Campbell Manufacturing pays its production managers a bonus based on the company’s profitability. During the two most recent years, the company maintained the same cost structure to manufacture its products.

(Assume that selling and administrative expenses are associated with goods sold.)

Levine sells its products for $109.3 per unit.

Required

1. Prepare income statements based on absorption costing for 2018 and 2019.

2. Since Levine sold the same number of units in 2018 and 2019, why did net income increase in 2019?

During their senior year at Clarkson College, two business students, Gerry Keating and Louis Lamont, began a part-time business making personal computers. They bought the various components from a local supplier and assembled the machines in the basement of a friend’s house. Their only cost was $359 for parts; they sold each computer for $638. They were able to make three machines per week and to sell them to fellow students. The activity was appropriately called Keating & Lamont Computers (KLC). The product quality was good, and as graduation approached, orders were coming in much faster than KLC could fill them.

A national CPA firm made Ms. Lamont an attractive offer of employment, and a large electronics company was ready to hire Mr. Keating. Students and faculty at Clarkson College, however, encouraged the two to make KLC a full-time venture. The college administration had decided to require all students in the schools of business and engineering to buy their own computers beginning in the coming fall term. It was believed that the quality and price of the KLC machines would attract the college bookstore to sign a contract to buy a minimum of 1,000 units the first year for $501 each. The bookstore sales were likely to reach 2,000 units per year, but the manager would not make an initial commitment beyond 1,000.

The prospect of $501,000 in annual sales for KLC caused the two young entrepreneurs to wonder about the wisdom of accepting their job offers. Before making a decision, they decided to investigate the implications of making KLC a full-time operation. Their study provided the following information relating to the production of their computers:

The two owners expected to devote their time to the sales and administrative aspects of the business.

Required

1. Classify each cost item into the categories of direct materials, direct labor, and manufacturing overhead.

2. Classify each cost item as either variable or fixed.

3. What is the cost per computer if KLC produces 1,000 units per year? What is the cost per unit if KLC produces 2,000 units per year?

4. If the job offers for Mr. Keating and Ms. Lamont totaled $93,000, would you recommend that they accept the offers or proceed with plans to make KLC a full-time venture?

3.Refer to FNM's last publically reported Balance Sheet before it was placed into Conservatorship:

If you believed that FNM's mortgage assets, as reported, were inflated by 70,000,000K, what journal entries would you use to correct this error? Choose all the correct entries.

a) dr Mortgage Write Down Expense 70,000,000

b) dr Short/Current Long Term Debt 70,000,000

c) cr Cash 70,000,000

d) cr Total Assets 70,000,000

e) dr Mortgages 70,000,000

f) cr Mortgage Write Down Expense 70,000,000

g) cr Mortgages 70,000,000

4.Refer to the information provided in Question 3 above. After you have corrected the value of FNM's mortgage assets, what is the value of the firm's equity?  

Financial Statements from the End-of-Period Spreadsheet

Demo Consulting is a consulting firm owned and operated by Jesse Flatt. The following end-of-period spreadsheet was prepared for the year ended August 31, 20Y9:

Based on the preceding spreadsheet, prepare an income statement for Demo Consulting.

Based on the preceding spreadsheet, prepare a statement of stockholders’ equity for Demo Consulting. During the year ended August 31, 20Y9, $3,100 of additional common stock was issued. If an amount box does not require an entry, leave it blank. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

Based on the preceding spreadsheet, prepare a balance sheet for Demo Consulting.

CompUSA Inc. sells computer hardware. It also markets related software and software-support services. The company prepares annual forecasts for sales, of which the first six months of 2019 are given below.

In a typical month, total sales are broken down as follows: cash sales, 30%; VISA® credit card sales, 65%; and 5% open account (the company’s own charge accounts). For budgeting purposes, assume that cash sales plus bank credit card sales are received in the month of sale; bank credit card sales are subject to a 3% processing fee, which is deducted daily at the time of deposit into CompUSA’s cash account with the bank. Cash receipts from collection of accounts receivable typically occur as follows: 20% in the month of sale, 50% in the month following the month of sale, and 27% in the second month following the month of sale. The remaining receivables generally turn out to be uncollectible.

CompUSA’s month-end inventory requirements for computer hardware units are 30% of the following month’s estimated sales. A one-month lead time is required for delivery from the hardware distributor. Thus, orders for computer hardware units are generally placed by CompUSA on the 25th of each month to ensure availability in the store on the first day of the month needed. These units are purchased on credit, under the following terms: n/45, measured from the time the units are delivered to CompUSA. Assume that CompUSA takes the maximum amount of time to pay its invoices. On average, the purchase price for hardware units runs 60% of selling price.

Required:

1. Calculate estimated cash receipts for April 2019.

2. The company is looking at the number of hardware units to order on January 25.

a. Determine the estimated number of units to be ordered.

b. Calculate the dollar cost (per unit and total) for these units.

3. Cash planning in this line of business is critical to success. Management feels that the assumption of selling price per unit ($3,000) is firm—at least for the foreseeable future. Also, it is comfortable with the 30% rate for end-of-month inventories. It is not so sure, however, about (a) the Cost of Goods Sold (CGS) rate (because of the state of flux in the supplier market) and (b) the level of predicted sales in March 2019. Discussions with marketing and purchasing suggest that three outcomes are possible for each of these two variables, as follows:

The preceding outcomes are assumed to be independent, which means that there are nine possible combinations (3 × 3). You are asked to conduct a sensitivity analysis to determine the range of possible cash outflows for April 10, under different combinations of the above. Assume, for simplicity, that sales volume for April is fixed. Complete the following table:

1. XYZ Sporting Corp. manufactures two types of products – Footwear and Apparel. The following table shows the estimated annual overhead cost of XYZ for the year of 2019 -

XYZ usually deploys a plantwide overhead rate based on machine hours. But the management of the company decided to implement an activity-based costing (ABC) system to allocate all $2,150,000 of its overhead costs to three cost pools –

The following table shows the distribution of resource consumption across the activity cost pools

1. Calculate the company’s plantwide overhead rate. Using the plantwide overhead rate,how much overhead cost is allocated to Apparel and how much is allocated to Footwear?
2. Calculate the activity rates of Customer Orders, Product Design, and Order Size. )
3. Using the ABC system, how much overhead cost is allocated to Apparel and how much is allocated to Footwear?

Assume the following set of facts for questions 5-6.

Puig corp. has developed some standard costs for the year based on a capacity of 180,000 direct labor hours as follows (Puig uses direct labor hours as a base for overhead):

Cost per unit:

direct materials        4 pounds @ $7 = $28

fixed overhead          2 hours @ $4 =   8

During the year, 90,000 units were scheduled for production; however, only 80,000 units were actually produced. The following data relate to the year:

Direct labor efficiency variance $20,000 u.

Actual direct labor hours were 165,000.

The denominator level of volume was 180,000 direct labor    hours.

____ 5. The standard wage per hour for direct labor is:

(a) $ 6

(b) $ 5

(c) $ 4

(d) $ 3

(e) none of the above, the correct answer is ________.

___ 6. The production volume variance for the year is:

(a) $60,000 f

(b) $60,000 u

(c) $30,000 u

(d) $30,000 f

(e) none of the above, the correct answer is _________.

Budgeted Income Statement and Balance Sheet

As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Factory output and sales for 20Y9 are expected to total 27,000 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 20Y9, are expected to remain unchanged from the balances at the beginning of the year.

Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:

Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $294,000 on 20Y9 taxable income will be paid during 20Y9. Regular quarterly cash dividends of $1 per share are expected to be declared and paid in March, June, September, and December on 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $158,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

2. Prepare a budgeted balance sheet as of December 31, 20Y9.

9.

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):

Transactions and events during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $174 on December 8, including $47 on credit and $127 collected in cash.
9. Recognized salaries and wages expense on December 9, $92 paid in cash.
10. Collected accounts receivable on December 10, $31.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $7.
12. Supplies counted on December 31, 2018, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $13.
16. Income tax for the year was $7. It will be paid in 2019.

1. 9-a. How much net income did H & H Tool, Inc., generate during 2018? What was its net profit margin?

2. 9-b. Is the company financed primarily by liabilities or stockholders’ equity?

3. 9-c. What is its current ratio?

6.

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

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):

Transactions and events during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $174 on December 8, including $47 on credit and $127 collected in cash.
9. Recognized salaries and wages expense on December 9, $92 paid in cash.
10. Collected accounts receivable on December 10, $31.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $7.
12. Supplies counted on December 31, 2018, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $13.
16. Income tax for the year was $7. It will be paid in 2019.

1. 6-a. Prepare an income statement.

2. 6-b. Prepare the statement of retained earnings.

3. 6-c. Prepare the balance sheet.

5.

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):

Transactions and events during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $174 on December 8, including $47 on credit and $127 collected in cash.
9. Recognized salaries and wages expense on December 9, $92 paid in cash.
10. Collected accounts receivable on December 10, $31.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $7.
12. Supplies counted on December 31, 2018, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $13.
16. Income tax for the year was $7. It will be paid in 2019.

5. Post the adjusting entries from requirement 4 and prepare an adjusted trial balance. (Enter your answers in thousands of dollars.)

3.

Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of dollars to simplify):

Transactions and events during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $11 cash on March 1 using a short-term note.
2. Purchased land on March 2 for future building site; paid cash, $8.
3. Issued additional shares of common stock on April 3 for $30.
4. Purchased software on July 4, $11 cash.
5. Purchased supplies on account on October 5 for future use, $19.
6. Paid accounts payable on November 6, $12.
7. Signed a $20 service contract on November 7 to start February 1, 2019.
8. Recorded revenues of $174 on December 8, including $47 on credit and $127 collected in cash.
9. Recognized salaries and wages expense on December 9, $92 paid in cash.
10. Collected accounts receivable on December 10, $31.

Data for adjusting journal entries as of December 31:

11. Unrecorded amortization for the year on software, $7.
12. Supplies counted on December 31, 2018, $12.
13. Depreciation for the year on the equipment, $5.
14. Interest of $1 to accrue on notes payable.
15. Salaries and wages earned but not yet paid or recorded, $13.
16. Income tax for the year was $7. It will be paid in 2019.

3. Prepare an unadjusted trial balance. (Enter your answers in thousands of dollars.)

Chart of Entity Comparison

Question:

Choose four characteristics (Rows) and describe how two of the entity selections options differ (e.g. Basis Decrease from Operations in Sole Proprietor vs. C Corporation)