Questions
Question 5.5 (Total: 34 marks) The board of directors for Apache Construction Corp. is meeting to...

Question 5.5 (Total: 34 marks)

The board of directors for Apache Construction Corp. is meeting to choose between the completed-contract method and the percentage-of-completion method of accounting for long-term contracts in the company's financial statements. You have been engaged to assist Apache’s controller in the preparation of a presentation to be given at the board meeting. The controller provides you with the following information:

· Apache commenced doing business on January 1, 2020.

· Construction activities for the year ended December 31, 2020, were as follows:



Project

Total contract

Price

Billings through

12/31/20

Cash collections through

12/31/20

A

$ 615,000

$ 340,000

$ 310,000

B

450,000

135,000

135,000

C

475,000

475,000

390,000

D

600,000

240,000

160,000

E

480,000

400,000

400,000


$ 2,620,000

$ 1,590,000

$ 1,395,000

  



Project

Contract costs incurred through 12/31/20

Estimated additional costs to complete contracts

A

$ 510,000

$ 120,000

B

130,000

260,000

C

350,000

-0-

D

370,000

290,000

E

320,000

80,000


$ 1,680,000

$ 750,000


· Each contract is with a different customer.

· Any work remaining to be done on the contracts is expected to be completed in 2021.


Required

1. Prepare a schedule by project, calculating the amount of gross profit (or loss) for the 2020 calendar year, which would be reported under:

a. The completed-contract method.

b. The percentage-of-completion method (based on estimated costs).

2. Prepare the general journal entry to record revenue and gross profit on project B for 2020, assuming that the percentage-of-completion method is used.   

3. Indicate the balances that would appear in the statement of financial position at December 31, 2020 for the following accounts for Project D, assuming that the percentage-of-completion method is used.

a. Accounts Receivable

b. Billings on Construction in Process

c. Construction in Process

How would the balances in the accounts discussed in part 3 above change (if at all) for Project D, if the completed-contract method is used?

In: Accounting

Problem 15-4 Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses...

Problem 15-4 Finance/sales-type lease; lessee and lessor [LO15-1, 15-2, 15-3] Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $1,750,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2018. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Lease Description: Quarterly lease payments $ 114,201—beginning of each period Lease term 5 years (20 quarters) No residual value; no purchase option Economic life of lithotripter 5 years Implicit interest rate and lessee's incremental borrowing rate 12% Fair value of asset $ 1,750,000 Required: 1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing? 2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2018. Adjusting entries are recorded at the end of each fiscal year (December 31). 3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.5 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2018.

In: Accounting

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced...

Dover Chemical Company manufactures specialty chemicals by a series of three processes, all materials being introduced in the Distilling Department. From the Distilling Department, the materials pass through the Reaction and Filling departments, emerging as finished chemicals. The balance in the account Work in Process—Filling was as follows on January 1: Work in Process—Filling Department (3,400 units, 30% completed): Direct materials (3,400 x $18.2) $61,880 Conversion (3,400 x 30% x $11.8) 12,036 $73,916 The following costs were charged to Work in Process—Filling during January: Direct materials transferred from Reaction Department: 43,900 units at $17.9 a unit $785,810 Direct labor 273,870 Factory overhead 263,128 During January, 43,500 units of specialty chemicals were completed. Work in Process—Filling Department on January 31 was 3,800 units, 50% completed.

1. Prepare a cost of production report for the Filling Department for January. If an amount is zero, enter "0". If required, round your cost per equivalent unit answers to two decimal places.

Dover Chemical Company
Cost of Production Report-Filling Department
For the Month Ended January 31
Unit Information
Units charged to production:
Inventory in process, January 1
Received from Reaction Department
Total units accounted for by the Filling Department
Units to be assigned costs:
Equivalent Units
Whole Units Direct Materials Conversion
Inventory in process, January 1
Started and completed in January
Transferred to finished goods in January
Inventory in process, January 31
Total units to be assigned costs
Cost Information
Cost per equivalent unit:
Direct Materials Conversion
Total costs for January in Filling Department $ $
Total equivalent units
Cost per equivalent unit $ $
Costs assigned to production:
Direct Materials Conversion Total
Inventory in process, January 1 $
Costs incurred in January
Total costs accounted for by the Filling Department $
Costs allocated to completed and partially completed units:
Inventory in process, January 1 balance $
To complete inventory in process, January 1 $
Cost of completed January 1 work in process $
Started and completed in January $
Transferred to finished goods in January $
Inventory in process, January 31
Total costs assigned by the Filling Department $

2. Journalize the entries for (1) costs transferred from Reaction to Filling and (2) the cost transferred from Filling to Finished Goods.

(1) Work in Process-Filling Department
Work in Process-Reaction Department
(2) Finished Goods
Work in Process-Filling Department

Feedback

2. Remember that there are three types of inventory; materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another department?

3. Determine the increase or decrease in the cost per equivalent unit from December to January for direct materials and conversion costs. If required, round your answers to two decimal places.

Increase or Decrease Amount
Change in direct materials cost per equivalent unit Decrease $
Change in conversion cost per equivalent unit Increase $

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between Work in Process  and Finished Goods . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

In: Accounting

Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to...

Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,060 remotes is as follows:

Cost
Direct materials $ 65,390
Direct labor $ 55,330
Variable overhead $ 30,180
Fixed overhead $ 50,300
Total $ 201,200

Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit.

Required:

1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income?

2. Compute the difference in cost between making and buying the remotes if $20,120 of the fixed costs can be avoided. What is the change in net income?

3. What is the change in net income if fixed cost of $20,120 can be avoided and Frannie could rent out the factory space no longer in use for $20,120?

In: Accounting

Since the 2008 subprime mortgage crisis occurred, homebuyers have become more aware of their rights and...

Since the 2008 subprime mortgage crisis occurred, homebuyers have become more aware of their rights and responsibilities of understanding the various terms and conditions offered by lenders. First, find a dream house you might be interested in purchasing. It could be anywhere in United States, even a Hollywood mansion. Provide the city and state where the home is located and also the current value of the home. You can even include a picture, but make sure you credit the actual source. Please note, you don’t have sufficient cash to purchase this property out right and will need to finance.

Next, fill out the Mortgage Payment Spreadsheet with the following information (but don’t share it):

price of the property-$200,000
down payment – should be 20%
interest rate – use the current 30-year Fixed Rate Mortgage from FRED
PMT frequency - monthly
In your initial post, address the following:

What was the overall amount of interest paid over the term of the loan?
Change multiple variables (such as interest rate, down payment) and describe the impact of each.
In your analysis, what variable played the biggest role on the total amount paid on the loan amount over the life of the mortgage? Be creative, you can even prepay throughout the life of the mortgage.
After doing this exercise, would you be changing anything in your current mortgage or maybe future mortgage?

In: Accounting

A $35,000 bond has a payable interest of 6% per year compounded quarterly. The bond is...

A $35,000 bond has a payable interest of 6% per year compounded quarterly. The bond is expected to mature in fifteen years. If the market interest rate is 8% per year compounded quarterly, the present value of the bond closest to which of the following values?

a.

$37,570

b.

$22,700

c.

$28,900

d.

$33,400

In: Accounting

After being employed. During the operating period, it has been noticed that there happened to be...

After being employed. During the operating period, it has been noticed that there happened to be shrinkage to its inventory. Some music plus was missing. Of course, it’s the liability of the securities. They didn’t take their accountability enough. So the security should pay for it. Big shareholder named Mr. Madson sent his curious that there is shrinkage while there is nothing to do with the income statement. If you are an accountant, please send a communication letter to Mr. Madson and explain the reason.

please help me with this question

In: Accounting

Selling price   $75.00 June 8000 July 9000 August 10000 September 12000 Credit Sales Collected in the...

Selling price  

$75.00

June

8000

July

9000

August

10000

September

12000

Credit Sales Collected in the month of the sale

40%

Following month

60%

Ending finished goods inventory of the following month's unit sales

20%

Ending raw materials inventory of the following month's raw materials production needs

10%

Raw materials purchases are paid for in the month of purchase

30%

Following month

70%

Pounds of raw materials required for each unit of finished goods

5

Raw materials cost per pound

$2.00

Direct labor wage rate per hour

$15.00

Direct labor hours required for each unit of finished goods

2

Variable selling & administrative expense per unit sold

$1.80

fixed selling and administrative expense per month

$60,000.00

1. What are the budgeted sales for July?

2. What are the expected cash collections for July?

3. What is the accounts receivable balance at the end of July?

4. According to the production budget, how many units should be produced in July?

5. If 52,000 pounds of raw materials are needed to meet production in August, how many pounds of raw materials should be purchased in July?

6. What is the estimated cost of raw materials purchases for July?

7. If the cost of raw material purchases in June is $88,880, what are the estimated cash disbursements for raw materials purchases in July?

8. What is the estimated accounts payable balance at the end of July?

9. What is the estimated raw materials inventory balance at the end of July?

10.What is the total estimated direct labor cost for July assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced?

11.If the company always uses an estimated predetermined plantwide overhead rate of $10 per direct labor-hour, what is the estimated unit product cost?

12.What is the estimated finished goods inventory balance at the end of July?

13.What is the estimated cost of goods sold and gross margin for July?

14.What is the estimated total selling and administrative expense for July?

15.What is the estimated net operating income for July?

Assumptions to use for the budget:

1. the selling price is $75.00 per unit.

2. the beginning accounts receivable balance is $315,000

3. the beginning accounts payable balance is $49,000.

4. the beginning cash balance is $49,500

Other than the above all other information is as presented in the text.

Required:

Using the information above answer questions 1 through 15

In: Accounting

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:...

Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows:

Year Unit Sales
1 73,600
2 86,600
3 105,750
4 97,900
5 67,600

Production of the implants will require $1,650,000 in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are $3,500,000 per year, variable production costs are $258 per unit, and the units are priced at $384 each. The equipment needed to begin production has an installed cost of $17,100,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 25 percent of its acquisition cost. The tax rate is 23 percent the required return is 15 percent. MACRS schedule

a.

What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. What is the IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

In: Accounting

The following information is available for year 1 for Pepper Products: Sales revenue (210,000 units) $...

The following information is available for year 1 for Pepper Products: Sales revenue (210,000 units) $ 3,150,000 Manufacturing costs Materials $ 168,000 Variable cash costs 142,400 Fixed cash costs 337,600 Depreciation (fixed) 989,000 Marketing and administrative costs Marketing (variable, cash) 422,400 Marketing depreciation 149,600 Administrative (fixed, cash) 509,200 Administrative depreciation 64,800 Total costs $ 2,783,000 Operating profits $ 367,000 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 4 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 10 percent. Other unit variable manufacturing costs are expected to decrease by 9 percent per unit. Fixed cash costs are expected to increase by 5 percent. Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero. Pepper Products operates on a cash basis. Required: Estimate the cash from operations expected in year 2. (Do not round intermediate calculations.)

In: Accounting

The following information is available for year 1 for Pepper Products: Sales revenue (300,000 units) $...

The following information is available for year 1 for Pepper Products: Sales revenue (300,000 units) $ 8,100,000 Manufacturing costs Materials $ 478,000 Variable cash costs 406,000 Fixed cash costs 935,000 Depreciation (fixed) 2,851,000 Marketing and administrative costs Marketing (variable, cash) 1,205,000 Marketing depreciation 428,000 Administrative (fixed, cash) 1,456,000 Administrative depreciation 213,000 Total costs $ 7,972,000 Operating profits $ 128,000 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 16 percent. Material costs per unit are expected to increase by 9 percent. Other unit variable manufacturing costs are expected to decrease by 7 percent per unit. Fixed cash costs are expected to increase by 5 percent. Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 2 percent. Inventories are kept at zero. Pepper Products operates on a cash basis. Required: Prepare a budgeted income statement for year 2. (Do not round intermediate calculations.)

In: Accounting

Mamas & Papas, Inc. issues 7%, 10-year bonds with a face amount of $80,000 for $74,564...

Mamas & Papas, Inc. issues 7%, 10-year bonds with a face amount of $80,000 for $74,564 on January 1, 2020. The market interest rate for bonds of similar risk and maturity is 8%. Interest is paid semiannually on June 30 and December 31.


1. Record the bond issue in the journal.

2. Record in the journal the first interest payment on June 30, 2020.

In: Accounting

Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially...

Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially complex part of one of the ships needs special production equipment that is not useful for other products. The company purchased this equipment early in 2015 for $200,000. It is now early in 2019, and the manager of the Model Ships Division, Jeri Finley, is thinking about purchasing new equipment to make this part. The current equipment will last for six more years with zero disposal value at that time. It can be sold immediately for $30,000. The following are last year's total manufacturing costs, when production was 8,600 ships: Direct materials $33,970 Direct labor 31,390 Variable overhead 14,190 Fixed overhead 37,840 Total $117,390 The cost of the new equipment is $145,000. It has a six year useful life with an estimated disposal value at that time of $40,000. The sales representative selling the new equipment stated, "The new equipment will allow direct labor and variable overhead combined to be reduced by a total of $1.90 per unit." Finley thinks this estimate is accurate, but also knows that a higher quality of direct material will be necessary with the new equipment, costing $0.23 more per unit. Fixed overhead costs will decrease by $4,800. Finley expects production to be 9,050 ships in each of the next six years. Assume a discount rate of 3%. REQUIRED 1. What is the difference in net present values if Nautical Creations buys the new equipment instead of keeping their current equipment?

In: Accounting

1. At the beginning of the current year, Trenton Company's total assets were $274,000 and its...

1.

At the beginning of the current year, Trenton Company's total assets were $274,000 and its total liabilities were $188,000. During the year, the company reported total revenues of $119,000, total expenses of $89,000 and owner withdrawals of $18,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $286,000. Trenton Company's debt ratio at the end of the current year is:

  • 52.1%.

  • 1.52%.

  • 34.3%.

  • 65.7%.

  • 68.6%.

2.

Joe Jackson opened Jackson's Repairs on March 1 of the current year. During March, the following transactions occurred and were recorded in the company's books:

  1. Jackson invested $38,000 cash in the business.
  2. Jackson contributed $113,000 of equipment to the business.
  3. The company paid $3,300 cash to rent office space for the month of March.
  4. The company received $29,000 cash for repair services provided during March.
  5. The company paid $7,500 for salaries for the month of March.
  6. The company provided $4,300 of services to customers on account.
  7. The company paid cash of $1,800 for utilities for the month of March.
  8. The company received $4,400 cash in advance from a customer for repair services to be provided in April.
  9. Jackson withdrew $6,300 for his personal use from the company.

Based on this information, net income for March would be:

  • $6,600.

  • $26,500.

  • $7,100.

  • $20,700.

  • $26,400.

In: Accounting

Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement,...

Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company is concerned about the net loss on its No. 3 peaches.

GEORGIA ORCHARDS
Income Statement
For Year Ended December 31, 2019
No. 1 No. 2 No. 3 Combined
Sales (by grade)
No. 1: 400,000 Ibs. @ $1.20/lb $ 480,000
No. 2: 400,000 Ibs. @ $0.80/lb $ 320,000
No. 3: 800,000 Ibs. @ $0.25/lb $ 200,000
Total sales $ 1,000,000
Costs
Tree pruning and care @ $0.25/lb 100,000 100,000 200,000 400,000
Picking, sorting, and grading @ $0.20/lb 80,000 80,000 160,000 320,000
Delivery costs 15,600 15,600 38,100 69,300
Total costs 195,600 195,600 398,100 789,300
Net income (loss) $ 284,400 $ 124,400 $ (198,100 ) $ 210,700


In preparing this statement, the company allocated joint costs among the grades on a physical basis as an equal amount per pound. The company’s delivery cost records show that $31,200 of the $69,300 relates to crating the No. 1 and No. 2 peaches and hauling them to the buyer. The remaining $38,100 of delivery costs is for crating the No. 3 peaches and hauling them to the cannery.

Problem 09-5AC Part 1

Required:
1. Prepare reports showing cost allocations on a sales value basis to the three grades of peaches. Separate the delivery costs into the amounts directly identifiable with each grade. Then allocate any shared delivery costs on the basis of the relative sales value of each grade. (Do not round intermediate calculations.)

In: Accounting