Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. Following is the company's unadjusted trial balance as of December 31, 2019. December 31, 2019 Unadjusted Trial Balance Cash $ 20,000 Accounts receivable 5,500 Allowance for doubtful accounts $ 858 Merchandise inventory 16,200 Trucks 47,000 Accum. depreciation—Trucks 0 Equipment 92,400 Accum. depreciation—Equipment 24,200 Accounts payable 5,750 Estimated warranty liability 2,150 Unearned services revenue 0 Interest payable 0 Long-term notes payable 30,000 Common stock 25,000 Retained earnings 68,800 Dividends 25,000 Extermination services revenue 90,000 Interest revenue 902 Sales (of merchandise) 109,826 Cost of goods sold 50,800 Depreciation expense—Trucks 0 Depreciation expense—Equipment 0 Wages expense 50,000 Interest expense 0 Rent expense 24,000 Bad debts expense 0 Miscellaneous expense 1,286 Repairs expense 15,500 Utilities expense 9,800 Warranty expense 0 Totals $ 357,486 $ 357,486 The following information in a through h applies to the company at the end of the current year. The bank reconciliation as of December 31, 2019, includes the following facts. Cash balance per bank $ 16,600 Cash balance per books 20,000 Outstanding checks 2,550 Deposit in transit 3,200 Interest earned (on bank account) 82 Bank service charges (miscellaneous expense) 30 Reported on the bank statement is a canceled check that the company failed to record. (Information from the bank reconciliation allows you to determine the amount of this check, which is a payment on an account payable.) An examination of customers’ accounts shows that accounts totaling $694 should be written off as uncollectible. Using an aging of receivables, the company determines that the ending balance of the Allowance for Doubtful Accounts should be $775. A truck is purchased and placed in service on January 1, 2019. Its cost is being depreciated with the straight-line method using the following facts and estimates. Original cost $ 39,500 Expected salvage value $ 14,000 Useful life (years) 4 Two items of equipment (a sprayer and an injector) were purchased and put into service in early January 2017. They are being depreciated with the straight-line method using these facts and estimates. Sprayer Injector Original cost $ 39,000 $ 21,000 Expected salvage value $ 3,000 $ 4,000 Useful life (years) 8 5 On September 1, 2019, the company is paid $20,700 cash in advance to provide monthly service for an apartment complex for one year. The company began providing the services in September. When the cash was received, the full amount was credited to the Extermination Services Revenue account. The company offers a warranty for the services it sells. The expected cost of providing warranty service is 2.5% of the extermination services revenue of $76,200 for 2019. No warranty expense has been recorded for 2019. All costs of servicing warranties in 2019 were properly debited to the Estimated Warranty Liability account. The $22,500 long-term note is an 8%, five-year, interest-bearing note with interest payable annually on December 31. The note was signed with First National Bank on December 31, 2019. The ending inventory of merchandise is counted and determined to have a cost of $16,200. Bug-Off uses a perpetual inventory system. Required: 1. Determine amounts for the following items: Correct (reconciled) ending balance of Cash; and the amount of the omitted check. Adjustment needed to obtain the correct ending balance of the Allowance for Doubtful Accounts. Depreciation expense for the truck used during year 2019. Depreciation expense for the two items of equipment used during year 2019. The adjusted 2019 ending balances of the Extermination Services Revenue and Unearned Services Revenue accounts. The adjusted 2019 ending balances of the accounts for Warranty Expense and Estimated Warranty Liability. The adjusted 2019 ending balances of the accounts for Interest Expense and Interest Payable. 2. Use the results of part 1 to complete the six-column table by first entering the appropriate adjustments for items a through g and then completing the adjusted trial balance columns. Hint: Item b requires two adjustments. 3. Prepare journal entries to record the adjustments entered on the six-column table. Assume Bug-Off’s adjusted balance for Merchandise Inventory matches the year-end physical count. 4a. Prepare a single-step income statement for year 2019. 4b. Prepare the statement of retained earnings (cash dividends during 2019 were $25,000) for 2019. 4c. Prepare a classified balance sheet as at 2019.
In: Accounting
Essay
27. Discuss the business judgment rule.
In: Accounting
Question: Transfer Pricing
The Battery Division of Parker Company makes a standard 12 -volt battery. The Division has the
following data:
Production capacity (number of batteries) 200,000
Selling price per battery to outsiders $ 50
Variable costs per battery $20
Fixed costs per battery (based on capacity) $ 7
Parker Company has a Vehicle Division that could use this battery in its forklift trucks. The Vehicle
Division is now buying 100.000 batteries per year from an outside supplier at $48 per battery.
Required:
For (a) through (d) below, assume the Battery Division can sell all of its output to outside customers at
the $50 Price.
(a). If the Vehicle Division purchases 100,000 batteries per year from the Battery Division. what price
should control the transfers?
(b). If the Battery Division meets the price that the Vehicle Division is currently paying to its outside
suppliers and sells 100.000 batteries to the Vehicle Division each year. what will be the effect on the
profits of the Battery Division. the Vehicle Division. and the company as a whole?
(c). Assume that the Battery Division can avoid $4 in variable costs, such as selling commissions. on
Intra - company sales. What are the lower limit and upper limit for a transfer price? (3 marks]
d. The Vehicle Division wants the Battery Division to supply it with 50,000 special heavy duty
batteries.
• The variable cost for each heavy duty battery would be $27.
• The Battery Division has no idle capacity
• Heavy duty batteries require more processing time than regular batteries: they would displace
75.000 regular batteries from the product line.
What should be the minimum transfer price?
For (e) through (g) below. suppose that the Battery Division has enough idle capacity to supply the
Vehicle Division's needs.
(e) . What are the lower limit and the upper limit for a transfer price?
I. Suppose that the Vehicle Division's outside suppliers drop their price to only $40 per battery. Should
the Battery Division meet this price? If the Battery Division does not meet this price, what will be the
effect on the profits of the company as a whole?
(g). What is the lowest possible transfer price the Battery Division would be willing to match with
outside suppliers? Elaborate the reasons.
In: Accounting
A machine purchased 3 years ago for $140,000 is now too slow to satisfy the demand of the customers. It can be upgraded now for $81,000 or sold to a smaller company internationally for $43,000. The upgraded machine will have an annual operating cost of $79,000 per year and a $29,000 salvage value in 3 years. If upgraded, the presently owned machine will be retained for only 3 more years, then replaced with a machine to be used in the manufacture of several other product lines. The replacement machine, which will serve the company now and for a maximum of 8 years, costs $225,000. Its salvage value will be $53,000 for years 1 through 5; $20,000 after 6 years; and $10,000 thereafter. It will have an estimated operating cost of $45,000 per year. Perform an economic analysis at 10% per year using a specified 3-year planning horizon.
a) Determine if the current machine should be replaced now or 3 years from now.
b) Once decided, determine the equivalent AW for the next three years.
In: Finance
Production and Pricing
The following data describe the monthly demand and monthly costs for a manufacturer of electronic components.
Complete the following cost and revenue schedules for this company.
Quantity of Boxes | Price per box | variable cost per box | fixed cost | total cost | average variable cost per box | average total cost per box | marginal cost per box | total revenue | marginal revenue per box |
0 | $ 300 | $ 300 | $0.00 | ||||||
1 | $1,600 | $ 1,281 | $ 300 | $ 1,581 | $1,281.00 | $1,581.00 | $ 1,281 | $1,600 | $ 1,600 |
2 | $1,570 | $ 2,268 | $ 300 | $ 2,568 | $1,134.00 | $1,284.00 | $ 1,000 | $3,140 | $ 1,540 |
3 | $1,540 | $ 3,027 | $ 300 | $ 3,327 | $1,009.00 | $1,109.00 | $ 759 | $4,620 | $ 1,480 |
4 | $1,490 | $ 3,624 | $ 300 | $ 3,924 | $ 906.00 | $ 981.00 | $ 597 | $5,960 | $ 1,340 |
5 | $1,430 | $ 4,125 | $ 300 | $ 4,425 | $ 825.00 | $ 885.00 | $ 501 | $7,150 | $ 1,190 |
6 | $1,350 | $ 4,596 | $ 300 | $ 4,896 | $ 766.00 | $ 816.00 | $ 471 | $8,100 | $ 950 |
7 | $1,270 | $ 5,303 | $ 300 | $ 5,603 | $ 757.57 | $ 800.43 | $ 707 | $8,890 | $ 790 |
8 | $1,190 | $ 6,112 | $ 300 | $ 6,412 | $ 764.00 | $ 801.50 | $ 809 | $9,520 | $ 630 |
9 | $1,090 | $ 7,189 | $ 300 | $ 7,489 | $ 798.78 | $ 832.11 | $ 1,077 | $9,810 | $ 290 |
Italic text is my own answers
Bold text is what was on original worksheet
*What is the profit maximizing (or loss minimizing)
quantity of boxes that this company should supply?
*What price will the company charge? How is this price determined? Will this result in economic profits?
*If the company charged a higher price than what you found in (b) above, what would happen?
*What market structure do you think this company participates in?
In: Economics
Customers arrive at a grocery store at an average of 2.2 per
minute. Assume that the number of arrivals in a minute follows the
Poisson distribution. Provide answers to the following to 3 decimal
places.
Part a)
What is the probability that exactly two customers arrive in a
minute?
Part b)
Find the probability that more than three customers arrive in a
two-minute period.
Part c)
What is the probability that at least seven customers arrive in
three minutes, given that exactly two arrive in the first
minute?
In: Statistics and Probability
feasibility analysis on the following business, using primary or secondary research to support your decisions, and include information about the research in your appendix section.
Meal Planning Company
You are preparing to open a new small business: a meal planning and delivery company - but with a twist. YOU need to research meal prep companies and come up with the twist: that is, a competitive advantage over the companies in the marketplace today.
Description and details of the business: As a meal planner, you would:
Remember the proposed business so you have the liberty of making decisions / assumptions (that you explain) and you may make decisions about the company (such as the type of food, etc) and so on. Plan that the business will start up in MI (research hint!)
In: Operations Management
Division A manufactures electronic circuit boards. The boards can be sold either to Division B of the same company or to outside customers. Last year, the following activity occurred in Division A:
Selling price per circuit board$192
Variable cost per circuit board$112
Number of circuit boards:
Produced during the year 20,500
Sold to outside customers 14,600
Sold to Division B 5,900
Sales to Division B were at the same price as sales to outside customers. The circuit boards purchased by Division B were used in an electronic instrument manufactured by that division (one board per instrument). Division B incurred $220 in additional variable cost per instrument and then sold the instruments for $640 each.
1. Calculate the net operating incomes earned by Division A, Division B, and the company as a whole.
2. Assume Division A’s manufacturing capacity is 20,500 circuit boards. Next year, Division B wants to purchase 6,900 circuit boards from Division A rather than 5,900. (Circuit boards of this type are not available from outside sources.) From the standpoint of the company as a whole, should Division A sell the 1,000 additional circuit boards to Division B or continue to sell them to outside customers?
In: Accounting
Schedule of Cash Collections of Accounts Receivable
OfficeMart Inc. has "cash and carry" customers and credit customers. OfficeMart estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 20% pay their accounts in the month of sale, while the remaining 80% pay their accounts in the month following the month of sale. Projected sales for the next three months are as follows:
| October | $114,000 |
| November | 143,000 |
| December | 209,000 |
The Accounts Receivable balance on September 30 was $76,000.
Prepare a schedule of cash collections from sales for October, November, and December. Round all calculations to the nearest whole dollar.
| OfficeMart Inc. | |||
| Schedule of Cash Collections from Sales | |||
| For the Three Months Ending December 31 | |||
| October | November | December | |
| Receipts from cash sales: | |||
| Cash sales | $ | $ | $ |
| September sales on account: | |||
| Collected in October | |||
| October sales on account: | |||
| Collected in October | |||
| Collected in November | |||
| November sales on account: | |||
| Collected in November | |||
| Collected in December | |||
| December sales on account: | |||
| Collected in December | |||
| Total cash receipts | $ | $ | $ |
Ace Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for July for the two rackets is as follows:
| Junior | Pro Striker | |
| Production budget | 9,600 units | 22,100 units |
Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:
| Forming Department | Assembly Department | |
| Junior | 0.25 hour per unit | 0.5 hour per unit |
| Pro Striker | 0.35 hour per unit | 0.6 hour per unit |
The direct labor rate for each department is as follows:
| Forming Department | $14 per hour |
| Assembly Department | $12 per hour |
Prepare the direct labor cost budget for July.
| Ace Racket Company | ||
| Direct Labor Cost Budget | ||
| For the Month Ending July 31 | ||
| Forming Department | Assembly Department | |
| Hours required for production: | ||
| Junior | ||
| Pro Striker | ||
| Total | ||
| Hourly rate | x$ | x$ |
| Total direct labor cost | $ | $ |
In: Accounting
| Dec. | 2 | Issued Check No. 410 for $4,000 to Jay Bank to purchase retirement savings bonds for employees. |
| 2 | Issued Check No. 411 to Jay Bank for $27,046 in payment of $9,270 of social security tax, $2,306 of Medicare tax, and $15,470 of employees’ federal income tax due. | |
| 13 | Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
| Salary distribution: | ||
| Operations | $41,200 | |
| Officers | 26,000 | |
| Office | 6,000 | $73,200 |
| Deductions: | ||
| Social security tax | $ 4,392 | |
| Medicare tax | 1,098 | |
| Federal income tax withheld | 14,640 | |
| State income tax withheld | 3,294 | |
| Retirement savings deductions | 2,000 | |
| Medical insurance deductions | 3,300 | 28,724 |
| Net amount | $44,476 |
| 13 | Issued Check No. 420 in payment of the net amount of the biweekly payroll to fund the payroll bank account. | |
| 13 | Journalized the entry to record payroll taxes on employees’ earnings of December 13: social security tax, $4,392; Medicare tax, $1,098; state unemployment tax, $330; federal unemployment tax, $105. | |
| 16 | Issued Check No. 424 to Jay Bank for $25,620, in payment of $8,784 of social security tax, $2,196 of Medicare tax, and $14,640 of employees’ federal income tax due. | |
| 19 | Issued Check No. 429 to Sims-Walker Insurance Company for $23,100 in payment of the semiannual premium on the group medical insurance policy. |
On page 11 of the journal:
| Dec. | 27 | Journalized the entry to record the biweekly payroll. A summary of the payroll record follows: |
| Salary distribution: | ||
| Operations | $40,800 | |
| Officers | 26,800 | |
| Office | 6,200 | $73,800 |
| Deductions: | ||
| Social security tax | $ 4,428 | |
| Medicare tax | 1,107 | |
| Federal income tax withheld | 14,604 | |
| State income tax withheld | 3,321 | |
| Retirement savings deductions | 2,000 | 25,460 |
| Net amount | $48,340 |
| 27 | Issued Check No. 541 in payment of the net amount of the biweekly payroll to fund the payroll bank account. | |
| 27 | Journalized the entry to record payroll taxes on employees’ earnings of December 27: social security tax, $4,428; Medicare tax, $1,107; state unemployment tax, $230; federal unemployment tax, $60. | |
| 27 | Issued Check No. 543 for $20,533 to State Department of Revenue in payment of employees’ state income tax due on December 31. | |
| 31 | Issued Check No. 545 to Jay Bank for $4,000 to purchase retirement savings bonds for employees. | |
| 31 | Paid $51,000 to the employee pension plan. The annual pension cost is $68,000. (Record both the payment and unfunded pension liability.) |
| Required: | |||||
| 1. | Journalize the transactions on pages 10 and 11 of the journal. Refer to the Chart of Accounts for exact wording of account titles. | ||||
| 2. | On page 12 of the journal,
journalize the following adjusting entries on December 31 (refer to
the Chart of Accounts for exact wording of account titles):
|
In: Accounting