Learning Objectives 4, 5, 6: Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance) During the first month of operation of Gordon Construction, Inc., completed the following transactions: June 2 Gordon received $55,000 cash and issued common stock to the stockholders. 3 Purchased supplies, $3,000, and equipment, $5,200, on account. 4 Performed services for a client and received cash, $6,300. 7 Paid cash to acquire land, $37,000. 11 Performed services for a customer and billed the customer, $1,200. Johnson expects to collect within one month. 16 Paid partial for the equipment purchased June 3 on account $2,800. 17 Paid the telephone bill, $230. 18 Received partial payment from customer on account, $700. 22 Paid the water and electricity bills, $400. 29 Received $5,000 cash for repairing the pipes of a customer. 30 Paid employee salary, $4,300. 30 Declared and paid dividends of $3,000. ▸Requirements • 1. Record each transaction in the journal. Key each transaction by date. Explanations are not required. • 2. Post the transactions to the T-accounts, using transaction dates as posting references. • 3. Prepare the trial balance of Gordon Construction, Inc., at June 30, 20xx. • 4. The manager asks you how much in total resources the business has to work with and, how much it owes. Case Study 1 (Part B) Requirement 2 (Learning Objectives 3, 4: Adjust the accounts; construct the financial statements) Record the following month end adjusting entries for Gordon Construction, Inc. at June 30, 20xx Month end accruals at June 30, 20xx: • a. Accrued advertising revenue at June 30, $3,100. • b. Supplies used during June, $2,300. • c. Accrued salary expense at June 30 for Monday, Tuesday, and Wednesday. The five-day weekly payroll is $6,100 and will be paid on Friday. Requirement 2 Prepare adjusted trial balance for Gordon Construction at June 30, 20xx. How much are the total resources? How much does the business owe? How much profit was made in June?

The following are independent situations for which you will recommend an appropriate audit report: 1. Subsequent to the date of the financial statements as part of his post-balance sheet date audit procedures, a CPA learned that a recent fire caused heavy damage to one of a client’s two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. The financial statements and footnotes as prepared by the client did not disclose the loss caused by the fire. 2. During the course of his audit of the financial statements of a corporation for the purpose of expressing an opinion on the statements, a CPA is refused permission to inspect the minutes of board of directors’ meetings that document significant decisions of the board. The corporation secretary instead offers to give the CPA a certified copy of all resolutions and actions involving accounting matters. 3. A CPA is engaged in the audit of the financial statements of a large manufacturing company with branch offices in many widely separated cities. The CPA was not able to count the substantial undeposited cash receipts at the close of business on the last day of the fiscal year at all branch offices. As an alternative to this auditing procedure used to verify the accurate cutoff of cash receipts, the CPA observed that deposits in transit as shown on the year-end bank reconciliation appeared as credits on the bank statement on the first business day of the new year. He was satisfied as to the cutoff of cash receipts by the use of the alternative procedure. 4. On January 2, 2020, the Retail Auto Parts Company received a notice from its primary supplier that effective immediately, all wholesale prices will be increased by 10 percent. On the basis of the notice, Retail Auto Parts revalued its December 31, 2019, inventory to reflect the higher costs. The inventory constituted a material proportion of total assets; however, the effect of the revaluation was material to current assets but not to total assets or net income. The increase in valuation is adequately disclosed in the footnotes. 5. A CPA has completed her audit of the financial statements of a bus company for the year ended December 31, 2019. Prior to 2019, the company depreciated its buses over a 10-year period. During 2019, the company determined that a more realistic estimated life for its buses was 12 years and computed the 2019 depreciation on the basis of the revised estimate. The CPA has satisfied herself that the 12-year life is reasonable.The company has adequately disclosed the change in estimated useful lives of its buses and the effect of the change on 2019 income in a note to the financial statements. 6. E-Lotions.com, Inc., is an online retailer of body lotions and other bath and body supplies. The company records revenues at the time customer orders are placed on the website, rather than when the goods are shipped, which is usually two days after the order is placed. The auditor determined that the amount of orders placed but not shipped as of the balance sheet date is not material.

b. State the level of materiality as immaterial, material, or highly material. If you cannot decide the level of materiality, state the additional information needed to make a decision.

Black Co. acquired 100% of Blue, Inc. on January 1, 2020. On that date, Blue had land with a book value of $38,000 and a fair value of $49,000. Also, on the date of acquisition, Blue had a building with a book value of $250,000 and a fair value of $460,000. Blue had equipment with a book value of $340,000 and a fair value of $280,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2020 related to the acquisition allocations of Blue

2. Deb is the sole shareholder of Timeless Corporation, a calendar year C corporation. In the current year, Trash earned taxable income of $250,000 and distributed $175,000 to Deb. Kyle is the sole shareholder of Swanky Corporation, an S corporation. In the current year, Swanky earned taxable income of $250,000 and distributed $175,000 to Kyle. Assume both Kyle and Deb are in the highest regular tax bracket (use 37%). Contrast the tax treatment of Timeless Corporation and Deb with the tax treatment of Swanky Corporation and Kyle.

Question 2

Required

Discuss generally why accountants need to understand data representation, basic data structures and coding schemes.  

Waterway Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye.

(a)

Calculate average-cost per unit. (Round answer to 4 decimal places, e.g. 2.7613.)

(b)

Compute cost of goods sold, assuming Waterway uses: (Round average cost per unit to 4 decimal places, e.g. 2.7631 and final answers to 0 decimal places, e.g. 6,548.)

Question 3

Identify and describe a minimum of four internal controls in a computer lab classroom.

Required

1. Classify each control as being preventive, corrective and/or detective. If the control is an information technology control, also classify the control as a general or application control.
2. Describe the risk(s) each control is intended to address.
3. Describe the operation of each control.
4. Identify and discuss a potential deficiency in at least one of the controls you have identified.

PLEASE MAKE SURE ALL NUMBERS MATCH UP AND ARE CORRECTLY CALCULATED

The following unadjusted trial balance is prepared at fiscal year-end for Nelson Company.  

  
Rent expense and salaries expense are equally divided between selling activities and general and administrative activities. Nelson Company uses a perpetual inventory system.
  
Additional Information:

1. Store supplies still available at fiscal year-end amount to $1,750.
2. Expired insurance, an administrative expense, for the fiscal year is $1,400.
3. Depreciation expense on store equipment, a selling expense, is $1,525 for the fiscal year.
4. To estimate shrinkage, a physical count of ending merchandise inventory is taken. It shows $10,900 of inventory is still available at fiscal year-end.

Required:
1. Using the above information prepare adjusting journal entries:
2. Prepare a multiple-step income statement for fiscal year 2018.
3. Prepare a single-step income statement for fiscal year 2018.

Required:

1. What is the monthly break-even point in unit sales and in dollar sales?

2. Without resorting to computations, what is the total contribution margin at the break-even point?

3-a. How many units would have to be sold each month to attain a target profit of $39,600?

3-b. Verify your answer by preparing a contribution format income statement at the target sales level. (confused on this)

4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms.

5. What is the company’s CM ratio? If sales increase by $99,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Manufacturers Southern leased high-tech electronic equipment from International Machines on January 1, 2018. International Machines manufactured the equipment at a cost of $104,000. Manufacturers Southern's fiscal year ends December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Related Information:

Lease term2 years (8 quarterly periods)

Quarterly rental payments$18,200 at the beginning of each period

Economic life of asset2 years

Fair value of asset$135,990

Implicit interest rate8%

Required:
1. Show how International Machines determined the $18,200 quarterly lease payments.
2. Prepare appropriate entries for International Machines to record the lease at its beginning, January 1, 2018, and the second lease payment on April 1, 2018.

Problem 5-25 Prepare and Interpret Income Statements; Changes in Both Sales and Production; Lean Production [LO5-1, LO5-2, LO5-3]

Starfax, Inc., manufactures a small part that is widely used in various electronic products such as home computers. Operating results for the first three years of activity were as follows (absorption costing basis):

In the latter part of Year 2, a competitor went out of business and in the process dumped a large number of units on the market. As a result, Starfax’s Sales dropped by 20% during Year 2 even though production increased during the year. Management had expected sales to remain constant at 50,000 units; the increased production was designed to provide the company with a buffer of protection against unexpected spurts in demand. By the start of Year 3, management could see that inventory was excessive and that spurts in demand were unlikely. To reduce the excessive inventories, Starfax cut back production during Year 3, as shown below:

Additional information about the company follows:

1. The company’s plant is highly automated. Variable manufacturing expenses (direct materials, direct labor, and variable manufacturing overhead) total only $4.00 per unit, and fixed manufacturing overhead expenses total $540,000 per year.  
2. Fixed manufacturing overhead costs are applied to units of product on the basis of each year’s production. That is, a new fixed manufacturing overhead rate is computed each year.
3. Variable selling and administrative expenses were $3 per unit sold in each year. Fixed selling and administrative expenses totaled $70,000 per year.
4. The company uses a FIFO inventory flow assumption.

Starfax’s management can’t understand why profits more than doubled during Year 2 when sales dropped by 20%, and why a loss was incurred during Year 3 when sales recovered to previous levels.

Required:

1. Prepare a contribution format variable costing income statement for each year.

2a. Compute the unit product cost in each year under absorption costing. (Round your answers to 2 decimal places.)

2b. Reconcile the variable costing and absorption costing net operating income (loss) figures for each year.

5b. If Lean Production had been used during Year 2 and Year 3 and the predetermined overhead rate is based on 50,000 units per year, what would the company's net operating income (loss) have been in each year under absorption costing? (Losses should be indicated by a minus sign.)

1. Would you be comfortable in Higgins’s job? Does the job of ethics officer appeal to you? Why, or why not?
2. Research a company that hires Ethics Officers? What did you find? (Use the Internet to do your research. Click on the website you found) What company did you research? Please include the link.
3. What qualities is the company that you researched looking for in an Ethics/Corporate Social Relations Officer?

1- The Statute of Limitations discharges a debt by operation of law unless the debtor reinstates the debt.

Select one:

True

False

2- When an anticipatory repudiation occurs, it is treated as a material breach of a contract.

Select one:

True

False

3-

Select one:

True

False

4- Anything less than complete performance is a material breach of contract.

Select one:

True

False

5- Any breach entitles the non-breaching party to sue for damages.

Select one:

True

False

EcoPak Ltd is a small private company, specialising in the manufacture of takeaway packaging, which offers an environmentally friendly alternative to disposable food containers. The business’s accountant Kate has prepared a draft version of EcoPak’s Balance Sheet and Income Statement for the financial year ended 30 June 2020. Kate knows she has made several mistakes in classifying the elements of the Balance Sheet and Income Statement because the income statement shows EcoPak has made a loss and the Balance Sheet doesn’t balance! Kate’s statements are shown below.