LINEA-VERDE customized clothing line uses normal costing for its job-costing system, which has two direct costs: Direct materials and direct manufacturing labor; in addition to one indirect cost . During 2018 the following numbers were computed: Cost of finished goods manufactured was $4,050,000, Total Manufacturing cost was $4,150,000, Work-in-process Inventory on January 1, 2018, $220,000. as for Manufacturing overhead applied, it was $2,000,000 based on a rate of 1.75 times direct manufacturing labor costs.

A. Calculate Direct Manufacturing Labor Cost of 2018. Show all calculations.

B. Calculate the cost of Direct Materials used in 2018. Show all calculations.

C. Calculate the WIP ending balance on December 31, 2018.

D. Assuming 2018, is the first year of operation for LINEA-VERDE and the balance of Direct Materials on December 31, 2018 is one fourth of DIrect MAterials used for production during the year, HOW much Direct MAterials was purchased during 2018?

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax’s sales are for credit (no cash is collected at the time of sale). The company began 2018 with a refund liability of $300,000. During 2018, Halifax sold merchandise on account for $11,500,000. Halifax's merchandise costs it 65% of merchandise selling price. Also during the year, customers returned $450,000 in sales for credit, with $250,000 of those being returns of merchandise sold prior to 2018, and the rest being merchandise sold during 2018. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year.

Required:
1. Prepare entries to (a) record actual returns in 2018 of merchandise that was sold prior to 2018; (b) record actual returns in 2018 of merchandise that was sold during 2018; and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with a refund liability of $380,000. During 2018, Halifax sold merchandise on account for $12,300,000. Halifax's merchandise costs it 70% of merchandise selling price. Also during the year, customers returned $603,000 in sales for credit, with $333,000 of those being returns of merchandise sold prior to 2018, and the rest being merchandise sold during 2018. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year.

Required:

1. Prepare entries to (a) record actual returns in 2018 of merchandise that was sold prior to 2018; (b) record actual returns in 2018 of merchandise that was sold during 2018; and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?

Problem 5

Sage Corp. enters into a contract with a customer to build an apartment building for $1,069,900. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $153,300 to be paid if the building is ready for rental beginning August 1, 2018. The bonus is reduced by $51,100 each week that completion is delayed. Sage commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:

(a) Determine the transaction price for the contract, assuming Sage is only able to estimate whether the building can be completed by August 1, 2018, or not (Sage estimates that there is a 70% chance that the building will be completed by August 1, 2018).

Transaction price: $__________

(b) Determine the transaction price for the contract, assuming Sage has limited information with which to develop a reliable estimate of completion by the August 1, 2018, deadline.

Transaction price: $__________

On June 1, 2018, DCI purchased a call option for $450, which gave it the right to buy 10,000 shares of iLines, Inc., for $54 each until December 1, 2018 . On that date, iLines’ shares were being traded for $52. On June 30, 2018, the option contract could be traded in the market at $96,000. On December 1, 2018, with the shares being traded at $70 each, DCI exercised the option and took delivery of the shares of iLines.

You are required to record all necessary entry/entries related to this option on:

a]   June 1, 2018 when DCI acquired the call option.

b]   June 30, 2018, when DCI closed its books of accounts.

c]   December 1, 2018 assuming DCI exercises the call option and takes delivery of the shares of iLynes.

d]   December 1, 2018, assuming DCI settles the call option for cash without taking delivery of the iLynes shares

NOTE:       Wherever no entry is needed, write "No entry necessary".

Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par value of $100,000 and semiannual interest payments.

     
Use the above straight-line bond amortization table and prepare journal entries for the following.

(a) The issuance of bonds on December 31, 2017.

(b) The first interest payment on June 30, 2018.

(c) The second interest payment on December 31, 2018.

Record the issue of bonds with a par value of $100,000 cash December 31, 2017.

Record the interest payment and amortization on June 30, 2018.

Record the interest payment and amortization on December 31, 2018.

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with a refund liability of $330,000. During 2018, Halifax sold merchandise on account for $11,800,000. Halifax's merchandise costs it 70% of merchandise selling price. Also during the year, customers returned $345,000 in sales for credit, with $191,000 of those being returns of merchandise sold prior to 2018, and the rest being merchandise sold during 2018. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year.

Required:

1. Prepare entries to (a) record actual returns in 2018 of merchandise that was sold prior to 2018; (b) record actual returns in 2018 of merchandise that was sold during 2018; and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?

Mario, 35, is single and lives with his girlfriend, Huyen, also 35. Mario has a 6-year-old son, Manpreet, who lived with him for all of 2018. Mario provided more than 50% of the support for both Manpreet and Huyen in 2018.

In 2018, Mario earned a salary of $76,000. In addition to his salary, Mario also received alimony of $1,000 per month and child support payments of $500 per month from his ex-spouse. Mario contributed $2,500 to an individual retirement account in 2018. Mario paid $13,000 of expenditures that qualify as itemized deductions and childcare costs of $6,000 to allow Mario to work. Mario had a total of $6,500 in federal income taxes withheld from his paychecks during 2018.

Huyen worked on and off in 2018 and earned wages of $4,000. Huyen paid no expenses that qualify as deductions. Huyen had a total of $400 in federal income taxes withheld from her paychecks during 2018.

1. What is Mario’s federal gross income for 2018?

2. What is Mario’s federal adjusted gross income for 2018?

3. What is the total amount of Mario’s deductions from AGI for 2018?

4. What is Mario’s federal taxable income for 2018?

5. What is Mario’s federal taxes payable or refund due for 2018?

6. Mario is upset because he received a large federal income tax refund last year (tax year 2017). Mario thinks that the tax reform enacted at the end of 2017 resulted in higher taxes for him this year. Briefly explain to Mario why that is not necessarily the case just because he did not receive a large refund again this year.

Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):

1. Expenses each year include $20 million from a two-year casualty insurance policy purchased in 2018 for $40 million. The cost is tax deductible in 2018.
2. Expenses include $2 million insurance premiums each year for life insurance on key executives.
3. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $26 million and $31 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $18 million ($7 million collected in 2017 but not recognized as revenue until 2018) and $26 million, respectively. Hint: View this as two temporary differences—one reversing in 2018; one originating in 2018.
4. 2018 expenses included a $15 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019.
5. During 2017, accounting income included an estimated loss of $4 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible.
6. At January 1, 2018, Arndt had a deferred tax asset of $4 million and no deferred tax liability.

4. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2019.

Butch's Pool Service & Supply, Inc. (BPSS) is completing the accounting process for the year just ended, December 31, 2018. The transactions during 2018 have been journalized and posted. The following data with respect to adjusting entries are available:

1. BPSS owed $7,500 wages to the office receptionist and three assistants for working the last 10 days in December. The employees will be paid in January 2019.
2. On October 1, 2018, PPSS received $24,000 from customers who prepaid pool cleaning service for one year beginning on November 1, 2018.
3. The company received a $520 utility bill for December utility usage. It will be paid in January 2018.
4. BPSS borrowed $30,000 from a local bank on May 1, 2018, signing a note with a 10 percent interest rate. The note and interest are due on May 1, 2019.
5. On December 31, 2018, BPSS cleaned and winterized a customer's pool for $800, but the service was not yet recorded on December 31.
6. On August 1, 2018, BPSS purchased a two-year insurance policy for $4,200, with coverage beginning on that date. The amount was recorded as Prepaid Insurance when paid.
7. On December 31, 2018, BPSS had $3,100 of pool cleaning supplies on hand. During 2018, BPSS purchased supplies costing $23,000 from Pool Corporation, Inc., and had $2,400 of supplies on hand on December 31, 2017.
8. BPSS estimated that depreciation on its buildings and equipment was $8,300 for the year.
9. At December 31, 2018, $110 of interest on investments was earned that will be received in 2019.

Prepare adjusting entries for Butch's Pool Service & Supply, Inc., on December 31, 2018.