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
10
11

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

Imagine that a coworker wants to circumvent an internal control to steal money from your company. Speculate on two (2) internal controls that your coworker might attempt to circumvent in order to steal the money. Recommend two (2) actions that the company could take in order to prevent the theft.

o   Outline an anti-fraud program that you would implement at your company (current or previous). Suggest the approach you would take to sell this program to your senior executives.

Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows:

	FMV			Adjusted Basis			Appreciation
Cash	$	26,000		$	26,000
Receivables		20,700			20,700
Building		108,500			54,250			54,250
Land		281,250			93,750			187,500
Total	$	436,450		$	194,700		$	241,750
Payables	$	24,600		$	24,600
Mortgage*		138,750			138,750
Total	$	163,350		$	163,350

* The mortgage is attached to the building and land.

Ernesto was asking for $518,350 for the company. His tax basis in the BLI stock was $122,000. Included in the sales price was an unrecognized customer list valued at $162,000. The unallocated portion of the purchase price ($83,250) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.)

a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?

b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds [computed in part (a)] to Ernesto in liquidation of his stock?

1. c1. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
2. c2. What is the tax basis in the assets received by Amy and Brian?

Church Company completes these transactions and events during March of the current year (terms for all its credit sales are 2/10, n/30).

Mar.		1				Purchased $38,000 of merchandise from Van Industries, invoice dated March 1, terms 2/15, n/30.
		2				Sold merchandise on credit to Min Cho, Invoice No. 854, for $15,200 (cost is $7,600).
		3		(a)		Purchased $1,140 of office supplies on credit from Gabel Company, invoice dated March 3, terms n/10 EOM.
		3		(b)		Sold merchandise on credit to Linda Witt, Invoice No. 855, for $7,600 (cost is $3,800).
		6				Borrowed $72,000 cash from Federal Bank by signing a long-term note payable.
		9				Purchased $19,000 of office equipment on credit from Spell Supply, invoice dated March 9, terms n/10 EOM.
		10				Sold merchandise on credit to Jovita Albany, Invoice No. 856, for $3,800 (cost is $1,900).
		12				Received payment from Min Cho for the March 2 sale less the discount.
		13		(a)		Sent Van Industries Check No. 416 in payment of the March 1 invoice less the discount.
		13		(b)		Received payment from Linda Witt for the March 3 sale less the discount.
		14				Purchased $28,000 of merchandise from the CD Company, invoice dated March 13, terms 2/10, n/30.
		15		(a)		Issued Check No. 417, payable to Payroll, in payment of sales salaries expense for the first half of the month, $15,600. Cashed the check and paid the employees.
		15		(b)		Cash sales for the first half of the month are $60,800 (cost is $48,640). (Cash sales are recorded daily, but are recorded only twice here to reduce repetitive entries.)
		16				Purchased $1,660 of store supplies on credit from Gabel Company, invoice dated March 16, terms n/10 EOM.
		17				Received a $2,800 credit memorandum from CD Company for the return of unsatisfactory merchandise purchased on March 14.
		19				Received a $570 credit memorandum from Spell Supply for office equipment received on March 9 and returned for credit.
		20				Received payment from Jovita Albany for the sale of March 10 less the discount.
		23				Issued Check No. 418 to CD Company in payment of the invoice of March 13 less the March 17 return and the discount.
		27				Sold merchandise on credit to Jovita Albany, Invoice No. 857, for $11,400 (cost is $4,560).
		28				Sold merchandise on credit to Linda Witt, Invoice No. 858, for $4,560 (cost is $1,824).
		31		(a)		Issued Check No. 419, payable to Payroll, in payment of sales salaries expense for the last half of the month, $15,600. Cashed the check and paid the employees.
		31		(b)		Cash sales for the last half of the month are $66,880 (cost is $40,128).
		31		(c)		Verify that amounts impacting customer and creditor accounts were posted and that any amounts that should have been posted as individual amounts to the general ledger accounts were posted. Foot and crossfoot the journals and make the month-end postings.

Assume the following ledger account amounts Inventory (March 1 beg. bal. is $63,000), Z. Church, Capital (March 1 beg. bal. is $63,000) and Church Company uses the perpetual inventory system.

Required:
2-a. Enter the transactions in a sales journal.
2-b. Enter the transactions in a purchases journal.
2-c. Enter the transactions in a cash receipts journal.
2-d. Enter the transactions in a cash disbursements journal.
2-e. Enter the transactions in a general journal.

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

1. The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 10,600 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 66,000 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

	Budgeted Unit Sales
July	43,000
August	48,000
September	58,000
October	38,000
November	28,000
December	18,000

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

QUESTIONS

1. For each of the following accounts, signify which part of the accounting equation

    would include the account balance.

1.1 Merchandise inventory

a) Liabilities            b) Owner's equity            c) Assets      

1.2 Freight out expense

   a) Liabilities           b) Owner's equity            c) Assets      

1.3 Sales revenue

     a) Liabilities            b) Owner’s equity           c) Assets      

1.4 Cost of goods sold

     a) Liabilities            b) Owner's equity            c) Assets      

1.5 Sales returns and allowances

      a) Liabilities            b) Owner’s equity            c) Assets      

1.6 Sales discounts

      a) Liabilities            b) Owner's equity           c) Assets      

1.7 Accounts receivable

      a) Liabilities            b) Owner's equity            c) Assets      

1.8 Owner's capital

     a) Liabilities            b) Owner’s equity            c) Assets      

1.9 Owner's withdrawals

      a) Liabilities            b) Owner's equity            c) Assets      

1.10 Accounts payable

   a) Liabilities            b) Owner's equity            c) Assets      

2. For each of the following accounts, signify DEBIT or CREDIT to indicate the normal balance

    of the account.

2.1 Merchandise inventory

  a) Debit            b) Credit      

2.2 Freight out expense

  a) Debit            b) Credit      

2.3 Sales revenue

   a) Debit            b) Credit      

2.4 Cost of goods sold

   a) Debit            b) Credit      

2.5 Sales returns and allowances

   a) Debit            b) Credit      

2.6 Sales discounts

     a) Debit            b) Credit      

2.7 Accounts receivable

     a) Debit            b) Credit      

2.8 Owner's capital

     a) Debit            Credit      

2.9 Owner's withdrawals

      a) Debit            b) Credit      

2.10 Accounts payable

      a) Debit            b) Credit      

3. For each of the following items, signify the effect the item will ultimately have on the TOTAL

    COST of merchandise inventory on the books of the business recording the item.

3.1 Purchase returns

  a) No effect            b) Decrease           c) Increase      

3.2 Purchase allowances

   a) No effect            b) Decrease            c) Increase      

3.3 Purchase discounts

   a) No effect            b) Decrease            c) Increase      

3.4 Incoming freight costs

  a) No effect            b) Decrease            c) Increase      

3.5 Sales returns

a) No effect            b) Decrease            c) Increase      

3.6 Sales allowances

  a) No effect            b) Decrease            c) Increase      

3.7 Sales discounts

  a) No effect            b) Decrease            c) Increase      

3.8 Outgoing freight costs

  a) No effect            b) Decrease            c) Increase   

Marcelino Co.'s March 31 inventory of raw materials is $86,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $384,000. Overhead costs incurred in April are: indirect materials, $54,000; indirect labor, $23,000; factory rent, $38,000; factory utilities, $23,000; and factory equipment depreciation, $61,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $645,000 cash in April. Costs of the three jobs worked on in April follow.

	Job 306				Job 307				Job 308
Balances on March 31
Direct materials		$	31,000			$	35,000
Direct labor			23,000				13,000
Applied overhead			11,500				6,500
Costs during April
Direct materials			130,000				215,000			$	105,000
Direct labor			105,000				151,000				105,000
Applied overhead			?				?				?
Status on April 30	Finished (sold)				Finished (unsold)					In process

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Exercise 24-3 Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,438. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $390,900 2 399,800 3 410,100 4 425,400 5 434,000 6 434,900 7 436,400 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,100. This new equipment would require maintenance costs of $94,000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value. Net present value $ Determine whether Hillsong should purchase the new machine to replace the existing machine? Click if you would like to Show Work for this question:

Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:

1. The Marketing Department has estimated sales as follows for the remainder of the year (in units):

July	38,000	October	28,000
August	86,000	November	14,500
September	55,000	December	15,000

The selling price of the beach umbrellas is $13 per unit.

2. All sales are on account. Based on past experience, sales are collected in the following pattern:

30%	in the month of sale
65%	in the month following sale
5%	uncollectible

Sales for June totaled $455,000.

3. The company maintains finished goods inventories equal to 15% of the following month’s sales. This requirement will be met at the end of June.

4. Each beach umbrella requires 4 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden be equal to 50% of the following month’s production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:

5. Gilden costs $0.60 per foot. One-half of a month’s purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $48,390.

6. Required:

   1. Calculate the estimated sales, by month and in total, for the third quarter.

   2. Calculate the expected cash collections, by month and in total, for the third quarter.

   3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.

   4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.

   5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.

   6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.

Activity: Funding 401(k)s and Roth IRAs

Objective: The purpose of this activity is to learn to calculate 15% of an income to save for retirement and to understand how to fund retirement investments.

Directions: Complete the investment chart based on the facts given for each situation. Assume each person is following Dave’s advice of investing 15% of their annual household income. Remember to follow the sequence of contributions recommended in the lesson.

Investments	Annual Salary	Company Match	401(k)	Roth IRA	Total Annual Investment
Joe	$40,000	1:1 up to 5%
Melissa	$55,000	1:2 up to 6%
Tyler & Megan	$105,000	No Match
Adrian	$111,000	1:1 up to 3%
David & Britney	$150,000	No Match
Brandon	$35,000	2:1 up to 6%
Chelsea	$28,000	No Match

• Joe will take advantage of the company match (5% of salary) then put the rest in a Roth IRA
• Melissa will fund the 401(k) up to the match and put the remainder in her Roth.
• Tyler & Megan can each fund a Roth, then put the remainder in the 401(k). With no match, fund the Roth first (based on 2011 contribution of $5,000 per individual).
• Adrian is not eligible to open a Roth IRA because he makes too much money. He will put his entire 15% into his 401(k).
• David & Britney are still within the guidelines for a married couple (based on 2011 contributions of $5,000 per individual). After maxing out the IRA, they will fund the 401(k).
• Brandon will fund his 401(k) up to the match, then put the remainder in his Roth.
• Chelsea will fund her Roth IRA.

Instructions:

**Must use formulas and link to cells throughout Excel file. Please name your project; i.e. Your Last Name_302 Project & Your Last Name_302 Memo. See Project Scoring Rubric for additional detail related to grading.

                        A. Record the journal entries for the December transactions.**Must show formulas in cells.

B. Record the adjusting journal entries for 12/31/18.**Must show formulas in cells.

                        C. Set up a worksheet using Excel to:

• Prepare the Unadjusted Trial Balance as of December 31, by making the December adjustments (separate columns). **Must link cells to journal entries.
• Enter the adjusting journal entries into worksheet (separate columns). **Must link cells to journal entries.
• Prepare the Adjusted Trial Balance as of December 31. **Use formulas.
• Complete the Income Statement and Balance Sheet columns of the worksheet. **Use formulas.

                        D. Prepare a multiple step income statement including calculation of weighted average shares and earnings per share. **Must link to worksheet.

                        E. Prepare a retained earnings statement. **Must link to worksheet.

                        F. Prepare a balance sheet (both years presented). **Must link to worksheet.

                        G. Prepare a cash flows statement. **Must link to comparative balance sheets and income statements.

                        H. Compute the following (**Must link to income statement and/or balance sheet):

• Current ratio
• Acid test ratio
• Debt to Equity
• Inventory Turnover
• Accounts Receivable Turnover
• At least 5 other ratios of your choosing

Using the memo format located in Microsoft Word, compile a memo incorporating the following information:   

• Based on the financial statements and ratios, describe the financial health of this company.
• Would you invest in this company? Why or why not? What would your advice be to the president of the company?
• Memo must include what other information would be helpful in making your decision.
• Memo will be graded based on content, correct grammar & spelling and the student’s ability to summarize financial data in a logical manner indicating the student’s general understanding of the financial data. See Rubric for additional details.

Record the following entries in general journal form for December, 2018:

December 1: Purchased Land for a future building site for $500,000, paying $100,000 down and signed a 5%, 90-day note for the balance.

December 3: Recorded sales on account of $45,000, 2/15, net 30. Cost of inventory was 23,500. JPJones using the net method for accounting for sales.

December 4: Bought back 5000 shares of stock for $20 per share.

December 4: Purchased 40,000 worth of equipment, 5 year life, $5,000 salvage value, for cash. Equipment will be depreciated using the straight-line method of depreciation.

December 5: Issued 5000 shares of restricted stock to its CFO. The stock has a fair value of $72,000. The service period related to this restricted stock is 3 years. Vesting occurs if the CFO stays with the company for 3 years. The par value of the stock is $1.

December 8: Purchased inventory of $44,000 on account and paid $30,000 on separate account.

December 15: Recorded cash sales of $24,000, cost of merchandise inventory was $14,900.

December 16: Issued 1,000 shares of common stock at $16.00 per share

December 17: Received payment related to sale on December 3.

December 20: Recorded sales on account of $113,000, cost of merchandise inventory was $75,000

December 24: Sold 2500 shares of Treasury Stock for $23 per share.

December 26: Wrote off 3,500 in bad debt.

Record the following adjusting entries in general journal form as of December 31, 2018:

1. Supplies on hand at the end of the year: $450
2. Equipment shown on the 12/1 TB was purchased on 1/1/17, has a 8 year life, no salvage value and company uses double-declining balance method for its depreciation.
3. Included in the truck balance is a fully depreciated truck for $6,500 and a new truck valued at $50,000 which was purchased on 1/1/17. The new truck has a 9-year life, no salvage value and the company uses the sum-of-the-years digits for its depreciation method on this asset.
4. The patent was purchased on 1/1/2013 for $100,000 and its useful life is 20 years.
5. $18,600 was paid on September 1, 2018 for six months rent
6. On 3/1/18, paid $22,500 for a 12-month insurance policy.
7. Declared dividends of $15,000 on December 31
8. The fair market value of the securities (classified as marketable) is $19,500.
9. 4% of Accounts Receivable is estimated to be uncollectible. Company uses the allowance method for estimating its uncollectible accounts.
10. Accrued salaries expense of $6,000 and recorded Payroll tax expense on account of $2300.
11. Had issued $200,000 of 6%, 10-year bond, dated 1/1/17 for $215,589 when the market rate was 5%. Interest is paid on June 30 and January 1 using the effective interest rate method. The June payment is included in the Dec. 1 TB. (Additional credit awarded if amortization table is included)
12. One month has passed since the issuance of restricted stock.
13. Interest on 30 days of note payable should be accrued. (Assume 360 days in a year for calculation)
14. Income tax rate is 25%

Additional Information:

During 2018, the following additional transactions occurred: (Hint: these are already included in 12/1/18 TB, but may be needed for the Statement of Cash Flows)

1. Issued 5,000 shares of common stock, $1 par, for $35,000 on June 30, 2018.
2. Some equipment was sold (original cost $10,000, book value $6,000) for $5,000 (do not consider in your #2 AJE)
3. All amortization and depreciation is recorded once a year on December 31.

Andrea purchased raw materials for her factory and received an invoice for $16,000 dated May 17, 2018, with terms 3/10, 2.3/15, n/30. She made a partial payment of $10,000 on June 1, 2018, and the balance on June 16, 2018. What was the total Andrea paid for the invoice?

The nut house sells almonds, cashews, and pistachios. They sold 10,000 cans last year. Pistachios outsold cashews by a margin of 2 to 1 in cans. sales of almonds were half the sales of cashews in cans. fixed costs for the nut house are 20,000 . almonds: unit sales Price:8.00 unit variable:4.00 cashews:unit sales price:10.00 unit variable:5.00 Pistachios: unit sales price:6.00 unit variable cost: 4.00 what is the breakeven sales volume and dollars for each nut rounded?

Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 75,000 units of product: net sales $1,500,000; total costs and expenses $1,620,000; and net loss $120,000. Costs and expenses consisted of the following.

	Total	Variable	Fixed
Cost of Goods Sold	$962,000	$451,000	$511,000
Selling Expenses	510,000	91,000	419,000
Administrative Expenses	148,000	58,000	90,000
	$1,620,000	$600,000	$1,020,000

Management is considering the following independent alternatives for 2020.
1.Increase unit selling price 25% with no change in costs and expenses.

2.Change the compensation of salespersons from fixed annual salaries totaling $205,000 to total salaries of $35,025 plus a 5% commission on net sales.

3.Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.

(a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.)

(b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)

	Break-even point
1) increase selling price	$
2) change compensation	$
3) purchase machinery	$