home / study / business / accounting / accounting questions and answers / the cfo of the tapco plastics industries corporation has requested your help in preparing several ... Question: The CFO of The Tapco Plastics Industries Corporation has requested your help in preparing several... (3 bookmarks) The CFO of The Tapco Plastics Industries Corporation has requested your help in preparing several journal entries. She has sent you the following information. October 1, 2013: issued $6,000,000 of “20” year convertible bonds. The bonds pay an annual rate of interest of 5%, payable semi-annually on April 1 st and October 1 st each year. The bonds were issued with a premium of $180,000. The premium is being amortized on a straight line basis. The bonds can be converted on any date after 4 years from their issue date, into 10 shares of Tapco’s $5 par value common stock for each $1,000 of bonds. On December 1, 2017 $1,200,000 of bonds were turned in for conversion. Accrued interest on the bonds being converted was also paid to the holders at the time of the conversion. The company’s stock was selling for $205 per share on the date of the conversion. On May1, 2018 $480,000 of bonds were turned in for conversion. Accrued interest on the bonds being converted was also paid to the holders at the time of the conversion. The company’s stock was selling for $235 per share on the date of the conversion. Note: Tapco Plastics Corporation has a year end of December 31 st . Prepare all journal entries pertaining to these bonds for the dates below: October 1, 2017 December 1, 2017 May 1, 2018 December 31, 2018 April 1, 2019

On January 1, 2017, Brussels Enterprises issues bonds at par dated January 1, 2017, that have a $2,600,000 par value, mature in 4 years, and pay 9% interest semiannually on June 30 and December 31.

1. Record the entry for the issuance of bonds for cash on January 1, 2017.
2. Record the entry for the first semiannual interest payment on June 30, 2017.
3. Record the entry for the second semiannual interest payment on December 31, 2017.
4. Record the entry for the maturity of the bonds on December 31, 2020 (assume semiannual interest is already recorded).
  

Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $336,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year:

1. Raw materials purchased on account, $225,000.
2. Raw materials used in production (all direct materials), $210,000.
3. Utility bills incurred on account, $58,000 (95% related to factory operations, and the remainder related to selling and administrative activities).
4. Accrued salary and wage costs:

Direct labor (1,125 hours)	$	255,000
Indirect labor	$	95,000
Selling and administrative salaries	$	135,000

5. Maintenance costs incurred on account in the factory, $59,000
6. Advertising costs incurred on account, $141,000.
7. Depreciation was recorded for the year, $89,000 (70% related to factory equipment, and the remainder related to selling and administrative equipment).
8. Rental cost incurred on account, $114,000 (75% related to factory facilities, and the remainder related to selling and administrative facilities).
9. Manufacturing overhead cost was applied to jobs, $ ? .
10. Cost of goods manufactured for the year, $820,000.
11. Sales for the year (all on account) totaled $1,450,000. These goods cost $850,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were:

Raw Materials	$	35,000
Work in Process	$	26,000
Finished Goods	$	65,000

Required:

1. Prepare journal entries to record the preceding transactions.

2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.)

3. Prepare a schedule of cost of goods manufactured.

4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.

4B. Prepare a schedule of cost of goods sold.

5. Prepare an income statement for the year.

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,800 of these meals using 1,400 direct labor-hours. The company paid these direct labor workers a total of $18,200 for this work, or $13.00 per hour.

According to the standard cost card for this meal, it should require 0.30 direct labor-hours at a cost of $12.50 per hour.

   
Required:

1. According to the standards, what direct labor cost should have been incurred to prepare 4,800 meals? How much does this differ from the actual direct labor cost? (Round labor-hours per meal and labor cost per hour to 2 decimal places.)

Number of meals prepared
Standard direct labor-hours per meal
Total direct labor-hours allowed
Standard direct labor cost per hour
Total standard direct labor cost
Actual cost incurred
Total standard direct labor cost
Total direct labor variance

2. Break down the difference computed in (1) above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Labor rate variance
Labor efficiency variance

Silven Industries, which manufactures and sells a highly successful line of summer lotions and insect repellents, has decided to diversify in order to stabilize sales throughout the year. A natural area for the company to consider is the production of winter lotions and creams to prevent dry and chapped skin.

After considerable research, a winter products line has been developed. However, Silven’s president has decided to introduce only one of the new products for this coming winter. If the product is a success, further expansion in future years will be initiated.

The product selected (called Chap-Off) is a lip balm that will be sold in a lipstick-type tube. The product will be sold to wholesalers in boxes of 24 tubes for $7 per box. Because of excess capacity, no additional fixed manufacturing overhead costs will be incurred to produce the product. However, a $55,000 charge for fixed manufacturing overhead will be absorbed by the product under the company’s absorption costing system.

Using the estimated sales and production of 110,000 boxes of Chap-Off, the Accounting Department has developed the following cost per box:

Direct materials	$	3.20
Direct labor		1.70
Manufacturing overhead		1.10
Total cost	$	6.00

The costs above include costs for producing both the lip balm and the tube that contains it. As an alternative to making the tubes, Silven has approached a supplier to discuss the possibility of purchasing the tubes for Chap-Off. The purchase price of the empty tubes from the supplier would be $1.25 per box of 24 tubes. If Silven Industries accepts the purchase proposal, direct labor and variable manufacturing overhead costs per box of Chap-Off would be reduced by 10% and direct materials costs would be reduced by 25%.

Required:

1a. Calculate the total variable cost of producing one box of Chap-Off? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

1b. Assume that the tubes for the Chap-Off are purchased from the outside supplier, calculate the total variable cost of producing one box of Chap-Off? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

1c. Should Silven Industries make or buy the tubes?

X	Make
	Buy

   

2. What would be the maximum purchase price acceptable to Silven Industries? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

     

3. Instead of sales of 110,000 boxes, revised estimates show a sales volume of 130,000 boxes. At this new volume, additional equipment must be acquired to manufacture the tubes at an annual rental of $46,000. Assume that the outside supplier will not accept an order for less than 130,000 boxes.

a. Calculate the total relevant cost of making 130,000 boxes and total relevant cost of buying 130,000 boxes. (Do not round intermediate calculations.)

b. Based on the above calculations, should Silven Industries make or buy the boxes?

	Make
X	Buy

  

4. Refer to the data in (3) above. Assume that the outside supplier will accept an order of any size for the tubes at $1.25 per box. Which of these is the best alternative?

	Make all 130,000 boxes
	Buy all 130,000 boxes
X	Make 110,000 boxes and buy 20,000 boxes
	Make 65,000 boxes and buy 65,000 boxes

BOR CPAs, Inc. is a closely held corporation owned by three stockholders who used the initials of their last names to form the corporation’s name: Cyrus Bailey, John Ogden, and Samuel Rogers. The firm’s Certified Public Accountants (CPAs) perform audits of both public companies and privately owned companies. BOR’s CPAs also provide tax services to both individuals and businesses.

The corporation is divided into two profit centers: the Audit Division and the Tax Division. Each division is composed of two cost centers. The Audit Division is composed of two cost-center departments: Public Company Audits and Private Company Audits. The Tax Division is composed of two cost-center departments also: Individual Tax and Business Tax.

BOR, a decentralized organization, is interested in evaluating the performance of the two divisions. The stockholders are responsible for deciding on investment in the two divisions. Cyrus Bailey is in charge of the performance evaluation, and turns to you for assistance. Mr. Bailey is only interested in evaluating operations at the profit center (division) level, and not at the cost center (department) level.

Mr. Bailey is considering temporarily using some of the staff from the Tax Division to assist the Audit Division during the upcoming busy audit season, and would like to evaluate the effect of this on net income. The Tax Division is estimated to have 800 hours of excess capacity.

The unit for determining sales revenue in both divisions is the "engagement", which means the total agreed-upon work for a given client in either audit or tax for a given year. The company charges on average a fee of $75,000 per audit engagement, and $15,750 per tax engagement.

The company has its own Payroll Office, which provides payroll services to both divisions and will allocate its total expenses to the two divisions as service department charges.

The following chart shows some basic data for the company:

Hourly market rate for staff (the price the company would have to pay from an outside contractor for staff services)	$110.00
Average hourly cost rate for staff (the average price the company pays to its staff)	$60.00
Number of paychecks issued by Audit Division	110
Number of paychecks issued by Tax Division	340
Total expense for Payroll Office	$31,500
Amount of assets invested in Audit Division by BOR CPAs, Inc.	$10,000,000
Amount of assets invested in Tax Division by BOR CPAs, Inc.	$4,000,000

Mr. Bailey would like you to start by analyzing the Payroll Office expenses, and allocating the total expenses to each division. He has decided to use the number of payroll checks as the activity base for the allocation.

Fill in the following blanks, allocating the total expense for the Payroll Office to each of the two divisions.

Payroll Charge Rate

per payroll check

Division	Allocated Service Department Charges
Audit Division
Tax Division

Mr. Bailey has prepared the following divisional income statement for you to review, assuming no transfer of excess capacity hours occurs. He has also included the total amounts for BOR CPAs, Inc. in the rightmost column.

Complete the following Income Statements with your data from the Payroll panel. Enter all amounts as positive numbers.

BOR CPAs, Inc.

Income Statements

For the Year Ended December 31, 20Y1

1		Audit Division	Tax Division	Total Company
2	Fees earned:
3	Audit fees (12 engagements)	$900,000.00		$900,000.00
4	Tax fees (45 engagements)		$708,750.00	708,750.00
5	Transfer-pricing fees			0.00
6	Expenses:
7	Variable:
8	Audit hours provided by Audit Division	216,000.00		216,000.00
9	Tax hours provided by Tax Division		283,500.00	283,500.00
10	Excess capacity hours paid to salaried staff		48,000.00	48,000.00
11	Audit hours provided by Tax Division		0.00	0.00
12	Fixed expenses	50,000.00	65,500.00	115,500.00
13	Income from operations before service department charges	$634,000.00	$311,750.00	$945,750.00
14	Service department charges for payroll
15	Income from operations

Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y1 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $110.00 per hour for the additional hours required, selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Income Statements. Enter all amounts as positive numbers. If there is no amount or an amount is zero, enter “0”.

BOR CPAs, Inc.

Income Statements

For the Year Ended December 31, 20Y1

1		Audit Division	Tax Division	Total Company
2	Fees earned:
3	Audit fees (16 engagements)	$1,200,000.00		$1,200,000.00
4	Tax fees (45 engagements)		$708,750.00	708,750.00
5	Transfer-pricing fees
6	Expenses:
7	Variable:
8	Audit hours provided by Audit Division	216,000.00		216,000.00
9	Tax hours provided by Tax Division		283,500.00	283,500.00
10	Excess capacity hours paid to salaried staff
11	Audit hours provided by Tax Division
12	Fixed expenses	50,000.00	65,500.00	115,500.00
13	Income from operations before service department charges
14	Service department charges for payroll
15	Income from operations

Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y1 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a cost transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Audit Division would pay the Tax Division's internal hourly rate of $60.00 per hour for the additional hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees.

Complete the following Income Statements. Enter all amounts as positive numbers. If there is no amount or an amount is zero, enter “0”.

BOR CPAs, Inc.

Income Statements

For the Year Ended December 31, 20Y1

1		Audit Division	Tax Division	Total Company
2	Fees earned:
3	Audit fees (16 engagements)	$1,200,000.00		$1,200,000.00
4	Tax fees (45 engagements)		$708,750.00	708,750.00
5	Transfer-pricing fees
6	Expenses:
7	Variable:
8	Audit hours provided by Audit Division	216,000.00		216,000.00
9	Tax hours provided by Tax Division		283,500.00	283,500.00
10	Excess capacity hours paid to salaried staff
11	Audit hours provided by Tax Division
12	Fixed expenses	50,000.00	65,500.00	115,500.00
13	Income from operations before service department charges
14	Service department charges for payroll
15	Income from operations

How do you adjust your own interpersonal communication styles to meet the organisation’s cultural diversity and ethical environment and guide and support the work team in their personal adjustment process?

Ridgecrest Electric manufactures electric motors. It competes and plans to grow by selling high-quality motors at a low price and by delivering them to customers quickly after receiving customers’ orders. There are many other manufacturers who produce similar motors. Ridgecrest believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2015.

1. Is Ridgecrest’s 2015 strategy one of product differentiation or cost leadership? Explain briefly.

2. Indicate a measure you would expect to see in Ridgecrest’s balanced scorecard for 2015.

Ratio Analysis - Use the 2019 numbers

This assignment includes calculating the 10 ratios for two different companies (Lockheed and Boeing) in the industry which can be found attached to this assignment. Then, tell me which company you would invest in and why.  Ratios (10 x 10 x 2 = 200) + 40 (explanation) = 240 points

The 10 ratios to be calculated are the

Current Ratio, Quick Ratio, Debt Ratio, Debt to Net Worth Ratio, Net Sales to Total Assets Ratio, Net Profit on Sales Ratio, Net Profit on Assets, Net Profit on Equity, Average Inventory Turnover Ratio, Accounts Receivables Ratio.

Use the materials from the Instructional Materials Area for Tesla and Toyota.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

	Fixed Cost per Month		Cost per Course		Cost per Student
Instructor wages			$	2,950
Classroom supplies					$	270
Utilities	$	1,240	$	75
Campus rent	$	4,600
Insurance	$	2,300
Administrative expenses	$	3,700	$	45	$	7

For example, administrative expenses should be $3,700 per month plus $45 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

	Actual
Revenue	$	51,390
Instructor wages	$	11,080
Classroom supplies	$	16,320
Utilities	$	1,950
Campus rent	$	4,600
Insurance	$	2,440
Administrative expenses	$	3,733

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Riveria Co. makes and sells a single product. The current selling price is $39 per unit. Variable expenses are $17 per unit, and fixed expenses total $39,500 per month. Sales volume for May totaled 4,550 units. Required: a. Calculate operating income for May. b. Calculate the break-even point in terms of units sold and total revenues. (Round your intermediate calculations to the nearest whole dollar.) c. Management is considering installing automated equipment to reduce direct labor cost. If this were done, variable expenses would drop to $11 per unit, but fixed expenses would increase to $64,100 per month. c-1. Calculate operating income at a volume of 4,550 units per month with the new cost structure. c-2. Calculate the break-even point in units with the new cost structure. c-3. Why would you suggest that management seriously consider investing in the automated equipment and accept the new cost structure? As sales volume moves above the break-even point, contribution margin and operating income will? By a relatively greater amount than under the old cost structure.

On December 31, 2017, Berclair Inc. had 260 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $200 million. The income tax rate is 40%. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share. In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value.

Required: Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2018.

Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Inventory, December 31, using FIFO → 44 Units @ $17 = $748
Inventory, December 31, using LIFO → 44 Units @ $13 = $572

Transactions in the Following Year	Units			Unit Cost			Total Cost
Purchase, January 9		56			18		$	1,008
Purchase, January 20		106			19			2,014
Sale, January 11 (at $41 per unit)		86
Sale, January 27 (at $42 per unit)		62

Required:

1. Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.
2. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods.
3. Does the inventory method used make a significant difference in the inventory turnover ratio?

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Alert Security Services Co. offers security services to business clients. The trial balance for Alert Security Services Co. has been prepared on the following end-of-period spreadsheet for the year ended October 31, 2016:

Alert Security Services Co.

End-of-Period Spreadsheet

For the Year Ended October 31, 2016

1		Unadjusted	Unadjusted			Adjusted	Adjusted
2		Trial Balance	Trial Balance	Adjustments	Adjustments	Trial Balance	Trial Balance
3		Debit	Credit	Debit	Credit	Debit	Credit
4	Cash	12.00
5	Accounts Receivable	90.00
6	Supplies	8.00
7	Prepaid Insurance	12.00
8	Land	190.00
9	Equipment	50.00
10	Accumulated Depreciation-Equipment		4.00
11	Accounts Payable		36.00
12	Wages Payable		0.00
13	Brenda Schultz, Capital		260.00
14	Brenda Schultz, Drawing	8.00
15	Fees Earned		200.00
16	Wages Expense	110.00
17	Rent Expense	12.00
18	Insurance Expense	0.00
19	Utilities Expense	6.00
20	Supplies Expense	0.00
21	Depreciation Expense	0.00
22	Miscellaneous Expense	2.00
23	Totals	$500.00	$500.00

The data for year-end adjustments are as follows:

•	Fees earned, but not yet billed, $13.
•	Supplies on hand, $4.
•	Insurance premiums expired, $10.
•	Depreciation expense, $3.
•	Wages accrued, but not paid, $1.

Prepare the adjusting entries for Alert Security Services Co. Refer to the Chart of Accounts for correct wording of account titles.

Chart of Accounts

CHART OF ACCOUNTS
Alert Security Services Co.
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 15 Land 16 Equipment 17 Accumulated Depreciation-Equipment LIABILITIES 21 Accounts Payable 22 Wages Payable EQUITY 31 Brenda Schultz, Capital 32 Brenda Schultz, Drawing	REVENUE 41 Fees Earned EXPENSES 51 Wages Expense 52 Rent Expense 53 Insurance Expense 54 Utilities Expense 55 Supplies Expense 56 Depreciation Expense 57 Miscellaneous Expense

Journal

Prepare the adjusting entries for Alert Security Services Co. Refer to the Chart of Accounts for correct wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
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The Koski Company has established standards as follows:

Direct material                                                     3 pounds @ P4/pound = P12 per unit

Direct labor                                                           2 hours @ P8/hour = P16 per unit

Variable overhead                                              2 hours @ P5/hour = $10 per unit

Actual production figures for the past year were as follows:

Units produced                                                                                    500

Direct material used                                                                           1,600 pounds

Direct material purchased (3,000 pounds)                                    $12,300

Direct labor cost (950 hours)                                                             $ 7,790

Variable overhead cost incurred                                                      $ 4,655
  

30. The materials price variance is:
    A. P160 U
    B. P6,300 U
    C. P300 U
    D. P150 U

31. The materials quantity variance is:
   A. P400 U
    B. P410 F
   C. P410 U
    D. P6,000 U

32. The labor efficiency variance is:
    A. P400 F
    B. P800 F
    C. P800 U
    D. P500 F

33. The variable overhead rate variance is:
    A. P345 F
   B. P95 F
    C. P655.50 F
    D. P345 U