Prepare a balance sheet for Freedom Non-Profit Organization as follows:

The budget director of Heather’s Florist has prepared the following sales budget. The company had $290,000 in accounts receivable on July 1. Heather’s Florist normally collects 100 percent of accounts receivable in the month following the month of sale.

Required

1. Complete the schedule of cash receipts by filling in the missing amounts.

2. Determine the amount of accounts receivable the company will report on its third quarter pro forma balance sheet.

Question 2 – Cost Allocation: Joint Products and Byproducts

Tivoli Labs produces a drug used for the treatment of hypertension. The drug is produced in batches. Chemicals costing $60,000 are mixed and heated, creating a reaction; a unique separation process then extracts the drug from the mixture. A batch yields a total of 2,500 gallons of the chemicals. The first 2,000 gallons are sold for human use while the last 500 gallons, which contain impurities, are sold to veterinarians.

The costs of mixing, heating, and extracting the drug amount to $90,000 per batch. The output sold for human use is pasteurized at a total cost of $120,000 and is sold for $585 per gallon. The product sold to veterinarians is irradiated at a cost of $10 per gallon and is sold for $410 per gallon.

In March, Tivoli, which had no opening inventory, processed one batch of chemicals. It sold 1,700 gallons of product for human use and 300 gallons of the veterinarian product. Tivoli uses the net realizable value method for allocating joint production costs.

Required:

1.   How much in joint costs does Tivoli allocate to each product?

2.   Compute the cost of ending inventory for each of Tivoli’s products.

3.   If Tivoli were to use the constant gross-margin percentage NRV method instead, how would it allocate its joint costs?

4.   Calculate the gross margin on the sale of the product for human use in March under the constant gross-margin percentage NRV method.

5.   Suppose that the separation process also yields 300 pints of a toxic byproduct. Tivoli currently pays a hauling company $5,000 to dispose of this byproduct. Tivoli is contacted by a firm interested in purchasing a modified form of this byproduct for a total price of $6,000. Tivoli estimates that it will cost about $30 per pint to do the required modification. Should Tivoli accept the offer?

PT corp makes 300 units of A per year. At this level, the cost per unit includes $360 in direct materials, $1,000 in direct labor, $240 in variable overhead, and $900 in fixed overhead. An outside supplier has offered to make all 300 units for $2,100 per unit. If PT accepts this offer, two thirds of the fixed overhead would persist, but would be defrayed by renting out the floor space for $83,000 per year.

What are the relevant costs (in total) for continuing to make this product?

The following events apply to Gulf Seafood for the 2016 fiscal year:

1. The company started when it acquired $34,000 cash by issuing common stock.

2. Purchased a new cooktop that cost $13,600 cash

3. Earned $20,600 in cash revenue.

4. Paid $12,100 cash for salaries expense.

5. Adjusted the records to reflect the use of the cooktop. Purchased on January 1, 2016, the cooktop has an expected useful life of five years and an estimated salvage value of $3,200. Use straight-line depreciation. The adjusting entry was made as of December 31, 2016.

a) Record the events in general journal format AND post to T-accounts.

cash, equipment, accumulated depreciation, common stock, sales revenue, salaries expense, depreciation expense

Required information

[The following information applies to the questions displayed below.]

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

Delph had no underapplied or overapplied manufacturing overhead during the year.

2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.

a. Compute the departmental predetermined overhead rates.

b. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.

c. If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200?

d. What is Delph’s cost of goods sold for the year?

Complete the question by entering your answers in the tabs given below.

• Required 2A
• Required 2B
• Required 2C
• Required 2D

Compute the departmental predetermined overhead rates. (Round the final answers to 2 decimal places.)

Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:

Required:

Allocate the service department costs to the two operating departments using the reciprocal method.

Essay
27. Discuss the business judgment rule.

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows: Year 1 Year 2 Sales (@ $60 per unit) $ 1,080,000 $ 1,680,000 Cost of goods sold (@ $35 per unit) 630,000 980,000 Gross margin 450,000 700,000 Selling and administrative expenses* 301,000 331,000 Net operating income $ \149,000\ $ 369,000 * $3 per unit variable; $247,000 fixed each year. The company’s $35 unit product cost is computed as follows: Direct materials $ 7 Direct labor 11 Variable manufacturing overhead 1 Fixed manufacturing overhead ($368,000 ÷ 23,000 units) 16 Absorption costing unit product cost $ 35 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are: Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 28,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

I.   Gross Profit Method

ABC Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of December.

1. Compute the estimated inventory at cost on December 31^st, assuming that the gross profit is 20% of sales.

b. How does the answer differ if the gross profit is 25% of cost instead?

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,550,000 Variable expenses 603,500 Contribution margin 946,500 Fixed expenses 1,041,000 Net operating income (loss) $ (94,500) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 390,000 $ 640,000 $ 520,000 Variable expenses as a percentage of sales 45 % 36 % 38 % Traceable fixed expenses $ 284,000 $ 322,000 $ 207,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $25,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising? Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,550,000 Variable expenses 603,500 Contribution margin 946,500 Fixed expenses 1,041,000 Net operating income (loss) $ (94,500) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 390,000 $ 640,000 $ 520,000 Variable expenses as a percentage of sales 45 % 36 % 38 % Traceable fixed expenses $ 284,000 $ 322,000 $ 207,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $25,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? 2-b. Would you recommend the increased advertising?

Exercise 19-8 Contribution margin format income statement LO P2

Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell for $3,800 each. Variable selling expenses are $250 per ATV. The remaining selling expenses are fixed. Administrative expenses are 50% variable and 50% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,890 each.

Required:

1. Prepare an income statement for this current year using the contribution margin format. (Round contribution margin per ATV to the nearest dollar amount.)

Question 2 – Mergers and Acquisitions

ABC has 1 million shares outstanding, each of which has a price of $20. It has made a takeover offer of XYZ Corporation which has 1 million shares outstanding and a price per share of $2.50. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms.

Required:

1. Assume ABC made a cash offer to purchase XYZ for $3 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offer represent?
2. Assume ABC makes a stock offer with an exchange ratio of 0.15. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent?
3. At current market prices, both offers are offers to purchase XYZ for $3 million. Does that mean that your answers to requirements (1) and (2) must be identical? Explain.