Franklin Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s department has a sales staff of nine employees, the manager of the women’s department has six employees, and the manager of the children’s department has three employees. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected to continue to do so. Last year’s income statements follow: Men’s Department Women’s Department Children’s Department Sales $ 670,000 $ 490,000 $ 180,000 Cost of goods sold (269,000 ) (179,200 ) (100,375 ) Gross margin 401,000 310,800 79,625 Department manager’s salary (59,000 ) (48,000 ) (28,000 ) Sales commissions (113,200 ) (82,600 ) (31,400 ) Rent on store lease (28,000 ) (28,000 ) (28,000 ) Store utilities (11,000 ) (11,000 ) (11,000 ) Net income (loss) $ 189,800 $ 141,200 $ (18,775 ) Required a. Calculate the contribution margin. Determine whether to eliminate the children’s department. b-1. Calculate the net income for the company as a whole with the children's department. b-2. Confirm the conclusion you reached in Requirement a by preparing income statements for the company as a whole with and without the children’s department. c. Eliminating the children’s department would increase space available to display men’s and women’s boots. Suppose management estimates that a wider selection of adult boots would increase the store’s net earnings by $39,000. Would this information affect the decision that you made in Requirement a?

Hepworth Company has implemented a JIT system and is considering the use of backflush costing. Hepworth had the following transactions for the current fiscal year:

1. Purchased raw materials on account for $600,000.

2. Placed all materials received into production.

3. Incurred actual direct labor costs of $90,000.

4. Incurred actual overhead costs of $625,000.

5. Applied conversion costs of $675,000.

6. Completed all work for the month.

7. Sold all completed work.

8. Computed the difference between actual and applied costs.

Required: 1. Prepare the journal entries for traditional and backflush costing. For backflush costing, assume there are two trigger points: (1) the purchase of raw materials, and (2) the completion of the goods.

2. Assume the second trigger point in Requirement 1 is the sale of goods. What would change for the backflush-costing journal entries?

3. What if there is only one trigger point and it is (a) completion of the goods or (b) sale of the goods? How would the backflush-costing journal entries differ from Requirement 1 for (a) and (b)?

Steve Hitchcock is 38 years old today and he wishes to accumulate $501,000 by his 61st birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his 38th through his 60th birthdays. What annual deposit must Steve make if the fund will earn 11% interest compounded annually?

Annual Deposit=?

Cindy Ross has $18,800 to invest today at 9% to pay a debt of $40,832. How many years will it take her to accumulate enough to liquidate the debt?

Number of year= ?

Amy Houston has a $29,000 debt that she wishes to repay 6 years from today; she has $17,292 that she intends to invest for the 6 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt?

Rate of interest ?

Betty DeRose, Inc. operates two departments, the handling department and the packaging department. During April, the handling department reported the following information: % complete % complete units DM conversion work in process, April 1 18,000 38% 71% units started during April 80,000 work in process, April 30 44,000 82% 47% The cost of beginning work in process and the costs added during April were as follows: DM Conversion Total cost work in process, April 1 $ 51,764 $152,477 $204,241 costs added during April 191,452 232,125 423,577 total costs 243,216 384,602 627,818 Calculate the total cost of the handling department's work in process inventory at April 30 using the FIFO process costing method.

For each employee listed, use the wage-bracket method to calculate federal income tax withholding.

1:Phil McGlynn (Married; 3 federal withholding allowances) earned weekly gross pay of $750.

Federal income tax withholding = $

2:Gary Williams (single; 1 federal withholding allowance) earned biweekly gross pay of $1,920. He participates in a flexible spending account, to which he contributes $50 during the period.

Federal income tax withholding = $

3:Lila Downing (single; 2 federal withholding allowances) earned monthly gross pay of $1,285. For each period, she makes a 401(k) contribution of 8% of gross pay.

Federal income tax withholding = $

4:Billie Hall (married; 2 federal withholding allowances) earned semimonthly gross pay of $2,250. She participates in a cafeteria plan, to which she contributes $250 during the period.

Federal income tax withholding =

Transfer pricing involves setting a price on goods that are transferred between divisions within a single company. Is this practice necessary? What are the advantages? Disadvantages? What’s an appropriate price if it’s going to be done?

Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the company’s market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market.

A year ago, the company’s cell phones had been ranked low in product quality in a consumer survey. Shocked by this result, Jorge Gomez, Mercury’s president, initiated an intense effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering, Marketing, Customer Service, Production, and Accounting departments. The broad representation was needed because Gomez believed that this was a companywide program and that all employees should share the responsibility for its success.

After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager, what he thought of the proposed program. Tran replied, “I have reservations. Quality is too abstract to be attaching costs to it and then to be holding you and me responsible for cost improvements. I like to work with goals that I can see and count! I’m nervous about having my annual bonus based on a decrease in quality costs; there are too many variables that we have no control over.”

Mercury’s quality improvement program has now been in operation for one year. The company’s most recent quality cost report is shown below.

As they were reviewing the report, Elsoe asked Tran what he now thought of the quality improvement program. Tran replied. “I’m relieved that the new quality improvement program hasn’t hurt our bonuses, but the program has increased the workload in the Production Department. It is true that customer returns are way down, but the cell phones that were returned by customers to retail outlets were rarely sent back to us for rework.”

Required:

1. Expand the company’s quality cost report by showing the costs in both years as percentages of both total production cost and total quality cost. (Round your percentage answers to 1 decimal place (i.e 0.1234 should be entered as 12.3).)

During the current year, Hitchcock Developers disposed of plant assets in the following transactions.

Required:
a. Prepare journal entries to record each of the disposal transactions. Assume that depreciation expense on each asset has been recorded up to the date of disposal. Thus, you need not update the accumulated depreciation figures stated in the problem.

b. Do gains and losses on asset disposals affect gross profit?

Nouveaux Toys Inc., manufactures plastic rubber ducks. In June, Nouveaux reported the following data:

a. All direct materials are added at the beginning of the process.

b. Beginning work-in-process consisted of 3,000 units, 30 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $450; and conversion costs, $138.

c. Costs added to production during the month were direct materials, $950; and conversion costs, $2,174.50.

d. Inspection takes place at the end of the process. Malformed units are discarded. During normal operations, 0.5% of the units started will end up being malformed and discarded.

e. During the month, 7,000 units were started and 8,000 good units were transferred out to Finishing. All other units finished were malformed and discarded. There were 1,000 units that remained in ending work in process, 55 percent complete.

f. Remember to round your decimal points to four places for cost/EU rates.

Required: A. Prepare a physical unit flow schedule.

B. Calculate the 1) cost of goods transferred out, 2) ending work-in-process, and 3) loss due to spoilage using the weighted average method.

C. Prepare the journal entries to record 1) and 3) above. Reconcile these journal entries with beginning work in process to ensure that ending work in process matches 2).

D. Calculate the 1) cost of goods transferred out, 2) ending work-in-process, and 3) loss due to spoilage using the FIFO method.

E. Prepare the journal entries to record 1) and 3) above. Reconcile these journal entries with beginning work in process to ensure that ending work in process matches 2).

F. Assume instead that inspection takes place when units are 40 percent complete. How does this change the number of units spoiled? How does this change the number of units that were abnormal spoilage v. normal spoilage?

Betty DeRose, Inc. operates two departments, the handling department and
the packaging department. During April, the handling department reported
the following information:

                                           % complete      % complete
                                units         DM           conversion 
work in process, April 1        18,000        38%             71%
units started during April      80,000
work in process, April 30       44,000        82%             47%

The cost of beginning work in process and the costs added during April
were as follows:

                                 DM         Conversion       Total cost
work in process, April 1      $ 51,764       $152,477         $204,241
costs added during April       191,452        232,125          423,577
total costs                    243,216        384,602          627,818

Calculate the total cost of the handling department's work in process
inventory at April 30 using the FIFO process costing method.

Your upper management has just realized that the last time a compliance program was done was over 15 years ago, and you are tasked with reviewing and revising it as necessary. How would you get started, and who would you include on your committee to get this done, since you have been given a deadline of one month? Do you need a compliance officer, and if so, who might you recommend to do this? Use your imagination! How is your INTEGRITY a core principle in your professional ethical behavior?

Prepare a statement of stockholders' equity for Oakwood for the year ended December 31, 2016 based on the following information:

Oakwood Inc. is a public enterprise whose shares are traded in the over-the-counter market. At December 31, 2015, Oakwood had 6,000,000 authorized shares of $10 par value common stock, of which 2,000,000 shares were issued and outstanding. The shareholders' equity accounts at December 31, 2015, had the following balances: Common stock $20,000,000 Additional paid-in capital on common stock 7,500,000 Retained earnings 6,470,000 Transactions during 2016 and other information relating to the shareholders' equity accounts were as follows: On January 5, 2016, Oakwood issued at $54 per share, 100,000 shares of $50 par value, 9%, cumulative convertible preferred stock. Each share of preferred stock is convertible, at the option of the holder, into 2 shares of common stock. Oakwood had 600,000 authorized shares of preferred stock. On February 2, 2016, Oakwood reacquired 20,000 shares of its common stock for $16 per share. Oakwood uses the cost method to account for treasury stock. On April 27, 2016, Oakwood sold 500,000 shares (previously unissued) of $10 par value common stock to the public at $17 per share. On June 18, 2016, Oakwood declared a cash dividend of $1 per share of common stock, payable on July 13, 2016, to shareholders of record on July 2, 2016. On November 9, 2016, Oakwood sold 10,000 shares of treasury stock for $21 per share. On December 14, 2016, Oakwood declared the yearly cash dividend on preferred stock, payable on January 14, 2017, to shareholders of record on December 31, 2016. On January 18, 2017, before the books were closed for 2016, Oakwood became aware that the ending inventories at December 31, 2015, were understated by $300,000 (the after-tax effect on 2015 net income was $210,000). The appropriate correcting entry was recorded the same day. After correcting the beginning inventory, net income for 2016 was $4,500,000. Required: 1. Prepare a statement of stockholders' equity for Oakwood for the year ended December 31, 2016. Assume that only single-period financial statements for 2016 are presented.

Entries for Selected Corporate Transactions

Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows:

The following selected transactions occurred during the year:

Required:

1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place.

2. Journalize the entries to record the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 22. Paid cash dividends of $0.12 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $38,880.

Apr. 10. Issued 70,000 shares of common stock for $1,120,000.

June 6. Sold all of the treasury stock for $17 per share.

July 5. Declared a 5% stock dividend on common stock, to be capitalized at the market price of the stock, which is $18 per share.

Aug. 15. Issued shares of stock for the dividend declared on July 5.

Nov. 23. Purchased 23,000 shares of treasury stock for $19 per share.

Dec. 28. Declared a $0.15-per-share dividend on common stock.

Dec. 31. Closed the credit balance of the income summary account, $8,497,000.

Dec. 31. Closed the two dividends accounts to Retained Earnings.

3. Prepare a retained earnings statement for the year ended December 31, 20Y6.

4. Prepare the Stockholders' Equity section of the December 31, 20Y6, balance sheet.

Coronado Company issues $26000000, 5%, 5-year bonds dated January 1, 2017 on January 1, 2017. The bonds pay interest semiannually on June 30 and December 31. The bonds are issued to yield 4%. What are the proceeds from the bond issue?

Answers given:

$27156209

$26000000

$27167784

$27160279