As the accountant for Wheatley International, it is your job to prepare the company’s income statement and balance sheet. Use the accounts listed below to construct the statements. Assume that the tax rate is 25%.

I recommend that you should first go through each account and determine if it is a balance sheet account (i.e., asset, liability, or owners' equity) or income statement account (i.e., revenue, costs of goods sold, expense, or net income). Hint: ending inventory goes on both the balance sheet and income statement; on the income statement, both beginning and ending inventory are used to calculate cost of goods sold.

This is a tough assignment. The important thing is to understand is if accounts are balance sheet accounts (i.e., assets, liabilities, or owners' equity) or income statement accounts (i.e., revenue, cost of goods sold, expense, or net income). Additionally, it's important to understand the fundamental accounting equation (A = L + OE).

Income Statements under Absorption and Variable Costing

The Duller Edge Inc. assembles and sells MP3 players. The company began operations on May 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for May:

Sales (14,500 units) $2,030,000

Production costs (19,000 units):

Direct materials $984,200

Direct labor 473,100

Variable factory overhead 235,600

Fixed factory overhead 157,700 1,850,600

Selling and administrative expenses:

Variable selling and administrative expenses $286,800

Fixed selling and administrative expenses 111,000 397,800

If required, round interim per-unit calculations to the nearest cent.

a. Prepare an income statement according to the absorption costing concept.

The Duller Edge Inc.

Absorption Costing Income Statement

For the Month Ended May 31, 2016

Sales

$

Cost of goods sold

Gross profit

$

Selling and administrative expenses

Income from operations

$

Feedback

a. Under absorption costing, the cost of goods manufactured includes direct materials, direct labor, and factory overhead costs. Both fixed and variable factory costs are included as part of factory overhead.

Learning Objective 1.

b. Prepare an income statement according to the variable costing concept.

The Duller Edge Inc.

Variable Costing Income Statement

For the Month Ended May 31, 2016

Sales

$

Variable cost of goods sold

Manufacturing margin

$

Variable selling and administrative expenses

Contribution margin

$

Fixed costs:

Fixed factory overhead

$

Fixed selling and administrative expenses

Income from operations

$

A company that makes baseball gloves produces them using 2 production departments. When the gloves are produced they first go through the Fabrication Department, which produces the pieces that are later assembled into a glove. After the Fabrication Department completes its work on the glove, the glove goes to the Assembly Department to finish putting the glove together.

The following data is for the Assembly Department (the second department that works on the gloves) for the month of November:

Units in the beginning work-in-process inventory 5,500

Units started during the month 38,500

Units completed during the month and transferred to Finished Goods 38,000

Units in the ending work-in-process inventory 6,000

Units in the ending work-in-process inventory are 85% completed in terms of direct materials and 55% completed in terms of conversion costs

Costs in the beginning work-in-process inventory - $35,000 of costs transferred in from the Fabrication Department, $47,000 of direct materials costs, and $36,000 of conversion costs

Costs added in the month of June - $405,000 of costs transferred in from the Fabrication Department, $470,200 of direct materials costs, and $542,200 of conversion costs

Please complete the 5 steps of involved in process costing:

1. Account for all the units

2. Calculate the number of equivalent units in terms of direct materials and conversion costs

3. Calculate the amounts spent on direct materials and conversion costs

4. Calculate the cost per equivalent unit for direct materials and conversion costs

5. Allocate the total amount spent between the cost of goods completed (transferred to Finished Goods) and the cost assigned to the ending work-in-process inventory.

Please complete all questions

Conklin Company manufactures outdoor fireplaces. For the first 9 months of 2017, the company reported the following operating results while operating at 80% of plant capacity:

Sales (75,000 units)                $6,750,000

                                    Cost of goods sold                  4,875,000

                                    Gross profit                             1,875,000

                                    Operating expenses                      750,000

                                    Net income                              $1,125,000

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

In October, Conklin Company receives a special order for 4,000 fireplaces at $62 each from Langston’s Landscape Company.   Acceptance of the order would result in an additional $7,000 of shipping costs but no increase in fixed operating expenses.

(a)        Prepare an incremental analysis for the special order.

(b)        Should Conklin Company accept the special order? Why or why not?

(c)        Before Conklin could give Langston’s Landscape Company an answer, they received a special order from Benson Building & Supply for 15,000 fireplaces. Benson is willing to pay $65 per fireplace but they want a special design imbedded into the fireplace that increases cost of goods sold by $67,500. The special design also requires the purchase of a part that costs $5,000 and will have no future use for Conklin Company. Benson Building & Supply will pick up the fireplaces, so no shipping costs are involved. Due to capacity limitations, Conklin cannot accept both special orders. Which order should be accepted? Document your decision by preparing an incremental analysis for Benson’s order.

[The following information applies to the questions displayed below.]

8.Prepare the following journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations.) Designate a credit or debit. Designate one of the following: No journal entry required, accounts payable, cost of finished goods, or cost of goods sold.

Record the purchase of direct material on account and the direct-material purchase price variance.

Record the addition of direct-material cost to work-in-process inventory and direct-material quantity variance.

Record the addition of direct-labor cost to work-in-process inventory and the direct-labor variances.

Record the closing of the direct materail and direct labor variances to cost of goods sold.

value:
10.00 points

Required information

CC6-1 Accounting for Merchandising Operations [LO 6-4, LO 6-5]

ThreePoint Sports Inc. manufactures basketballs for the Women’s National Basketball Association (WNBA). For the first 6 months of 2020, the company reported the following operating results while operating at 80% of plant capacity and producing 119,500 units.

Fixed costs for the period were cost of goods sold $960,000, and selling and administrative expenses $236,000.

In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basketballs at $27 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.77 per unit because of shipping costs but would not increase fixed costs and expenses.

Partially correct answer iconYour answer is partially correct.

(a) Prepare an incremental analysis for the special order. (Round all per unit computations to 2 decimal places, e.g. 15.25. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(b) Should ThreePoint Sports Inc. accept the special order?

  

What is the minimum selling price on the special order to produce net income of $5.15 per ball? (Round answer to 2 decimal places, e.g. 15.25.)

A company started the year with $185,000 of goods finished and ready for sale. During the year, a total of $700,000 of goods were started in production. Of the goods started, $550,000 were finished during the year.

If total cost of goods sold for the year equals $625,000, the company's ending finished goods inventory equals $

company valuation/ M&A/Financial leverage

Pursuing Myron Bronco: Wouldn’t it be good?:

It was right at the beginning of 2019. Myron Bronco Incorporation (MB) was a medium-sized company listed in a share market. Largely owned by a traditional and financially conversative elite family, the company operated in a lower-risk and mildly-competitive industry. With thin trading of its shares in the stock exchange, the family has been considerably successful in controlling major decisions/directions made by the company. The family-owners of the company also take pride with the fact the business has managed to stay constantly debt-free (long-term debt) for more than a decade or so.

In the same share market, there was an active group of hedge funds that seek for companies that can be easily turned around to create additional value. Circling Vulture Fund (CVF) was one of them. Surely and slowly enough, CVF has recently set its eyes on MB.

At the beginning of 2019, Genghis Smith, the managing partner of CVF projected the future (debt-free) free cash flows of MB as follows:

After 2025, yearly FCFs are projected to be perpetual and stay at 32.4 million $.

The Beta of MB from regression estimation (based on the past three-year daily data) is 0.75. The relevant risk-free rate and the market risk premium were 5% and 2% respectively. The treasury department of MB estimates the cost of debt if the company is to borrow to be 5.5% per year.

As observed in the beginning of 2019, share price of MB was 150 while EPS was 30. The number of shares outstanding was 5 million shares. The P/E ratio of the slow-growth industry MB belongs to was only 3.

The corporate tax rate is 21%.

Genghis Smith, with the backup VCF, plans to take over (acquire the majority stake of Myron Bronco) and then re-leverage MB by issuing a 15 year corporate debt at the fixed interest rate of 5.5% per year. The plan is for MB to borrow towards its own industry’s average debt financing appeared in the accounting book (book-based D/E ratio of the industry is 1.8). The book value of equity of MB is 450 mil$. How much value can be added to MB Incorporation based on this proposal?

16. A competitive firm which has zero economic profit will

have a rate of return that is -- that of comparable

firms

a. greater than b. less than

c. equal to d. indeterminate relative to

17. Given his income and the prices of the items, Jakor will

maximize his utility from the consumption of Big Red and

pizza at the point where his

a. budget line and indifference curve intersect

b. highest attainable budget lines intersect

c. highest attainable indifference curves intersect

d. budget line and indifference curve are tangent

18. If we observe a decrease in the equilibrium price of

gasoline then either

a. demand increased. supply decreased or both

b. demand increased, supply increased or both

c. demand decreased, supply increased or both

d. demand decreased, supply decreased or both

19. Under which situation will consumers receive the optimal

quantity of goods at the lowest possible price?

a. Pure competition c. Oligopoly

b. Monopoly d. Monopolistic competition

20. For all producing firms:

a. ATC rises as output rises then ATC begins to decline

b. ATC declines as output rises then ATC begins to rise

c. total cost rises as output rises then it begins to drop

d. MC rises as output rises then it begins to decline

21. In the long run:

a. fixed costs are zero b. implicit costs are zero

c. marginal costs are zero d. explicit costs are zero

22. Which of the following is most likely to be a fixed cost?

a. expenditures on raw materials

b. wages for unskilled labor

c. property insurance premiums

d. shipping charges

23. Which of the following is most likely to be a variable

cost?

cost?

a. real estate taxes b. rent for IBM equipment

c. interest on bonds d. fuel payments

24. The per unit price every price searching firm charges

a. equals its marginal revenue MR b. is less than its MR

c. is greater than its MR d. none of these

25. Marginal cost is rising sharply but is less than ATC, then

a. ATC is rising b. AVC is rising

c. AFC is rising d. ATC falling

26. In order to maximize profits oligopolies and monopolies

should produce up the point where:

a. marginal revenues equal marginal costs c. MR=ATC

b. marginal revenues equal total costs d. MR=AVC

27. Suppose Ms. Calhoun started a business after quitting a

$20,000 per year job. In year one, her total revenues were

$100,000 and payments to workers and suppliers were $65,000.

So, her total opportunity cost for that year was

a. $65,000 b. $85,000 c. $35,000 d. $15,000

28. Return to question 27. Her accounting profits were

a. $15,000 b. $35,000 c. $20,000 d. $55,000

29. Which of the following industries is the best example of

monopolistic competition?

a. cotton b. Peoples Gas c. steel d. service stations

30. Suppose Harris INC has a monthly fixed cost of $500,000.

How many units must be made just to break even if each

unit is sold for $60 and the AVC is $40?

a. 25,000 b. 12,500 c. 8,333 d. 5 e. Unknowable

31. Return to Question 30 and assume the breakeven output is

really 40,000 units. How many units should be made to get

a 10% profit?

a. 50,000 b. 64,000 c. 25.000 d. 48,000 e. 44,000

32. General Motors, Microsoft are really examples of

a. Monopolies b. oligopolies c. pure competitors d. monopolistic competitors