Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek produced and sold 60,000 units of B300 at a price of $21 per unit and 12,700 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $51,000 and $108,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

You are a legal assistant for the attorney of the FUN company. You must conduct research and find three (3) court opinions (i.e. cases that have been previously decided by the court) that are precedent (i.e. have similar facts and issues of law) to the case below. You must provide the case title and citation of each of the three (3) cases you find.

Three months ago the CEO for FUN Company sent a letter to the Pastor for the Church of Stranger Things pledging a $3,000,000.00 donation to the Church. Upon receipt of this news, the Pastor contacted FUN’s CEO who re-assured the Pastor that the Church would be receiving a check for this amount within the ensuing four to six weeks. The Pastor, who for several years had wanted to expand the Church in order to increase its congregation, immediately hired an architect and paid him $400,000.00 to design the new ambitious project. The Pastor was in love with the architect’s design, so he quickly hired a general contractor for $750,000.00 to start the building process. In addition to the $750,000.00 for the labor, the Pastor paid another 1,100,000.00 for the tools and materials needed for the project. Five weeks after receiving the letter and first speaking to FUN’s CEO on the phone, the bishop called FUN because he was nervous about the fact that he had not received the check and he had already incurred such significant expenses. Note that the only reason the Pastor engaged in this ambitious construction project was because of the extra money he was counting on getting from FUN since the Church’s structure did not need it to continue its regular operations. The CEO at that point told the Pastor that soon after committing to donate the money, FUN’s finances started going terribly wrong and as such at this point, they were not able to make a donation to the church. The Pastor is now demanding that FUN still true to its word and give the church the donation.

Accounting:

At the end of 2019, BETA Ltd, in order to compile the 2020 budget, gives the following info: - Product P1: Stock (in units) 31/12/2019: 7.000 - Product P2: Stock (in units) 31/12/2019 9.000 Company predicts to sell 20.000 EUR of P1 with price EUR 10 and EUR 25.000 of P2 with price EUR 12. Also, the final stock of P1 is expected to be 30% of its sales in units and the final stock of P2 20% of its sales in units. Concerning raw materials, the stock in units on 31/12/2019 is for Material M1 8.000 in units and for Material M2 12.000 in units. Also final stock for M1 is expected to be 10% of its use and for M2 20% of its use. Finally, note that for the production of P1 , 1 M1 and 3 M2 are needed and for the production of P2, 4M1 and 2 M2 are needed. The following are needed: a. The production in units for P1 and P2. b. Assuming that raw material M1 is bought EUR 4 per kilo and raw material M2 EUR 2 per kilo, find the cost of the required purchases of M1 and M2. c. Assuming that the cost of raw material M1 is EUR 4 per kilo and the cost of raw material M2 EUR 3 per kilo, direct labour 70.000, cost of electricity at head office 30.000, indirect materials 45.000 and the rest various factory costs 95.000 , find the direct (first ) cost of the company.

Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows:

*Common costs allocated on the basis of machine-hours.

†Common costs allocated on the basis of sales dollars.

Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company’s total general factory overhead or total Purchasing Department expenses.

Required:

a. Compute the increase or decrease of net operating income if the product line is continued or discontinued. (Decreases should be indicated by a minus sign.)

b. Would you recommend that the bilge pump product line be discontinued?

Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information:

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 13% discount rate.

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

Required:

1. What is the net present value of the “keep the old truck” alternative?

2. What is the net present value of the “purchase the new truck” alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?

The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:

The income before income tax was $447,700 and $391,700 for the current and previous years, respectively.

a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.

b. Determine the times interest earned ratio for both years. Round to one decimal place.

Denton Company manufactures and sells a single product. Cost data for the product are given:

The product sells for $49 per unit. Production and sales data for July and August, the first two months of operations, follow:

The company’s Accounting Department has prepared the following absorption costing income statements for July and August:

Required:

1. Determine the unit product cost under:

a. Absorption costing.

b. Variable costing.

2. Prepare contribution format variable costing income statements for July and August.

3. Reconcile the variable costing and absorption costing net operating incomes.

On January 1, 2018, Bishop Company issued 10% bonds dated January 1, 2018, with a face amount of $19.8 million. The bonds mature in 2027 (10 years). For bonds of similar risk and maturity, the market yield is 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
1. Determine the price of the bonds at January 1, 2018.
2. Prepare the journal entry to record the bond issuance by Bishop on January 1, 2018.
3. Prepare the journal entry to record interest on June 30, 2018, using the effective interest method.
4. Prepare the journal entry to record interest on December 31, 2018, using the effective interest method.

Sundance Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows:

a. Determine the factory overhead rate for Factory 1.
$ per machine hour

b. Determine the factory overhead rate for Factory 2.
$ per direct labor hour

c. Journalize the entries to apply factory overhead to production in each factory for March.

d. Determine the balances of the factory overhead accounts for each factory as of March 31, and indicate whether the amounts represent overapplied factory overhead or underapplied factory overhead.

Gustav Leasing Company agrees to lease equipment to Julliard Corporation on January 1, 2017. The

following information relates to the lease agreement.

1. The term of the lease is 6 years with no renewal option, and the machinery has an estimated

economic life of 8 years.

2. The cost of the machinery is $310,000, and the fair value of the asset on January 1, 2017, is $424,000.

3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of

$35,000. Julliard estimates that the expected residual value at the end of the lease term will be $35,000.

Julliard amortizes all of its leased equipment on a straight-line basis.

4. The lease agreement requires equal annual rental payments, beginning on January 1, 2017.

5. The collectability of the lease payments is probable.

6. Gustav desires a 6% rate of return on its investments. Julliard’s incremental borrowing rate is 8%, and

the lessor’s implicit rate is unknown.

(Assume the accounting period ends on December 31)

(a) Discuss the nature of this lease for both the lessee and the lessor.

(b) Calculate the amount of the annual rental payment required.

(c) Compute the value of the lease liability to the lessee.

(d) Prepare the journal entries Julliard would make in 2017 and 2018 related to the lease arrangement.

(e) Prepare the journal entries Gustav would make in 2017 and 2018 related to the lease arrangement.

(f) Suppose Julliard expects the residual value at the end of the lease term to be $28,000 but still

guarantees a residual of $35,000. Compute the value of the lease liability at lease commencement.

(g) Suppose the residual value is unguaranteed, how would Gustav’s journal entries change?

Wildhorse Co. markets CDs of numerous performing artists. At the beginning of March, Wildhorse had in beginning inventory 2,500 CDs with a unit cost of $8. During March, Wildhorse made the following purchases of CDs.

During March 11,600 units were sold. Wildhorse uses a periodic inventory system.

Determine the cost of goods available for sale.

Calculate Average Cost. (Round answer to 3 decimal places, e.g. 5.125.)

eTextbook and Media

List of Accounts

Determine (1) the ending inventory and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost). (Round answers to 0 decimal places, e.g. 125.)

eTextbook and Media

List of Accounts

Which cost flow method results in (1) the highest inventory amount for the balance sheet and (2) the highest cost of goods sold for the income statement?

Rebeca Pérez is the Controller of the firm Pérez Martínez & Asociados. She has been evaluating inventory reports over the past few months and thinks that one or more employees have been stealing large amounts of inventory that was for sale. Quickly, Rebeca asked the staff that manages the information systems to look for data that would help her solve this situation, however, they indicated that, mysteriously, much of the inventory information had been lost and they had no explanation for it. Rebeca talked to the company's internal auditors to ask about the missing reports and they were not aware of the situation either.

Based on the above, answer the following questions in paragraph form (5 to 6 sentences each):

1. What should Rebecca do? Should she call the police or should she hire an outside forensic accountant?

2. How can a forensic accountant help you solve this case? Look for outside information to elaborate on your answer.

3. What things can the forensic accountant do that an internal auditor cannot do?

Summary Balance sheet of Kishore Food Products Private Limited is given.

You are required to prepare the cash flow statement using the indirect method after considering the additional information given below.

Depreciation provided for the year was land and building 60000, Machinery 50000 and furniture 1200.

Previous year tax provision was paid during the year and current year tax provision 40500 was yet to be paid at the year end.

Proposed dividend of previous year was paid during the year and fresh provision was made at this year end.  

On June 1, 2016, Everly Bottle Company sold $3,000,000 in long-term bonds for $2,631,300. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds are to be accounted for under the effective-interest method.

- Construct a bond amortization table for this problem to indicate the amount of interest expense and discount amortization at each May 31.

- Assuming that interest and discount amortization are recorded each May 31, prepare the adjusting entry to be made on December 31, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)