Q1. Accounting in the financial institutions has special characteristics compared to the non-financial institutions, discuss this statement and explain characteristics of balance sheets, income statement and cash flow statement in banks.
In: Accounting
Coronado Company follows the practice of pricing its inventory
at the lower-of-cost-or-market, on an individual-item
basis.
|
Item No. |
Quantity |
Cost per Unit |
Cost to Replace |
Estimated Selling Price |
Cost of Completion and Disposal |
Normal Profit |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
1320 |
1,800 | $3.58 | $3.36 | $5.04 | $0.39 | $1.40 | ||||||||||||
|
1333 |
1,500 | 3.02 | 2.58 | 3.92 | 0.56 | 0.56 | ||||||||||||
|
1426 |
1,400 | 5.04 | 4.14 | 5.60 | 0.45 | 1.12 | ||||||||||||
|
1437 |
1,600 | 4.03 | 3.47 | 3.58 | 0.28 | 1.01 | ||||||||||||
|
1510 |
1,300 | 2.52 | 2.24 | 3.64 | 0.90 | 0.67 | ||||||||||||
|
1522 |
1,100 | 3.36 | 3.02 | 4.26 | 0.45 | 0.56 | ||||||||||||
|
1573 |
3,600 | 2.02 | 1.79 | 2.80 | 0.84 | 0.56 | ||||||||||||
|
1626 |
1,600 | 5.26 | 5.82 | 6.72 | 0.56 | 1.12 | ||||||||||||
From the information above, determine the amount of Coronado
Company inventory.
In: Accounting
P8-9 Milford Company determined its ending inventory at cost and at lower of cost and net realizable value at December 31, 2015, 2016, and 2017, as follows:
Cost Lower of Cost and Net Realizable Value
Dec. 31, 2015 $60,000 $60,000
Dec. 31, 2016 79,000 74,500
Dec. 31, 2017 78,800 69,000
Instructions (a) Prepare the journal entries that are required at December 31, 2016 and 2017, assuming that a periodic inventory system and the direct method of adjusting to NRV are used. (b) Prepare the journal entries that are required at December 31, 2016 and 2017, assuming that a periodic inventory system is used, with inventory recorded at cost and reduced to NRV through the use of an allowance account.
In: Accounting
Daybook Inc. budgeted production of 403,500 personal journals in 20Y6. Paper is required to produce a journal. Assume six square yards of paper are required for each journal. The estimated January 1, 20Y6, paper inventory is 40,400 square yards. The desired December 31, 20Y6, paper inventory is 38,900 square yards. Paper costs $0.40 per square yard.
Each journal requires assembly. Assume that eight minutes are required to assemble each journal. Assembly labor costs $13.00 per hour.
Prepare a cost of goods sold budget for Daybook Inc. using the information above. Assume the estimated inventories on January 1, 20Y6, for finished goods and work in process were $28,000 and $16,500, respectively. Also assume the desired inventories on December 31, 20Y6, for finished goods and work in process were $30,000 and $14,300, respectively. Factory overhead was budgeted at $214,600. Round your interim calculations to nearest cent, if required.
| DAYBOOK INC. | |||
| Cost of Goods Sold Budget | |||
| For the Year Ending December 31, 20Y6 | |||
| $ | |||
| $ | |||
| Direct materials: | |||
| $ | |||
| $ | |||
| Cost of direct materials placed in production | $ | ||
| Total work in process during period | $ | ||
| $ | |||
| $ | |||
In: Accounting
Magnolia Manufacturing makes wing components for large aircraft. Kevin Choi is the pro-
duction manager, responsible for manufacturing, and Michelle Michaels is the marketing
manager. Both managers are paid a flat salary and are eligible for a bonus. The bonus is
equal to 1 percent of their base salary for every 10 percent profit that exceeds a target. The
maximum bonus is 5 percent of salary. Kevin’s base salary is $180,000 and Michelle’s is
$240,000.
The target profit for this year is $6 million. Kevin has read about a new manufacturing
technique that would increase annual profit by 20 percent. He is unsure whether to employ the
new technique this year, wait, or not employ it at all. Using the new technique will not affect
the target.
Required
a. Suppose that profit without using the technique this year will be $6 million. By how much
will Kevin’s bonus change if he decides to employ the new technique? By how much will
Michelle’s bonus change if Kevin decides to employ the new technique?
b. Suppose that profit without using the technique this year will be $8.5 million. By how
much will Kevin’s bonus change if he decides to employ the new technique? By how much
will Michelle’s bonus change if Kevin decides to employ the new technique?
c. Suppose that profit without using the technique this year will be $4.8 million. By how
much will Kevin’s bonus change if he decides to employ the new technique? By how much
will Michelle’s bonus change if Kevin decides to employ the new technique?
d. Is it ethical for Kevin to consider the impact of the new technique on his bonus when
deciding whether or not to use it? Explain.
e. Assess the management control system used at Magnolia Manufacturing and provide
recommendations for changes, if any are required. Be sure to discuss:
• Decision authority
• Performance measures
• Compe nsation
In: Accounting
3. A receives a gift from B. B’s basis in the property
was $200,000 and the fair market value of the property was $500,000
on the date of the gift. B held the property for 5 years and
incurred $25,000 of gift tax due to the gift. A week after A
receives the property, A sells the property. What are the tax
results to A if A sells the property for $510,000? $450,000?
4. Same facts as above except B had a basis of $750,000 in the
property. What are the results to A now?
5. Assume that B knew the tax rules applicable to
gifts in question 4. Why wouldn’t B sell the property, take a
$200,000 loss and make a gift of cash to B of $500,000?
In: Accounting
On October 1, 2020, Sage Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $135,200, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Sage’s financial statements are prepared on a calendar-year basis. Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Sage Equipment Company for the entire term of the note. Assume that reversing entries are not made on January 1, 2021 and January 1, 2022
In: Accounting
The Alpine House, Inc., is a large retailer of snow skis. The company assembled the information shown below for the quarter ended March 31:
| Amount | ||
| Sales | $ | 1,496,000 |
| Selling price per pair of skis | $ | 440 |
| Variable selling expense per pair of skis | $ | 50 |
| Variable administrative expense per pair of skis | $ | 18 |
| Total fixed selling expense | $ | 145,000 |
| Total fixed administrative expense | $ | 105,000 |
| Beginning merchandise inventory | $ | 70,000 |
| Ending merchandise inventory | $ | 105,000 |
| Merchandise purchases | $ | 300,000 |
Required:
1. Prepare a traditional income statement for the quarter ended March 31.
2. Prepare a contribution format income statement for the quarter ended March 31.
3. What was the contribution margin per unit?
In: Accounting
| Explanation textbox: | ||
| Finishing | ||
| Hurdle Rate: | 16% | |
| Original Cost: | $ (1,600,000) | |
| Net Cash Inflows: | ||
| Year 1 | $ 345,000 | |
| Year 2 | 495,000 | |
| Year 3 | 365,000 | |
| Year 4 | 275,000 | |
| Year 5 | 329,000 | |
| Year 6 | 429,000 | |
| Year 7 | 329,000 | |
| Year 8 | 279,000 | |
| Payback period: | ||
| Internal Rate of Return: | ||
| Net Present Value: | ||
| Explanation textbox: | ||
In: Accounting
| Schultz Inc. is deciding to automate either its Molding department or its Finishing department. Funds are only available for one automation. You must decide which department will be automated. The original cost, net cash inflows, and hurdle rates are shown below for each project. Calculate the payback period, internal rate of return, and net present value for each project. Then decide which department you would choose to automate based on this information. Explain your answer. Calculations and explanations can be given on this worksheet. | ||||
| Molding | ||||
| Hurdle Rate: | 14% | |||
| Original Cost: | $ (845,000) | |||
| Net Cash Inflows: | ||||
| Year 1 | $ 267,000 | |||
| Year 2 | 245,000 | |||
| Year 3 | 221,000 | |||
| Year 4 | 215,000 | |||
| Year 5 | 190,000 | |||
| Year 6 | 168,000 | |||
| Payback period: | ||||
| Internal Rate of Return: | ||||
| Net Present Value: | ||||
In: Accounting
which of the following methods can be used to estimate ending inventory when a physical count is not possible:
1. lower of cost or market
2. FIFO
3. perpetual cost
4. gross profit
Explain the answer in detail.
In: Accounting
You are auditing payroll for the
Cast IronCast Iron
Technologies company for the year ended October 31,
20162016.
Included next are amounts from theclient's trial balance, along with comparative audited information for the prior year.
LOADING...
(Click the icon to view the amounts from the trial balance.)
LOADING...
(Click the icon to view the additional information.)
Requirements
|
a. |
Use the final balances for the prior year and the information in items 1 through 5 to develop an expected value for each account, except sales. (Round to the nearest whole dollar.) |
|
b. |
Calculate the difference between your expectation and the client's recorded amount as a percentage using the formula (expected value-recorded amount)/expected value. (Round to the nearest hundredth percent, X.XX%.) |
(Note 1: When computing the expected value of factory hourly payroll, you must take into consideration both the
44%
wage increase and the
66%
increase in the number of units produced and sold. Note 2: Use the increase in the
10/31/20162016
preliminary sales balance over the
10/31/20152015
audited sales balance to determine the expected value for sales commissions on
10/31/20162016.)
|
Requirement a. |
||
|
(A) |
(B) |
|
|
Preliminary Balance |
Expected Value |
|
|
10/31/2016 |
10/31/2016 |
|
|
Executive salaries |
649,215 |
|
|
Factory hourly payroll (see Note 1) |
11,597,899 |
|
|
Factory supervisors' salaries |
797,096 |
|
|
Office salaries |
2,694,881 |
|
|
Sales commissions (see Note 2) |
2,395,881 |
| Audited Balance | Preliminary Balance | |
| 10/31/15 | 10/31/16 | |
| Sales* | $55,934,900 | $60,969,041 |
| Executive salaries | 544,881 | 649,215 |
| Factory hourly payroll | 9,284,511 | 11,597,899 |
| Factory supervisors' salaries | 729,582 | 797,096 |
| Office salaries | 2,239,582 | 2,694,881 |
| Sales commissions | 2,798,321 | 2,395,881 |
| *Sales have increased 9% over prior year. 3% percent of that is due to an increase in the average selling price. The remaining 6% is attributed to an increase in the number of units sold. | ||
You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances.
|
1. |
There has been a significant increase in the demand for
Cast IronCast Iron's products. The increase in sales was due to both an increase in the average selling price ofthreethree percent and an increase in units sold that resulted from the increased demand and an increased marketing effort. |
|
2. |
Even though sales volume increased there was no addition of executives, factory supervisors, or office personnel. |
|
3. |
All employees including executives, but excluding commission
salespeople, received a
fourfour percent salary increase starting November 1,20152015. Commission salespeople receive their increased compensation through the increase in sales. |
|
4. |
The increased number of factory hourly employees was
accomplished by recalling employees that had been laid off. They
receive the same wage rate as existing employees.
Cast IronCast Iron does not permit overtime. |
|
5. |
Commission salespeople receive a
sevenseven percent commission on all sales on which a commission is given. Approximately6060 percent of sales earn sales commission. The other4040 percent are "call-ins," for which no commission is given. Commissions are paid in the month following the month they are earned. |
PrintDone
In: Accounting
Washington, Inc., makes three models of motorized carts for vacation resorts, X-10, X-20, and X-40. Washington manufactures the carts in two assembly departments: Department A and Department B. All three models are processed initially in Department A, where all material is assembled. The X-10 model is then transferred to finished goods. After processing in Department A, the X-20 and X-40 models are transferred to Department B for final assembly, and then transferred to finished goods. There were no beginning work-in-process inventories on April 1. Data for April are shown in the following table. Ending work in process is 25 percent complete in Department A and 60 percent complete in Department B. Conversion costs are allocated based on the number of equivalent units processed in each department. Total X-10 X-20 X-40 Units started 500 300 200 Units competed in department A 400 260 180 Units completed in department 225 165 Materials 450,000 75,000 135,000 240,000 Conversion costs: Department A 264,000 Department B 42,000 Total conversion costs 306,000 Required: a) What is the unit cost of each model transferred to finished goods in April? b) what is the balance of work-in-process inventory on April 30 for Department A? Department B?
In: Accounting
On January 1, 2017, Alison, Inc., paid $83,600 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $279,500 and liabilities of $118,500. A patent held by Holister having a $6,800 book value was actually worth $42,800. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $33,500 and declared and paid dividends of $11,000. In 2018, it had income of $68,000 and dividends of $16,000. During 2018, the fair value of Allison’s investment in Holister had risen from $92,900 to $103,200.
a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018?
In: Accounting
|
Due to erratic sales of its sole product�a high-capacity battery for laptop computers�PEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below: |
| Sales (13,200 units at $30 per unit) | $396,000 |
| Variable expenses |
198,000 |
| Contribution margin | 198,000 |
| Fixed expenses | 220,500 |
| Net operating loss |
$(22,500) |
| Requirement 1: |
|
Compute the company's CM ratio and its break-even point in both units and dollars. |
| CM ratio | % | |
| Break-even point in units | units | |
| Break-even point in dollars | $ | |
| Requirement 2: |
|
The president believes that a $6500 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $90,000 increase in monthly sales. If the president is right, by how much will the company's net operating income increase or decrease? (Use the incremental approach in preparing your answer.) |
| Net operating income | $ | (Click to select)increasedecrease |
| Requirement 3: |
|
Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $34,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted?(Net loss should be indicated by a minus sign. Omit the "$" sign in your response.) |
| Sales | $ |
| Variable expenses | |
| Contribution margin | |
| Fixed expenses | |
| (Click to select)Net operating lossNet operating income |
$ |
| Requirement 4: |
|
Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would help sales. The new package would increase packaging costs by 80 cents per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4500?(Round units to nearest whole unit.) |
| Sales | units |
| Requirement 5: |
|
Refer to the original data. By automating certain operations, the company could reduce variable costs by $3 per unit. However, fixed costs would increase by $60,000 each month. |
| (a) |
Compute the new CM ratio and the new break-even point in both units and dollars.(Round units to nearest whole unit, CM ratio to nearest whole percent. Omit the "%" and "$" signs in your response.) |
| CM ratio | % | |
| Break-even point in units | units | |
| Break-even point in dollars | $ | |
| (b) |
Assume that the company expects to sell 20,000 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.)(Omit the "$" and "%" signs in your response.) |
| Not Automated | Automated | |||||
| Total | Per Unit | % | Total | Per Unit | % | |
| Sales (26,000 units) | $ | $ | $ | $ | ||
| Variable expenses | ||||||
| Contribution margin |
$ |
$ |
||||
| Fixed expenses | ||||||
| Net operating income |
$ |
$ |
||||
In: Accounting