Question 3

Assiniboine Company has three employees who each earn $3,000 (monthly) and are paid on the 2^nd of each month (for the month just ended). The following payroll register for March (of the current year) has been prepared. Explanations are optional.

REQUIRED: Using the partial Chart of Accounts at the top of the next page,

1. Prepare the regular payroll journal entry on March 31^st to accrue the payroll for the month.

2. Prepare the journal entry to accrue the company’s costs (contributions) resulting from the previous entry.

3. Assiniboine matches the employee’s contribution to the medical insurance plan and accrues vacation pay at 4%. Prepare a journal entry to accrue these fringe benefits.

Journalize the following three cheques:

4. On April 3^nd, a cheque was issued to pay the employees.

5. On April 15^th, a cheque was issued, payable to the Receiver General, to pay for March’s mandatory deductions.

6. A cheque was issued on April 21^st to ABC Insurance in payment of the employee medical premiums for the month of March.

(a)

(b)

(c)

(d)

(e)

(f)

Partial Chart of Accounts:

Cash

CPP Payable

EI Payable

Employees’ Income Tax Payable

Estimated Vacation Pay Liability

Medical Insurance Payable

Salaries Payable

Benefits Expense

CPP Expense

EI Expense

Office Salaries Expense

Sales Salaries Expense

Pablo Company calculates the cost for an equivalent unit of production using process costing.

Required:

1. Compute the cost per equivalent unit for both the weighted-average and FIFO methods. (Round your answers to 3 decimal places.)

Weighted Average Cost per EU FIFO Cost Per EU

Direct Materials

Conversion

Total cost

[The following information applies to the questions displayed below.] The Shirt Shop had the following transactions for T-shirts for Year 1, its first year of operations: Jan. 20 Purchased 600 units @ $ 7 = $ 4,200 Apr. 21 Purchased 400 units @ $ 9 = 3,600 July 25 Purchased 480 units @ $ 12 = 5,760 Sept. 19 Purchased 290 units @ $ 14 = 4,060 During the year, The Shirt Shop sold 1,410 T-shirts for $23 each. c. Compute the difference in gross margin between the FIFO and LIFO cost flow assumptions.

Product Costing and Decision Analysis for a Service Company

Blue Star Airline provides passenger airline service, using small jets. The airline connects four major cities: Charlotte, Pittsburgh, Detroit, and San Francisco. The company expects to fly 170,000 miles during a month. The following costs are budgeted for a month:

Blue Star management wishes to assign these costs to individual flights in order to gauge the profitability of its service offerings. The following activity bases were identified with the budgeted costs:

The size of the company's ground operation in each city is determined by the size of the workforce. The following monthly data are available from corporate records for each terminal operation:

Three recent representative flights have been selected for the profitability study. Their characteristics are as follows:

Required:

1. Determine the fuel, crew, and depreciation cost per mile flown.
$ per mile

2. Determine the cost per arrival or departure by terminal city.

3. Use the information in (1) and (2) to construct a profitability report for the three flights. Each flight has a single arrival and departure to its origin and destination city pairs.

Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:

Required:

1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.

2. The president believes that a $6,600 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $82,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?

3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $32,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?

4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.70 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $5,000?

5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month.

a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.

b. Assume that the company expects to sell 20,300 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)

c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,300)?

Equivalent Units and Related Costs; Cost of Production Report; Entries

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals.

The balance in the account Work in Process—Filling was as follows on January 1:

The following costs were charged to Work in Process—Filling during January:

During January, 72,900 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 6,300 units, 50% completed.

Required:

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods. If an amount box does not require an entry, leave it blank.

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between   and  . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

How to calculate Return on Equity？（I just want to learn the formula, no specific data）

If the return on equity is low, how can it be improved?

Net Earnings per share
Retained earnings, beginning of the year
Dividends paid

Selling and Admin Expense
Operating Profit
Interest Expense

Income Taxes
Net Earnings

Retained earnings, end of year
Net Sales
Cost of goods sold
Other income (expense), net
Earnings before income taxes

Jimmie’s Fishing Hole has the following transactions related to its top-selling Shimano fishing reel for the month of June. Jimmie’s Fishing Hole uses a periodic inventory system.

3. Using LIFO, calculate ending inventory and cost of goods sold at June 30

The following information applies to the questions displayed below.]

Jimmie’s Fishing Hole has the following transactions related to its top-selling Shimano fishing reel for the month of June. Jimmie’s Fishing Hole uses a periodic inventory system.

4. Using weighted-average cost, calculate ending inventory and cost of goods sold at June 30. (Round your intermediate and final answers to 2 decimal places.)

The following information applies to the questions displayed below.]

Jimmie’s Fishing Hole has the following transactions related to its top-selling Shimano fishing reel for the month of June. Jimmie’s Fishing Hole uses a periodic inventory system.

4. Using weighted-average cost, calculate ending inventory and cost of goods sold at June 30. (Round your intermediate and final answers to 2 decimal places.)

The following information applies to the questions displayed below.]


The following events occur for Morris Engineering during 2021 and 2022, its first two years of operations.

Required:

1. Record transactions for each date. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Company X failed to record (accrue) $5,000,000 of vendor invoices and warranty liability at year-end. With this omission, the company's summary financial statements were stated as follows: Summarized Income Statement Sales $50,000,000 All Cost (incl. Interest & Taxes) $40,000,000 Net Income $10,000,000 Summarized Balance Sheet This Year Last Year Assets: All Current Assets combined $50,000,000 $40,000,000 All Long-Term Assets combined $50,000,000 $40,000,000 Total Assets: $100,000,000 $80,000,000 Liabilities & Stockholders Equity All Current Liabilities combined $30,000,000 $25,000,000 All Long-Term Liabilities combined $25,000,000 $20,000,000 Stockholders Equity $45,000,000 $35,000,000 Total Liabilities & Equity $100,000,000 $80,000,000 Answer the following questions: Current Ratio per Company Statements? Current Ratio if Statements Fixed This Error? Would the Current Ratio Be Better or Worse? ROI per Company Statements? ROI if Statements Fixed This Error? Would the ROI be Better or Worse? ROE per Company Statements? ROE if Statements Fixed This Error? Would the ROE be Better or Worse?

For each of the following, calculate the cost of inventory reported on the balance sheet.

Inventory Costing Methods—Periodic System

The following information is available concerning the inventory of Carter Inc.:

During the year, Carter sold 1,015 units. It uses a periodic inventory system.

Required:

1. Calculate ending inventory and cost of goods sold for each of the following three methods:

In your calculations round average unit cost to the nearest cent, and round all other calculations and your final answers to the nearest dollar.

2. Assume an estimated tax rate of 30%. How much more or less (indicate which) will Carter pay in taxes by using FIFO instead of LIFO?

3. Assume that Carter prepares its financial statements in accordance with IFRS. Which costing method should it use to pay the least amount of taxes?

Assume Maple Corp. has just completed the third year of its existence (year 3). The table below indicates Maple’s ending book inventory for each year and the additional §263A costs it was required to include in its ending inventory. Maple immediately expensed these costs for book purposes. In year 2, Maple sold all of its year 1 ending inventory, and in year 3 it sold all of its year 2 ending inventory. Year 1 Year 2 Year 3 Ending book inventory $ 2,870,000 $ 3,242,500 $ 2,517,500 Additional §263A costs 55,000 74,250 56,250 Ending tax inventory $ 2,925,000 $ 3,316,750 $ 2,573,750 Required: What book-tax difference associated with its inventory did Maple report in year 1? Was the difference favorable or unfavorable? Was it permanent or temporary? What book-tax difference associated with its inventory did Maple report in year 2? Was the difference favorable or unfavorable? Was it permanent or temporary? What book-tax difference associated with its inventory did Maple report in year 3? Was the difference favorable or unfavorable? Was it permanent or temporary?

Andretti Company has a single product called a Dak. The company normally produces and sells 86,000 Daks each year at a selling price of $60 per unit. The company’s unit costs at this level of activity are given below: Direct materials $ 8.50 Direct labor 10.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 5.00 ($430,000 total) Variable selling expenses 1.70 Fixed selling expenses 3.00 ($258,000 total) Total cost per unit $ 30.70 A number of questions relating to the production and sale of Daks follow. Each question is independent. Required: 1-a. Assume that Andretti Company has sufficient capacity to produce 107,500 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 25% above the present 86,000 units each year if it were willing to increase the fixed selling expenses by $150,000. What is the financial advantage (disadvantage) of investing an additional $150,000 in fixed selling expenses? 1-b. Would the additional investment be justified? 2. Assume again that Andretti Company has sufficient capacity to produce 107,500 Daks each year. A customer in a foreign market wants to purchase 21,500 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $12,900 for permits and licenses. The only selling costs that would be associated with the order would be $1.70 per unit shipping cost. What is the break-even price per unit on this order? 3. The company has 700 Daks on hand that have some irregularities and are therefore considered to be "seconds." Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What is the unit cost figure that is relevant for setting a minimum selling price? 4. Due to a strike in its supplier’s plant, Andretti Company is unable to purchase more material for the production of Daks. The strike is expected to last for two months. Andretti Company has enough material on hand to operate at 25% of normal levels for the two-month period. As an alternative, Andretti could close its plant down entirely for the two months. If the plant were closed, fixed manufacturing overhead costs would continue at 40% of their normal level during the two-month period and the fixed selling expenses would be reduced by 20% during the two-month period. a. How much total contribution margin will Andretti forgo if it closes the plant for two months? b. How much total fixed cost will the company avoid if it closes the plant for two months? c. What is the financial advantage (disadvantage) of closing the plant for the two-month period? d. Should Andretti close the plant for two months? 5. An outside manufacturer has offered to produce 86,000 Daks and ship them directly to Andretti’s customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti’s avoidable cost per unit that it should compare to the price quoted by the outside manufacturer?

1. Audit sampling requires that the auditor collect only a relatively small sub-sample of data, thereby initiating detection risk, i.e., the risk. . . that, based on the sample the auditor takes, the auditor will fail to detect a material misstatement in the financial statements. Data analytics seems to present a panacea to that notion of risk because, by auditing 100% of the sample, detection risk by definition is lower.
   1. It seems like data analytics is the perfect answer to the audit risk problem. So, comment on a variety of reasons that auditors might not be willing to rely on data analytics to drive audit risk down.
   2. Which do you think is costlier: sampling or data analytics? What are the different costs between sampling and data analytics?
   3. What role does cost-benefit play in the choice between employing statistical sampling versus data analytics?
2. Data analytics enables auditors to audit all transactions, rather than just a sample of transactions.
   1. Do you think that as the use of data analytics increases on audit engagements, the need for sampling will decrease?
   2. What role might the PCAOB or AICPA play in helping auditors determine when and how to incorporate data analytics into the audit?