Which of the following statements is true regarding the taxation of Social Security benefits?
a.85% is the maximum amount of taxable Social Security benefits.
b.50% is the maximum amount of taxable Social Security benefits.
c.If a taxpayer’s only source of income is $10,000 of Social Security benefits, then 50% of the benefits are taxable.
d.If a taxpayer’s only source of income is $10,000 of Social Security benefits, then 85% of the benefits are taxable.
In: Accounting
Internal Audit
Question 1
The following information is extracted from a draft of an audit report prepared upon the completion of an audit of the inventory warehousing procedures for a division.
Findings
[#5]
We performed extensive tests of inventory record-keeping and quantities on hand. Based on our tests, we have concluded that the division carries a large quantity of excess inventory, particularly in the area of component parts. We expect this is due to the conservatism of local management that does not want to risk shutting down production if the goods are not on hand. However, as noted earlier in the report, the excess inventory has led to a higher than average level of obsolete inventory write-downs at this division. We recommend that production forecasts be established, along with lead times for various products, and used in conjunction with economic order quantity concepts to order and maintain appropriate inventory levels.
[#6]
We observed that receiving reports were not filled out when the receiving department became busy. Instead, the receiving manager would fill out reports after work and forward them to accounts payable. There is a risk that all items received might not be recorded, or that failing to initially record might result in some items being diverted to other places. During our tests, we noted many instances in which accounts payable had to call to receiving to obtain a receiving report. We recommend that receiving reports be prepared.
[#7]
Inventory is messy. We recommend that management communicate the importance of orderly inventory management techniques to warehouse personnel to avoid the problems noted earlier about: (1) locating inventory when needed for production; and (2) incurring unusually large amounts of inventory write-offs because of obsolescence.
[#8]
We appreciate the cooperation of divisional management. We intend to discuss our findings with them and follow up by communicating your reaction to those recommendations included within this report. Given additional time for analysis, we feel there are substantial opportunities available for significant cost savings and we are proud to be a part of the process.
Required
In: Accounting
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:
Sales (13,100 units × $30 per unit) $ 393,000
Variable expenses 235,800
Contribution margin 157,200
Fixed expenses 175,200
Net operating loss $ (18,000 )
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 $6,500 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, 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 $31,000 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 0.60 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,800?
5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 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 21,000 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.)
c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)?
In: Accounting
1.
Dividends Per Share
Oceanic Company has 20,000 shares of cumulative preferred 3% stock, $50 par and 50,000 shares of $10 par common stock. The following amounts were distributed as dividends:
Year 1 | $45,000 |
Year 2 | 12,000 |
Year 3 | 90,000 |
Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.
Year 1 | Year 2 | Year 3 | |
Preferred stock (Dividends per share) | $ | $ | $ |
Common stock (Dividends per share) | $ | $ |
$ |
2.
Entries for Issuing Stock
On January 22, Muir Corporation issued for cash 15,000 shares of no-par common stock at $25. On February 14, Muir issued at par 5,000 shares of 6%, $75 par preferred stock for cash. On August 30, Muir Corporation issued for cash 12,000 shares of preferred 6% stock, $75 par at $84.
Journalize the entries to record the January 22, February 14,
and August 30 transactions.
For a compound transaction, if an amount box does not require an
entry, leave it blank.
Jan. 22 | |||
Feb. 14 | |||
Aug. 30 | |||
3. Entries for Issuing Par Stock
On October 31, Legacy Rocks Inc., a marble contractor, issued for cash 120,000 shares of $4 par common stock at $7, and on November 19, it issued for cash 20,000 shares of $10 par preferred stock at $34.
a. Journalize the entries for October 31 and November 19.
For a compound transaction, if an amount box does not require an entry, leave it blank.
Oct. 31 | |||
Nov. 19 | |||
b. What is the total amount invested (total
paid-in capital) by all
stockholders as of November
19?
$
In: Accounting
Forten Company, a merchandiser, recently completed its
calendar-year 2017 operations. For the year, (1) all sales are
credit sales, (2) all credits to Accounts Receivable reflect cash
receipts from customers, (3) all purchases of inventory are on
credit, (4) all debits to Accounts Payable reflect cash payments
for inventory, and (5) Other Expenses are paid in advance and are
initially debited to Prepaid Expenses. The company’s income
statement and balance sheets follow.
FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 |
|||||||
2017 | 2016 | ||||||
Assets | |||||||
Cash | $ | 70,900 | $ | 87,500 | |||
Accounts receivable | 86,910 | 64,625 | |||||
Inventory | 296,656 | 265,800 | |||||
Prepaid expenses | 1,350 | 2,175 | |||||
Total current assets | 455,816 | 420,100 | |||||
Equipment | 143,500 | 122,000 | |||||
Accum. depreciation—Equipment | (43,625 | ) | (53,000 | ) | |||
Total assets | $ | 555,691 | $ | 489,100 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 67,141 | $ | 135,675 | |||
Short-term notes payable | 14,200 | 8,800 | |||||
Total current liabilities | 81,341 | 144,475 | |||||
Long-term notes payable | 58,000 | 62,750 | |||||
Total liabilities | 139,341 | 207,225 | |||||
Equity | |||||||
Common stock, $5 par value | 190,750 | 164,250 | |||||
Paid-in capital in excess of par, common stock | 51,500 | 0 | |||||
Retained earnings | 174,100 | 117,625 | |||||
Total liabilities and equity | $ | 555,691 | $ | 489,100 | |||
FORTEN COMPANY Income Statement For Year Ended December 31, 2017 |
||||||
Sales | $ | 652,500 | ||||
Cost of goods sold | 299,000 | |||||
Gross profit | 353,500 | |||||
Operating expenses | ||||||
Depreciation expense | $ | 34,750 | ||||
Other expenses | 146,400 | 181,150 | ||||
Other gains (losses) | ||||||
Loss on sale of equipment | (19,125 | ) | ||||
Income before taxes | 153,225 | |||||
Income taxes expense | 43,850 | |||||
Net income | $ | 109,375 | ||||
Problem 12-5AB Direct: Statement of cash flows LO P1, P3, P5
Additional Information on Year 2017 Transactions
The loss on the cash sale of equipment was $19,125 (details in b).
Sold equipment costing $88,875, with accumulated depreciation of $44,125, for $25,625 cash.
Purchased equipment costing $110,375 by paying $58,000 cash and signing a long-term note payable for the balance.
Borrowed $5,400 cash by signing a short-term note payable.
Paid $57,125 cash to reduce the long-term notes payable.
Issued 3,900 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $52,900.
Required:
Prepare a complete statement of cash flows; report its operating
activities according to the direct method.
(Amounts to be deducted should be indicated with a minus
sign.)
In: Accounting
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments--Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
Molding | Fabrication | Total | |||||||
Estimated total machine-hours used | 2,500 | 1,500 | 4,000 | ||||||
Estimated total fixed manufacturing overhead | $ | 14,750 | $ | 17,850 | $ | 32,600 | |||
Estimated variable manufacturing overhead per machine-hour | $ | 3.30 | $ | 4.10 | |||||
Job P | Job Q | |||||
Direct materials | $ | 32,000 | $ | 17,500 | ||
Direct labor cost | $ | 36,200 | $ | 15,100 | ||
Actual machine-hours used: | ||||||
Molding | 3,600 | 2,700 | ||||
Fabrication | 2,500 | 2,800 | ||||
Total | 6,100 | 5,500 | ||||
Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.
Required:
For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.
2. How much manufacturing overhead was applied to Job P and how much was applied to Job Q?
3.What was the total manufacturing cost assigned to Job P?
4.If Job P included 20 units, what was its unit product cost?
5.What was the total manufacturing cost assigned to Job Q?
6.If Job Q included 30 units, what was its unit product cost?
7.Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?
8.What was Sweeten Company’s cost of goods sold for March
9.What were the company’s predetermined overhead rates in the Molding Department and the Fabrication Department?
10.How much manufacturing overhead was applied from the Molding Department to Job P and how much was applied to Job Q?
11.How much manufacturing overhead was applied from the Fabrication Department to Job P and how much was applied to Job Q?
12.If Job P included 20 units, what was its unit product cost?
13.If Job Q included 30 units, what was its unit product cost?
14.Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?
15.What was Sweeten Company’s cost of goods sold for March?
In: Accounting
Use the information below to answer questions 1-5.
UNIT COSTS(based on production of 100,000 units of each product). | ALPHA | BETA |
DIRECT MATERIAL | $24 | $18 |
DIRECT LABOR | 20 | 16 |
VARIABLE OVERHEAD | 10 | 6 |
VARIABLE SALES | 10 | 6 |
TRACEABLE FIXED | 12 | 10 |
COMMON FIXED COST | 14 | 12 |
ADDITIONAL INFORMATION | ||
SELLING PRICE PER UNIT | $120 | $80 |
MATERIAL COST PER POUND | 6 | 6 |
The company considers its traceable fixed cost to be avoidable. | ||
whereas its common fixed expenses are unavoidable. | ||
|
Required: (Answer each question)
1. What is the total amount of traceable fixed manufacturing
overhead for each of the two products?
2. What is the company’s total amount of common fixed expenses?
3. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 10,000 additional Alphas for a price of $80 per unit. What is the financial advantage (disadvantage) of accepting the new customer’s order?
4. Assume that Cane expects to produce and sell 90,000 Betas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 5,000 additional Betas for a price of $39 per unit. What is the financial advantage (disadvantage) of accepting the new customer’s order?
5. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. One of Cane’s sales representatives has found a new customer who is willing to buy 10,000 additional Alphas for a price of $80 per unit; however pursuing this opportunity will decrease Alpha sales to regular customers by 5,000 units. What is the financial advantage (disadvantage) of accepting the new customer’s order?
In: Accounting
On July 31, 2017, Coronado Company engaged Minsk Tooling Company to construct a special-purpose piece of factory machinery. Construction was begun immediately and was completed on November 1, 2017. To help finance construction, on July 31 Coronado issued a $303,600, 3-year, 12% note payable at Netherlands National Bank, on which interest is payable each July 31. $208,600 of the proceeds of the note was paid to Minsk on July 31. The remainder of the proceeds was temporarily invested in short-term marketable securities (trading securities) at 10% until November 1. On November 1, Coronado made a final $95,000 payment to Minsk. Other than the note to Netherlands, Coronado’s only outstanding liability at December 31, 2017, is a $28,200, 8%, 6-year note payable, dated January 1, 2014, on which interest is payable each December 31.
Collapse question part
(a)
Calculate the interest revenue, weighted-average accumulated expenditures, avoidable interest, and total interest cost to be capitalized during 2017.
Interest revenue
$
Weighted-average accumulated expenditures
$
Avoidable interest
$
Interest capitalized
$
In: Accounting
PART B. Problems
1. The CINEDivision of OMAR Sports Equipment Companymanufactures baseball gloves in its Milwaukee plant. Two production departments are used in sequence: the Cutting Department and the Stitching Department. In the Cutting Department, direct material consisting of imitation leather is placed into production at the beginning of the process. Direct-labor and manufacturing overhead costs are incurred uniformly throughout the process. The material is rolled to make it softer and then cut into the pieces needed to produce baseball gloves.
Below is presented a summary of the activity and costs in the Cutting Department during March. The direct-material and conversion costs listed below for the March 1 work in process consist of costs that were incurred during February. These costs were assigned to the units remaining in process at the end of February.
INFORMATION
Work in process, March 1 |
25,000 units |
Direct material: 100% complete, cost of |
$143,000 |
Conversion: 40% complete, cost of |
474,700 |
Balance in work in process, March 1 |
$617,700 |
Units started during March |
30,000 units |
Units completed during March and transferred out of the Cutting Department |
35,000 units |
Work in process, March 31 |
|
Direct Material: 100% complete |
|
Conversion: 80% complete |
|
Costs incurred during March: |
|
Direct material |
$165,000 |
Conversion costs: |
|
Direct labor |
$1,000,000 |
Applied manufacturing overhead |
1,174,000 |
Total conversion costs |
$2,174,000 |
Required: Weighted Average and FIFO methods
Prepare a physical flow schedule for the month of March.
Calculate equivalent units for materials AND equivalent units for conversion.
Calculate cost per equivalent unit for materials AND cost per equivalent unit for conversion.
Calculate the value of work in process inventory on March 31 and cost of goods transferred out during March.
In: Accounting
Situation 1
Honest Andrea’s Auto Dealer purchases used cars at auto auctions and sells them retail. The autos, on average, sell for approximately $20,000 each and cost Andrea $13,000. The costs that the company incurs in a typical month are listed below:
Costs Cost Formula
Selling:
Advertising $3,800 per month
Preparation of Autos for Delivery $ 750 per auto sold
Sales salaries & commissions $4,500 per month, plus 7% of sales
Utilities $5,200 per month
Depreciation on sales facility $4,500 per month
Administrative:
Executive salaries $14,000 per month
Depreciation on office equipment $2,200 per month
Clerical staff salaries $3,500 per month
Insurance $1,800 per month
During April, Honest Andrea’s sold 65 autos.
Required
Prepare a traditional income statement as of April 30. All numbers should be rounded to the nearest dollar.
Prepare a contribution format income statement as of April 30. All numbers should be rounded to the nearest dollar. Show costs and revenues on both a total and per unit basis down through the contribution margin.
What costs does the Contribution Margin Income Statement format isolate (make apparent) that the Traditional Income Statement format does not?
For the statement you prepared for Part 2, why might it be misleading to show the fixed costs on a per unit basis?
In: Accounting
You run a hospital with 100 rooms. Fixed daily cost is $988.00 which includes staff salary, property charges, maintenance etc. Variable cost per room is $12.00 which includes cleaning, equipment rentals, utility cost etc. which is incurred only when the room is full. You charge $84.00 per room per day. You sold 37.00 rooms today, how much profit/loss did you earn for today.
In: Accounting
Explain the difference between operating and financing liabilities. In addition, discuss the implications of lease accounting for the analysis of financial statements.
In: Accounting
writing 275 words about. News or advices you could give your clients as you Finanical planner.
In: Accounting
Superior Markets, Inc., operates three stores in a large metropolitan area. A segmented absorption costing income statement for the company for the last quarter is given below:
Superior Markets, Inc. Income Statement For the Quarter Ended September 30 |
||||||||||||
Total | North Store |
South Store |
East Store |
|||||||||
Sales | $ | 3,500,000 | $ | 780,000 | $ | 1,400,000 | $ | 1,320,000 | ||||
Cost of goods sold | 1,925,000 | 450,000 | 749,000 | 726,000 | ||||||||
Gross margin | 1,575,000 | 330,000 | 651,000 | 594,000 | ||||||||
Selling and administrative expenses: | ||||||||||||
Selling expenses | 827,000 | 236,400 | 317,500 | 273,100 | ||||||||
Administrative expenses | 408,000 | 111,000 | 158,400 | 138,600 | ||||||||
Total expenses | 1,235,000 | 347,400 | 475,900 | 411,700 | ||||||||
Net operating income (loss) | $ | 340,000 | $ | (17,400 | ) | $ | 175,100 | $ | 182,300 | |||
The North Store has consistently shown losses over the past two years. For this reason, management is giving consideration to closing the store. The company has asked you to make a recommendation as to whether the store should be closed or kept open. The following additional information is available for your use:
The breakdown of the selling and administrative expenses that are shown above is as follows:
Total | North Store |
South Store |
East Store |
|||||
Selling expenses: | ||||||||
Sales salaries | $ | 228,000 | $ | 62,600 | $ | 77,000 | $ | 88,400 |
Direct advertising | 170,000 | 56,000 | 77,000 | 37,000 | ||||
General advertising* | 52,500 | 11,700 | 21,000 | 19,800 | ||||
Store rent | 325,000 | 90,000 | 125,000 | 110,000 | ||||
Depreciation of store fixtures | 18,500 | 5,100 | 6,500 | 6,900 | ||||
Delivery salaries | 22,500 | 7,500 | 7,500 | 7,500 | ||||
Depreciation of delivery equipment |
10,500 | 3,500 | 3,500 | 3,500 | ||||
Total selling expenses | $ | 827,000 | $ | 236,400 | $ | 317,500 | $ | 273,100 |
*Allocated on the basis of sales dollars.
Total | North Store |
South Store |
East Store |
|||||
Administrative expenses: | ||||||||
Store managers' salaries | $ | 77,500 | $ | 23,500 | $ | 32,500 | $ | 21,500 |
General office salaries* | 52,500 | 11,800 | 21,000 | 19,700 | ||||
Insurance on fixtures and inventory | 30,000 | 9,000 | 11,500 | 9,500 | ||||
Utilities | 103,425 | 31,390 | 37,700 | 34,335 | ||||
Employment taxes | 57,075 | 15,810 | 20,700 | 20,565 | ||||
General office—other* | 87,500 | 19,500 | 35,000 | 33,000 | ||||
Total administrative expenses | $ | 408,000 | $ | 111,000 | $ | 158,400 | $ | 138,600 |
*Allocated on the basis of sales dollars.
The lease on the building housing the North Store can be broken with no penalty.
The fixtures being used in the North Store would be transferred to the other two stores if the North Store were closed.
The general manager of the North Store would be retained and transferred to another position in the company if the North Store were closed. She would be filling a position that would otherwise be filled by hiring a new employee at a salary of $10,800 per quarter. The general manager of the North Store would continue to earn her normal salary of $11,800 per quarter. All other managers and employees in the North store would be discharged.
The company has one delivery crew that serves all three stores. One delivery person could be discharged if the North Store were closed. This person’s salary is $4,500 per quarter. The delivery equipment would be distributed to the other stores. The equipment does not wear out through use, but does eventually become obsolete.
The company pays employment taxes equal to 15% of their employees' salaries.
One-third of the insurance in the North Store is on the store’s fixtures.
The “General office salaries” and “General office—other” relate to the overall management of Superior Markets, Inc. If the North Store were closed, one person in the general office could be discharged because of the decrease in overall workload. This person’s compensation is $5,900 per quarter.
Required:
1. How much employee salaries will the company avoid if it closes the North Store?
2. How much employment taxes will the company avoid if it closes the North Store?
3. What is the financial advantage (disadvantage) of closing the North Store?
4. Assuming that the North Store's floor space can’t be subleased, would you recommend closing the North Store?
5. Assume that the North Store's floor space can’t be subleased. However, let's introduce three more assumptions. First, assume that if the North Store were closed, one-fourth of its sales would transfer to the East Store, due to strong customer loyalty to Superior Markets. Second, assume that the East Store has enough capacity to handle the increased sales that would arise from closing the North Store. Third, assume that the increased sales in the East Store would yield the same gross margin as a percentage of sales as present sales in the East store. Given these new assumptions, what is the financial advantage (disadvantage) of closing the North Store?
In: Accounting
In 2020, Ibran Corp. required additional cash for its business. Management decided to use accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following transactions:
1. On July 1, 2020, Ibran assigned $600,000 of accounts receivable to Provincial Finance Corporation as security for a loan. Ibran received an advance from Provincial Finance of 90% of the assigned accounts receivable less a commission of 3% on the advance. Before December 31, 2020, Ibran collected $220,000 on the assigned accounts receivable, and remitted $232,720 to Provincial Finance. Of the latter amount, $12,720 was interest on the advance from Provincial Finance.
2. On December 1, 2020, Ibran sold $300,000 of accounts receivable to Wunsch Corp. for $275,000. The receivables were sold outright on a without recourse basis and Ibran has no continuing interest in the receivables.
3. On December 31, 2020, an advance of $120,000 was received from First Bank by pledging $160,000 of Ibran's accounts receivable. Ibran's first payment to First Bank is due on January 30, 2021. Instructions a. Prepare a schedule showing the income statement effects of 1004 these transactions for the year ended December 31, 2020.
Instructions
a. Prepare a schedule showing the income statement effects of
these transactions for the year ended December 31, 2020.
In: Accounting