103. Green Corp. uses a predetermined overhead rate based on direct labor hours. Green has determined that overhead was overapplied by $20,000 for the year. The WIP ending inventory was $125,000. The finished goods inventory was $200,000 and the COGS was $500,000. Required: A. Make the journal entries to close the overapplied overhead out to COGS. B. Make the journal entries to prorate the overapplied overhead.

Bell Products Corporation manufactures after-market clutch plates for motorcycles, automobiles, racing applications, and heavy industry vehicles. One of the first stages of clutch plate production is to stamp the raw plates out of rolls of metal. The process requires the use of 100 ton presses that stamp out hundreds of plates per minute.

A chemical is used to keep the presses from overheating and is automatically sprayed in fractions of seconds to keep the press operating smoothly to lubricate and prepare the metal. The chemical also keeps the press from sparking during the punching process. A small spark could cause a fire and safety hazard. Therefore, the chemical is crucial to the operation of the stamping process.

The stamping solution contains proprietary ingredients that are toxic and considered to be hazardous waste, and disposal must be through EPA approved methods. The cost to dispose of the chemical is many times greater than regular waste products.

Currently, Bell Products uses a traditional, volume-based costing system for its clutch plate products. Total manufacturing overhead for the period is allocated to the clutch plates based on machine hours.

Fred, who was recently hired, is the controller for Bell Products. He has five years of experience as a cost accountant at a lumber manufacturing facility. At the lumber plant, Fred implemented an activity-based costing system that helped the plant manager determine the profitability of various product lines. After getting to know the manufacturing process at Bell Products, Fred has determined that an activity-based costing system would help management make better decisions and track the costs of the clutch plates more accurately.

Tina is the manager of the stamping department and is good friends with Fred. Tina runs a very efficient department and has earned several bonuses for the stamping department’s production and profitability. Each of the department managers are evaluated based on the profitability of the departments based on internal cost reports.

If activity-based costing is used to allocate costs and the hazardous waste of the stamping chemical is allocated to the department that uses the product, the internally calculated profits of the stamping department would decline drastically. The decline in profitability would be due to the extreme high cost of the stamping chemical and this cost would be directed allocated to the stamping department.

Tina decides to take Fred to an expensive restaurant and eventually brings up the activity-based costing system. She voices her concern about the allocation of the hazardous waste being directly allocated to her department. She asks Fred if there is any way that he could reduce the amount of hazardous waste allocated to the stamping department. Fred values Tina’s friendship and realizes that she is on the compensation committee that evaluates Fred on an annual basis. Fred definitely wants to keep Tina happy and on his side.

As a result, Fred decides to not setup a cost pool for hazardous waste. He reasons that since the hazardous waste has always been a part of the manufacturing process, he will bury it as part of the manufacturing costs that are allocated across all departments. He justifies his decision because the activity-based system will still accurately allocate all other costs and it is much more accurate than the old traditional costing system. Fred feels no one will get hurt. Since the activity-based costing cannot be used for external reporting, Fred feels that his decision is not illegal.

Using the Institute of Management Accountants Statement of Ethical Professional Practice on page 12 of your textbook (Exhibit 1-6) as an ethical framework, answer the following questions:

What are the ethical issues in this case?

1. Activity-based costing cannot be used for external reporting. Does this fact influence your analysis of whether Fred has violated any ethical principles? Why, or why not?
2. Do you agree with Fred that no one will get hurt by burying the hazardous waste into the general manufacturing cost pool shared by all departments? Explain.
3. What are Fred’s responsibilities as a management accountant? What should he do now?

Departmental Overhead Rates

Lansing, Inc., provided the following data for its two producing departments:

Machine hours are used to assign the overhead of the Molding Department, and direct labor hours are used to assign the overhead of the Polishing Department. There are 25,000 units of Form A produced and sold and 50,000 of Form B.

Required:

1. Calculate the overhead rates for each department.

2. Using departmental rates, assign overhead to the two products and calculate the overhead cost per unit. Round your answers to the nearest cent.

How does this compare with the plantwide rate unit cost, using direct labor hours?
Relative to the plantwide rate, the cost increased  for Form A and decreased for Form B.

3. What if the machine hours in Molding were 1,200 for Form A and 3,800 for Form B and the direct labor hours used in Polishing were 5,000 and 15,000, respectively? Calculate the overhead cost per unit for each product using departmental rates. Round your answers to the nearest cent.

Compare with the plantwide rate unit costs calculated in Requirement 2. What can you conclude from this outcome?

Relative to the plantwide rate, the cost increased  for Form A and decreased for Form B.

Feedback

1. For departmental rates, OH rates are assigned to each production department either per machine hrs. or direct labor hrs. Dept. estimated OH ÷ machine hour = rate per machine hour. Dept. estimated OH ÷ direct labor hour = rate per direct labor hour

2. Machine hours are used to assign OH of the Molding Dept. and direct labor hours are used to assign OH of the Polishing Dept. Total applied OH ÷ Units of production = Unit OH cost (each form). Plantwide rate = total estimated OH ÷ total direct hours

3. Use new numbers given and calculate OH the same as in Requirement 1 & 2, compare departmental to plantwide, and give conclusion of the results.

For each of the following items, tell me where they would go on a balance sheet or that they would not go on a balance sheet. I want the name of the line on the balance sheet and the section (i.e. accounts payable in current liabilities).

1. You buy fertilizer in December to use the next spring. The fertilizer will not be delivered until it is used.
2. The costs associated with planting winter wheat.
3. You sold hay to a neighbor, but he isn’t going to pay you until February.
4. Feeder calves you purchased and plan to feed out then sell.
5. Replacement heifers.
6. Money owed to Cal Ranch at the end of the year.
7. Mortgage
   1. Principal due within the next year
   2. Principal due beyond the next year
   3. Accrued interest at the end of the year
8. Estimated income tax payable during spring 2015 on income generated during 2014 on the December 31, 2014 balance sheet.
9. Family car
10. Farm truck

Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2019, and that all income statement items reflect activities that occurred during the year ended December 31, 2019. There were no changes in paid-in capital during the year.

Required:

1. Prepare an income statement and statement of changes in stockholders' equity for the year ended December 31, 2019, and a balance sheet at December 31, 2019, for Breanna Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b-e.
2. What is the company's average income tax rate?
3. What interest rate is charged on long-term debt? Assume that the year-end balance of long-term debt is representative of the average long-term debt account balance throughout the year.
4. What is the par value per share of common stock?
5. What is the company's dividend policy (i.e., what proportion of the company's earnings is used for dividends)?

For this assignment discuss the importance of ethics in financial accounting. What issues may arise if ethics is compromised? How would this impact the company internally, how would it impact the external users such as investors, creditors, government, etc?

Explain how the choice of one of the following accounting methods over the other raises or lowers a company’s net income during a period of continuing inflation.

a. Use of FIFO instead of LIFO for inventory costing.

b. Use of a 6-year life for machinery instead of a 9-year life.

c. Use of straight-line depreciation instead of declining-balance depreciation.

     Elaborate on the following statements:

          It's wrong to say "Profit = Increase in Cash"

          It's correct to say "Profit = Increase in Net Worth"

Cost of Production Report

The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

1. Direct materials and conversion equivalent units of production for August
2. Direct materials and conversion costs per equivalent unit for August
3. Cost of goods finished during August
4. Cost of work in process at August 31

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent.

5.        Bridgemen Inc. is preparing its 2017 yearend financial statements . Prior to any possible adjustments from the items listed below, inventory was valued at $75,060, based on a physical count of the goods on hand.

1. Goods valued at 11,000 are on consignment with Clark Company.

2. Goods costing $2,800 were received from a vendor on January 4, 2018. The related invoice was received and recorded on January 12, 2018. The goods had been shipped on December 31, 2017, FOB shipping point.

3. Goods costing $8,400 were shipped on December 31, FOB shipping point. These were delivered to the customer on January 2, 2018. The goods had been included in the physical count of inventory, and the sale had been recorded upon delivery to the customer.

4. A shipment of goods to a customer priced at $3,500, terms FOB destination, delivered on January 5, 2018, was not included in the inventory count at 12/31. They cost Bridgemen $2,600. The sale was recorded in 2017.

5. An invoice from Cole Inc. for goods costing $5,500 was received and recorded on December 27, 2017. The related goods were shipped FOB destination on December 27 and arrived at Bridgemen’s business on January 3, 2018.

6. Goods valued at $6,500 are on consignment from Fields Corp. These goods were not included in the physical count.

7. A $9,750 shipment of goods to a customer on December 30, 2017 FOB destination was recorded as a sale in 2017. The goods, costing $8,250, were delivered to the customer on January 8, 2018.

5a. Justify your treatment of each of the above items in the calculation of ending inventory at December 31, 2017

5b. Compute the proper inventory amount for the December 31, 2017 balance sheet.

5c. By how much would Bridgemen’s net income be misstated if no adjustments had been made for the items above?

5d. If Bridgemen did not find this list of possible errors until after the audit were completed, but before the end of 2018, prepare any necessary entry. Bridgemen uses the periodic inventory system and assume the amounts are material. Hint: Chapter 23 could be useful…

What is the ATCF rate of return for machine that costs 300,000, lasts for 8 years, has zero salvage value, and is classified as 5 year MACRS property? The machine will be purchased with a 20.0% down payment and a four year loan for the remaining amount at an annual interest rate of 11.50%. The machine produces net revenues after deducting direct and indirect expenses but not depreciation of 46,000 in year 1, 120,000 in years 2 to 6, 60,000 in year 7, and 40,000 in year 8. Use a tax rate of 21.00%

Agri Machinery P/L enters into a lease (to a lessee) agreement and leases harvesting equipment to Grain Holdings Ltd. The lease consists of the following;  Date of inception: 1/1/13  Duration of lease: 4 years  Life of leased asset: 5 years  Lease payments (annual): $160,000 (annual) includes $15,000 for maintenance and insurance costs per annum.  $70,000 (added to final payment)  Implicit rate of interest is 11.5% (is this the actual rate)  Fair value: $490,384 The asset was acquired on 12/11/2012 Required; a) Check that the implicit rate is correct against FV. b) Do the journal entries for the Lessor (using the Net Method) for acquisition,

Ms. Brown apparently wasn't up on pension accounting because the plan file contains only the following note: Remember to tell boss that I need help with accounting for these things! -C.B.

It takes a couple of days to assemble the information you need, but you finally get it all together and summarize it as follows:

Pension Plan

Tasks:

• Prepare a pension worksheet using Microsoft Excel for both years 2014 and 2015 and the necessary computations and amortization of the loss (2015), using the corridor approach.
• Prepare in the same worksheet the journal entries to reflect all pension plan transactions and events at December 31 of each year.
• For 2015, indicate (in the same worksheet) the pension amounts to be reported in the financial statements.
• Explain alternative measures for valuing the pension obligation. What would you advise for Panache?

Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

The following information about the jobs was given for April.

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.
What is the cost of goods manufactured?

a.$ 249,610

b.$ 178,340

c.$ 215,670

d.$ 144,400

Using the appropriate present value table and assuming a 12% annual interest rate, determine the present value on December 31, 2018, of a five-period annual annuity of $7,700 under each of the following situations: (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.)

1.The first payment is received on December 31, 2019, and interest is compounded annually.
2.The first payment is received on December 31, 2018, and interest is compounded annually.
3.The first payment is received on December 31, 2019, and interest is compounded quarterly.