Having a accounting system in place to generate reliable accounting information is imperative for any business. It allows the owner, and investors to know if the company is making profit, how much they are making, and what they need to do to increase the profit. Having the accounting information allows them to see where they are spending their money, and if they need to increase, or decrease spending in a certain category. It also shows them how much revenue they are making, and if they need to increase, or decrease the amount they are charging for their services, or products. Having accurate accounting records helps the owners to attract stockholders, and investors. This accuracy will help them retrieve loans from the bank to expand their business, or make improvements. The banks want to see if the company will be able to pay back the loans. Some of the things they will look at is, debt to income ratio, assets, and if the company is making a profit. Investors will want to know that the company will continuously be making a profit. The accounting records can be used as a guide to improve any business. Without these accurate records, owners will not know the financial status of their company.

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"Creditors and investors depend on financial account information in order to access the financial state of a company. This information is needed in order for external parties to make critical decisions as to their involvement with a company. Through tools such as balance sheets a more detailed report of the companies assets and liabilities can be discovered.

Accounting statements can be considered by past or present or both perspectives. A companies past may not be of interest to external parties if the present financial statements have momentum in a positive direction. On the opposite side of the spectrum there are other situations where the present financial status are showing negative findings but because of the past statements creditors and investors may believe a company can make a come back.

Financial Accounting information can be used to gauge the projected future of a company. Creditors may decide to get out of a deal and cut its loses if a companies future looks as if it may not be able to reach it's projected goals in order to meet creditors and investors expectation. If the companies past trends show a high probability of growth and profit, creditors may want to invest more funds to take advantage of the future growth.

Investors may look at a longer projected time period compared to creditors. Even though investors may be prepared to make longer commitments, the decision is based on calculated past financial records. Often the most important information that is the sum of financial account information is the bottom line question, which is what is the net worth of a company? Even though this is an important question, how a companies value is determined is shown by financial accountant information."

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The following were selected from among the transactions completed by Babcock Company during November of the current year:

Required:

Journalize the transactions.

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Journalize these transactions from the buyer's point of view. Using the perpetual inventory system, purchases of inventory on account are recorded by increasing both the merchandise inventory account and the accounts payable account. Recall that FOB shipping point freight is the buyer's cost, while FOB destination freight is the seller's expense. Often freight must be prepaid for the carrier to deliver.

Nov. 3: Calculate any trade discount before the purchase or sale amount is recorded.

Nov. 5: Using the perpetual inventory system, purchases of inventory on account are recorded by debiting the merchandise inventory account and crediting the accounts payable account. Freight expense added to the invoice increases the cost of the merchandise.

Nov. 6: A return of merchandise that had a trade discount is recorded without the trade discount. Using the perpetual inventory system, any discounts or returns are recorded directly by the buyer who debits Accounts Payable and credits Merchandise Inventory, basically reversing what was done in recording the purchase.

Nov. 13 and 15: Returns are not eligible for discounts. Since the invoice is paid within the discount period, the cash paid on account is the difference between the invoice and the discount.

Journalize these transactions from the seller's point of view. Keep in mind that the sales discounts are given on the outstanding balance of the sale transaction, except for any freight costs.

Nov. 4: Two entries are required for (1) the cash sale and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 14: Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) the sale for cash and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 23: Since no discount is allowed, no discount is recorded. The cash paid is equal to the receivable on the seller's books.

Nov. 24: Two entries are required for: (1) the sale on account and (2) the cost of the merchandise sold and inventory decrease on the seller's records.

Nov. 28: Record the service fee as an expense.

Nov. 30: Customer Refunds Payable is debited while the credit is to Cash. A second entry increases Merchandise Inventory and credits Estimated Returns Inventory for the return cost.

Problem 8-50 Prepare a Production Cost Report and Adjust Inventory Balances: Weighted-Average Method (LO 8-3, 4) The records of Fremont Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs. Units Unaudited Costs Work-in-process inventory 215,000 $ 818,897 Finished goods inventory 26,000 366,250 As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are added at the beginning of the manufacturing process, and overhead is applied at the rate of 80 percent of the direct labor costs. There was no finished goods inventory at the start of the period. The following additional information is also available. Costs Units Direct Materials Direct Labor Beginning inventory (80% complete as to labor) 93,000 $ 435,600 $ 524,000 Units started 590,000 Current costs 1,750,000 2,246,000 Units completed and transferred to finished goods inventory 468,000 Required: a. Prepare a production cost report for Fremont using the weighted-average method. (Hint: You will need to calculate equivalent units for three categories: materials, labor, and overhead.) (Round "Cost per equivalent unit" to 2 decimal places.)

Journal entry worksheet

• Record the difference between the unaudited records and actual ending balances of Work-in-Process Inventory and Finished Goods Inventory.

Note: Enter debits before credits.

c. If the adjustment in requirement (b) is not made, will the company’s income and inventories be overstated or understated?

When considering organisational risk it is important to review the political, economic, social, legal, technological, and policy context. Comment on the influence/ impact each of those factors has on an organisation’s risk profile—the risk scope and context. (500–700 words)

. What was the motivation for FASB's revision of the goodwlll impairment test? A. Congressional mandate B. FASB's simplification initiative C. Concern over the cost and complexity of the current standard D. Both B and C

P.F Steel Industries Co. uses the step method for allocating the costs of its service departments to operating departments. The company has two support departments (Human Resource and Information Technology) and two operating departments (Hot Rolled Hollow Steel and Cold Rolled Hollow Steel).

P.F. Industries Co. decided to allocate Human Resource department costs based on the number of employees in each department and Information Technology costs based on the number of machine hours in each department.

Required:

a- Give a numerical example for the four departments as a given information.

b- Then based on your given information, use the step-down method to allocate support department costs.

Allocate cost:

Support department cost allocation—reciprocal services method

Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, and costs from the Security Department are allocated based on asset value. Information about each department is provided in the following table:

Determine the total cost of each production department after allocating all support department costs to the production departments using the reciprocal services method.

The Fitzgerald Company maintains a checking account at the Bank of the North. The bank provides a bank statement along with canceled checks on the last day of each month. The October 31, 2018, bank statement included the following information:

The company’s general ledger cash (checking) account had a balance of $42,544 at the end of October. Deposits outstanding totaled $4,224, and all checks written by the company were processed by the bank except for those totaling $5,620. In addition, a check for $500 for the purchase of office furniture was incorrectly recorded by the company as a $50 disbursement. The bank correctly processed the check during October.

Required:
1. Prepare a bank reconciliation for the month of October.
2. Prepare the necessary journal entries at the end of October to adjust the general ledger cash account.

On October 29, 2017, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company’s cost per new razor is $20 and its retail selling price is $75 in both 2017 and 2018. The manufacturer has advised the company to expect warranty costs to equal 8% of dollar sales. The following transactions and events occurred.

2017

2018

Problem 9-4A Part 1

1a. Prepare journal entries to record above transactions and adjustments for 2017.
1b. Prepare journal entries to record above transactions and adjustments for 2018.

1a.

• Nov. 11: Record the sales revenue of 105 razors for $7,875 cash.

• Nov. 11: Record the cost of goods sold for 105 razors.

• Nov. 30: Record the estimated warranty expense at 8% of November sales.

• Dec. 09: Record the replacement of 15 razors that were returned under the warranty.

• Dec. 16: Record the sales revenue of 220 razors for $16,500 cash.

• Dec. 16: Record the cost of goods sold for 220 razors.

• Dec. 29: Record the replacement of 30 razors that were returned under the warranty.

• Dec 31: Record the estimated warranty expense at 8% of December sales.

  1b. Prepare journal entries to record above transactions and adjustments for 2018.

• Jan. 05: Record the sales revenue of 150 razors for $11,250 cash.

• Jan. 05: Record the cost of goods sold for 150 razors.

• Jan. 17: Record the replacement of 50 razors that were returned under the warranty.

• Jan. 31: Record the adjusting entry for warranty expense for the month of January 2018.

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage door opening device. The president has asked that you review the company’s costing system and “do what you can to help us get better control of our manufacturing overhead costs.” You find that the company has never used a flexible budget, and you suggest that preparing such a budget would be an excellent first step in overhead planning and control.

After much effort and analysis, you determined the following cost formulas and gathered the following actual cost data for March:

During March, the company worked 20,000 machine-hours and produced 14,000 units. The company had originally planned to work 22,000 machine-hours during March.

Required:

1. Calculate the activity variances for March.

2. Calculate the spending variances for March.

Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost drivers—the number of pizzas sold and the number of deliveries made.

The pizzeria’s cost formulas appear below:

In November, the pizzeria budgeted for 1,560 pizzas at an average selling price of $15 per pizza and for 220 deliveries.

Data concerning the pizzeria’s actual results in November appear below:

Required:

1. Complete the flexible budget performance report that shows both revenue and spending variances and activity variances for the pizzeria for November. (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.)

Average Rate of Return Method, Net Present Value Method, and Analysis

The capital investment committee of Ellis Transport and Storage Inc. is considering two investment projects. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $420,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis.

Required:

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.

2. The warehouse has a smaller  net present value as tracking technology cash flows occur earlier  in time. Thus, if only one of the two projects can be accepted, the tracking technology  would be the more attractive.

Sassafras Yacht Corporation began operations on December 1, 2017. The company uses normal

costing as part of a job-order cost system. During December, the company purchased $75,000 of

direct material, and then used $60,000 of these direct materials to start Job 450. The company

charged total conversion costs of $80,000 (direct labor and overhead) to Job 450 during December.

As of the end of December Job 450 was not complete. There was no underapplied or overapplied

overhead for December.

The company charges overhead to jobs using direct labor HOURS (careful!). The estimated direct

labor hours for 2018 are 25,000 hours and the estimated overhead cost for 2018 is $600,000. During

2018, the following transactions occurred.

1.

There were 5 jobs that had work completed on them in 2018. Some of the data for these jobs

are shown below:

Job 450

Job 500

Job 550

Job 600

Job 650

Direct Material Cost

$8,000

$60,000

$80,000

$20,000

$12,000

Direct Labor

Hours

5,000 hrs.

6,000 hrs.

10,000 hrs. 2,000 hrs.

3,000 hrs.

2.

The Direct Labor Rate for 2018 is $40 per hour.

3.

The company purchased $200,000 of direct materials.

4.

At the end of 2018, the jobs that were not finished were Jobs 600 and 650. Job 450 consisted

of 5,000 units of which 4,200 sold in 2018 at a selling price of $200 each. Job 550 consisted of

15,000 units of which 10,000 sold in 2018 at a selling price of $100 each. Job 500 consisted of

10,000 units, none of which sold at the end of 2018.

5.

Other costs incurred during 2018 include the following:

Advertising Expense

$125,000

Indirect Labor

$275,000

Maintenance- Factory

$ 75,000

Factory Insurance

$ 45,000

Administrative Expense

$450,000

Corporate General Expenses

$150,000

Depreciation- Factory

$60,000

F.G. Warehouse Depreciation

$ 40,000

Utilities- Factory

$110,000

Miscellaneous Overhead

$ 60,000

Selling Expense

$200,000

Indirect Materials

$ 75,000

Your Task:

A.

Prepare, in good form, a Schedule of Cost of Goods Manufactured for 2018.

B.

Add up the total costs of Jobs A, B and C. Does this total equal your Cost of Goods

Manufactured from Part A? Should it?

C.

Compute the underapplied or overapplied overhead for 2018. Is it under or overapplied?

D.

Assume that any underapplied or overapplied overhead is closed totally to Cost of Goods Sold

at the end of 2018. Prepare, in good form, an Income Statement for 2018.

Ecola Company uses a job order costing system. Manufacturing overhead is applied on the basis of direct labor cost. Total manufacturing overhead was estimated to be $142,560 for the year; direct labor was estimated to total $162,000.

The following transactions have occurred during the year.

(a) Calculate the predetermined overhead rate.

(b) Calculate cost of goods manufactured.

(c) Calculate the over- or underapplied overhead. (Input the amount as positive value.)

(d) Calculate adjusted cost of goods sold.