RETL 261 –FINAL EXAM PROBLEMS
The Trial Balance for Greengrass Lawn Care Company after second year of operations:
Greengrass Lawn Care Company
Trial Balance
December 31, 2017
Debit Credit
Cash $ 4,500
Accounts Receivable 5,100
Prepaid Insurance 2,100
Equipment 21,000
Notes payable 4,300
Accounts payable 10,200
Unearned Service Revenue 2,000
K. Johnson, capital 20,000
K. Johnson, withdrawals 12,000
Service Revenue 28,000
Advertising Expense 1,800
Rent Expense 3,400
Salaries Expense 9,000
Utilities Expense 5,600 _____
$64,500 $64,500
In: Accounting
| Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer | |||||||||
| and telecommunication industries. At the request of the company VP of | |||||||||
| marketing, the cost management staff has recently completed a customer- | |||||||||
| profitability study. The following activity-based costing information was | |||||||||
| the basis for the analysis. | |||||||||
| Customer - Related Activities | Cost Driver Base | Cost Driver Rate | |||||||
| Sales activity | Sales visits | $860 | |||||||
| Billing and Collection | Invoices | 160 | |||||||
| Order taking | Purchase orders | 220 | |||||||
| Special shipping | Shipments | 430 | |||||||
| Customer - Related Activities | Trace Telecom | Caltex Computer | |||||||
| Sales activity | 14 visits | 18 visits | |||||||
| Billing and Collection | 22 invoices | 26 invoices | |||||||
| Order taking | 26 orders | 28 orders | |||||||
| Special shipping | 12 shipments | 14 shipments | |||||||
| The following additional information has been compiled for Fresno Fiber Optics | |||||||||
| for two of its customers, Trace Telecom and Caltex Computer, for the most recent year. | |||||||||
| Trace Telecom | Caltex Computer | ||||||||
| Sales revenue | $240,000 | $226,000 | |||||||
| Cost of goods sold | 140,000 | 110,000 | |||||||
| General selling costs | 42,000 | 32,000 | |||||||
| General administrative costs | 24,000 | 18,000 | |||||||
| Required: | |||||||||
| 1. Prepare a customer profitability analysis for Trace Telecom and Caltex Computer. | |||||||||
| (Hint: Refer to Exhibit 5-13 for guidance). | |||||||||
| 2. Build a spreadsheet: Construct an Excel spreadsheet to solve requirement (1) above. | |||||||||
| Show how the solution will change if the following information changes: Trace Telecom's | |||||||||
| cost of goods sold was $114,000 and Caltex Computer's sales revenue was $206,000. | |||||||||
In: Accounting
Problem 16-55 Profit Variance Analysis (LO 16-4)
The results for July for Brahms & Sons
follow:
| Actual (based on actual sales of 98,000 units) | Master Budget (based on budgeted sales 96,000 units) | ||||||||||
| Sales revenue | $ | 650,000 | $ | 816,000 | |||||||
| Less | |||||||||||
| Variable costs | |||||||||||
| Direct material | 98,000 | 81,600 | |||||||||
| Direct labor | 98,000 | 144,000 | |||||||||
| Variable overhead | 105,000 | 144,000 | |||||||||
| Marketing | 20,800 | 24,000 | |||||||||
| Administrative | 15,800 | 24,000 | |||||||||
| Total variable costs | $ | 337,600 | $ | 417,600 | |||||||
| Contribution margin | $ | 312,400 | $ | 398,400 | |||||||
| Less | |||||||||||
| Fixed costs | |||||||||||
| Manufacturing | 138,100 | 138,000 | |||||||||
| Marketing | 43,800 | 24,000 | |||||||||
| Administrative | 102,100 | 99,000 | |||||||||
| Total fixed costs | $ | 284,000 | $ | 261,000 | |||||||
| Operating profits | $ | 28,400 | $ | 137,400 | |||||||
Required:
Prepare a profit variance analysis for Brahms & Sons. ( Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, or "U" for unfavorable. If there is no effect, do not select either option.)
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In: Accounting
Suppose in its income statement for the year ended June 30,
2022, The Clorox Company reported the following
condensed data (dollars in millions).
|
Salaries and wages expenses |
$ 460 |
Research and development expense |
$ 114 | |||
|---|---|---|---|---|---|---|
|
Depreciation expense |
90 |
Income tax expense |
770 | |||
|
Sales revenue |
7,830 |
Loss on disposal of plant assets |
46 | |||
|
Interest expense |
161 |
Cost of goods sold |
3,800 | |||
|
Advertising expense |
499 |
Rent expense |
105 | |||
|
Sales returns and allowances |
230 |
Utilities expense |
60 |
Assume a tax rate of 34%.
Prepare a multiple-step income statement. (Round answers to 0 decimal places, e.g. 15,222.)
Calculate the gross profit rate and the profit margin. (Round answers to 1 decimal place, e.g. 15.2%.)
Assume the marketing department has presented a plan to increase
advertising expenses by $340 million. It expects this plan to
result in an increase in both net sales and cost of goods sold of
25%. (Hint: Increase both sales revenue and sales returns
and allowances by 25%.) Redo parts (a) and (b) and discuss whether
this plan has merit. (Assume a tax rate of 34%, and round all
amounts to whole dollars.)
Prepare a multiple-step income statement. (Round
answers to 0 decimal places, e.g. 15,222.)
Calculate the gross profit rate and the profit margin.
(Round answers to 1 decimal place, e.g.
15.2%.)
|
Gross profit rate |
enter percentages rounded to 1 decimal place | % | |
|---|---|---|---|
|
Profit margin |
enter percentages rounded to 1 decimal place | % |
In: Accounting
Exercise 22-16
You have been engaged to review the financial statements of Teal Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows.
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1. |
Year-end wages payable of $3,130 were not recorded because the bookkeeper thought that “they were immaterial.” |
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|
2. |
Accrued vacation pay for the year of $34,100 was not recorded because the bookkeeper “never heard that you had to do it.” |
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|
3. |
Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $2,724 because “the amount of the check is about the same every year.” |
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4. |
Reported sales revenue for the year is $2,141,200. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state’s Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that “the sales tax is a selling expense.” At the end of the current year, the balance in the Sales Tax Expense account is $104,600. |
Prepare the necessary correcting entries, assuming that Teal uses a
calendar-year basis. The books for the current year have not been
closed. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and
enter 0 for the amounts.)
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|
1. |
|||
|
2. |
|||
|
3. |
|||
|
4. |
|||
|
(To record the sales taxes due.) |
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|
(To correct prior entry.) |
In: Accounting
Required information
[The following information applies to the questions displayed below.]
Adger Corporation is a service company that measures its output based on the number of customers served. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results for May as shown below:
|
Fixed Element per Month |
Variable Element per Customer Served |
Actual Total for May |
|||||
| Revenue | $ | 5,200 | $ | 170,000 | |||
| Employee salaries and wages | $ | 51,000 | $ | 1,200 | $ | 92,700 | |
| Travel expenses | $ | 650 | $ | 20,600 | |||
| Other expenses | $ | 30,000 | $ | 29,000 | |||
When preparing its planning budget the company estimated that it would serve 30 customers per month; however, during May the company actually served 35 customers.
11. What amount of employee salaries and wages would be included in Adger’s planning budget for May?
12. What amount of travel expenses would be included in Adger’s planning budget for May?
13. What amount of other expenses would be included in Adger’s planning budget for May?
14. What activity variance would Adger report in May with respect to its revenue? (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.)
15. What activity variances would Adger report with respect to each of its expenses for May? (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
In: Accounting
18) Assume the following information appears in the standard
cost card for a company that makes only one product:
| Standard Quantity or hours |
Standard Price or Rate |
Standard Cost | ||||||
| Direct materials | 5 | pounds | $ | 11.70 | per pound | $ | 58.50 | |
| Direct labor | 2 | hours | $ | 17.00 | per hour | $ | 34.00 | |
| Variable manufacturing overhead | 2 | hours | $ | 3.00 | per hour | $ | 6.00 | |
During the most recent period, the following additional information
was available:
What is the direct materials spending variance?
A) 5850 U
B) 5850 F
C) 18150 F
D) 18150 U
1) Assume that the cost formula for one of a company’s variable expenses is $5.00 per unit. The company’s planned level of activity was 2,000 units and its actual level of activity was 2,200 units. The actual amount of this expense was $10,050. The spending variance for this expense is:
A) 950F
B) 1550F
C) 2500F
D) 2500U
10) Assume that a company provided the following excerpts of
information from its flexible budget performance report:
| Actual Results | Flexible Budget | Planning Budget | |||||||||
| Flights (q) | 55 | ? | 50 | ||||||||
| Revenue ($175.00q) | $ | 11,550 | $ | ? | $ | ? | |||||
What amount of revenue would appear in the company’s flexible
budget?
A) 8750
B) 9075
C) 9625
D) 9175
In: Accounting
Information concerning Concord Corporation’s intangible assets is as follows. 1. On January 1, 2020, Concord signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $60,000. Of this amount, $12,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $12,000 each, beginning January 1, 2021. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2020, of the 4 annual payments discounted at 12% (the implicit rate for a loan of this type) is $36,450. The agreement also provides that 8% of the revenue from the franchise must be paid to the franchisor annually. Concord’s revenue from the franchise for 2020 was $850,000. Concord estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) 2. Concord incurred $75,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2020. Legal fees and other costs associated with registration of the patent totaled $20,000. Concord estimates that the useful life of the patent will be 8 years. 3. A trademark was purchased from Shanghai Company for $35,000 on July 1, 2017. Expenditures for successful litigation in defense of the trademark totaling $10,200 were paid on July 1, 2020. Concord estimates that the useful life of the trademark will be 20 years from the date of acquisition.
Prepare a schedule showing the intangible assets section of Concord’s balance sheet at December 31, 2020.
In: Accounting
West End Hospital is pursuing a sixty-two-bed expansion and would like to determine how many beds should be allocated to cardiac surgical patients versus oncology patients to maximize revenues. The average length of stay for cardiac surgical patients is 4.7 days whereas the average length of stay for oncology patients is seven days. Assume the hospital is open 365 days a year. The average revenue generated from from an oncology patient is $9,500 and the average revenue generated from a cardiac surgical patient is $10,750. The hospital currently has four hundred beds, and its laboratories, radiology department, and operating rooms have excess capacity and would be able to handle the increased demand from the expansion with existing staff. the laboratories could process up to an additional ten thousand tests annually. the average cardiac surgical patient requires 2.5 lab tests whereas the average oncology patient requires two lab tests. the radiology department can process up to an additonal five thousand imaging requests annually. the average cardiac surgical patient requires two imaging services whereas the oncology patient requires four. Last, fifteen hundred additional surgeries could be accommodated in the hospital's existing operating rooms.
a. Formulate this as a linear programming problem.
b. Solve the problem using Excel Solver.
c. What is the optimal allocation of beds to cardiac surgical versus oncology patients?
Please show answers using Excel!
In: Operations Management
On January 1, 2018, the following information was drawn from the accounting records of Carter Company: cash of $800; land of $3,500; notes payable of $600; and common stock of $1,000.
Required
a. Determine the amount of retained earnings as of January 1, 2018.
b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $1,000 cash dividend to the stockholders. Can the company pay this dividend?
c. As of January 1, 2018, what percentage of the assets were acquired from creditors?
d. As of January 1, 2018, what percentage of the assets were acquired from investors?
e. As of January 1, 2018, what percentage of the assets were acquired from retained earnings?
f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.
g. During 2018, Carter Company earned cash revenue of $1,800, paid cash expenses of $1,200, and paid a cash dividend of $500. (Hint: It is helpful to record these events under an accounting equation before preparing the statements.)
g-1. Prepare an income statement dated December 31, 2018.
g-2. Prepare a statement of changes in stockholders’ equity dated December 31, 2018.
g-3. Prepare a balance sheet dated December 31, 2018.
g-4. Prepare a statement of cash flows dated December 31, 2018.
j. What is the balance in the Revenue account on January 1, 2019?
In: Accounting