The following is the unadjusted trial balance for Panorama Resort Inc. at its year end, December 31, 2018. The company adjusts its accounts annually.

Additional information is provided below:

1. A count of supplies on December 31st shows $4,150 of supplies on hand.
2. The building has an estimated 20 year life with no residual value and straight-line depreciation is used.
3. Salaries of $1,640 were unpaid on December 31st.
4. Rental revenue for 5 nights at $150 per night during the last week of December has not been paid (received) or recorded.
5. A two year insurance policy was purchased September 1, 2018.
6. Income tax payable is estimated to be $1,920.
7. Of the unearned revenue, it was determined that $28,500 remains unearned.
8. Interest on the note payable is $785 per month and was last paid on October 31, 201
9. The December utility bill of $3,380 has not year been recorded or paid.

REQUIRED:

Prepare all necessary adjusting journal entries for their year-end, December 31, 2018. Omit explanations but show calculations. Round all calculations to the nearest dollar.

Should setting a transfer pricing rule differ between national and multinational companies?

Produce a direct materials budget with the following additional information.

Units = 83,000

Direct material Cost    Usage

Steel    $8.00/lb 12.100 oz/unit

Plastic    $3.50/lb 10.897 oz/unit

What is the total direct materials cost?

Note: lb = pound = 16 oz

Ida Sidha Karya Company is a family-owned company located on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $910. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 300 Units sold 265 Units in ending inventory 35 Variable costs per unit: Direct materials $ 115 Direct labor $ 325 Variable manufacturing overhead $ 45 Variable selling and administrative $ 20 Fixed costs: Fixed manufacturing overhead $ 72,000 Fixed selling and administrative $ 34,000 The absorption costing income statement prepared by the company’s accountant for last year appears below: Sales $ 241,150 Cost of goods sold 192,125 Gross margin 49,025 Selling and administrative expense 39,300 Net operating income $ 9,725 Required: 1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. Prepare an income statement for last year using variable costing.

FINE WOOD MACHINING IS CONSIDERING REPLACING AN EXISTING LATHE WITH A MORE EFFICIENT LATH. THE NEW LATHE COST $55,000 AND REQUIRES $5,000 IN INSTALLATION COST. THE OLD LATHE WAS PURCHASED 2 YEARS AGO FOR AN INSTALLED COST OF $35,000 AND HAS A BOOK VALUE OF $16,800. IT CAN BE SOLD TODAY FOR $20,000. ASSUME THE NEW MACHINE INCREASES WORKING CAPITAL BY $2,000. THE FIRM IS IN THE 21% TAX BRACKET. THE NEW MACHINE WILL PROVIDE $15,000/YEAR OF INCREMENTAL OPERATING CASH FLOWS FOR 4 YEARS AND THE COMPANY’S COST OF CAPITAL IS 10%.

I HAVE THE BA II PLUS AND THE TI-84 PLUS, PLEASE SHOW YOUR CALCULATED WORK. THANKS!

A: WHAT IS THE INITIAL INVESTMENT FOR THE PROPOSED PROJECT?

B: COMPUTE THE NET PRESENT VALUE FOR THE PROJECT.

C: COMPUTE THE IRR.

D: MAKE A RECOMMENDATION TO ACCEPT OR REJECT THE PROJECT AND EXPLAIN.

Cost Information and the Weighted Average Method

Morrison Company had the equivalent units schedule and cost information for its Sewing Department for the month of December, as shown below.

Required:

1. Calculate the unit cost for December, using the weighted average method. Do NOT round interim calculations and, if required, round your answer to the nearest cent.
$ per equivalent unit

2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

Cost of goods transferred out:

Reconciliation
Cost to account for:

3. What if you were asked to show that the weighted average unit cost for materials is the blend of the November unit materials cost and the December unit materials cost? The November unit materials cost is $3.53 ($60,000/17,000), and the December unit materials cost is $10.42 ($500,000/48,000). The equivalent units in BWIP are 17,000, and the FIFO equivalent units are 48,000. Calculate the weighted average unit materials cost using weights defined as the proportion of total units completed from each source (BWIP output and current output). Do NOT round interim calculations and, if required, round your answer to the nearest cent.
$ per unit

What is a good example of a company that uses job costing and another company that uses process costing? Also, what type of products do these companies make or provide services for and why would one company use one method over the other?

In five years, Kent Duncan will retire. He is exploring the possibility of opening a self-service car wash. The car wash could be managed in the free time he has available from his regular occupation, and it could be closed easily when he retires. After careful study, Mr. Duncan determined the following:

1. A building in which a car wash could be installed is available under a five-year lease at a cost of $3,800 per month.
2. Purchase and installation costs of equipment would total $210,000. In five years the equipment could be sold for about 9% of its original cost.
3. An investment of an additional $3,000 would be required to cover working capital needs for cleaning supplies, change funds, and so forth. After five years, this working capital would be released for investment elsewhere.
4. Both a wash and a vacuum service would be offered. Each customer would pay $1.35 for a wash and $.90 for access to a vacuum cleaner.
5. The only variable costs associated with the operation would be 7.5 cents per wash for water and 10 cents per use of the vacuum for electricity.
6. In addition to rent, monthly costs of operation would be: cleaning, $2,300; insurance, $75; and maintenance, $1,795.
7. Gross receipts from the wash would be about $2,295 per week. According to the experience of other car washes, 60% of the customers using the wash would also use the vacuum.

Mr. Duncan will not open the car wash unless it provides at least a 15% return.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. Assuming that the car wash will be open 52 weeks a year, compute the expected annual net cash receipts from its operation.

2-a. Determine the net present value using the net present value method of investment analysis.

2-b. Would you advise Mr. Duncan to open the car wash?

On January 1, 2017, Blue Company issued $1,810,000 face value, 7%, 10-year bonds at $1,943,218. This price resulted in a 6% effective-interest rate on the bonds. Blue uses the effective-interest method to amortize bond premium or discount. The bonds pay annual interest on each January 1.

A. Prepare the journal entries to record the following transactions. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

B. Show the proper long-term liabilities balance sheet presentation for the liability for bonds payable at December 31, 2018. (Round answers to 0 decimal places, e.g. 125.)

C. Provide the answers to the following questions.

1. What amount of interest expense is reported for 2018? (Round answer to 0 decimal places, e.g. 125.)

2. The bond interest expense reported in 2018 would be (select an option: greater than, less than, same as) the amount that would be reported if the straight-line method of amortization were used.

Tharp Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows.

For purposes of simplicity, the firm averages total fixed costs over the total number of units of C and D produced and sold.

   The research department has developed a new product (E) as a replacement for product D. Market studies show that Tharp Company could sell 11,600 units of E next year at a price of $114; the variable cost per unit of E is $42. The introduction of product E will lead to a 12% increase in demand for product C and discontinuation of product D. If the company does not introduce the new product, it expects next year’s results to be the same as last year’s.

Compute company profit with products C & D and with products C & E.

Should Tharp Company introduce product E next year? (Yes or NO)

e7.17

1. In preparing for the upcoming holiday season, Fresh Toy Company (FTC) designed a new doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll is $120,000. The variable cost, which includes material, labor, and shipping costs, is $30 per doll. During the holiday selling season, FTC will sell the dolls for $45 each. If FTC overproduces the dolls, the excess dolls will be sold in January through a distributor who has agreed to pay FTC $8 per doll. Demand for new toys during the holiday selling season is extremely uncertain. Forecasts are for expected sales of 40,000 dolls with a standard deviation of 10,000. The normal probability distribution is assumed to be a good description of the demand. FTC has tentatively decided to produce 40,000 units (the same as average demand), but it wants to conduct an analysis regarding this production quantity before finalizing the decision.

   1. Create a what-if spreadsheet model using a formula that relate the values of production quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of surplus, total cost, and net profit. What is the profit corresponding to average demand (40,000 units)?
      
      $  
      
   2. Modeling demand as a normal random variable with a mean of 40,000 and a standard deviation of 10,000, simulate the sales of the Dougie doll using a production quantity of 40,000 units. What is the estimate of the average profit associated with the production quantity of 40,000 dolls? Round your answer to the nearest dollar.
      
      $  
      
      How does this compare to the profit corresponding to the average demand (as computed in part (a))?
      
      Average profit is
      • less than
      • more than
      • equal to
      the profit corresponding to average demand.
      
   3. Before making a final decision on the production quantity, management wants an analysis of a more aggressive 50,000-unit production quantity and a more conservative 30,000-unit production quantity. Run your simulation with these two production quantities. What is the mean profit associated with each? Round your answers to the nearest dollar.
      
      30,000-unit production quantity: $  
      
      50,000-unit production quantity: $  
      
   4. In addition to mean profit, what other factors should FTC consider in determining a production quantity?
      
      The input in the box below will not be graded, but may be reviewed and considered by your instructor.
      
      
      
      Compare the three production quantities (30,000, 40,000, and 50,000) using all these factors. What trade-offs occur? Round your answers to 3 decimal places.
      
      30,000 units:
      
      40,000 units:
      
      50,000 units:
      
      What is your recommendation?
      
      The input in the box below will not be graded, but may be reviewed and considered by your instructor.
      

The following investments are available to you:

                                                                                    Annual pretax yield

• Fully-taxable bonds -   9%
• Non-dividend paying stocks   -   7.2%
• Tax-exempt not-for-profit bonds - 6%

The stocks are subject to a tax rate of 40% of the tax rate applicable to fully taxable bonds. This lower tax rate reflects capital gains treatment and deferral of taxation

At what tax rate are you indifferent between investing the fully taxable bonds and stocks and at what tax rate are you indifferent between investing in stocks and tax-exempt bonds?

Camarillo Manufacturing Company was established to manufacture two types of pipe fittings, XL1 and XL2. The manufacturing process involves molding the fittings and then smoothing them.
The firm was initially capitalized with $500,000 as an S Corporation. The firm purchased equipment for $450,000 with cash of $125,000 and a note payable of $325,000. It also acquired furniture for $120,000 with cash of $60,000 and a note payable of $60,000. Management is now preparing the master budget for the first year of operations.

Sales Budget
Management expects to meet established market prices for its pipe fittings of $50 for XL1 and $40 for XL2. Sales representatives have estimated that total sales of XL1 fittings will be 4,500 units and sales of XL2 will be 12,000 units.

Production Budget
Management has expressed a desire to have 1,000 units of XL1 and 3,000 units of XL2 in ending inventory.

Material Acquisition Budget
The firm’s industrial engineer has prepared standards that call for 0.6 pounds of material per XL1 casting and 0.4 pounds per XL2 casting. Both products require the same material. Management also desires to end the period with 2,000 pounds of material in raw materials inventory. The purchasing agent anticipates that the metal can be purchased at an average cost of $4 per pound.

Direct Labor Budget
The standards for a unit of XL1 call for 0.5 hours of direct labor in Molding and 0.3 hours in Smoothing. The standards for a unit of XL2 call for 0.4 hours in Molding and 0.2 hours in Smoothing. Management’s anticipated average cost for labor is $15 per hour.

Factory Overhead Budget
Service Department 1 handles personnel matters. The firm anticipates having 12 factory employees and expects the variable costs to operate the personnel department to average $1,000 per employee. The cost of this department is allocated to other departments on the assumption that there will be three employees in the maintenance department, five employees in the molding department, and four employees in the smoothing department. The personnel department’s fixed costs are estimated to be $15,000 and will be allocated on a lump sum basis at $3,000 to maintenance, $6,000 to molding and $6,000 to smoothing.

The maintenance department is budgeted to make 100 service calls during the period, 60 calls for the molding department and 40 calls for the smoothing department. The maintenance manager estimates that it will cost an average of $150 in variable costs per service call. The fixed costs of $14,000 are thought to benefit the two production departments equally.

The molding department is expected to incur $29,000 in variable overhead and $42,000 in fixed overhead. The smoothing department is expected to have $32,000 in variable overhead and $8,000 in fixed overhead.

Management has decided to allocated 60% of the fixed overhead cost of molding to XL1 and 40% to XL2 and split the fixed smoothing costs evenly between the two products. Variable costs will be allocated based on direct labor hours.

Selling and Administration Expenses Budget
Budgeted selling and administration expenses are $126,400. This includes sales commissions at 10% of sales or $56,400; administration salaries of $30,000; advertising of $6,000; supplies of $2,000 and interest of $32,000.

Budgeting Cash Receipts and Disbursements
Sales are presumed to be $100,000 in the first quarter; $160,000 in the second quarter; $220,000 in the third quarter and $225,000 in the fourth quarter. Seventy percent of sales will be paid for in the quarter in which they are made and thirty percent will be paid in the quarter following the sale. Production will be spread uniformly over the year. The firm will pay for materials, supplies, and labor in the quarter the cost is incurred. Utilities will be paid one month after incurred. Half the property tax is aid in the first and third quarters. The first payment for a new company is not made until the third quarter. Sales commissions are paid in the quarter a sale is made. Other selling and administration costs are incurred and paid uniformly. Finally, the firm makes note payments of $30,000 per quarter which consists of $22,000 of principal repayment and $8,000 of interest. Total Costs include depreciation of $27,000; $21,000 for equipment and $6,000 for the furniture.

Additional Information

Sales by Quarter:
1st $100,000
2nd 160,000
3rd 220,000
4th 225,000

Budgeted Selling & Administration Expenses:

Required
Prepare the following budgets:
  Factory overhead budget