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The ledger of Cranston Corporation has the following account balances at the company's first year end of October 31, 2018.

Prepare the closing entries at October 31, 2018.

How can you use accounting to manage your personal finances?

What are the benefits of keeping track of personal transactions – income and expenses – in an organized manner?  

What are some of the possible risks if you don’t keep track of personal transactions?

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Managers create budgets from anticipated financial conditions and market expectations for future periods. They calculate revenues and expenses for the specific period being budgeted. Once that period has come, managers compare the actual expenses to the budget numbers and evaluate the department’s performance (Adams, 2017). This is usually done through a variance analysis, which uses the difference between actual performance and budgeted performance to evaluate the performance of individuals and business units (Lanen, 2018, P. 621). It helps to identify and determine the possible causes of the difference (Lanen, 2018, P. 621). It also helps maintain control over a unit’s expenses by monitoring planned versus actual costs (Adams, 2017). A few common variances used in variance analysis are profit, purchase price, labor rate, variable overhead spending, fixed overhead spending, and selling price. Effective variance analysis allows management to understand why fluctuations occur in its business, and what it can do to change the situation. A variance analysis should be performed on variances that are of most concern for the company, especially if it can be rectified. For example, a company’s budget for sales was $12,000, but the actual sales were $9,000, the variance analysis would yield a difference of $3,000. A complete analysis could reveal that the variance was caused by a lost account. The customer purchased $2,600 per month from the company. The account was lost, due to the company’s inconsistent delivers.

            The downside of using variance analysis is that managers usually only receive them once a month, so they rely on other measurements (Adams, 2017). The reasons for the variances are not always located in the accounting records, managers must sort through information to determine the causes of the difference. Lastly, the variance may not produce any useful information.

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  How are budgets used for performance evaluation?

Financial budgets are normally prepared by the finance or accounting department of a company. In small businesses, the owner is required to prepare this budget. A performance budget allows businesses to plan for future expenditures. A budget, therefore, determines the amount of capital required to generate a certain level of sales. Businesses also adjust future expenses based on the past budget performance. Through analyzing and reviewing the budgets, a business will know the amount it has and identifies if external financing is required.

A budget helps businesses track its spending variances. Although financial budgets are prepared on annual basis, tracking of budget variances is done monthly (Vitez, 2018). This tracking enables businesses to understand where the funds were spent and compare with the number of revenues generated. Anny excessive budget variances will require businesses to review their budgets to make sure they are accurately forecasted.

Businesses use performance reports to provide additional information to the managers concerning the budget variances (Vitez, 2018). This information may be either financial or non-financial information which may impact the budget to exceed its allowable limits. Resource costs may cause the financial budgets to increase. Inferior resources are examples of non-financial budgets which may make the budget to increase.

Performance evaluation requires managers to have a benchmark for the past years will act as a guideline in future. This is normally communicated to managers through a budget for their responsibility center. At the end of the accounting year, each center is evaluated based on the actual sales generated. This information will only appear on the performance evaluation report.

List the 4 financial statements and describe them. Make sure to include how they flow together.

Prior to the withdrawal of AASB 1031 and with reference to the AASB 1031 Materiality (issued by the Australian Accounting Standards Boards - AASB) and the ASA 320 Materiality in Planning and Performing an Audit and ASA 450 Evaluation of Misstatements Identified during an Audit (issued by the Auditing and Assurance Standards Board – AUASB), :
a. Define materiality.
b. Outline the qualitative and quantitative guidelines of materiality.
c. How the concepts and constructs of “materiality” influence the auditors’ professional judgment on misstatements

The Sheldon Corporation began a consulting business specializing in on-site computer training on January 1, 2018. The following transactions took place during its first three months of operations.

Summary of Transactions

Jan. 1         Sold 5,000 shares of capital stock for a total of $500,000 cash.

Jan. 2         Paid the premium of $12,000 on a 24-month insurance policy on all assets.

Jan. 3         Purchased land and a building for a total of $350,000 cash. The land is valued at $50,000, while the building is valued at $300,000 and is expected to have a useful life of 30 years.

Jan. 10          Purchased a computer network system for $36,000 cash. The expected useful life is 6 years.

Jan. 15          Paid $2,400 cash for a phone system that should have a 3-year useful life.

Jan. 16          Paid cash to acquire equipment and furniture for business purposes at a cost of $12,000. The expected useful life is 4 years.

Jan. 19          Purchased office supplies for $1,250 cash. (Use the asset account “Office Supplies” for such purchases.)

Jan. 24          Paid cash of $10,000 for binders, manuals, and workbooks for use in Sheldon's client programs. Sheldon's policy is to initially record these materials as an asset (Program Supplies) and to then expense the materials used for a particular training program when the program is completed.

Jan. 30          Paid wages of $1,800 and salaries of $3,600 for work performed during January.

Feb. 14         Completed the first client program for a fee of $9,500. The customer paid $2,500 of the fee that day, with the remainder billed on account. Program supplies used on the project had originally cost Sheldon $1,500.

Feb. 15         Paid wages of $2,400 in cash.

Feb. 19         Paid utilities for the month of January of $1,050 in cash.

Feb. 23         Purchased on account 30 specialized manuals as program supplies for use in computer training for a total of $1,800.

Feb. 28         Borrowed $45,000 from the bank on a 2-year note. The interest rate on the note is 6% per year (or 0.5% per month).

Mar. 1       Paid wages of $3,600 and salaries of $6,000.

Mar. 1       Completed on-site computer training for two customers: JKL Products, Inc., and Watson Company. Billed JKL $11,000 on account. The fee for Watson was $9,200, half of which Watson paid in cash with the remainder on account. Program supplies used for the two customers totaled $4,600.

Mar. 4       Purchased additional program supplies on account for a total of $3,600.

Mar. 13        Collected $16,600 on account from credit customers.

Mar. 15        Completed first all-day computer workshop for walk-in customers. Sales totaled $4,250, all in cash. Program supplies used for the workshop originally cost Sheldon $1,850.

Mar. 16        Billed Coastal Corporation $7,500 for on-site training completed on March 16. Program supplies for the training originally cost Sheldon $2,500.

Mar. 16        Paid wages of $3,700.

Mar. 17 Purchased office supplies of $750 on account.

Mar. 21        Paid $3,200 to suppliers for materials previously purchased on account.

Mar. 23        Paid utilities for the month of February of $1,800 in cash.

Mar. 26        Received a $2,000 cash advance from Watson Company for additional computer training to begin April 1, 2018.

Mar. 29        Collected $6,250 on account from credit customers.

Mar. 31        Purchased $3,600 of program supplies for cash.

Additional Data Determined at March 31, 2018:

Unpaid and unrecorded wages and salaries totaled $2,700 and $8,500, respectively.

Service revenue unrecorded and unbilled at March 31 amounted to $9,300. Program supplies associated with these services originally cost Sheldon $2,800.

Office supplies on hand at March 31 totaled $450.

Sheldon uses straight-line depreciation on all depreciable assets and assumes the assets will have no value at the end of their estimated useful lives. A full month's depreciation is taken for the month of purchase, regardless of which day of the month the purchase is made. For example, depreciation expense for the three months ended March 31, 2018, on the phone system is $200 (i.e., $2,400/3 years x 3/12 of a year). Land is not considered depreciable. You may use a single account (Depreciation Expense) to record all of the depreciation expense for the depreciable assets. Also, you may use a single account (Accumulated Depreciation) to record the effect of depreciation on total assets.

Sheldon must record accrued interest for one month on the $45,000 bank loan.

Sheldon estimates utilities used during March amounted to $1,800, although the bill has not yet been received.

Remember insurance that has expired.

Record the transactions and events for the three months ending March 31, 2018, in general journal format. Record all prepaid expenses as assets at this time and all unearned revenues as liabilities. Do not record any adjusting journal entries based on the "additional data" at this time.

1. The Master (Static) budget for Jack Daniels Inc. is presented below. For June, Jack Daniels Inc. manufactured and sold 920 units for $835. During this month the company incurred $460,000 total variable expenses and $180,000 total fixed expenses.
   1. Required
      1. Prepare a flexible budget performance report for June including all variances.

         Master (Static) Budget

2. Jack Daniels Inc. used 3,450 pounds of aluminum in June to manufacture 920 units. The company paid $28.50 per pound during the month to purchase aluminum. On June 1, the company had 50 pounds of aluminum on hand. At the end of June, the company had only 30 pounds of aluminum in its warehouse. Daniels used 4,340 direct labor hours in June, at an average cost of $41.50 per hour.  The standard for aluminum is 4 pounds per unit at a standard cost of $25.00 per pound. The standard for direct labor is 5 hours per unit at a standard rate of $40 per hour.
   1. Compute for June, Jack Daniels Inc.
      1. Purchase price variance for aluminum
      2. Direct labor rate and efficiency variance
   2. Daniels deployed new strategies for both aluminum and labor. For aluminum and labor they invested in better inputs. Did management make good decisions?

The net income reported on the income statement for the current year was $410,400. Depreciation recorded on store equipment for the year amounted to $17,470. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

Required:

Equivalent Units of Production

The Converting Department of Hopkinsville Company had 1,120 units in work in process at the beginning of the period, which were 30% complete. During the period, 23,600 units were completed and transferred to the Packing Department. There were 1,240 units in process at the end of the period, which were 25% complete. Direct materials are placed into the process at the beginning of production.

Determine the number of equivalent units of production with respect to direct materials and conversion costs. If an amount is zero, enter in "0".

QUESTION 7a:

Alpha Company prepares quarterly adjusting entries. On November 1, 2017, Alpha Company purchased equipment with a sticker price of $8,515 and signed a note due in 9 months for $10,000 that included interest in the value of the note. Use this information to prepare a general journal entry for the August 1 equipment purchase. Prepare any additional general journal adjusting entries for Fiscal Years 2017 & 2018. Additionally, prepare the general journal entry to record the payment of the note when due in 2018.

General Journal

General Journal

QUESTION 7b:

Alpha Company uses aging of Accounts Receivable to estimate uncollectible. The unadjusted Trial Balance amount of Accounts Receivable on December 31, 2016, has a balance that consists of:

Activity during FiscalYear 2016, for Alpha Company consisted of July 15 Alpha wrote of the Bravo Zulu Company account as not collectable for the amount of $8,500.

Oct. 20 Alpha company recovered $5,500 from the Charlie Delta Company for settlement of their prior debt that had been off during FY 2015.

Alpha Company’s December 31, 2015 allowance for uncollectible accounts was $2,700/ Under the aging method, what amounts should Alpha Company report at December 31, 2016 for:

1. Allowance for Uncollectible Accounts

2. Bad Debt Expense

ANSWER 7:

            1.___________________________

            2.___________________________

QUESTION 3:

Alphas Company had the following events during FY 2017:

Mar. 1 – Accepted Bravo Company’s 4 month, 9% note, as settlement of an outstanding $18,000 accounts receivable for goods sold in the prior year.

Mar. 15 – Sold, $27,200 of equipment (from merchandise inventory) to Charlie Company and accepted 9 months, 6% note.

Mar. 21 – Loaned Delta Company $22,800 cash and accepted a 90 days, 9% note.

June. 19 – Received payment from Delta Company.

July 1 – Received payment from Bravo Company.

Dec. 16 – Received payment from Charlie Company.

Alpha Company uses the periodic system for inventory sales and prepares quarterly adjusting entries. Use this information to prepare the compound General Journal entries (without explanation) for all events related to the notes. Students may add the company names after the note receivable account names to further identify the various subsidiary note transactions.

Calculations for any interest must be done on a standard 365 day year for notes where the term is set in days. Use whole months (or fractions thereof) for notes with term limits set in months or years.

General Journal

Luzadis Company makes furniture using the latest automated technology. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of machine-hours. The predetermined overhead rate was based on a cost formula that estimates $592,000 of total manufacturing overhead for an estimated activity level of 74,000 machine-hours. During the year, a large quantity of furniture on the market resulted in cutting back production and a buildup of furniture in the company’s warehouse.

The company’s cost records revealed the following actual cost and operating data for the year:

Machine-hours 67,000

Manufacturing overhead cost $ 551,000

Inventories at year-end: Raw materials $ 13,000

Work in process (includes overhead applied of $37,520) $ 139,300

Finished goods (includes overhead applied of $101,840) $ 378,100

Cost of goods sold (includes overhead applied of $396,640) $ 1,472,600

Required:

1. Compute the underapplied or overapplied overhead.

2. Assume that the company closes any underapplied or overapplied overhead to Cost of Goods Sold. Prepare the appropriate journal entry.

3. Assume that the company allocates any underapplied or overapplied overhead proportionally to Work in Process, Finished Goods, and Cost of Goods Sold. Prepare the appropriate journal entry.

4. How much higher or lower will net operating income be if the underapplied or overapplied overhead is allocated to Work in Process, Finished Goods, and Cost of Goods Sold rather than being closed to Cost of Goods Sold?