Problem 24-2
Flounder Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The
following information relating to each segment is available for 2018.
A B C D E
Sales revenue $40,100 $74,500 $575,600 $34,900 $55,000
Cost of goods sold 19,400 49,200 270,300 19,100 29,900
Operating expenses 10,100 39,700 235,900 12,000 18,300
Total expenses 29,500 88,900 506,200 31,100 48,200
Operating profit (loss) $10,600 $(14,400) $69,400 $3,800 $6,800
Identifiable assets $35,600 $79,000 $490,300 $65,700 $49,700
Sales of segments B and C included intersegment sales of $20,300 and $101,700, respectively.
(a) Determine which of the segments are reportable based on the:
Reportable Segment
(1) Revenue test.
(2) Operating profit (loss) test.
(3) Identifiable assets test.
(b) Prepare the necessary disclosures required by GAAP. (Enter negative amounts using either a negative
sign preceding the number e.g. -45 or parentheses e.g. (45).)
A B C Other Totals
External Revenues
$
$
$
$
$
Intersegment Revenues
Total Revenues
$
Cost of Goods Sold
Operating Expenses
Total Expenses
Operating Profit (Loss)
$
$
$
$
$
Identifiable Assets
$
$
$
$
$

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h] Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Budgeted Unit Sales 46,000 72,000 36,000 72,000 Each T-shirt is expected to sell for $21. The purchasing manager buys the T-shirts for $8 each. The company needs to have enough T-shirts on hand at the end of each quarter to fill 31 percent of the next quarter’s sales demand. Selling and administrative expenses are budgeted at $92,000 per quarter plus 20 percent of total sales revenue. Required: 1. Determine budgeted sales revenue for each quarter. 2. Determine budgeted cost of merchandise purchased for each quarter. 3. Determine budgeted cost of good sold for each quarter. 4. Determine selling and administrative expenses for each quarter. 5. Complete the budgeted income statement for each quarter. rev: 10_28_2016_QC_CS-67902 ReferenceseBook

Spelling Company has the following sales projection (in units) for the next six months:
Feb: 9000
Mar: 10500
Apr: 8000
May: 11500
Jun: 9500
Jul: 7000

Each unit sells for $30.

Spelling has prepared the following sales budget for the quarter of April, May and June:

Spelling's cost of goods sold is 60% of its sales revenue. The company has a policy that it keeps 10% of next months budgeted cost of goods sold as ending inventory. The company had exactly the budgeted amount of inventory on hand at April 1.

Prepare a purchases budget on paper or, PREFERABLY, in Excel for the quarter of April, May and June. (If you build your schedule using formulas in excel, multiple attempts will be much faster.)

1. What is the cost of inventory at April 1 (Beginning inventory)

2. What is the budgeted cost of purchases in June?

3. What is the desired cost of inventory at the end of the quarter?

(1) For all three parts, the $100,00 loan is at 6% interest.

(a) If the loan is a six month note beginning on 2/1/18 with repayment on 8/1/18, prepare the entries for 2/1/18 and 8/1/18.

(b-1) If the loan is a six month note beginning on 11/1/18 with repayment on 5/1/19, prepare the entries for 11/1/18, 12/31/18, and 5/1/19.

(b-2) With reference to (b-1), how much interest will be shown on the 2018 and 2019 income statements? Will it be interest revenue or expense?

(c-1) If the loan is a three year note beginning on 1/1/18 with repayment on 1/1/21, prepare the entries for 1/1/18, 12/31/18, 12/31/19, 12/31/20 and 1/1/21.

(c-2) With respect to (c-1), how much interest will be on the income statements in 2018, 2019, 2020, and 2021? Will it be interest revenue or expense?

(2) Calculate the due dates for a note that is made on 2/17 and has the following terms:

(a) 3 months

(b) 90 days

(c) 60 days

(d) 45 days

On 1/1/2016, Choco acquired 70% of Cake. Choco paid $700,000 and acquisition date fair value of non-controlling interest (NCI) is $200,000. On 1/1/2016, Choco allocated the entire $80,000 excess fair value over book value to adjust “patented technology” account (estimated remaining life of 10 years). During 2016, Choco sold goods to Cake for $200,000 which cost Choco $170,000. Cake still owns 50% of the goods at the end of 2016. Sales revenue for Choco is $1,200,000, and for Cake is $800,000 in 2016. Cost of goods sold for Choco is $700,000 and for Cake is $500,000 in 2016.   Net income for Choco is $120,000 and for Cake is $70,000 in 2016. Cake declared $10,000 of dividends in 2016. Choco uses equity method to account for this investment

Calculate 1) gross profit in percentage and 2) gross profit for remaining year-end inventory.

What is the “equity in earnings of Cake” and “investment in Cake” in 12/31/16?

Prepare consolidation Entry TI

Prepare consolidation Entry G:

What is the consolidated sales revenue for 2016?

What is the consolidated cost of goods sold for 2016?

What is the non-controlling interest’s (NCI’s) share of consolidated net income?

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2018, costs of $2,000,000 were incurred with estimated costs of $4,000,000 yet to be incurred. Billings of $2,500,000 were sent, and cash collected was $2,250,000.

In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

Required:
1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method?
2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019

Assume that Lee Inc. has the following accounts at the end of the current year:

1. Common Shares

2. Raw Materials Inventory

3. FV-OCI Investments

4. Unearned Rent Revenue

5. Work-in-Process Inventory

6. Intangible Assets—Copyrights

7. Buildings

8. Notes Receivable (due in three months)

9. Cash (includes Restricted Cash—see item 12)

10. Salaries and Wages Payable

11. Accumulated Depreciation—Buildings

12. Restricted Cash (for plant expansion)

13. Land Held for Future Plant Site

14. Allowance for Doubtful Accounts

15. Retained Earnings

16. Unearned Subscriptions Revenue (earned in the next year)

17. Accounts Receivable—Officers (due in one year)

18. Finished Goods Inventory

19. Accounts Receivable

20. Bonds Payable (due in four years)

21. Accounts Payable

22. Goodwill

Prepare a classified statement of financial position in good form (no monetary amounts are necessary). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)

Lee Inc.
Statement of Financial Position
December 31, 20–

Assets

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Liabilities and Shareholders’ Equity

_________

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On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,540,000. During 2018, costs of $2,180,000 were incurred with estimated costs of $4,180,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,430,000. In 2019, costs incurred were $2,680,000 with remaining costs estimated to be $3,870,000. 2019 billings were $2,930,000 and $2,655,000 cash was collected. The project was completed in 2020 after additional costs of $3,980,000 were incurred. The company’s fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method? 2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,100 per month plus $0.08 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.80 per car washed.

The actual operating results for August are as follows:

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.)

Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 3 percent for peaches and 8 percent for oranges. The current year’s sales revenue data follow:

Based on the company’s past experience, cost of goods sold is usually 65 percent of sales revenue. Company policy is to keep 15 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

Required

Prepare the company’s sales budget for the next year for each quarter by individual product.

If the selling and administrative expenses are estimated to be $610,000, prepare the company’s budgeted annual income statement.

Ms.Jasper estimates next year’s ending inventory will be $35,500 for peaches and $56,400 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.