The following calendar year-end information is taken from the December 31, 2017, adjusted trial balance and other records of Leone Company.

Advertising expense $ 34,000

Depreciation expense—Office equipment 10,000

Depreciation expense—Selling equipment 9,300 Depreciation expense—Factory equipment

35,550 Factory supervision 105,360

Factory supplies used 7,850

Factory utilities 39,000

Direct labor 750,000

Indirect labor 67,800

Miscellaneous production costs 9,775

Office salaries expense 67,400

Raw materials purchases* 952,500

Rent expense—Office space 28,400

Rent expense—Selling space 26,100

Rent expense—Factory building 78,800

Maintenance expense—Factory equipment 42,600

Sales 4,762,500 Sales salaries expense 406,160

*Assume that the raw materials inventory account is used only for direct materials. Indirect materials are recorded in a factory supplies account. Required: Classify each of the costs as either a product or period cost. Then, classify each of the product costs as either direct materials, direct labor, or factory overhead and each of the period costs as either selling or general and administrative expenses. (Leave no cell blank.)

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.

rev: 07_28_2020_QC_CS-217627

Required:

1. Assume Delph uses a plantwide predetermined overhead rate based on machine-hours.

a. Compute the plantwide predetermined overhead rate.

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 cost, 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?

Chapter 05 Problem 11

Input Area:

Output area

At December 31, 2016, Belmont Company had a net deferred tax
liability of $375,000. An explanation of the items that compose this balance is as follows.
Resulting Balances

2. Accrual, for book purposes, of estimated loss contingency from pending
lawsuit that is expected to be settled in 2017. The loss will be deducted on

In analyzing the temporary differences, you find that $30,000 of the depreciation temporary difference will reverse in 2017, and
$120,000 of the temporary difference due to the installment sale will reverse in 2017. The tax rate for all years is 40%.
Instructions
Indicate the manner in which deferred taxes should be presented on Belmont Company’s December 31, 2016, balance sheet

Dividing LLC Income

Martin Farley and Ashley Clark formed a limited liability company with an operating agreement that provided a salary allowance of $65,000 and $52,000 to each member, respectively. In addition, the operating agreement specified an income-sharing ratio of 3:2. The two members withdrew amounts equal to their salary allowances. Revenues were $668,000 and expenses were $520,000, for a net income of $148,000.

a. Determine the division of $148,000 net income for the year.

b. Provide journal entries to close the (1) revenues and expenses and (2) drawing accounts for the two members. For a compound transaction, if an amount box does not require an entry, leave it blank.

c. If the net income were less than the sum of the salary allowances, how would income be divided between the two members of the LLC?

If the net income of the LLC were less than the sum of the salary allowances,   members would still be credited with their salary allowances. The difference between the net income and total salary allowances would be allocated to each partner as  , according to the   ratio.

In testing cash disbursements for the Jay Klein Company, you obtained an understanding of internal control. The controls are reasonably good, and no unusual audit problems arose in previous years. Although there are not many individuals in the accounting department, there is a reasonable separation of duties in the organization. There is a separate purchasing agent who is responsible for ordering goods and a separate receiving department that counts the goods when they are received and prepares receiving reports. There is a separation of duties between recording acquisitions and cash disbursements, and all information is recorded in the two journals independently. The controller reviews all supporting documents before signing the checks, and he immediately mails the checks to the vendors. Check copies are used for subsequent recording. All aspects of internal control seem satisfactory to you, and you perform minimum tests of 25 transactions as a means of assessing control risk. In your tests, you discover the following exceptions:

1. One invoice was paid twice. The second payment was supported by a duplicate copy of the invoice. Both copies of the invoice were marked “paid.”

2. Two items in the acquisitions journal were misclassified.

3. Three invoices were not initialed by the controller, but there were no dollar misstatements evident in the transactions.

4. Five receiving reports were recorded in the acquisitions journal at least 2 weeks later than their date on the receiving report.

5. Two receiving reports for vendors’ invoices were missing from the transaction packets. One vendor’s invoice had an extension error, and the invoice was initialed that the amount had been checked.

6. One check amount in the cash disbursements journal was for $100 less than the amount stated on the vendor’s invoice.

7. One voided check was missing.

a. Identify whether each of 1 through 7 is a control test deviation, a monetary misstatement, or both.

b. For each exception, identify which transaction-related audit objective was not met.

c. What is the audit importance of each of these exceptions?

d. What follow-up procedures would you use to determine more about the nature of each exception?

e. How would each of these exceptions affect rest of the your audit? Be specific. f. Identify internal controls that should have prevented each misstatement.

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company’s assembly process. During 2018, management became aware that the $2.0 million cost of the machinery was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

The tax rate is 40% for all years involved.

Required:
1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2018 depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 7,300 pounds of oysters in August. The company’s flexible budget for August appears below:

The actual results for August appear below:

Required:

Calculate the company’s revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

The Pyramid Company has used the LIFO method of accounting for inventory during its first two years of operation, 2016 and 2017. At the beginning of 2018, Pyramid decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2016–2018. The income tax rate for all years is 40%.

Pyramid issued 49,000 $1 par, common shares for $225,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $12,000 cash dividends were paid in both 2017 and 2018.

Required:
1. Prepare the journal entry to record the change in accounting principle.
2. Prepare the 2018–2017 comparative income statements beginning with income before income taxes.
3. Prepare the 2018–2017 comparative statements of shareholders’ equity. (Hint: The 2016 statements reported retained earnings of $35,760. This is $59,600 – [$59,600 × 40%]).

Direct Labor Variances

La Batre Bicycle Company manufactures commuter bicycles from recycled materials. The following data for July of the current year are available:

a. Determine the direct labor rate variance, direct labor time variance, and total direct labor cost variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

b. How much direct labor should be debited to Work in Process?
$

You are provided with the following information for Sunland Inc. Sunland Inc. uses the periodic method of accounting for its inventory transactions. March 1 Beginning inventory 2,000 liters at a cost of 70¢ per liter. March 3 Purchased 2,500 liters at a cost of 74¢ per liter. March 5 Sold 2,300 liters for $1.05 per liter. March 10 Purchased 4,000 liters at a cost of 81¢ per liter. March 20 Purchased 2,500 liters at a cost of 89¢ per liter. March 30 Sold 5,200 liters for $1.25 per liter. Collapse question part (a1) Incorrect answer. Your answer is incorrect. Try again. Calculate the value of ending inventory that would be reported on the balance sheet, under each of the following cost flow assumptions. (Round answers to 2 decimal places, e.g. 125.50.)

(1) Specific identification method assuming: (i) The March 5 sale consisted of 1,000 liters from the March 1 beginning inventory and 1,300 liters from the March 3 purchase; and (ii) The March 30 sale consisted of the following number of units sold from beginning inventory and each purchase: 450 liters from March 1; 550 liters from March 3; 2,900 liters from March 10; 1,300 liters from March 20.

(2) FIFO

(3) LIFO

The comparative balance sheet of Canace Products Inc. for December 31, 20Y6 and 20Y5, is as follows: 1 Dec. 31, 20Y6 Dec. 31, 20Y5 2 Assets 3 Cash $643,740.00 $678,670.00 4 Accounts receivable (net) 567,590.00 546,500.00 5 Inventories 1,010,270.00 983,300.00 6 Investments 0.00 239,830.00 7 Land 520,160.00 0.00 8 Equipment 879,990.00 680,730.00 9 Accumulated depreciation (244,840.00) (200,100.00) 10 Total assets $3,376,910.00 $2,928,930.00 11 Liabilities and Stockholders’ Equity 12 Accounts payable (merchandise creditors) $771,010.00 $748,100.00 13 Accrued expenses payable (operating expenses) 63,500.00 71,400.00 14 Dividends payable 7,850.00 5,880.00 15 Common stock, $2 par 56,000.00 32,000.00 16 Paid-in capital: Excess of issue price over par—common stock 408,000.00 192,000.00 17 Retained earnings 2,070,550.00 1,879,550.00 18 Total liabilities and stockholders’ equity $3,376,910.00 $2,928,930.00 The income statement for the year ended December 31, 20Y6, is as follows: 1 Sales $5,983,200.00 2 Cost of goods sold 2,452,370.00 3 Gross profit $3,530,830.00 4 Operating expenses: 5 Depreciation expense $44,740.00 6 Other operating expenses 3,099,470.00 7 Total operating expenses 3,144,210.00 8 Operating income $386,620.00 9 Other expense: 10 Loss on sale of investments (64,530.00) 11 Income before income tax $322,090.00 12 Income tax expense 102,390.00 13 Net income $219,700.00 Additional data obtained from an examination of the accounts in the ledger for 20Y6 are as follows: a. Equipment and land were acquired for cash. b. There were no disposals of equipment during the year. c. The investments were sold for $175,300 cash d. The common stock was issued for cash. e. There was a $28,700 debit to Retained Earnings for cash dividends declared.

Are there any recent examples of a capital budgeting decision gone bad (besides Microsoft/Nokia and Sony/Columbia pictures?

The ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y3:

Lambert and Yost

ADJUSTED TRIAL BALANCE

December 31, 20Y3

The balance in Yost’s capital account includes an additional investment of $10,200 made on April 10, 20Y3.

X

Accounts, Labels and Amount Descriptions

X

Income Statement and Allocation to Partners

1. Prepare an income statement for 20Y3. Create a separate statement indicating the division of net income to the partners. The partnership agreement provides for salary allowances of $45,400 to Lambert and $54,600 to Yost, allowances of 10% on each partner’s capital balance at the beginning of the fiscal year, and equal division of the remaining net income or net loss. Refer to the information given and the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. If a net loss is incurred, enter that amount as a negative number using a minus sign.