Example Five:

On January 1, 2018, OP Company purchased equipment to be used in their business. The equipment cost $78,000. It will be used for 8 years, after which its salvage value (residual value) is estimated to be $6,000.

Required:

1. Record the purchase of the machine on January 1, 2017.

2. Complete the depreciation table below using straight-line depreciation.

Record the depreciation expense as of December 31, 2018.

Suppose OP Company sells the equipment on December 31, 2021 for $44,000. Prepare the journal entry to record the sale.

The following table lists the cross elasticity of demand for several goods, where the percentage quantity change is measured for the first good of the pair, and the percentage price change is measured for the second good.

Good Cross elasticity of demand

Air-conditioning units and kilowatts of electricity -0.34

Coke and Pepsi 0.63

High-fuel-consuming SUVs and gasoline -0.28

McDonald’s burgers and Harvey burgers 0.82

Butter and Margarine 1.54

1.Explain the sign of each of the cross elasticities. What does it imply about relationship between the two goods in questions.

2. Compare the absolute value of the cross elasticities and explain their magnitudes. For example, why is the cross elasticity of demand of McDonald’s burgers and Harvey’s burgers less than cross elasticity of butter and margarine?

3. Use the information in the table to calculate how a 5% increase in the price of Pepsi affects the quantity of Coke demanded.

4. Use the information in the table to calculate how a 10% decrease in the price of gasoline affects the quantity of SUVs demanded

Scherer Company provided the following income statements for its first 3 years of operation:

X

Labels and Amount Descriptions

Refer to the list below for the exact wording of an account title within your income statement.

The US Federal Reserve Bank (FED) is considering tightening the money supply now. The United States has an open macro-economy including exports and imports, a market for foreign currency (exchange rates are the price in this market), and international capital mobility. If the FED does restrict the money supply, it will affect investment as it would in a closed economy. But now, adjustments in the foreign currency market occur that induce further changes in aggregate Supply and Demand.

Summarize the majority market adjustments to the new monetary policy. First, explain how a change in the money supply affects aggregate demand(and why). Then explain the second level effects on exchange rates, and the market for goods and services (aggregate supply and demand). Use three supply/demand diagrams, one for the money market, one for the goods and services market, and one for the foreign currency market.

Compared to the closed economy we studied earlier in the semester, are the effects of a change in the money supply larger or smaller when the economy is open (Has trade and floating exchange rates)?

Moonbeam Company manufactures toasters. For the first 8 months of 2020, the company reported the following operating results while operating at 75% of plant capacity:

Cost of goods sold was 70% variable and 30% fixed; operating expenses were 80% variable and 20% fixed.

In September, Moonbeam receives a special order for 23,100 toasters at $7.85 each from Luna Company of Ciudad Juarez. Acceptance of the order would result in an additional $3,100 of shipping costs but no increase in fixed costs.

(a)

Prepare an incremental analysis for the special order. (Round computations for per unit cost to 2 decimal places, e.g. 15.25 and all other computations and final answers to the nearest whole dollar, e.g. 5,725. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Sunset Products manufactures skateboards. The following transactions occurred in March:

Purchased $22,000 of materials on account.

Issued $1,200 of supplies from the materials inventory.

Purchased $25,400 of materials on account.

Paid for the materials purchased in transaction (1) using cash.

Issued $30,400 in direct materials to the production department.

Incurred direct labor costs of $27,000, which were credited to Wages Payable.

Paid $21,900 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.

Applied overhead on the basis of 125 percent of direct labor costs.

Recognized depreciation on manufacturing property, plant, and equipment of $5,400.

The following balances appeared in the accounts of Sunset Products for March:

Required:

a. Prepare journal entries to record the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Bayas Corporation uses process costing. A number of transactions that occurred in June are listed below.

1. (1) Raw materials that cost $40,900 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials.

2. (2) Direct labor costs of $17,200 are incurred, but not yet paid, in the Mixing Department.

3. (3) Manufacturing overhead of $46,800 is applied in the Mixing Department using the department’s predetermined overhead rate.

4. (4) Units with a carrying cost of $88,700 finish processing in the Mixing Department and are transferred to the Drying Department for further processing.

5. (5) Units with a carrying cost of $112,400 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse.

6. (6) Finished goods with a carrying cost of $99,300 are sold.

Required:

Prepare journal entries for each of the transactions listed above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet 1-6

You are the owner of a very small business that sells gourmet coffee.

You sell only one product, a 12-ounce bag of whole-bean French roast coffee. You sell each bag of coffee for $14 each, but due to the fluctuation in commodity prices, the price you pay your supplier to stock the product is constantly changing. In your first month of operations, you bought bags of coffee from your supplier in the following order: (a) 1 units at $2 each on January 1, (b) 7 units at $4 each on January 8, and (c) 2 units at $8 each on January 29.

Assuming you sold 6 units during the month, calculate the cost of goods available for sale, ending inventory, and cost of goods sold under the (a) FIFO, (b) LIFO, and (c) weighted average cost flow assumptions. Assume a periodic inventory system is used. (Round "Cost per Unit" to 2 decimal places.)

Aspen Company estimates its manufacturing overhead to be $631,250 and its direct labor costs to be $505,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $195,600. Job 2-2, which was completed, but not sold at the end of the year, had actual direct labor costs of $326,000. Job 2-3, which is still in work-in-process inventory, had actual direct labor costs of $130,400. Actual manufacturing overhead for year 2 was $801,900. Manufacturing overhead is applied on the basis of direct labor costs.

Required:

Prepare an entry to allocate over- or underapplied overhead to Work in Process, Finished Goods and Cost of Goods Sold. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record the allocation of over- or underapplied overhead.

Note: Enter debits before credits.