 Job 140 3,400 Total direct labor 103,200 Indirect labor 26,000 Total $129,200 Applied overhead to Jobs 136, 138, and 139. Transferred Jobs 136, 138, and 139 to Finished Goods. Sold Jobs 136 and 138 on credit at a total price of $550,000. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance). Depreciation of factory building $68,500 Depreciation of factory equipment 37,500 Expired factory insurance 11,000 Accrued property taxes payable 36,500 Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost. rev: 02_01_2017_QC_CS-77139 3. Post the journal entries for the transactions to the following T-accounts, each of which started the month with a zero balance.

You are planning to buy a new car. The cost of the car is $50,000. You have been offered two payment plans:

• A 10 percent discount on the sales price of the car, followed by 60 monthly payments financed at 9 percent per year.

• No discount on the sales price of the car, followed by 60 monthly payments financed at 2 percent per year.

If you believe your annual cost of capital is 9 percent, which payment plan is a better deal? Assume all payments occur at the end of the month.

Can you demonstrate these in EXCEL?

Problem 23-2A (Part Level Submission) Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017. Costs and Production Data Actual Standard Raw materials unit cost $2.30 $2.20 Raw materials units used 11,100 10,400 Direct labor payroll $174,640 $171,360 Direct labor hours worked 14,800 15,300 Manufacturing overhead incurred $214,678 Manufacturing overhead applied $218,178 Machine hours expected to be used at normal capacity 43,500 Budgeted fixed overhead for June $65,250 Variable overhead rate per machine hour $3.10 Fixed overhead rate per machine hour $1.50 Overhead is applied on the basis of standard machine hours. 3.10 hours of machine time are required for each direct labor hour. The jobs were sold for $476,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. (a) Your answer is correct. Compute all of the variances for (1) direct materials and (2) direct labor. (Round answers to 0 decimal places, e.g. 125.) (1) Total materials variance $ Materials price variance $ Materials quantity variance $ (2) Total labor variance $ Labor price variance $ Labor quantity variance $ Click if you would like to Show Work for this question: Open Show Work Show Solution Show Answer Link to Text Link to Text Link to Text Attempts: 1 of 3 used (b) Your answer is partially correct. Try again. Compute the total overhead variance. Total overhead variance $ Click if you would like to Show Work for this question: Open Show Work Show Solution Show Answer Link to Text Link to Text Link to Text Attempts: 3 of 3 used (c) Prepare an income statement for management. (Ignore income taxes.) (Round answers to 0 decimal places, e.g. 125.) AYALA CORPORATION Income Statement $ $ $

Compute trend percents for the above accounts, using 2013 as the base year.

Exercise 9-12 Activity Variances [LO9-2]

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,000 per month plus $0.10 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.90 per car washed. The company actually washed 8,300 cars in August.

Required:

Calculate the company's activity variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Required: Make the necessary journal entries from the information given. Some dates do not require a journal entry. On dates that do not require an entry say “no entry required”. Omit the journal descriptions. Use the journal paper on the next page to make your journal entries.

2. Dominic Bueno started a delivery business as a sole proprietorship on 7/1/XX. During the month of July the company had the following transactions:

7/1 The owner invested $100,000 in cash into the business checking account. 7/1 Rented a garage with office space for $5,000 per month and paid the first month’s rent by check.

7/2 A new 2 ton delivery truck was purchased by the company. The total purchase price including taxes, license and fees was $115,000. The company paid $15,000 by check as a down payment and signed a long-term note for five years at an interest rate of 9% per year for the balance that was owed.

7/6 The company purchased a desktop computer and a printer for a total price of $1,150 and paid by check for the computer equipment.

7/8 Picked up and delivered machinery for a client. Billed $350 for the delivery service with terms “due on receipt”.

7/10 Received a bill for legal services in the amount of $1,200. 7/12 Entered into a $125,000 one year contract with a client to provide delivery services.

7/14 Received the amount owed from the 7/8 transaction.

7/15 Picked up and delivered furniture for a client and billed the client $565 with terms of “due on receipt”.

7/15 Wrote a check to Mr. Bueno for personal use in the amount of $2,000.

7/18 Purchased diesel fuel from a bulk fuel distributor on credit. The total amount owed for the fuel was $579 which the company will receive a bill for at the end of the month.

7/21 Delivered machinery under the terms of the contract signed on 7/12. The contract terms required that any amounts owed for delivery services will be billed for at the end of each month with terms of net 30 days.

7/31 Received the bill for the purchase of diesel fuel on 7/18 with terms of net 30 days.

7/31 Received a utility Bill in the amount of $475 and paid the bill immediately by check.

7/31 Billed the client for the delivery service provided on 7/21 in the amount of $2,100.