Assume that MTA Sandwiches sells sandwiches for $3.75 each. The cost of each sandwich follows:

One of MTA's regular customers asked the company to fill a special order of sandwiches at a selling price of $2.60 each for a fund-raising event sponsored by a social club at the local college. MTA has capacity to fill it without affecting total fixed costs for the month. MTA's general manager was concerned about selling the sandwiches below the cost of $3.15 per sandwich and has asked for your advice.

Required:

a. Prepare a schedule to show the impact on MTA's profits of providing 500 sandwiches in addition to the regular production and sales of 19,600 sandwiches per month. (Select option "higher" or "lower", keeping Status Quo as the base. Select "None" if there is no effect.)

b. Based solely on the data given, what is the lowest price per sandwich at which the special order can be filled without reducing MTA's profits? (Round your answer to 2 decimal places.)

Account Balances as of December 31, 2018

Debit Balance Credit Balance

100000 Bank Account $277,518

110100 Accounts Receivable (Direct Posting Account) 92,670

110150 Allowance for Bad Debts 2,500

200600 Inventory-Operating Supplies 8,832

200900 Inventory-Raw Materials (Direct Post) 52,000

200910 Inventory-Finished Goods (Direct Post) 281,298

200920 Inventory-Trading Goods (Direct Post) 66,474

210000 Prepaid Insurance 5,000

212000 Prepaid Advertising 1,100

220110 Land (Direct Post) 425,000

220210 Production Machinery, Equip & Fixtures (Dir.Post) 915,000

220310 Accumulated Depreciation-Machinery (Direct Post) 305,000

300200 Accounts Payable (Direct Posting Account) 48,000

300700 Payables-Salaries and Wages 94,313

300800 Accrued Expenses Payable 1,200

320000 Accrued Tax – Output 3,000

329000 Common Stock 1,000,000

329100 Additional Paid-in-Capital 52,870

330010 Retained Earnings (Direct Posting) 618,009

Events During January 2019

Event Date Description of Event

1 January 3 Employees are paid monthly on the first business day of the month for work done in the previous month. (Ignore payroll taxes for this assignment.) Accounting wrote and distributed the paychecks.

2 GBI received $60,000 in safety product inventory and $40,000 in raw materials from Dallas Bike Basics. This inventory was ordered on December 28. The payment terms for the invoice total of $100,000 are net 10 days. GBI paid the CWX shipping company $500 with a manual check for the shipment of the goods. The bill of lading showed that the safety product inventory arrived in 6 boxes with a total weight of 50 lbs. and the raw materials came on a pallet and weighed 60 lbs. Shipping charges are allocated based on weight.

3 Windy City Bikes in Chicago, IL ordered $22,000 of bicycle accessories from GBI. The cost of the accessories (to GBI) is $15,000. The goods were shipped to Windy City immediately via UPS using Windy City’s UPS shipping number. The terms of payment for Windy City’s order are 3/10 net 30 days.

4 January 7 GBI received payment of $14,000 from Northwest Bikes in Seattle, WA for the balance due on their account.

5 January 10 GBI’s account on the utility company website is updated at the end of each month when the meter is read. GBI uses this data to accrue the expenses at the end of each month (in this case on December 31st.) This allows recognition of the expense in the correct period. Expenses are usually accrued at the end of the month as “Accrued Expenses”. GBI paid the December utility bill via the company’s automatic electronic bill pay program.

6 GBI’s advertisement in the English language edition of Italian Cycling Journal was published today. This ad was prepaid at the end of July for six months of advertising, August through January, (Five months of advertising have already been used.)

7 January 11 The office manager in San Diego ordered $432 of office (operating) supplies from Staples. While on the way back from a delivery, one of the warehouse staff picked up the Staples order and brought it to GBI’s office. GBI has an account with Staples and payment terms are net 10. Operating supplies expense is figured at the end of the month determined by the amount of supplies used during the month.

8 GBI ordered $75000 in raw materials from Space Bike Composites in Houston, TX. Terms of payment to Space Bikes are net 30.

9 GBI received payment from Windy City Bikes for their order from January 3. Windy City paid the invoice amount less the discount for paying within 10 days.

10 January 12 GBI paid $100,000 via bank transfer for the inventory order that they received from Dallas Bike Basics January 3.

11 January 13 In order to better track inventory, GBI ordered a bar-coding and tracking system which will be installed and tested by Computer Specialists, Inc. (CSI). The system will allow employees to track inventory using mobile devices and special software which will link into their new computerized accounting system. The barcode system costs $6,000 (including sales tax) and CSI will charge GBI $1,300 for the installation and tests. GBI paid a deposit of $2,000 on the system and the remainder is due and payable when the system is installed. GBI will classify the bar-coding system as “Production Machinery, Equipment and Fixtures”.

12 January 17 GBI paid an invoice from Lightbulb Accessory Kits for ordered goods that were received on December 20. The amount of the invoice from Lightbulb is $15,890 due net 30.

13 The city of Denver will be hosting a decathlon at the end of February. The event is expected to create demand for high quality bikes. Rocky Mountain Bikes in Denver, CO placed an order with GBI for $128,000 worth of bicycles to be delivered immediately. Rocky Mountain will pay the shipping. The bikes cost GBI $78000. GBI shipped the order immediately so that Rocky Mountain can start promoting the bikes. Because Rocky Mountain is a good customer, GBI is giving them special terms of net 45 days on this order.

14 GBI received raw materials inventory ordered from Space Bike Composites January 11. Shipping charges of $600 were included in the invoice from Space Bike.

15 GBI received notice that Bunky’s Bicycle Emporium had declared section 13 bankruptcy which meant GBI would not be able to collect the $3,350 that Bunky’s owed them.

16 January 18 GBI received a $90,000 funds transfer from Silicon Valley Bikes in Palo Alto for the balance due on their account.

17 January 19 GBI paid Staples for the office supplies they received January 11.

18 SoCal Bikes in Irvine, CA placed an order for $2500 in bicycle helmets for a special event in February. The merchandise cost GBI $1,300. SoCal sent a truck to the GBI distribution center in SanDiego, CA and picked up the merchandise directly from GBI’s warehouse. Terms of payment are net 30. (Don’t forget to charge sales tax of 6.00% for this order.)

19 January 24 Beantown Bikes in Boston, MA placed an order with GBI for $27,000 in bicycles. The cost of the bicycles is $17,000. Beantown Bikes is a new customer. Its buyers saw GBI’s booth at a trade show. Because Beantown is a new customer, they must either wait until their credit can be approved or pay for the order before GBI will ship the bikes to them.

20 January 25 GBI has been offered the opportunity to advertise in the Bicycle Times online magazine for a reduced price if they pay for three months in advance. In light of the upcoming Tour de France, the advertising is a great opportunity for GBI to get additional recognition. The advertising will start in February. GBI wrote a check for $9,000 for three months of advertising.

21 January 26 GBI received notification from their bank that Beantown Binkes had transferred funds into their account for their prior order, so GBI’s warehouse personnel shipped Beantown’s order. Beantown will be responsible for paying Fed-X $400 for shipping the order.

22 January 27 The county approved GBI’s building plans for their new warehouse. Estimated building costs are $1,100,000 which will be funded via a mortgage from Bank of America. GBI plans to break ground on the new building April 18th of this year.

23 GBI sent a $31,000 check to Night Rider Aluminum Products for an order of bicycle parts GBI received December 30th.

24 Big Apple Bikes in New York City is expanding to another location in New York and needs to stock the new location. GBI received a phone order from Big Apple for $230,000 in bicycles and $108,500 in bicycle accessories and safety gear at special discount prices. The cost of the bicycles in this order is $170000 and the cost of the accessories is $65,000. Big Apple will have a contract trucking company pick up the order when it is ready. The order is sent to GBI’s warehouse for picking and packing, which may take a couple days. Payment terms to Big Apple for this order are net 30.

25 January 31 GBI pays sales tax once a quarter via the state’s electronic filing and payment system. GBI filed its return and paid its sales tax for the quarter ending December 31.

26 GBI paid February’s rent of $4,000 for the office and warehouse space in San Diego.

27 CSI installed and tested the new barcode system. The warehouse manager approved the installation and commented that she thinks it works great. GBI wrote a check to CSI for the balance owed and gave it to the installer.

28 Big Apple’s truck arrived at GBI’s warehouse and picked up the order from January 27th.

Adjustment information as of January 31, 2019 not already given in the original transaction(s):

1. Based on prior experience, GBI estimates that approximately 2 % of the accounts receivable balance will become bad debt. GBI writes off bad debts as they occur and recognizes bad debt expense based on analyzing accounts receivable as an adjusting entry each month.

2. As a control measure, physical inventories are taken on a periodic basis alternating between the raw materials inventory, finished goods inventory and trading goods inventory. Physical inventory of the finished goods inventory was taken at the end of January. It was determined that the value of the finished goods merchandise on hand was $17,000.

3. GBI counted the office (operating) supplies on hand after the close of business on the last day of the month and determined the cost of the unused office supplies to be $1000.

4. Production Machinery, Equipment and Fixtures were placed in service on January 1, 2014, with an expected service life of 15 years and no salvage value. The bar-code system has a 5-year life and no salvage value. GBI depreciates fixed assets on a straight-line basis and those assets acquired in the first half of the months are depreciated for the entire month, while fixed assets placed in service during the last half of the month are not depreciated until the second month. Depreciation is rounded to the nearest dollar and assets are depreciated on a monthly basis (i.e. number of days in the month is not of consequence).

5. GBI used the Internet to review the monthly charges for utilities the business consumed during January. Based on the Internet report, the amount to be billed by the utilities company for January usage is the same as was billed for December.

6. Liability insurance for the six-month period ending on February 28, 2019 was paid last September on the first of the month. Liability insurance is assumed to be utilized uniformly over the six-month policy period.

7. GBI needs to recognize the wages expense for the month. Since all employees are paid salaries and no changes have been made, this amount is the same as the previous month salaries. (For purposes of this assignment, ignore manufacturing and assume all labor costs will be expensed.)

Nilam Patel is the primary stockholder in two hotel corporations. One corporation owns a 90‐room economy property located in the suburbs of a large western town. The other corporation is a 350‐room full‐service convention hotel in the downtown city center for which Nilam has employed a management company to operate the property. Nilam is preparing balance sheets for both properties using a common size format. Complete the two balance sheets. Then answer the questions that follow.

1. What was the amount of cash in the 90‐room property's Cash in House Banks account at year end?
2. What is the amount of Allowance for Doubtful Accounts in the 350‐room property? Do you think it is excessive? Explain your answer?
3. What would explain the lack of a beverage inventory value in the 90‐room hotel?
4. What was the dollar amount of Total Assets in the 90‐room hotel?
5. What was the dollar amount of Total Assets in the 350‐room hotel?
6. What was the dollar amount of Current Maturities of Long‐Term Debt in the 350‐room property? Why is that amount likely so much higher than for the 90‐room property?
7. What was the dollar amount of Paid in Capital for the 90‐room property?
8. What is the Owners' Equity percentage of Total Assets in the 90‐room property? What is it in the 350‐room property?

Sounds Extreme Inc.

Sounds Extreme Inc. (“Sounds”) sells high quality hearing protection.

Sounds most popular product is a set of ear plugs designed for smaller ear sizes, offered in 5 different colours. The production process involves both forming and laser cutting. Sounds has a monthly production capacity of 400 hours on the forming machine and 1,200 hours on the laser machine. Both machines are operating at 85% capacity every month to satisfy demand from existing customers. The direct labour rate per hour is $20 for forming and $25 for cutting.

The revenue and costs per unit for a pair of ear plugs is provided below.

On August 1, 2020, Sportsco, a retailer of recreation equipment, contacts the production manager of Sounds with a special order. Sportsco requires 600 sets of ear plugs by October 31, 2020.

The production manager determined that Sounds would be ready to produce the sets for Sportco beginning September 1, 2020. This allows 2 months to fulfill the order.

Sportco has offered a price of $65 per set of ear plugs. No variable selling costs will be incurred on the order.

When the production manager presents the offer to the sales manager of Sounds, the sales manager is prepared to reject the special order. In the sales manager’s view, the sales price offered by Sportsco is $15 below the sales price charged to a regular customer of Sounds. Therefore, profits would decrease by 600 x $15 = $9,000.

Required:

Prepare an analysis of the special order for the sales manager. Include both quantitative and qualitative analysis.

On January 1, 2017, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $325,200. Stinson’s book value on that date consisted of common stock of $100,000 and retained earnings of $192,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $216,800. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company’s accounting record by $74,200 and an unrecorded customer list (15-year remaining life) assessed at a $50,100 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year end, there are no intra-entity payables or receivables.

Intra-entity inventory sales between the two companies have been made as follows:

The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow:

a. Show hos Mcllroy determined the $384,548 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson’s income.

b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018.

The following transactions apply to Pecan Co. for Year 1, its first year of operations:

1. Received $38,000 cash in exchange for issuance of common stock.
2. Secured a $101,000 ten-year installment loan from State Bank. The interest rate is 6 percent and annual payments are $13,723.
3. Purchased land for $20,000.
4. Provided services for $115,000.
5. Paid other operating expenses of $39,000.
6. Paid the annual payment on the loan.

Required

1. Organize the transaction data in accounts under an accounting equation.
2. Prepare an income statement and balance sheet for Year 1.
3. What is the interest expense for Year 2? Year 3?

The following transactions apply to Pecan Co. for Year 1, its first year of operations:

1. Received $38,000 cash in exchange for issuance of common stock.
2. Secured a $101,000 ten-year installment loan from State Bank. The interest rate is 6 percent and annual payments are $13,723.
3. Purchased land for $20,000.
4. Provided services for $115,000.
5. Paid other operating expenses of $39,000.
6. Paid the annual payment on the loan.

Required

1. Organize the transaction data in accounts under an accounting equation.
2. Prepare an income statement and balance sheet for Year 1.
3. What is the interest expense for Year 2? Year 3?

Q1.

In this question, you need to provide an amount for each transaction.

1- A merchandising company purchases merchandise inventory on credit, the credit terms are 2/10,n/30.

2- The company pays the amount due within the purchase discount period.

Required:

A. Record the journal entries for both transactions: issuance of the invoice, payment.

B. Prepare the T-Accounts for: Accounts Payable and Merchandise Inventory.

Q2-

On your own words, talk briefly about two of the inventory costing methods, give one example of each method.

Q3.

A- Explain how to calculate the net income for merchandising companies, why is it different than calculating the net income for service companies.

B- Prepare the income Statement for Yazeed merchandising company for December 2018 that has the followings:

Sales: 1,000,000

Sales discount: 20,000

Salaries expenses: 100,000

Advertising expenses: 100,000

Sales returns and allowances: 50,000

Insurance expenses: 10,000

Costs of Goods Sold: 450,000

On January 1, 2018, Access IT Company exchanged $910,000 for 40 percent of the outstanding voting stock of Net Connect. Especially attractive to Access IT was a research project underway at Net Connect that would enhance both the speed and quantity of client-accessible data. Although not recorded in Net Connect's financial records, the fair value of the research project was considered to be $1,870,000.

In contractual agreements with the sole owner of the remaining 60 percent of Net Connect, Access IT was granted (1) various decision-making rights over Net Connect's operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Access IT established itself as the primary beneficiary of Net Connect. Immediately after the purchase, Access IT and Net Connect presented the following balance sheets:

Each of the above amounts represents a fair value at January 1, 2018. The fair value of the 60 percent of Net Connect shares not owned by Access IT was $1,365,000.

Prepare an acquisition-date consolidated worksheet for Access IT and its variable interest entity

Cost of Goods Sold

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 54,200 units will be produced, with the following total costs:

Next year, Pietro expects to purchase $116,000 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

Pietro expects to produce 54,200 units and sell 53,500 units. Beginning inventory of finished goods is $39,500, and ending inventory of finished goods is expected to be $31,000.

Required:

1. Prepare a statement of cost of goods sold in good form.

2. What if the beginning inventory of finished goods decreased by $3,000? What would be the effect on the cost of goods sold?

• increase
• decrease
• no change

by $

Our Chapter 4 discussion will focus on the purpose and benefits of financial forecasting.

Commonly, financial forecasting is being used in a variety of businesses to control any upcoming risks, thereby assisting in making essential adjustments before issues will occur. In order for companies to efficiently accomplish their goals, whether it is a short or long-term one, the need for a capable strategy to manage the desired outcome is required. In general, short-term forecasts are formed for tactical reasons in a seasonal period of time (6 months or less). For example, Mr. Smith, who just established his own start-up smoothie shop 4 months ago. The business did not bring any profit and only increased its debts because of old operated equipment and salaries that the owner had to pay for his vast network of employers. Based on the poor performance, Mr. Smith decided to reconsider the production planning and control over the products manufacturing in advance to receive sales fluctuations. He invested in almost brand-new equipment, updated the menu for smoothies, and convinced his family to work in his business until the inventory occupies its expenses within 3 months. This strategy can be very significant for further production and business growth, while the general trends may be of less consequence. However, if the smoothie business would not still reach its financial goal after 3 months and receive poor sales return, the business will expect a negative impact on losing its credibility. Moreover, if businesses are unable to meet demand, it causes the unsatisfactory experience of customers, which eventually leads to further loss of sales down the line.

As for long term forecasting, business individuals are accountable for moving forward its mission and vision and can be accomplished from planning ahead from 6 months to years and more. Objectives may include detailed improvements in the company’s competitive position, profitability, return on investments, etc. All in all, the main criteria in following the forecast is for businesses to have an accurate and realistic management process along with implementing an effective decision making based on the planning.

Using the discussion area, describe how forecasting can effect the short and long term goals of the organization. In answering please give some thought to how the lack of forecasting can negatively affect a business.

On your own words, talk briefly about two of the inventory costing methods, give one example of each method.

Problem 2-16 Plantwide Predetermined Overhead Rates; Pricing [LO2-1, LO2-2, LO2-3]

Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates:

During the year, Job 550 was started and completed. The following information is available with respect to this job:

Required:

1. Assume that Landen has historically used a plantwide predetermined overhead rate with direct labor-hours as the allocation base. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

2. Assume that Landen’s controller believes that machine-hours is a better allocation base than direct labor-hours. Under this approach:

a. Compute the plantwide predetermined overhead rate.

b. Compute the total manufacturing cost of Job 550.

c. If Landen uses a markup percentage of 200% of its total manufacturing cost, what selling price would it establish for Job 550?

(Round your intermediate calculations to 2 decimal places. Round your "Predetermined Overhead Rate" answers to 2 decimal places and all other answers to the nearest whole dollar.)

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

* $3 per unit variable; $249,000 fixed each year.

The company’s $36 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Required:

1. Using variable costing, what is the unit product cost for both years?

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

Jason has an opportunity with his current employer to work overseas for five years. If he takes this option, Jason would move overseas, while his family would stay in Canada. In this case, Jason would visit his family often, returning to Canada for his six weeks of vacation and as many holidays as possible. Jason is unsure how working overseas will impact his residency in Canada for tax purposes. Explain the difference between deemed resident, ordinarily resident, and non-resident for an individual for tax purposes in Canada. In addition, Jason knows that an individual can be considered either a full-time or part-time resident, but he doesn't know the difference between the two. Explain the difference between full-time and part-time residents to Jason. (Full answer please and thanks you)

Cost of Goods Sold Budget

Wilmington Chemical Company uses oil to produce two types of plastic products, P1 and P2. Wilmington budgeted 31,900 barrels of oil for purchase in June for $63 per barrel. Direct labor budgeted in the chemical process was $221,100 for June. Factory overhead was budgeted $361,700 during June. The inventories on June 1 were estimated to be:

The desired inventories on June 30 were:

Use the preceding information to prepare a cost of goods sold budget for June.