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1)

Social Security Benefits (LO. 4)


Melissa, who is 70 years old, is unmarried and has no dependents. Her annual income consists of
a taxable pension of $17,000, $14,000 in Social Security benefits, and $3,000 of dividend
income. She does not itemize her deductions. She is in the 15% marginal income tax bracket. She
is considering getting a part-time job that would pay her $5,000 a year. The applicable two bases
for Social Security computations for Melissa are $25,000 and $34,000.
a. What would be Melissa's after-tax income from the part-time job, considering Social Security
and Medicare tax (use 7.65%) as well as Federal income tax on the earnings of $5,000? (Round
your intermediate computations and final answer to the nearest dollar.)
$
b. What would be the effective tax rate (increase in tax/increase in income) on the additional
income
from
the
part-time
job?
Round
to
two
decimal
places.
%
2)
The following information is provided for Terrapin Services, Inc. at January 31, 2014:
Debit Credit
Cash $ 275,000
Accounts receivable 150,000
Investment 50,000
Spare parts and supplies 30,000
Prepaid insurance 25,000
Land and Equipment (net) 325,000
Accounts payable $ 100,000
Interest Payable 100

Wage Payable 10,000


Note payable 225,000
Salaries payable 10,000
Common stock (no par) 450,000
Retained earnings 59,900
$855,000

$855,000

All February 2014 activity follows:


1. Provided services on account for a total of $225,000.
2. Used $25,000 in parts and supplies.
3. Sold an investment costing $50,000 for a $65,000 note receivable due May 15.
4. Paid accounts payable of $100,000.
5. Collected accounts receivable of $78,800.
6. Issued common stock for $75,000.
7. Purchased equipment costing $55,000.
8. Paid March rent of $25,000.
9. Paid $35,000 for employee services, $10,000 of that was for services performed in
December of 2013.
10. Paid $300 for February newspaper advertisement.
11. Paid $2,000 on long-term note including $200 interest incurred ratably in January an
d
February 2014.
12. Paid $60,000 on July 1, 2013 for one years flood insurance coverage.

Required:
a. For each transaction, show the revenue/expense that would be recognized under the
accrual method in one column and the revenue/expense that would be recognized under
the cash method in a second column.
b. Prepare appropriate journal entries for each transaction.
c. Prepare a classified balance sheet at February 28, 2014 in good form.

3)
Lance H. and Wanda B. Dean are married and live at 431 Yucca Drive, Santa Fe, NM
87501. Lance works for the convention bureau of the local Chamber of Commerce,
while Wanda is employed part-time as a paralegal for a law firm.
During 2012, the Deans had the following receipts:
Salaries ($60,000 for Lance, $41,000 for Wanda)
$101,000
Interest income
City of Albuquerqe general purpose bonds
$1,000
Ford Motor company bonds
1,100
Ally Bank certificate of deposit
400
2,500
Child support payments from John Allen
7,200
Annual gifts from parents
26,000
Settlement from Roadrunner Touring Company
90,000
Lottery winnings
600
Federal income tax refund (for tax year 2011)
400
Wanda was previously married to John Allen. When they divorced several years ago,
Wanda was awarded custody of their two children, Penny and Kyle. (Note: Wanda has
never issued a Form 8332 waiver.) Under the divorce decree, John was obligated to
pay alimony and child supportthe alimony payments were to terminate if Wanda
remarried.
In July, while going to lunch in downtown Santa Fe, Wanda was injured by a tour bus.
As the driver was clearly at fault, the owner of the bus, Roadrunner Touring Company,
paid her medical expenses (including a one-week stay in a hospital). To avoid a lawsuit,
Roadrunner also transferred $90,000 to her in settlement of the personal injuries she
sustained.
The Deans had the following expenditures for 2012:
Medical expenses (not covered by insurance)
$7,200
Taxes
Property taxes on personal residence
$3,600

State of New Mexico income tax (includes


amount withheld from wages during 2012)
4,200
Interest on home mortgage
6,000
Paid church pledge
3,600
Life insurance premiums (policy on Lances life)
1,200
Contribution to traditional IRA (on Wandas behalf)
5,000
Traffic fines
300
Contribution to the reelection campaign fund of
the mayor of Santa Fe
500
Funeral expenses for Wayne Boyle
6,300
The life insurance policy was taken out by Lance several years ago and designates
Wanda as the beneficiary. As a part-time employee, Wanda is excluded from coverage
under her employers pension plan. Consequently, she provides for her own retirement
with a traditional IRA obtained at a local trust company. Because the mayor is a
member of the local Chamber of Commerce, Lance felt compelled to make the political
contribution.
The Deans household includes the following, for whom they provide more than half
of the support:
Social Security Number Birth Date
Lance Dean (age 42)
123-45-6786
Wanda Dean (age 40)
123-45-6787
Penny Allen (age 19)
123-45-6788
Kyle Allen (age 17)
123-45-6789
Wayne Boyle (age 75)
123-45-6785
Penny graduated from high school on May 9, 2012, and is undecided about college.
During 2012, she earned $8,500 (placed in a savings account) playing a harp in the
lobby of a local hotel. Wayne is Wandas widower father who died on January 20, 2012.
For the past few years, Wayne qualified as a dependent of the Deans.
Federal income tax withheld is $5,200 (Lance) and $3,100 (Wanda). The proper
amount of Social Security and Medicare tax was withheld.

7,800

12/16/1970
08/08/1972
10/09/1993
05/03/1995
06/15/1937

Determine the Federal income tax for 2012 for the Deans on a joint return.
What's the AGI, Taxable Income and Net Balance?

4)
Albania, Inc. manufactures instruments for use by large and small corporations. The company
uses a normal costing system, in which manufacturing overhead is applied on the basis of directlabor hours. The companys budget for the current year includes the following predictions:
Budgeted total manufacturing overhead

$5.000, 000

Budgeted total direct-labor hours

200,000

During October, the firm worked on the following two production jobs.
Job number T79, consisting of 76 High Density Instruments
Job Number C41, consisting of 110 Low Density Instruments
The events of October are described as follows:
a.One thousand square feet of rolled brass sheet metal was purchased on account for $6,600.
b.Four hundred pounds of brass tubing was purchased on account for $6,300.
c.The following requisitions were submitted to the inventory warehouse on October 5:
Requisition number 112: 480 square feet of brass sheet metal at $7.00 per square foot
(for job number T79)
Requisition number 113: 1,800 pounds of brass tubing at $5.00 per pound (for job
number C41)
Requisition number 114: 25 gallons of valve lubricant at $10 per gallon.
All brass used in production is treated as direct material. Valve lubricant is an indirect
material.
d.An analysis of labor time cards revealed the following labor usage for October.
Direct labor: Job number T79, 1,600 hours at $60 per hour.
Direct labor: Job number C41, 1,750 hours at $40 per hour.
Indirect labor: General factory cleanup, $4,900.
Indirect labor: Factory supervisory salaries, $14,000.
e.Depreciation of the factory building and equipment during October amounted to
$16,000.
f.Rent paid in cash for factory equipment used during October was $1,600.

g.Heat and light costs on the factory incurred during October amounted to $2,800. The
invoices for these costs were received, but the bills were not paid in October.
h.October property taxes on the factory were paid in cash, $2,300.
i.The insurance cost covering factory operations for the month of October was $3,800. The
insurance policy had been prepaid.
j.The cost of salaries and fringe benefits for sales and administrative personnel paid in cash
during October amounted to $9,000.
k.Depreciation on sales office equipment and space amounted to $5,600.
l.Other selling and administrative expenses paid in cash during October amounted to $1,300.
m.Job number T79 was completed on October 20.
n.Seventy-five percent (75%) of the 76 instruments in job number T79 were sold on account
during October for $4,000 each.
The October 1 balances in selected accounts are as follows:
Cash

$35,000

Accounts Receivable

32,000

Prepaid Insurance

6,000

Raw-Material Inventory
Manufacturing Supplies Inventory

120,000
600

Work-in-Process Inventory

56,000

Finished-Goods Inventory

180,000

Accumulated Depreciation: Buildings and Equipment

80,000

Accounts Payable

16,500

Wages Payable

98,500

Required:

1.Calculate the companys predetermined overhead rate for the year,


2.Prepare journal entries to record the events of October.
3.Set-up T-accounts, and post the journal entries made in requirement (2).
4.Calculate the overapplied or underapplied overhead for October. Prepare a
journal entry to close this balance into Cost of goods Sold.
5.Prepare a schedule of cost of goods manufactured for October.
6.Prepare a schedule of cost of goods sold for October
7.Prepare an income statement for October.

5)
1. Which of the following is not a major change in the business environment that has affected the
way many companies think about conducting business?
An increased focus on the customer, especially their opinions about functionality and
quality.
A growing emphasis on globalization -new markets for products and new competitors.
A larger number of companies are starting to use advanced information technologies, such
as business intelligence.
The development of improved cost management methods.
Question 2. 2. In a local factory, employees are rewarded for finding new and better ways of
changing the way they work. This company is motivating its employees to use what management
technique? (Points : 2)
Benchmarking.
Activity-Based Costing.
Theory of Constraints.
Continuous Improvement.
Total Quality Management.
Question 3. 3. In keeping with the current trend of increased strategic planning, how have

management accountants changed their use of life-cycle costing? (Points : 2)


They have now shifted their focus from R&D costs to marketing and promotion costs.
They have turned from a sole focus on manufacturing costs to a much wider outlook, taking
into account costs from the entire product life-cycle.
They stopped looking at the entire life-cycle, and now focus their attention on product
design costs.
Accountants don't use life-cycle costing, that task is left for the operations manager.
Question 4. 4. The competitive strategy in which the firm succeeds by developing and
maintaining a unique value for the product, as perceived by the customer, is termed: (Points : 2)
Differentiation.
Specialization advantage.
Design strategy.
Benchmarking.
Product Specialization.
Question 5. 5. A firm that has traditionally succeeded on the basis of its innovative products and
excellent customer service has started to place greater emphasis on reducing waste and providing
its customers with the lowest priced product. Which of the following most accurately describes
this change of competitive strategy? (Points : 2)
Cost leadership to differentiation.
A balanced strategy to cost leadership.
Differentiation to a balanced strategy.
Cost leadership to a balanced strategy.
Differentiation to cost leadership.
Question 6. 6. Assume the following information pertaining to Moonbeam Company:
Beginning Finished Goods Inventory = $130,000
Ending Finished Goods Inventory = $124,000
Beginning WIP Inventory = $85,000
Ending WIP Inventory = $104,000
Beginning Direct Materials = $117,000
Ending Direct Materials = $130,000
Costs incurred during the period are as follows:

Total Manufacturing Costs = $896,000


Factory Overhead = $199,000
Direct Materials Used = $156.000
Materials purchases are calculated to be: (Points : 2)
$143,000.
$156,000.
$91,000.
$169,000.
$140,000.
Question 7. 7. Tierney Construction, Inc. recently lost a portion of its financial records in an
office theft. The following accounting information remained in the office files:
COGS = $80,000
WIP Inventory January 1. = $18,500
WIP Inventory December 31 = $14,500
Selling & Administrative Expenses = $16,000
Net Income = $30,000
Factory O/H = $20,000
Direct Materials Inventory, January 1= $26,000
Direct Materials Inventory, December 31= $14,000
COGM = $98,000
Finished Goods Inventory, January 1 = 31,000
Direct labor cost incurred during the period amounted to 2.5 times the factory overhead. The
CFO of Tierney Construction, Inc. has asked you to recalculate the following accounts and to
report to him by the end of tomorrow.
What should be the amount of direct materials used? (Points : 2)
$15,000.
$29,000.
$20,000.
$24,000.
Question 8. 8. Which of the following is a batch-level cost driver? (Points : 2)

Output units.
Number of employees.
Number of orders.
Number of parts.
Question 9. 9. In calculating unit cost in a process costing system, "conversion cost" is defined as
the sum of: (Points : 2)
Direct and indirect material costs.
Direct and indirect labor costs.
Direct labor and factory overhead costs.
Indirect labor and factory overhead costs.
Question 10. 10. Units accounted for includes units completed and transferred out plus: (Points :
2)
Beginning inventory.
Units to account for.
Ending inventory.
Units started.
Question 11. 11. Multistage ABC is used when: (Points : 2)
There are many departments in the organization.
Management wants a higher level of accuracy from the ABC calculations.
There are complex relationships among the activities.
To simplify the ABC calculations.
Question 12. 12. Product costing system design or selection: (Points : 2)
Is cost management expertise.
Requires an understanding of the nature of the business.
Should provide useful cost information for strategic and operational decision needs.
Should be cost effective in design and operation.
All the above answers are correct.

Question 13. 13. East Bay Fisheries Inc. processes king salmon for various distributors. Two
departments are involved processing and packaging. Data relating to tons of king salmon
processed in the processing department during June 2013 are provided below:

Work-in-Process Inventory June 1


Work-in-Process Inventory June 1
Started processing during June

Tons of
King Salmon
1,500
2,800
7,800

Percent Completed
Materials
Conversion
90
80
60
40

Total equivalent units for materials under the weighted-average method are calculated to be:
(Points : 2)
6,830 equivalent units.
8,180 equivalent units.
6,980 equivalent units.
7,140 equivalent units.
7,620 equivalent units.
Question 14. 14. Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor
hours, and had the following manufacturing overhead:
Overhead Cost Pool - Budgeted O/H $- Budgeted Level for Cost Driver - O/H Cost Driver
Materials Handling
$160,000
3,200 lbs.
Material Weight
Machine Setup
13,200
390 S/Us
# of S/Us
Machine Repair
1,380
30,000 Mach. Hrs
Machine Hrs.
Inspections
10,560
160 Inspections
# of Inspections
Requirements for Job #971 which included 4 Units of Production:
D/L Hours =
20 Hours
D/Matls
= 130 lbs.
Machine S/U = 30 Set-ups
Machine Hrs. = 15,000 Machine Hours
Inspections =
15 Inspections.
Using ABC, the materials handling overhead cost assigned to Job #971 is: (Points : 2)
$2,300.
$990.
$6,500.
$690.
$1,020.

Question 15. 15. At the breakeven point, total fixed cost is: (Points : 2)
Less than the total contribution margin.
Equal to the total contribution margin.
More than the total contribution margin.
Equal to the contribution margin per unit.
Equal to the contribution margin divided by operating income.
Question 16. 16. The use of a relationship of total factory overhead to direct labor hours is said to
be valid only within the relevant range, which means: (Points : 2)
Within a reasonable dollar amount for labor costs.
Within the range of observations of the cost driver.
Within the range of reasonableness as judged by the department supervisor.
Within the budget allowance for overhead.
Question 17. 17. Which of the following provides the most accurate cost estimation? (Points : 2)
Regression analysis with R-squared of 0.12.
Regression analysis with F value of 1.2
High-low method.
Regression analysis with R squared of 0.89.
Question 18. 18. Joint products are products that: (Points : 2)
Have minor total sales value.
Have substantial sales value.
Come from different production processes.
Are marketed in a joint marketing program.
Question 19. 19. The p-value measures: (Points : 2)
The probability that the regression equation is reliable.
The statistical significance of the dependent variable.
The risk that a particular independent variable has only a chance relationship to the
dependent variable.

The confidence range around the regression prediction.


Question 20. 20. Variable costs will generally be relevant for decision making because they:
(Points : 2)
Differ between options.
Are volume-based.
Have not been committed and differ between options.
Differ between options and have been committed.
Measure opportunity cost.
Question 21. 21. Jackson, Inc. is preparing a budget for the coming year and requires a
breakdown of the cost of electrical power used in its factory into the fixed and variable elements.
The following data on the cost of power used and direct labor hours worked are available for the
last six months of this year:
Month
July
Aug
Sept
Oct
Nov
Dec
Total

$ for Power
$ 15,850
13,400
16,370
19,800
17,600
18,500
$101,520

DL Hours
3,000
2,050
2,900
3,650
2,670
2,650
16,920

Assuming that Jackson uses the high-low method of analysis, the estimated variable cost of
steam per direct labor hour is: (Points : 2)
$4.00.
$5.42.
$5.82.
$6.00.
Question 22. 22. For a typical capital investment project, the bulk of the investment-related cash
outflow occurs: (Points : 2)
During the initiation stage of the project (i.e., at time period 0).
During the operation stage of the project.
Either during the initiation stage or the operation stage.

During neither the initiation stage nor the operation stage.


Evenly during all three stages: initiation, operation, and final disposal.
Question 23. 23. Given the same total cash flow returns (CFRs), the internal rate of return (IRR)
method of capital budgeting would favor a proposal having yearly CFRs that were: (Points : 2)
Even.
Uneven.
Heavier towards the end of a proposal's life.
Heavier towards the beginning of a proposal's life.
Question 24. 24. Research has shown that in framing capital investment decisions, sunk costs
tend to: (Points : 2)
Have no discernible impact on decisions by managers.
Have a slight impact on the decision-making process.
Have an impact only when capital funds are limited.
Escalate commitment in making capital budgeting decisions.
Question 25. 25. In situations when management must decide on accepting or rejecting one-timeonly special orders, where there is sufficient idle capacity, which one of the following is not
relevant to the decision? (Points : 2)
Absorption costs.
Differential costs.
Direct costs.
Variable costs.
Incremental costs.
Question 26. 26. In deciding whether to drop or keep a product line, all of the following are
relevant to the decision EXCEPT: (Points : 2)
The level of unavoidable fixed costs.
The segment margin generated by the product line.
Demand interdependencies across product lines of the company.
Effect of the decision on overall company morale.

Question 27. 27. Omaha Plating Corporation is considering purchasing a machine for
$1,500,000. The machine is expected to generate a constant after-tax income of $100,000 per
year for 15 years. The firm will use straight-line (SL) depreciation for the new machine over 10
years with no residual value.
What is the annual accounting (book) rate of return (rounded to two decimal places) on the initial
investment? (Points : 2)
6.67%.
10.00%.
13.33%.
16.67%.
23.33%.
Question 28. 28. Pique Corporation wants to purchase a new machine for $300,000.
Management predicts that the machine can produce sales of $200,000 each year for the next 5
years. Expenses are expected to include direct materials, direct labor, and factory overhead
(excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with
no residual value for all depreciable assets. Pique's combined income tax rate is 40%.
Management requires a minimum after-tax rate of return of 10% on all investments.
What is the approximate internal rate of return (IRR) of the investment? (NOTE: To answer this
question, students must have access to Table 2 from Appendix C, Chapter 12.) (Points : 2)
Less than 12%.
Somewhere between 12% and 14%.
Somewhere between 15% and 20%.
Somewhere between 20% and 25%.
Over 25%.
Question 29. 29. The theory of constraints (TOC) emphasizes which of the following? (Points :
2)
Developing competitive constraints.
Finding and eliminating design constraints.
Removing bottlenecks from the production process.
Improving overall production efficiency.
Question 30. 30. A ______________ standard gets progressively tighter over time: (Points : 2)

Peak-efficiency.
Currently attainable.
Benchmarked.
Flexible-budget.
Continuous-improvement.
Question 31. 31. For internal reporting purposes, it is recommended that fixed overhead
allocation rates in a standard costing system be based on: (Points : 2)
Budgeted capacity usage.
Theoretical capacity since this is the level required under generally accepted accounting
principles.
Actual capacity utilization.
Expected capacity usage.
Practical capacity.
Question 32. 32. Generally, firms will price a product more competitively at which stages of the
product's sales life cycle? (Points : 2)
Product introduction and Growth.
Maturity and Decline.
Throughout the cycle.
At the end of the life cycle.
Question 33. 33. Electronic Component Company (ECC) is a producer of high-end video and
music equipment. ECC currently sells its top of the line "ECC" DVD player for a price of $250.
It costs ECC $210 to make the player. ECC's main competitor is coming to market with a new
DVD player that will sell for a price of $220. ECC feels that it must reduce its price to $220 in
order to compete. The sales and marketing department of ECC believes the reduced price will
cause sales to increase by 15%. ECC currently sells 200,000 DVD players per year.
Assuming sales and marketing are not correct in their estimation and the volume of sales is not
changed and ECC meets the competitive price, what is the target cost if ECC wants to maintain
its same income level? (Points : 2)

$210.
$200.
$190.
$180.
Question 34. 34. Lucky Company's direct labor information for the month of February is as
follows:
Actual DL Hours Word (AQ)
= 61,500
Standard DL Hours Allowed (SQ) = 63,000
Total Payroll for DL
= $774,900
DL Efficiency Variance
= $18,000
The actual direct labor rate per hour (AP) is: (Points : 2)
$12.00.
$12.30.
$12.60.
$13.20.
$13.50.
Question 35. 35. A company's flexible budget for 15,000 units of production showed sales of
$48,000; variable costs of $18,000; and fixed costs of $12,000. The operating income in the
master budget for 20,000 units is: (Points : 2)
$8,000.
$13,500.
$24,000.
$28,000.
$30,000.
Question 36. 36. Controllable margin is determined by subtracting short-term controllable fixed
costs from the: (Points : 2)
Long-term controllable fixed cost.
Contribution margin.
Variable costs.
Fixed costs.

Variable costs and fixed costs.


Question 37. 37. The need for coordination between the production and the selling function will
impact the choice of: (Points : 2)
Profit, cost or revenue center.
Manager for the firm.
Formal or informal control systems.
Profitability goal for the firm.
Control measures to prevent fraud.
Question 38. 38. The manager acting independently in such a way as to simultaneously achieve
top management's objectives is: (Points : 2)
Performance evaluation.
Operational control.
Goal congruence.
Principal-agent model.
Management control.
Question 39. 39. Which one of the following is a drawback of decentralization? (Points : 2)
Uses local knowledge only.
May hinder coordination among independent SBUs.
Provides less effective operational control.
May affect goal congruence.
Offers an inefficient method of performance evaluation.
Question 40. 40. "Outsourcing" a cost center is often done to: (Points : 2)
Reduce cost and obtain strategic focus.
Increase control over a strategic resource.
Reduce the firm's contractual relationships.
Shift costs within remaining cost centers.
Question 41. 41. SBU is the acronym for: (Points : 2)

Small Business Unit.


Sustainable Business Unit.
Standard Business Unit.
Strategic Business Unit.
Question 42. 42. Which one of the following has been the most common payment option for
bonus compensation in recent years? (Points : 2)
Vacation time.
Stock options.
Increased benefits.
Salary increase.
Question 43. 43. Which of the following is one of the most comprehensive bases of
compensation? (Points : 2)
Balanced scorecard.
Unit-based compensation pool.
Firm-wide compensation pool.
Salary.
Question 44. 44. EVA is calculated as: (Points : 2)
EVA Net Income - (Cost of Capital x EVA Invested Capital).
Total Net Income - (Cost of Capital x Invested Capital).
Gross Income - Cost of Capital.
Total Net Income - EVA Net Income.
Accounting earnings adjusted for EVA.
Question 45. 45. An increase in the market price of a company's common stock will immediately
affect its: (Points : 2)
Stock return.
Debt to equity ratio.

Earnings per share.


Economic value added.
Return on equity.
Question 46. 46. The objectives of management compensation, when compared to the objectives
used to develop performance measurement systems, are: (Points : 2)
More numerous.
Less specific.
Consistent in their objectives.
Significantly broader in scope.
More specific.
Question 47. 47. A company had income of $50,000 using variable costing for a given period.
Beginning and ending inventories for that period were 80,000 units and 90,000 units,
respectively. If the fixed overhead application rate were $10.00 per unit, what would operating
income have been using full costing? (Points : 2)
$(50,000).
$170,000.
$150,000.
$0.
Cannot be determined from the information given.
Question 48. 48. The King Mattress Company had the following operating results for 2012-2013.
In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made
capital expenditures in both years of $30,000 per year. The company's stock price in 2012 was $8
and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013
and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly
owned and has 1,200,000 shares of outstanding stock at the end of 2013.
Balance Sheet, December 31
Cash
Accounts Receivable
Inventory
Total Current Assets
Long Lived Assets
Total Assets
Current Liabilities

2013
340,000
350,000
250,000
$ 940,000
1,080,000
$ 2,020,000
$ 200,000
$

2012
$ 100,000
400,000
300,000
$ 800,000
1,100,000
$ 1,900,000
$ 300,000

Long-Term Liabilities
600,000
Stockholders Equity
1,220,000
Total Liabilities & Equity
$ 2,020,000
Income Statement for the Year Ended December 31
Sales
$ 4,750,000
Cost of Sales
4,100,000
Gross Margin
$ 650,000
Operating Expenses
350,000
Operating Income
$
300,000
Taxes
120,000
Net Income
$ 180,000
Cash Flow from Operations
Net Income
$ 180,000
Plus Depreciation Expense
50,000
+Decrease (-Inc) in A/T and Inventory 100,000
+Increase (-Dec) in Current Liabilities (100,000)
Cash Flow from Operations
$ 230,000

500,000
1,100,000
$ 1,900,000
$ 4,500,000
4,000,000
$ 500,000
400,000
$ 100,000
40,000
$ 60,000
$

60,000
50,000
-0-0
$ 110,000

The current ratio for 2013 is: (Points : 2)


1.8
2.0
3.9
4.7
Question 49. 49. During October, Rover Industries produced 35,000 units of product with costs
as follows:
DM
= $ 84,000
DL
=
43,000
Variable O/H = 13,000
Fixed O/H
= 147,000
Total
=$ 287,000
What is Rover's unit cost for October, calculated on the variable costing basis? (Points : 2)
$3.25.
$3.75.
$4.00.
$4.50.
$5.00.

6)
Presented below are certain account balances of Paczki Products Co.
Rent revenue
Interest expense
Beginning retained earnings
Ending retained earnings
Dividend revenue
Sales returns and allowances
Allocation to noncontrolling interest

$7,340
12,940
114,980
134,210
71,130
12,580
17,610

Sales discounts
Selling expenses
Sales revenue
Income tax expense
Cost of goods sold
Administrative expenses

$8,030
99,800
405,010
27,110
185,380
83,590

From the foregoing, compute the following:


(a)

Total net revenue

(b)

Net income

(c)

Dividends declared

(d)

Income attributable to controlling stockholders

7)
Sweeten Company had no jobs in progress at the beginning of March and no beginning
inventories. It started only two jobs during MarchJob P and Job Q. Job P was completed and
sold by the end of the March and Job Q was incomplete at the end of the March. The company
uses a plantwide predetermined overhead rate based on direct labor-hours. The following
additional information is available for the company as a whole and for Jobs P and Q (all data and
questions relate to the month of March):
Estimated total fixed manufacturing overhead
$14,800
Estimated variable manufacturing overhead per direct labor-hour $ 1.60
Estimated total direct labor-hours to be worked
3,700

Total actual manufacturing overhead costs incurred


Direct materials
Direct labor cost
Actual direct labor-hours worked

$21,000

Job P
Job Q
$ 21,500$ 9,700
$ 44,800$ 12,000
2,800
750

Required:
1. What is the companys predetermined overhead rate?
Predetermined overhead rate
2. How much manufacturing overhead was applied to Job P and Job Q?
Job P
Manufacturing overhead applied

per DLH
Job Q

check my workreferencesebook & resources


3. What is the direct labor hourly wage rate?
Job P

Job Q

Direct labor hourly wage rate


4-a. If Job P includes 20 units, what is its unit product cost?
Unit product cost

4-b.
What is the total amount of manufacturing cost assigned to Job Q as of the end of March
(including applied overhead)?
Total manufacturing cost

5.
Assume the ending raw materials inventory is $2,700 and the company does not use any
indirect materials. Prepare the journal entries to record raw materials purchases and the
issuance of direct materials for use in production. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)

6.
Assume that the company does not use any indirect labor. Prepare the journal entry to record
the direct labor costs added to production. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field.)
8.
Assume the ending raw materials inventory is $2,700 and the company does not use any indirect
materials. Prepare a schedule of cost of goods manufactured.

Schedule of Cost of Goods Manufactured


Direct materials:

Total raw materials available


Raw materials used in production

Total manufacturing costs

10.
Prepare a completed Work in Process T-account including the beginning and ending
balances and all debits and credits posted to the account.

Work in Process

Beg. bal.

End. bal.
11. Prepare a schedule of cost of goods sold.
Schedule of Cost of Goods Sold

Unadjusted cost of goods sold


13. What is the amount of underapplied or overapplied overhead?
15.
Assume that Job P includes 20 units that each sell for $5,000 and that the companys selling
and administrative expenses in March were $10,000. Prepare an absorption costing income
statement for March.

Income Statement for March

8)
Sweeten Company had no jobs in progress at the beginning of March and no beginning
inventories. It started only two jobs during MarchJob P and Job Q. Job P was completed and
sold by the end of the March and Job Q was incomplete at the end of the March. The company
uses a plantwide predetermined overhead rate based on direct labor-hours. The following
additional information is available for the company as a whole and for Jobs P and Q (all data and
questions relate to the month of March):
Estimated total fixed manufacturing overhead

$14,800

Estimated variable manufacturing overhead per direct labor-hour $ 1.60


Estimated total direct labor-hours to be worked
3,700
Total actual manufacturing overhead costs incurred
$21,000
Direct materials
Direct labor cost
Actual direct labor-hours worked

Job P
Job Q
$ 21,500$ 9,700
$ 44,800$ 12,000
2,800
750

Required:
1. What is the companys predetermined overhead rate?
Predetermined overhead rate
2. How much manufacturing overhead was applied to Job P and Job Q?
Job P
Manufacturing overhead applied

per DLH
Job Q

check my workreferencesebook & resources


3. What is the direct labor hourly wage rate?
Job P

Job Q

Direct labor hourly wage rate


4-a. If Job P includes 20 units, what is its unit product cost?
Unit product cost

4-b.
What is the total amount of manufacturing cost assigned to Job Q as of the end of March
(including applied overhead)?
Total manufacturing cost

5.
Assume the ending raw materials inventory is $2,700 and the company does not use any
indirect materials. Prepare the journal entries to record raw materials purchases and the
issuance of direct materials for use in production. (If no entry is required for a

transaction/event, select "No journal entry required" in the first account field.)

6.
Assume that the company does not use any indirect labor. Prepare the journal entry to record
the direct labor costs added to production. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field.)
8.
Assume the ending raw materials inventory is $2,700 and the company does not use any indirect
materials. Prepare a schedule of cost of goods manufactured.

Schedule of Cost of Goods Manufactured


Direct materials:

Total raw materials available


Raw materials used in production

Total manufacturing costs

10.
Prepare a completed Work in Process T-account including the beginning and ending
balances and all debits and credits posted to the account.

Work in Process
Beg. bal.

End. bal.
11. Prepare a schedule of cost of goods sold.
Schedule of Cost of Goods Sold

Unadjusted cost of goods sold


13. What is the amount of underapplied or overapplied overhead?
15.
Assume that Job P includes 20 units that each sell for $5,000 and that the companys selling
and administrative expenses in March were $10,000. Prepare an absorption costing income
statement for March.

Income Statement for March

9)

Pearson architectural
Cost of subcontracted work
$230,600
$76,100
$121,760
$389,500
$6,580
Predetermined over head rate

10)

Sweeten Company had no jobs in progress at the beginning of March and no beginning
inventories. It started only two jobs during MarchJob P and Job Q. Job P was completed and
sold by the end of the March and Job Q was incomplete at the end of the March. The company
uses a plantwide predetermined overhead rate based on direct labor-hours. The following
additional information is available for the company as a whole and for Jobs P and Q (all data and
questions relate to the month of March):
Estimated total fixed manufacturing overhead
$14,800
Estimated variable manufacturing overhead per direct labor-hour $ 1.60
Estimated total direct labor-hours to be worked
3,700
Total actual manufacturing overhead costs incurred
$21,000
Direct materials
Direct labor cost
Actual direct labor-hours worked

Job P
Job Q
$ 21,500$ 9,700
$ 44,800$ 12,000
2,800
750

Required:
1. What is the companys predetermined overhead rate?
Predetermined overhead rate
2. How much manufacturing overhead was applied to Job P and Job Q?
Job P
Manufacturing overhead applied

per DLH
Job Q

check my workreferencesebook & resources


3. What is the direct labor hourly wage rate?
Job P

Job Q

Direct labor hourly wage rate


4-a. If Job P includes 20 units, what is its unit product cost?
Unit product cost

4-b.
What is the total amount of manufacturing cost assigned to Job Q as of the end of March
(including applied overhead)?
Total manufacturing cost

5.
Assume the ending raw materials inventory is $2,700 and the company does not use any
indirect materials. Prepare the journal entries to record raw materials purchases and the
issuance of direct materials for use in production. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)

6.
Assume that the company does not use any indirect labor. Prepare the journal entry to record
the direct labor costs added to production. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account field.)
8.
Assume the ending raw materials inventory is $2,700 and the company does not use any indirect
materials. Prepare a schedule of cost of goods manufactured.

Schedule of Cost of Goods Manufactured


Direct materials:

Total raw materials available


Raw materials used in production

Total manufacturing costs

10.
Prepare a completed Work in Process T-account including the beginning and ending
balances and all debits and credits posted to the account.

Work in Process
Beg. bal.

End. bal.
11. Prepare a schedule of cost of goods sold.
Schedule of Cost of Goods Sold

Unadjusted cost of goods sold


13. What is the amount of underapplied or overapplied overhead?
15.
Assume that Job P includes 20 units that each sell for $5,000 and that the companys selling
and administrative expenses in March were $10,000. Prepare an absorption costing income
statement for March.

Income Statement for March

11)

In February 2014, U.S. Deputy Marshal Raylan Givens used TurboTax software to complete his
2013 personal income tax return. When Raylan was nearly finished with his return, TurboTax
presented Raylan with a promotional offer claiming to increase his federal income tax refund.
Specifically, if Raylan elected to receive any portion of his federal income tax refund in the form
of a gift card to Amazon.com, Intuit (the makers of TurboTax software) offered to match an
additional 10% of the elected amount in Amazon.com gift certificates, free of charge. Raylans
total tax refund was $6,000, and he elected to apply $5,000 of his total refund to this offer.
Raylan received an Amazon.com gift card from Intuit in March 2014 for $5,500 (i.e., $5,000
applied refund plus 10%). Raylan used the entire $5,500 gift card to purchase a new highdefinition television and sound system so he could watch all of his favorite shows in style.
Based on the facts above, what amount of the $5,500 gift card, if any, does Raylan need to
recognize as gross income for tax year 2014? Why? Assume Raylan is your client and prepare a
brief research memo, complete with citations and analysis of primary authority, to support your
conclusions. Remember that Raylan is not a professional tax preparer, so it is important that you
explain your position in a clear and concise manner that is not overly technical (i.e., do not copy
and paste excerpts from primary authorities and call it a day).
12)

Assume 360 days per year. Round your intermediate and final answers to two decimal places.
The accounts receivable turnover ratios for The Coca-Cola Company and PepsiCo for 2010 are

13)
Whats going on in that lab? asked Kevin Brolsma, chief administrator for Cincinnati
Hospital, as he studied the prior months reports. Every month the lab teeters between a profit
and a loss. Are we going to have to increase our lab fees again?
We cant, replied Jessica Duffy, the controller. Were getting lots of complaints about the last
increase, particularly from the insurance companies and governmental health units. Theyre now
paying only about 80% of what we bill. Im beginning to think the problem is on the cost side.
To determine if lab costs are in line with other hospitals, Mr. Brolsma has asked you to
evaluate the costs for the past month. Ms. Duffy has provided you with the following
information:

a.

Two basic types of tests are performed in the labsmears and blood tests. During the past
month, 3,400 smears and 1,000 blood tests were performed in the lab.

Small glass plates are used in both types of tests. During the past month, the hospital
purchased 17,000 plates at a cost of $53,040. This cost is net of a 4% purchase discount. A
b.
total of 2,400 of these plates were unused at the end of the month; no plates were on hand at
the beginning of the month.

c.

During the past month, 2,400 hours of labor time were used in performing smears and blood
tests. The cost of this labor time was $26,400.

d.The labs variable overhead cost last month totaled $19,200.

Cincinnati Hospital has never used standard costs. By searching industry literature, however,
you have determined the following nationwide averages for hospital labs:

Plates:

Three plates are required per lab test. These plates cost $3.25 each and are disposed
of after the test is completed.

Labor:

Each smear should require 0.4 hours to complete, and each blood test should require
0.8 hours to complete. The average cost of this lab time is $11.60 per hour.

Overhead:

Overhead cost is based on direct labor-hours. The average rate of variable overhead
is $7.50 per hour.

Required:
Compute the materials price variance for the plates purchased last month, and compute a
materials quantity variance for the plates used last month. (Input all amounts as positive
1. values. Leave no cells blank - be certain to enter "0" wherever required. Indicate the
effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None"
for no effect (i.e., zero variance.)

Materials price variance


Materials quantity
variance

$
$

2. For labor cost in the lab:

Compute a labor rate variance and a labor efficiency variance. (Input all amounts as
positive values. Leave no cells blank - be certain to enter "0" wherever required.
a.
Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance.)

Labor rate variance


Labor efficiency
variance

$
$

In most hospitals, three-fourths of the workers in the lab are certified technicians and onefourth are assistants. In an effort to reduce costs, Cincinnati Hospital employs only oneb.
half certified technicians and one-half assistants. Would you recommend that this policy
be continued?
Yes
No

Compute the variable overhead rate and efficiency variances. (Input all amounts as
positive values. Leave no cells blank - be certain to enter "0" wherever required.
3a.
Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance.)

Variable overhead rate variance


Variable overhead efficiency
variance

3b.

$
$

Is there any relation between the variable overhead efficiency variance and the labor
efficiency variance?

Yes
No

14)
LIFO Perpetual Inventory
The beginning inventory at RTE Office Supplies and data on purchases and sales for a threemonth period are as follows:

Required:
1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory
record similar to the one illustrated in Exhibit 4, using the last-in, first-out method. Under LIFO,
if units are in inventory at two different costs, enter the units with the HIGHER unit cost first in
the Cost of Merchandise Sold Unit Cost column and LOWER unit cost first in the Inventory Unit
Cost column. Round unit cost to two decimal places, if necessary.

RTE Office Supplies


Schedule of Cost of Merchandise Sold
LIFO Method
For the three months ended August 31, 2
Purchases
Date
June 1

Quantity

Unit Cost

Cost of Merchandise Sold


Total Cost

Quantity

Unit Cost

June 10

1500

$
34

51000

June 28

June 30

July 5

July 10

3600

35

126000

3000

35.80

107400

July 16

July. 28

Aug. 5

Aug. 14

Aug. 25

500

36

18000

Aug. 30

Aug. 31

Balances

2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for
the period.
$

Total sales
Total cost of merchandise sold
Gross profit from sales

$
$

3. Determine the ending inventory cost as of August 31, 2014.


$
15)
White Boxes are wrong, Please HLEP !
Krause Industries balance sheet at December 31, 2013, is presented below.
KRAUSE INDUSTRIES
Balance Sheet
December 31, 2013
Assets

Current Assets
Cash
Accounts receivable
Finished goods inventory (2,000 units)
Total current assets
Property, Plant, and Equipment
Equipment
$41,810
Less: Accumulated depreciation
11,810
Total assets
Liabilities and Stockholders' Equity
Liabilities
Notes payable
Accounts payable
Total liabilities
Stockholders' Equity
Common stock
$48,190
Retained earnings
31,810
Total stockholders' equity
Total liabilities and stockholders' equity

$7,500
82,500
33,620
$123,620

30,000
$153,620

$26,810
46,810
73,620

80,000
$153,620

Additional information accumulated for the budgeting process is as follows.


Budgeted data for the year 2014 include the following.
Sales budget (8,000 units at $35)
Direct materials used
Direct labor
Manufacturing overhead applied
Selling and administrative expenses

4th Qtr. of 2014


Year 2014 Total
$84,000
$280,000
13,380
69,400
12,500
56,600
10,000
52,190
16,190
76,000

To meet sales requirements and to have 3,000 units of finished goods on hand at December 31,
2014, the production budget shows 9,000 required units of output. The total unit cost of
production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory
costing method. Selling and administrative expenses include $11,946 for depreciation on
equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to
be 40% of income before income taxes.
All sales and purchases are on account. It is expected that 60% of quarterly sales are collected
in cash within the quarter and the remainder is collected in the following quarter. Direct
materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in
the following quarter. Purchases in the fourth quarter were the same as the materials used. In
2014, the company expects to purchase additional equipment costing $20,810. It expects to pay

$9,810 on notes payable plus all interest due and payable to December 31 (included in interest
expense $3,500, above). Accounts payable at December 31, 2014, include amounts due
suppliers (see above) plus other accounts payable of $7,510. In 2014, the company expects to
declare and pay an $6,810 cash dividend. Unpaid income taxes at December 31 will be $6,810.
The companys cash budget shows an expected cash balance of $7,950 at December 31, 2014.

* Question 9
Your answer is partially correct. Try again.
Prepare a budgeted income statement for 2014.
KRAUSE INDUSTRIES
Budgeted Income Statement
For the Year Ending December 31, 2014
Sales

$ 280,000

Cost of Goods Sold


Finished Goods Inventory, January 1

$ 33,620

Cost of Goods Manufactured

178,190

Cost of Goods Available For Sale

211,810

Finished Goods Inventory, December 31

60,000

Cost of Goods Sold

271,810

Gross Profit

8,190

Selling and Administrative Expenses

76,000

Income from Operations

52,190

Interest Expense

3,500

Income before Income Taxes

48,690

Income Tax Expense

19,476

Net Income/ (Loss)


Attempts: 5 of 5 used

$ 29,214

* Question 9
Your answer is partially correct. Try again.
Prepare a budgeted balance sheet at December 31, 2014. (List assets in order of liquidity.)
KRAUSE INDUSTRIES
Budgeted Balance Sheet
December 31, 2014
Assets
Current Assets
$

Cash

7,950

Accounts Receivable

82,500

Finished Goods Inventory

60,000
$

Total Current Assets

176,000

Property, Plant and Equipment


$

Equipment

41,810

Less: Accumulated Depreciation

11,946

Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Notes Payable

$ 17,000

Accounts Payable

53,320

Income Taxes Payable

19,476

Total Liabilities
Stockholders' Equity
Common Stock
Retained Earnings

$ 48,190
31,810

Total Stockholders' Equity


Total Liabilities and Stockholders' Equity

16)
: Lance Company, an accrual basis corporation, reported taxable income of $1,560,000
for 2013. Included in the computation were the following:
MACRS depreciation of $200,000, S/L would have bee $120,000
Net Capital loss carryover of $10,000 from 2012
Net Operating Loss carryover of $25,000 from 2012
Not Included were the following:
Tax Exempt income of $5,000
Life insurance proceeds of $250,000
Excess charitable contributions of $2,500 to be carryover to 2013
Tax-Deferred gain of $20,000 on a like kind exchange
Federal income tax refund from 2012 of $30,000
Nondeductible insurance premiums of $3,500
Lance Company paid federal income taxes of $496,500. The companys Accumulated E&P on
January 1 was $2,400,000.
During the year they distribute 50,000 on June 30 and $75,000 on December 31 to the sole
Shareholder Nick.
A. Compute Lances current E&P for 2013
B. Compute the amount of Dividend Income reported by Nick in 2013.
C. Compute Lances Accumulated E&P at the beginning of 2014.

17)

The Brisbane Manufacturing Company produces a single model of a CD player. Each player is
sold for $204 with a resulting contribution margin of $71.
Brisbane's management is considering a change in its quality control system. Currently, Brisbane
spends $40,500 a year to inspect the CD players. An average of 1,900 units turn out to be
defective - 1,330 of them are detected in the inspection process and are repaired for $80. If a
defective CD player is not identified in the inspection process, the customer who receives it is
given a full refund of the purchase price. Competitors are expected to improve their quality
control systems in the future, so if Brisbane does not improve its system, sales volume is
expected to fall by 490 CD players a year for the next five years. In other words, it will fall by
490 units in the first year, 980 units in the second year, etc..
The proposed quality control system involves the purchase of an x-ray machine for $310,000.
The machine would last for five years and would have salvage value at that time of $18,000.
Brisbane would also spend $820,000 immediately to train workers to better detect and repair
defective units. Annual inspection costs would increase by $23,000. This new control system
would reduce the number of defective units to 380 per year. 315 of these defective units would
be detected and repaired at a cost of $42 per unit. Customers who still received defective players
would be given a refund equal to one-and-a-fourth times the purchase price.
Questions 1 & 2 [no credit; unlimited tries]
1. What is the Year 3 cash flow if Brisbane keeps using its current system?

Tries 0/99
2. What is the Year 3 cash flow if Brisbane replaces its current system?

Tries 0/99

Questions 3 & 4 [5 points each; 5 tries each]


3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its
current system?

Tries 0/5

4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current
system?

18)
JumpinJehosaPhats is a small business owned by JJ Phats as the sole proprietor. JJphats is
incorporating the business.
On January 1, 2012 JumpinJehosaPhats Inc. has been authorized to issue 1,000,000 common
shares with a Par Value of $1. In the process of incorporating, the sole proprietor owners equity
accounts must be closed and the equity must now reflect a corporate stockholders equity
account.
The books for the Sole Proprietorship indicate the following:
JJ Phats deposited $35,000 to start JumpinJehosaPhats
JJ Phats contributed $50,000 of equipment to start JumpinJehosaPhats
Retained Earnings December 31, 2011 = $150,000
Prepare the Stockholders Equity Portion of the Balance Sheet on January 1, 2012.

Then answer . part 2

JumpinJehosaPhats was incorporated on January 1, 2012 and a year later it needs $10,000,000 to
expand operations. JJ Phats is the sole shareholder of the corporation.
The corporation is considering three methods to raise the capital:
issuing common shares at FMV
issuing preferred stock with par = $1000
issuing 10 year bonds with par = $1000
You have been hired to determine the best way for the company to obtain the funds needed
which might be a single method or combination of methods. Using the following
information, discuss the pros and cons of each method and provide necessary calculations
to support the position you recommend.
The company is authorized to issue 1,000,000 shares with a par value of $1.00
On January 1, 2013 an appraisal of the company indicates that it has a current value of
$25,000,000.
On January 1, 2013 current interest rates are 3.5% APR and rising.
On December 1, 2012 the competition (LeapinLizards Inc) issued 10,000 ten year
cumulative preferred shares with par = $1000 at 3.4%
19)
Hannah & Maggie Inc.

Hannah & Maggie are independent recording artists who manufacture all their CDs by hand
whole sale. In December Hannah found a Neumann record cutting machine on sale for $25,000.
The machine can be used to transfer digital music to vinyl records (LPs).
Hannah and Maggie think their new album would sound amazing (and sell well) as an LP, but
they need a loan to purchase the machine. A local bank is agreeable, but requires both current
(2013) and budgeted (3 months in 2014) financial statements.

Balance Sheet

December 2013 &

December 31, 2013

2014 Sales Forecast

Cash

$19,200

January

29,600

A/R

22,000

February 34,400

Inventory @1/1/14

6,000

March

38,000

Fixed Assets

28,000

April

43,200

Total Assets

$75,200

May

31,200

A/P Purchase Dec

$6,400

Accrued Credit
FeesDec

550

Common Stock

16,000

Retained Earnings

52,250

Total Liab & Equity

$75,200

Additional Information:
a. Everyone who buys H&Ms music pays with a credit card. H&M collect 40% in the month
of the sale and 60% in the month after the sale.
b. The credit card sales also mean that H&M incur a 1.5% sales fee. The sales fee is due one
month after the sale.

c.

The cost of sales is 35% of (current month) sales.

d. To make sure they dont run out of music to sell at shows, Hannah & Maggie plan to
maintain inventory at the sales requirements for the next two months budgeted sales.
e. Hannah & Maggie use a credit card for all their purchases; the duo pays off their balance in
full the following month.

f.

Hannah & Maggie pay their manager 3% of sales each month

g. In addition to the variable management cost, the duo incurs fixed expenses of $5,000 per
month, $500 of which is for depreciation of fixed assets.
Want an answer?
20)
Need to figure out where we calculate the 700,500. Below was the given statement. Below all
of this will be the trial balance and any other information I can find.
For the Chapter 7 CAP closing entries we made an entry to move $317,232 from Net Postion Unrestricted to Net Position - Net Investment in Capital Assets. Why did we do this entry? And
how do we come up with the calculation of $317,232***? See the calculation below:
Statement of Net positon

Beginning Balance - Net Position - Net Investment in Capital Assets


2013 Trial Balance)

$1,773,712 (see your

Less: Depreciation

(380,008) - Entry #16

Less: Amortization
#16

Add: Change in Utility Plant


YOU CALCULATE THIS AMOUNT? (The Assignment)
Ending Balance - Net Position - Net Investment in Capital Assets
your Financial Statement
*** $317,232 = (380,008) + (3,260) + 700,500
City of Bingham
Water Utility Fund
Post-Closing Trial Balance
For year 2011
75
7.e
CITY OF BINGHAM
Water Utility Fund
Statement of Net Assets
As of December 31, 2011
ASSETS:
Current Assets:
Cash $ 985,168
Due from other funds 40,000
Customer accounts receivable $ 199,490

3,260) - Entry #8 + Entry


700,500 - HOW DO
$2,090,944 - Number on

Less: Accumulated provision uncollectible accounts 5,820 193,670


Inventory of supplies 101,546
Total Current Assets 1,320,384
Restricted Assets: Cash 58,460
Utility Plant:
Utility plant in service 19,902,990
Less: Accumulated provision for depreciation 4,391,286 15,511,704
Construction work in progress 664,300
Total Utility Plant 16,176,004
Total Assets 17,554,848
LIABILITIES:
Current and Accrued Liabilities:
Vouchers payable 94,020
Accrued interest payable 434,100
Total Current and Accrued Liabilities 528,120
Liabilities Payable from Restricted Assets: Customer deposits 58,460
Long-Term Debt: 6% Revenue bonds 14,470,000
Less: Unamortized bond discount 61,940 14,408,060
Total Liabilities 14,994,640
NET ASSETS:
Invested in capital assets, net of related debt 1,767,944
Unrestricted 792,264
Total Net Assets $ 2,560,208

Debits Credits
Cash $985,168
Restricted Cash - Customer Deposits 58,460
Customer Accounts Receivable 199,490
Accumulated Provision for Uncollectible Accounts $5,820
Inventory of Supplies 101,546
Due from Other Funds 40,000
Utility Plant in Service 19,902,990
Accumulated Depreciation Utility Plant 4,391,286
Construction Work in Progress 664,300
Vouchers Payable 94,020
Customer Deposits 58,460
Accrued Interest Payable 434,100
6% Revenue Bonds Payable 14,470,000
Unamortized Bond Discounts on Revenue Bonds Payable 61,940
Net Assets - Invested in Capital Assets, Net of related Debt 1,773,712
Net Assets - Unrestricted 41,250
Sales of Water 3,066,700
Operation Expense 826,786
Maintenance Expense 268,400
Depreciation Expense 380,008
Uncollectible Accounts 3,800
Interest on Long-Term Debt 842,460

Totals for all accounts $24,335,348 $24,335,348


City of Bingham
Water Utility Fund
Pre-Closing Trial Balance
For year 2011
76
7.e CITY OF BINGHAM
Water Utility Fund
Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended December 31, 2011
Operating Revenues:
Sales of water (net of provision for
uncollectible accounts of $3,800) $3,062,900
Operating Expenses:
Operation expense $ 826,786
Maintenance expense 268,400
Depreciation expense 380,008
Total Operating Expense 1,475,194
Operating Income 1,587,706
Nonoperating Revenue and Expense:
Interest on long-term debt 842,460
Change in Net Assets 745,246
Net Assets, December 31, 2010 1,814,962

Net Assets, December 31, 2011 $2,560,208


77
7.f
CITY OF BINGHAM
Water Utility Fund
Statement of Cash Flows
For Year Ended December 31, 2011
Cash flows from operating activities:
Cash received from customers and City $2,994,100
Cash provided by customer
deposits (see Note A) 3,854
Cash payments to employees for services(less: $70,500
for construction) (746,930)
Cash payments to suppliers (332,800)
Net cash provided by operating activities $1,918,224
Cash flows from capital and related
financing activities:
Construction of capital assets (348,500)
Interest paid on long-term debt (868,200)
Net cash used for capital and related
financing activities (1,216,700)
Net increase in cash and cash equivalents 701,524
Cash and cash equivalents, December 31, 2010 342,104

Cash and cash equivalents, December 31, 2011 $1,043,628


Reconciliation of cash and cash equivalents to the balance sheet:
End Beginning
of Year of Year
Cash and cash equivalents in current
and accrued assets $ 985,168 $284,904
Restricted cash and cash equivalents 58,460 57,200
Total cash and cash equivalents $1,043,628 $342,104
78
7.f (Contd)
Reconciliation of operating income to net cash provided by
operating activities:
Operating income $1,587,706
Adjustments:
Depreciation $ 380,008
Increase in accounts receivable, net (37,950)
Increase in inventory of supplies (7,400)
Increase in due from other funds (27,000)
Increase in accounts payable 21,600
Increase in customer deposits 1,260
Net adjustments 330,518
Net cash provided by operating activities $1,918,224
Note A: Entry 7-b-13, deposits received, $6,904, minus deposits refunded to customers,

$3,050.
21)
The Numo Company, which was acquired (and renamed) in 2003 by E. R. Numo, sells frigets to
multinational firms. In 2012, a venture capital firm provided additional funding in order to allow
the company to expand operations. The following information was taken from the preliminary
trial balance of Numo Company, a calendar year company, on December 31, 2012:
Cash

74,000

Accounts Receivable

60,000

Inventory

88,000

Transportation Equipment

203,000

Accumulated Depreciation - Transportation Equipment


Goodwill

68,000
200,000

Accounts Payable

20,000

Deferred Tax Liability - Depreciation

6,000

Common Stock, $2 par

62,000

Paid-in Capital in Excess of Par Value

81,000

Retained Earnings, 1/1/12

280,000

Sales

363,000

Salaries/Compensation Expense

86,000

Cost of Goods Sold

140,000

Supplies Expense

16,000

Depreciation Expense - Transportation Equipment

22,000

Municipal Bond Interest

1,000

Gain on Discontinued Operation - before tax

8,000

However, the bookkeeping staff did NOT record the following transactions and adjustments
because staff members were unsure about the appropriate accounting treatment:
(1)
On October 31, 2012, Numo issued a five-year, $400,000, non-interest bearing note
to the venture capital firm and received $248,368 in cash, which reflects a 10% market yield. For
financial statement purposes, interest expense is recognized using the effective interest rate
method. However, for tax purposes, interest is not deductible until paid, which will be at the end
of the five-year period.
HINT - In addition to the 10/31/12 transaction, be sure to record the required adjusting entry to
record interest expense as of 12/31/12
(2)
In 2012, the company was accused of patent infringement. While the company is
contesting the case, management believes that there is a probably loss of between $15,000
and $40,000. This loss has NOT been recorded
HINT - Record the appropriate loss. This accrued liability should be considered a current
liability. Also, remember that the loss is not deductible until paid.
(3)
During the last quarter of the year, Numo found that inventory originally costing
$17,000 had become obsolete and was no longer saleable. However, Numo has made the
decision to temporarily retain the goods to see if a buyer can be found. For tax purposes, the cost
of obsolete inventory can not be deducted on the tax return until the goods are actually disposed
of.

Required:
A.

Record appropriate transactions and adjusting entries as described above.

B.
Partially prepare a multiple-step Income Statement (through Income before Income
Taxes) in accordance with GAAP.
C.
Record Income tax Expense for 2012. The tax rate is 25% for all years. You have
learned that the company's interest revenue is tax-exempt since it was earned on municipal
bonds. In addition to the temporary differences described above, you have identified that a
temporary difference exists for depreciation. As of 12/31/2011, there is a cumulative difference
between tax depreciation and financial statement depreciation that amounts to $24,000. In
2012, tax depreciation was $28,000 and book depreciation (already recorded - see trial balance)
was $22,000. You may assume that all deferred tax assets, if any, will be realized.
Then record the tax effect of the discontinued operation. You can assume that the discontinued
operation is taxable on this years tax return.
D.
Complete your Income Statement. Be sure that it contains all items that are required
by GAAP. You do NOT need to show Earnings Per Share data.
E.

Prepare a classified Balance Sheet in accordance with GAAP.

22)
1) Large Corporation acquired and placed in service the following 100% business-use alerts.
Large did not elect Sec. 179 expensing on any of these properties, and elected out of bonus
depreciation for all of them.

1. Truck (light-duty, modified non-personal use) costing $36,000: Placed in service on


March 3, 2013 with a 5-year MACRS recovery period.
2. Machinery costing $85,000: Placed in service on November 15, 2013 with a 7-year
MACRS recovery period.
3. Land costing $90,000: Placed in service on October 12, 2013.
4. Building costing $280,000: Placed in service on December 4, 2013 with a 39-year
MACRS recovery period.
a)

a) What is Larges total depreciation deduction in 2013?

b)
b)Large Corporation sells the machinery on February 2, 2015 and sells the building on
September 18, 2015. What are the adjusted bases of these two assets on the dates of sale
(compute accumulated depreciation to date of sale)?
2) In July 2013, Tish acquires and places in service a business machine costing $450,000 with a
7-year MACRS recovery period. Tish elects the maximum allowable Sec. 179 expense on the
machine but elects out of bonus depreciation. In August 2013, she also places in service business
equipment costing $1,650,000, with a 5-year MACRS recovery period. Tishs taxable income
(before the Sec. 179 expense and the 50% of SE tax deduction) is $310,000.

a) What is Tishs allowable 2013 Sec. 179 expense on the machine? What amount can she carry
over to 2014?
b) What is Tishs total 2013 depreciation deduction?
c) What are the limitations on Tishs ability to use the Sec. 179 carryover in 2014?
d) How would your answer to Part a change if Tishs business taxable income (before the Sec.
179 expense and the 50% of SE tax deduction) were $525,000 in 2013 instead of $310,000?
3) On January 1 of the current year, Palm Corporation purchases the net assets of Vickis
unincorporated business for $600,000. The tangible net assets have a $300,000 book value and a
$400,000 FMV. The purchase agreement states that Vicki will not compete with Palm
Corporation by starting a new business in the same area for a period of five years. The stated
consideration received by Vicki for the covenant not to compete is $50,000. Other intangible
assets included in the purchase agreement are as follows:

Goodwill: $70,000
Patents: (12-year remaining legal life) $30,000
Customer list: $50,000

a)

a) How would Vickis assets be recorded for tax purposes by Palm Corporation?

b)

b) What is the amortization amount for each intangible asset in the current year?

23)
he Brisbane Manufacturing Company produces a single model of a CD player. Each player is
sold for $210 with a resulting contribution margin of $74.
Brisbane's management is considering a change in its quality control system. Currently, Brisbane
spends $39,500 a year to inspect the CD players. An average of 1,900 units turn out to be
defective - 1,330 of them are detected in the inspection process and are repaired for $85. If a
defective CD player is not identified in the inspection process, the customer who receives it is
given a full refund of the purchase price. Competitors are expected to improve their quality
control systems in the future, so if Brisbane does not improve its system, sales volume is
expected to fall by 550 CD players a year for the next four years. In other words, it will fall by
550 units in the first year, 1,100 units in the second year, etc..
The proposed quality control system involves the purchase of an x-ray machine for $290,000.
The machine would last for four years and would have salvage value at that time of $19,000.
Brisbane would also spend $780,000 immediately to train workers to better detect and repair
defective units. Annual inspection costs would increase by $23,000. This new control system
would reduce the number of defective units to 350 per year. 280 of these defective units would
be detected and repaired at a cost of $41 per unit. Customers who still received defective players
would be given a refund equal to one-and-a-half times the purchase price.
Questions 1 & 2 [no credit; unlimited tries]
1. What is the Year 3 cash flow if Brisbane keeps using its current system?

2. What is the Year 3 cash flow if Brisbane replaces its current system?

Questions 3 & 4 [5 points each; 5 tries each]


3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its
current system?
4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current
system?

24)
The Brisbane Manufacturing Company produces a single model of a CD player. Each player is
sold for $207 with a resulting contribution margin of $77.

Brisbane's management is considering a change in its quality control system. Currently, Brisbane
spends $39,500 a year to inspect the CD players. An average of 2,000 units turn out to be
defective - 1,400 of them are detected in the inspection process and are repaired for $75. If a
defective CD player is not identified in the inspection process, the customer who receives it is
given a full refund of the purchase price. Competitors are expected to improve their quality
control systems in the future, so if Brisbane does not improve its system, sales volume is
expected to fall by 520 CD players a year for the next five years. In other words, it will fall by
520 units in the first year, 1,040 units in the second year, etc..

The proposed quality control system involves the purchase of an x-ray machine for $310,000.
The machine would last for five years and would have salvage value at that time of $22,000.
Brisbane would also spend $810,000 immediately to train workers to better detect and repair
defective units. Annual inspection costs would increase by $25,000. This new control system
would reduce the number of defective units to 360 per year. 290 of these defective units would
be detected and repaired at a cost of $46 per unit. Customers who still received defective players
would be given a refund equal to one-and-a-half times the purchase price.

Questions 1 & 2 [no credit; unlimited tries]


1. What is the Year 2 cash flow if Brisbane keeps using its current system?

2. What is the Year 2 cash flow if Brisbane replaces its current system?

Questions 3 & 4 [5 points each; 5 tries each]


3. Assuming a discount rate of 8%, what is the net present value if Brisbane keeps using its
current system?

4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current
system?

25)
The following unemployment tax rate schedule is in effect for the calendar year
2014 in State A, which uses the reserve ratio formula in determining employer
contributions: Conrad Company, which is located in State A, had an average annual
payroll of $1,150,000 for the three 12-month periods ending on June 30, 2013 (the
computation date for the tax year 2014). As of June 30, 2013, the total contributions
that had been made to Conrad Company's reserve account, in excess of the
benefits charged, amounted to $21,560. Compute the following: a. Conrad
Company's reserve ratio for 2013. Round your answer to two decimal places. % b.
2014 contribution rate for the company. Round your answer to one decimal place. %
c. Smallest contribution that the company can make in order to reduce its tax rate if
State A permits voluntary contributions. $ d. Tax savings realized by the company,
taking into consideration the voluntary contribution made in (c) if the taxable
payroll in 2014 is $1,295,000. $
26)
Problem 7-4A (Part Level Submission)

The bank portion of the bank reconciliation for LaRoche Company at October 31,
2014, is shown below.
LAROCHE COMPANY
Bank Reconciliation
October 31, 2014
Cash balance per bank

$12,367.
90

Add: Deposits in transit

1,530.20

Less: Outstanding checks

13,898.1
0

Check Number

Check
Amount

2451

$ 1,260.40

2470

684.20

2471

844.50

2472

426.80

2474

1,050.00

Adjusted cash balance per


bank

4,265.90
$9,632.2
0

The adjusted cash balance per bank agreed with the cash Cash balance per
books at October 31. The November bank statement showed the following
checks and deposits.
Bank Statement
Checks
Date

Deposits
Number

Amount

Date

Amount

11-1

2470

$ 684.20

11-1

$ 1,530.20

11-2

2471

844.50

11-4

1,211.60

11-5

2474

1,050.00

11-8

990.10

11-4

2475

1,640.70

11-13

2,575.00

11-8

2476

2,830.00

11-18

1,472.70

11-10

2477

600.00

11-21

2,945.00

11-15

2479

1,750.00

11-25

2,567.30

11-18

2480

1,330.00

11-28

1,650.00

11-27

2481

695.40

11-30

1,186.00

11-30

2483

575.50

Total

11-29

2486

940.00

16,127.90

Total

$12,940.30

The cash records per books for November showed the following.
Cash Payments Journal
Amount

Cash Receipts Journal

Date

Number

Date

Number

Amount

Date

Amount

11-1

2475

$1,640.70 11-20

2483

$ 575.50

11-3

$ 1,211.60

11-2

2476

2,830.00 11-22

2484

829.50

11-7

990.10

11-2

2477

600.00 11-23

2485

974.80

11-12

2,575.00

11-4

2478

538.20 11-24

2486

940.00

11-17

1,472.70

11-8

2479

1,705.00 11-29

2487

398.00

11-20

2,954.00

11-10

2480

1,330.00 11-30

2488

800.00

11-24

2,567.30

11-15

2481

695.40 Total

$14,469.10

11-27

1,650.00

11-18

2482

612.00

11-29

1,186.00

11-30

1,304.00

Total

$15,910.70

The bank statement contained two bank memoranda:


1 A credit of $2,242.00 for the collection of a $2,100 note for LaRoche
. Company plus interest of $157 and less a collection fee of $15. LaRoche
Company has not accrued any interest on the note.
2
A debit for the printing of additional company checks $85.00.
.
At November 30, the cash balance per books was $11,073.80 and the cash
balance per bank statement was $17,712.50. The bank did not make any errors,
but LaRoche Company made two errors.

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(a)

Using the four steps in the reconciliation procedure, prepare a bank


reconciliation at November 30, 2014.
LAROCHE COMPANY
Bank Reconciliation
November 30, 2014
$

Add:

Less:
$

Add:

Less:

Want an answer?

27)
Multi-Part Work Out Problem
Carefully consider the following information before answering the questions that follow:
Quarter Foods began its operations January 1, 2014. Quarter Foods sells non-local and
nonorganic foods to individual consumers and local businesses. As its food does not go bad,
Quarter Foods return policy is that anything can be returned for a full refund within one week. In
2014 all sales were completed before December 24, 2014.

Individual Customers:
All of its sales to individual customers are with traditional credit cards and these credit card
companies charge Quarter Foods a 2% service fee for all sales (and refund this fee with any
returns). In 2014, Quarter Foods sold $220,000 to individual consumers and $20,000 of these
sales was returned within the one week period. An individual who spent $5,000 at Quarter Foods
realized that Quarter Foods was non-organic and when she inquired about returns Quarter Foods
offered her an allowance on the purchase in the form of a $1,500 store gift card, which she
accepted instead of returning the items.

Business Customers:
All of Quarter Foods sales to businesses are on account. Quarter Foods offers a discount of
5/20 n/60 for early payments of sales on account. In 2014, Quarter Foods sold $170,000 to
business customers and $10,000 of these sales was returned within the one week period. Quarter
Foods estimates that 5% of the final Sales on Account (those that the business customers do not
return) will not be collected.
One business customer, with purchases in 2014 of $20,000, always paid Quarter Foods within 15
days of the purchase. Another business customer, with $5,000 of unpaid purchases, declared
bankruptcy and did not have any means to pay any of the bill. No other business customer paid
within 30 days of the purchase. At the end of the year Quarter Foods balance in Accounts
Receivable is $20,000. Both of these customers purchases were included in the $170,000.

Quarter Foods appropriately accounted for all of its transactions and adjusting entries during
2014.
Multi-Part Questions for Quarter Foods: (Be sure to read all of page 1 first.)

What where Quarter Foods Net Sales to individual customers for 2014? 4 points.

How much net cash did it ultimately receive from Sales to individual customers in
2014?

Write the entry that Quarter Foods made to record Bad Debt Expense in 2014:

Journal Entry

Debit

Credit

What is the Net Realizable Value of Quarter Foods Accounts Receivable as of the
end of 2014?

What was Quarter Foods Total Net Sales for 2014?

How much total cash from all customers did Quarter Foods ultimately receive in
2014?

28)
a. Prepare the first and second page of the 3-page assignment. Each page will show a
spreadsheet, each with data shown in different ways.
On the spreadsheet for the first page, show your work area (including your notes) and all your
data (with the dollar amounts).
On the spreadsheet for the second page, show all your formulas. (Remember that the entire
spreadsheet will only be formulas.) You can make these formulas visible by pressing the Ctrl key
and the Tilde key (~) at the same time. The Tilde key is located to the left of the number 1 on the
keyboard.

a. Prepare the third page of the 3-page assignment. This page will show two line charts, both
showing a chart title and labels for the X and Y axes. Format the charts, so they are easily
readable and understandable.
On the first chart, show a comparison of the projected total income per month from April
through September 2014. (Do not show itemized income.) Title this Comparison of Monthly
Income. Show the name of the months on the X axis.
On the second chart, show a comparison of the projected total expenses per month from April
through September 2014. (Do not show itemized expenses.) Title this Comparison of Monthly
Expenses. Again, show the names of the months on the X axis.

=====================================================================
======

Projected Income from April through September 2014:

You will receive the following:


$50,000/year for foundations, which will be evenly distributed as monthly income throughout
the year
$600/month from individual donations
$300/month from additional donations that will start June, 2014
$6,000 from a 6-month grant will be received in July, 2014. The money will be counted as
income in full in August.
A 25% increase from last year's banks sponsorship. (Last year, the sponsorship
amount was $10,000.) The funds were donated in June but will be recorded in full in the month
of July.
25% increase of the amount of funds raised from last year fundraising event. (Last year,
$35,000 was raised.) Even though the fundraising event will be held in August, the funds will be
recorded in full in the month of September.
Money from your partners inheritance. The money is currently invested in a
mutual fund which is gaining interest every year. When it reaches a total amount of $15,000
(predicted for July, 2014), you plan to invest the total amount in your business account at that
time.

Projected Expenses from April through September 2014:


On a monthly basis, you plan to continue to spend the following:
$800 for renting office space
5% of monthly income for office supplies for all months except July, August and September
$250 for training and development
$400 for insurance
$125 for student meals
In July, you plan to hire a consultant to help the Board develop leadership skills; the cost will
be $3000. This cost will be evenly distributed every month from July through September.
In April and May, you plan to hold a retreat for Board development and spend $500 to rent a
facility for each event.

In August, you plan to spend $8,000 to hold a fundraising event.


In June, you plan to decrease the Board's training and development expenditures by 25% as
the need for ongoing formal training will decrease. This June expense will then apply and be the
same amount through September.
In June, you plan to increase the expenses for student meals by 6% as it is predicted that
there will be an increase in the cost of food. This June expense will then apply and be the same
amount through September.
In September, you plan to spend $450 to conduct a Volunteer Recognition event.
======================================================
PLEASE HELP ME!
PLEASE SHOW THE FORMULA AND YOUR WORK! THANKS IN ADVANCE!
29)
cicleta manufacturing has four activities: receiving materials, assembly, expediting products, and
storing goods. receiving and assembly are necessary activities; expediting and storing goods are
unnecessary. the following data pertain to the four activities for the year ending 2012 (actual
price per unit of the activity driver is assumed to be equal to the standard price):

activity/ activity driver/ SQ/ AQ/ SP


receiving/ receiving orders/ 12000/ 18000/ $21
assembly/ labor hours/ 75000/ 90000/ 15
expediting/ orders expedited/ 0/ 6000/ 50
storing/ number of units/ 0/ 12000/ 7

1. prepare a cost report for the year ending 2012 that shows value-added costs, non-value-added
costs, and total costs for each activity.
2. explain why expediting products and storing goods are non-value added activities/
3. what if receiving cost is a step-fixed cost with each step being 1,500 orders whereas assembly
cost is a variable cost? what is the implication for reducing the cost of waste for each activity?
30)
I have a homework for accounting 1 in connect.mcgraw-hill.com for one chapter due tonight at
12 p.m.
Please who can do it for me ?

31)
Uxmaiz Corporation had only one job in process during MayJob X32Zand
had no finished goods inventory on May 1. Job X32Z was started in April and
finished during May. Data concerning that job appear below: Job X32Z Beginning
balance $ 5,000 Charged to the job during May Direct materials $ 8,000 Direct labor
$ 2,000 Manufacturing overhead applied $ 4,000 Units completed 100 Units in
process at the end of May 0 Units sold during May 40 In May, overhead was
overapplied by $300. The company adjusts its cost of goods sold every month for
the amount of the overhead that was underapplied or overapplied. Required: 1.
Using the direct method, what is the cost of goods sold for May? 2. What is the total
value of the finished goods inventory at the end of May?

32)

Uxmaiz Corporation had only one job in process during May-Job X32z- and
had no finished goods inventory on May 1. Job X32Z was started in April and
finished during May. Data concerning that job appear below:

In May, overhead was over applied by $300. The company adjusts its cost of
goods sold every month for the amount of the overhead that was under
applied or over applied.
1. Using the direct method, what is the cost of goods sold for May?
2. What is the total value of the finished goods inventory at the end of
May?
3. What is the total value of the work in process inventory at the end of
May?

33)
I would appreciate help :) A testing lab owns a hydraulic load frame, which was
purchased for $35,000 early in the labs fiscal year 4 years ago. The internal
bookkeeping uses a sum of the years digits depreciation method assuming a
life of 12 years and zero salvage value. For tax purposes, it is being
depreciated with a 25% Capital Cost Allowance. The labs MARR is 10%. The
fiscal year is the same as the calendar year.
The existing frame has no value on the second hand market. The operating
and maintenance costs for this frame have remained constant, and will
remain constant, at $6500.00 per year.
There is a new load frame on the market, which sells for $40,000.00, and its
operating and maintenance costs are estimated to be $3,000 in the first
year, increasing by 15% per year.
This new frame does have a second hand value estimated to decline 50%
from the original purchase price in the first year, a further 30% in the second
year and subsequently level off at $12000.00 for the foreseeable future.
1. (a) What was the internal depreciation charge that was made last
year?
2. (b) What will the Undepreciated Capital Cost of the load frame be at
the end of this fiscal year?
3. (c) If the frame is in fact sold for $5,000 this year what final entry
must be made on this years tax filing?

4. (d) What is the economic life of the new machine? Show all
calculations or include a copy of your excel
spreadsheet.
5. (e) Should the existing frame be replaced with the new model (now)?
Justify your answer.

34)
No full excel
35)
The stockholders equity accounts of Miley Corporation on January 1, 2014, were as follows.
Preferred Stock (7%, $100 par noncumulative, 5,000 shares authorized) = $300,000
Common Stock ($4 stated value, 300,000 shares authorized)=1,000,000
Paid-in Capital in Excess of Par ValuePreferred Stock)=15,000
Paid-in Capital in Excess of Stated ValueCommon Stock=480,000
Retained Earnings=688,000
Treasury Stock(5,000 common shares)=40,000
During 2014, the corporation had the following transactions and events pertaining to its
stockholders equity.
Feb. 1 Issued 5,000 shares of common stock for $30,000.
Mar. 20Purchased 1,000 additional shares of common treasury stock at $7 per share.
Oct. 1 Declared a 7% cash dividend on preferred stock, payable November 1.
Nov. 1 Paid the dividend declared on October 1.
Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on
December 15, payable December 31, 2014.

Dec. 31 Determined that net income for the year was $280,000. Paid the dividend declared on
December 1.
Feb 1
Cash 30,000
Common Stock 25,000
Paid-in Capital in Excess of States Value-Common Stock 5,000
Match 20
Treasury Stock 7,000
Cash 7,000
Oct 1
Cash Dividends
Dividends Payable
Nov 1
Dividends Payable
Cash
Dec 1
Cash Dividends
Dividends Payable
Dec 31
Income Summary
Retained Earnings
Dec 31
Retained Earnings
Cash Dividends
Dec 31
Dividends Payable
Cash

Payout ratio

$
Earnings per share

Return on common stockholders


equity

36)
I just do not know which form those numbers should go in. I would canculate the results myself.
Thanks
John and Ellen Brite are married and file a joint return. They have no dependents. John owns an
unincorporated specialty electrical lightning retail store, Brite-On. Brite-On had the following assets
on January 1, 2012:
Old store building purchased april 1, 1999: $100,000
Equipment (7-year recovery)purchased January 10,2007: $30,000
Inventory valued using FIFO method: 4,000 light bulbs: $5/bulb
Brite-On purchased a competitor's store on March 1, 2012 for $107,000. The purchase price include
the following:
New store building: $60,000(FMV)
Land: $18,000(FMV)

Equipment:(5-year recovery): $11,000(FMV)


Inventory: 3,000 lights bulbs: $6/bulb(cost)
On Junes 30,2012, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased
a $30,500 car for $500/month beginning on January 1,2012. The car is used 100% for business and
was driven 14,000 miles during the year.
Brite-On sold 8,000 light bulbs at a price of $15/bulb during the year. Also, Brite-On made additional
purchases of 4,000 light bulbs in August 2011 at a cost of $7/bulb. Brite-On had the following
revenues(in addition to the sales of light bulbs) an additional expenses:
Service revenue: $64,000
Interest expense on business loans: $4,000
Auto expenses (gas, oil, etc): $3,800
Taxes and licenses: $3,300
Utilities: $2,800
Salaries: $24,000
John and Ellen also had some personal expenses:
Medical bills: $4,500
Real property taxes: $3,800
State income taxes: $4,000
Home mortgage interest: $5,000
Charitable contributions (cash): $600
The Brites received interest income on a bank savings account of $275. John and Ellen made four
$5,000 quarterly estimated tax payments. For self-employment tax purposes, assume John spent
100% of his time at the store while Ellen spends no time at the store.
Additional facts:
-Equipment acquired in 2007: the Brites elected out of bonus depreciation and did not elect Sec. 179
-Equipment acquired in 2012: the Brites elected Sec. 179 to expense the cost of the 5-year
equipment but elected out of bonus depreciation
-Lease inclusion rules require that Brite-On reduces its deductible lease expense by $8
Complete their 2012 Form 1040, Schedules A, C, and SE, form 4562

37)
Green Bay Konkers Corporation prepares quarterly financial statements. The balance sheet at 12/31/13 is

presented below.

Balance Sheet

12/31/2013

Cash

$ 26,500

Accounts payable

Accounts receivable

22,300

Common stock

Allowance for doubtful


accounts

(2,000)

Retained earnings

Equipment

35,000

Accumulated depreciation equipment

(25,000)

Land

40,000

$ 36,200

130,000

50,600

Building

Accumulated depreciation building

160,000

(40,000)

$ 216,800

$216,800

During the first quarter of 2014, the following transactions occurred:

1. Green Bay Konkers performed services during the first quarter for $162,000 on account.

2. On 2/1/14, Green Bay Konkers collected fees of $18,000 in advance for $1,500 of services to be
performed each month from 2/1/14 to 1/30/15.

3. On 2/1/14, Green Bay Konkers purchased computer equipment for $15,000 plus sales taxes of $750.
$5,000 cash was paid with the rest on account. Check #455 was used.

4. Green Bay Konkers collected $151,000 on 3/5/14 from customers on account.

5. Green Bay Konkers paid $42,300 on accounts payable. Check #456 was used.

6. Paid other operating expenses of $105,230. Check #457 was used.

7. Acquired a patent with a 10-year life for $12,000 cash on 3/1/14. Check #458 was used.

8. Wrote off a customer receivable of $500 who went bankrupt.

9. On 3/31/14, Green Bay Konkers sold for $2,780 cash equipment which originally cost $16,000. It had
an estimated life of 5 years and salvage of $1,000. Accumulated depreciation as of 12/31/13 was $13,500
using the straight line method. Record depreciation on the equipment sold, then record the sale.

10. AJE 3/31/14: Record revenue earned from item 2 above.

11. AJE 3/31/14: $27,800 of accounts receivable at 3/31/14 are not due yet. The bad debt percentage for
these is 5%. The balance of A/R are past due. The bad debt percentage for these is 48.5%. Record bad debt
expense.

HINT: You will need to compute the balance in accounts receivable and the unadjusted allowance for
doubtful accounts before calculating this.

12. AJE 3/31/14: Depreciation is recorded on the equipment still owned at 3/31/14. The new equipment
purchased in February is being depreciated on a double declining basis over 5 years and salvage value was
estimated at $2,000. The old equipment still owned is being depreciated over a 10 year life using straight
line with no salvage value.
13. AJE 3/31/14: Depreciation is recorded on the building on a straight-line basis based on a 30-year life
and a salvage value of $10,000.

14. AJE 3/31/14: Amortization is recorded on the patent.

15. The company reconciles its bank statement every quarter. Information from the 12/31/13 Bank
Reconciliation is:
Deposit in transit: 12/30/08 $1,000
Outstanding Checks #440 2,345
#452 2,030
#453 890
#454 6,555
The Bank statement received for the quarter ended 3/31/14 is as follows:
Beginning balance per bank $ 37,320
Deposits: 1/2/14 $1,000, 2/2/14 $18,000, 3/6/14 $151,000 170,000
Checks: #452 $2,030, #453 $890, #456 $42,300, #457 $105,230 (150,450)

Debit memo: Bank service charge (Record as operating expense) ( 75)


Ending bank balance $ 56,795

16. AJE: The income tax rate is 30%. This amount will be paid when the tax return is due in April. Hint:
Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.
a. Enter the 12/31/13 balances in ledger accounts. Use the ledger account running balance
format accounts provided on the following pages.
b. Post the journal entries to the ledger accounts for items 1 9.
c. Prepare an unadjusted trial balance at March 31 and enter on the worksheet. Then
complete the other worksheet columns. (See below.)
Worksheet requirement: Using your unadjusted trial balance above and the data for adjusting
entries, prepare a 10 column worksheet similar to the one in the chapter 4 appendix of your text.

d. Prepare a bank reconciliation in good form. (Item 15 above.) Use your own paper. Record
the necessary AJE.
e. Journalize and post all other adjusting entries. (Items 10 - 16)
f. Prepare an income statement and a retained earnings statement for the quarter ended
3/31/14 and a classified balance sheet at 3/31/14. Use your own paper. (No formatted
sheets are supplied as we did for the other items.)

38)

You are about to purchase your first home for personal use. The price of the house is $400K.
The property taxes and casualty insurance are estimated at $200 and $100 per month
respectively; these two costs are placed each month into your escrow. You are estimating

$3,500 in closing fees and expect to get a 15 year fixed rate mortgage for a fixed 4.9% APR
with 2 points. Assume taxes and insurance remain constant for the duration of the loan. Your
PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%.
The appraised value of the house is expected to rise at 2% each year (at the end of each year).
You are in a 30% marginal tax bracket. All tax credits in a given year will be received at the
end of the year. You have two options:
1) You put down $40,000 on the home (plus any points and closing fees) and take out a
360K mortgage.
2)
2) You put down $40,000 on the home (plus any points and closing fees), borrow another
$40,000 from your uncle Vini and pay this back at 10% annual effective interest rate with 4
payments on 02/30/2015, 02/30/2016, 02/30/2017, 02/30/2018 (the interest portion of 40K
loan from uncle Vini is non-tax-deductible). You get a 320K mortgage.
You take out the mortgage and buy the house on March 1 20014. The first payment of the
mortgage is due at the beginning of April 2014. You will sell the property on April 1st 2029
(15 years later) at its appraised value. Your MARR is 10% per year compounded monthly.
What is the present cost of these transactions at March 1st 2014 under each option (attach your
spreadsheet):
Option 1________________
Option 2________________

Should you borrow from your uncle?____________

39)
In comparing U.S. GAAP and international financial reporting standards (IFRS) with regard to a
basis for measurement of a non-controlling interest, which of the following is true?
acquiree's

1) U.S. GAAP requires acquisition-date fair value measurement and IFRS requires the
identifiable net asset fair value measurement.
2) U.S. GAAP and IFRS both require acquisition-date fair value measurement.

3) U.S. GAAP and IFRS both require the acquiree's identifiable net asset fair value
measurement.
4)U.S. GAAP requires acquisition-date fair value measurement, but IFRS allows an
option for acquisition-date fair value measurement.
5)U.S. GAAP and IFRS both apportion goodwill to the parent only.
Pot Co. holds 90% of the common stock of Skillet Co. During 2011, Pot reported sales of
$1,120,000 and cost of goods sold of $840,000. For this same period, Skillet had sales of
$420,000 and cost of goods sold of $252,000. Included in the amounts for Pot's sales were Pot's
sales of merchandise to skillet for $140,000. There were no sales from Skillet to Pot. Intra-entity
sales had the same markup as sales to outsiders. Skillet had resold all of the intra-entity
purchases form Pot to outside parties during 2011. What are consolidated sales and cost of goods
sold for 2011?
1) $1,400,000 and $952,000.
2) $1,400,000 and $1,092,000.
3) $1,540,000 and $952,000.
4) $1,400,000 and $1,232,000.
5) $1,540,000 and $1,092,000.
Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a
25% profit on selling price. The following data are available pertaining to intra-entity purchases.
Gargiulo was acquired on January 1, 2010.

Assume the equity method is used. The following data are available pertaining to Gargiulo's
income and dividends.

For consolidation purposes, what amount would be debited to January 1 retained earnings for the
2012 consolidation worksheet entry with regard to the unrealized gross profit of the 2011 intraentity transfer of merchandise?

$3,000.

$2,400.

$1,000.

$800.

$900.

On January 1, 2010, Smeder Company, an 80% owned subsidiary of Collins, Inc., transferred
equipment with a 10-year life (six of which remain with no salvage value) to Collins in exchange

for $84,000 cash. At the date of transfer, Smeder's records carried the equipment at a cost of
$120,000 less accumulated depreciation of $48,000. Straight-line depreciation is used. Smeder
reported net income of $28,000 and $32,000 for 2010 and 2011, respectively. All net income
effects of the intra-entity transfer are attributed to the seller for consolidation purposes.
Compute Collins' share of Smeder's net income for 2010.

$12,400.

$14,400.

$11,200.

$12,800.

$18,000.

Stark Company, a 90% owned subsidiary of Parker, Inc., sold land to Parker on May 1, 2010, for
$80,000. The land originally cost Stark $85,000. Stark reported net income of $200,000,
$180,000, and $220,000 for 2010, 2011, and 2012, respectively. Parker sold the land purchased
from Stark in 2010 for $92,000 in 2012.
Which of the following will be included in a consolidation entry for 2011?

Debit retained earnings for $5,000.

Credit retained earnings for $5,000.

Debit investment in subsidiary for $5,000.

Credit investment in subsidiary for $5,000.

Credit land for $5,000.

Which of the following statements is false regarding government-wide financial statements?

Government-wide financial statements report a government's activities and financial


position as a whole.

The government-wide financial statement approach helps users make long-term


evaluations of the financial decisions and stability of the government.

Government-wide financial statements focus on the short-term instead of the longterm.

Government-wide financial statements assess the finances of the government in its

entirety, including the year's operating results.

The measurement focus of government-wide financial statements is on all economic


resources and utilizes accrual accounting.

GASB Codification Section N50.104 divides all eligibility requirements into four general
classifications including all of the following except:

Required characteristics of the recipients.

Time requirements.

Reimbursement.

Contingencies.

Refunding.

GASB Codification Section 2200.106-107 makes which of the following statements regarding
Management's Discussion and Analysis?

MD&A is required only for Proprietary Fund Financial Statements.

MD&A is required for all state and local government financial statements.

MD&A is only required for comprehensive annual financial reports.

MD&A for state and local government financial statements must include an analysis of
potential, untapped revenue sources.

MD&A is an optional inclusion for state and local government financial statements.

Wachovia for equipment with a seven-year life. The asset will be returned to the lessor at the end
of the lease. The present value of the lease is $20,000, and annual payments of $5,411.41 are
payable beginning on the date the lease is signed. The interest portion of the second payment is
$1,604.75. The equipment is to be used in City Hall and was purchased from appropriated funds
of the General Fund.
What entry should be made for the government-wide financial statements one year from the date
the lease is signed?

Option A

Option B

Option C

Option D

Option E

40)

Image text transcribed for accessibility Please use financial data from Google Finance to
complete the project associated with the companies listed above. Executive Summary. In two to
three pages double space, summarize the merits of your company its compared to its competitor.
Include the following: Each company's industry and age. The primary business activity of the
companies. The strengths and weaknesses of each company. Overall perception (finanical
strength, leadership, goodwill and ethical standings) of each firm. Other unique aspects of the
company. Which company is better and why? Ratio Analysis. Present the following for your
company using four most recent annual finanical statements. Compare and contrast each
company for the ratio types (using a table format). Discuss the meaning of each ratio and identify
which company is performing better. Short-term solvency, or otherwise called Liquidity Ratios:
Current Ratio Quick Ratio Cash Ratio Long-term solvency, or otherwise called finanical
leverage, ratios: Total Debt Ratio Debt-Equity Ratio times interest earned ratio Asset utilization,
or otherwise called turnover ratios: Invertory Ratio Receivable Ratio Profitability ratios: Profit
Margin Return on Assets CEO Performance: List the CEO's pay. Based on the financial analysis
that you performed for each company, is the CEO's pay appropriate? Discuss methods you would

use to improve each CEO's performance. Indicate any concerns that attribute the company's
performance to the CEO.
41)

Hull Companys record of transactions concerning part X for the month of April was as
follows.

Image text transcribed for accessibility Hull Company's record of transactions concerning part X
for the month of April was as follows. Calculate average-cost per unit. (Round answer to 4
decimal places, e. g. 2. 7621. ) Average-cost per unit $
42)
1.Jerry Rees invested $8,000 at 5% annual interest, and left the money invested without
withdrawing any of the interest for 12 years. At the end of the 12 years, Jerry withdrew the
accumulated amount of money.
(a) What amount did Jerry withdraw, assuming the investment earns simple interest?
(b) What amount did Jerry withdraw, assuming the investment earns interest compounded
annually?

2. Ekman Company issued $1,000,000, 10-year bonds and agreed to make annual sinking fund
deposits of $78,000. The deposits are made at the end of each year into an account paying 5%
annual interest.
What amount will be in the sinking fund at the end of 10 years?

3.Orear Company earns 10% on an investment that will return $480,000, 8 years from now. What
is the amount Orear should invest now to earn this rate of return?

4. Dayton Company is considering investing in an annuity contract that will return $45,000
annually at the end of each year for 15 years.What amount should Dayton Company pay for this
investment if it earns a 5% return?

5. Kirby Railroad Co. is about to issue $300,000 of 10-year bonds paying a 9% interest rate, with
interest payable semiannually. The discount rate for such securities is 8%.How much can Kirby
expect to receive for the sale of these bonds?

6. Jimenez Enterprises issued 9%, 8-year, $2,600,000 par value bonds that pay interest
semiannually on October 1 and April 1. The bonds are dated April 1, 2014, and are issued on that
date. The discount rate of interest for such bonds on April 1, 2014, is 10%.What cash proceeds
did Jimenez receive from issuance of the bonds?

7. Blake Mohr has been offered the opportunity of investing $25,490 now. The investment will
earn 10% per year and at the end of that time will return Blake $80,000.How many years must
Blake wait to receive $80,000?
43)
ABC S-Corporation had $200,000 of ordinary income in 2013 (after all depreciation but before
any IRC Section 179 election)

Abe an 80% owner contributes White Machine in an IRC Section 351 transaction on
1/10/13 the machine had a FMV $8,000 and basis to him of $3,000
Bob a 10% owner contributes Blue Machine in the same IRC section 351 transaction
on 1/10/13 the machine had a FMV of $1,000 and basis to him of $5,000
Abe sells Red Machine to ABC S-Corp for $1000 on 11/5/13 his adjusted basis is
$100 at the time of the sale
Carl a 10% owner sells Green Land to ABC S-Corp for $100,000 on 6/1/13 his
adjusted basis in the land is $25,000 at the time of the sale
ABC S-Corp buys Grey machine for $300,000 from a third party on
7/1/13
ABC S-Corp buys Orange Machine for $90,000 from a third party on
12/31/13
ABC S-Corp buys Yellow machine for $90,000 from a third party on
11/5/13
Assume all of the above assets are placed in service on the date of acquisition except
for Orange Machine which is placed in service on 1/5/14
Assume Abe and Bob work in the S-Corp business and have salaries of $10,000
each. Carl does not work in the S-Cor. Carl has sole proprietorship with income
of
$15,000 and no property placed in service under IRC Section 179
Type a tax memorandum and determine the amount and treatment of the IRC
Section 179 deduction for the S-Corp and all shareholders.

44)
Nautical Creations is one of the largest producers of miniature ships in a bottle. An especially
complex part of one of the ships needs special production equipment that is not useful for other
products. The company purchased this equipment early in 2008 for $200,000. It is now early in
2013, and the manager of the Model Ships Division, Jeri Finley, is contemplating three
alternatives.
Alternative 1 - Continue to produce the complex part using the current equipment. The following
are last year's average per-unit manufacturing costs, when production was 8,400 ships:

Direct materials

$3.95

Direct labor

3.70

Variable overhead

1.60

Fixed overhead

4.45

Total unit cost

$13.70

The equipment will last for five more years with zero disposal value at that time. It can be sold
immediately for $35,000. Alternative 2 - Purchase the complex part from an outside supplier. An
outside supplier has offered to supply the complex part for $12.25 per part as a once-only offer,
and Nautical Creations would have to guarantee to purchase at least 7,000 parts in each of the
next five years. Finley predicts that 45% of the fixed overhead will be saved if production of the
part is eliminated. Alternative 3 - Continue to produce the complex part with new, more efficient
equipment. The cost of the new equipment is $225,000 and will have a five-year useful life with
an estimated disposal value at that time of $30,000. The sales representative selling the new
equipment stated, "The new equipment will allow direct labor and variable overhead to be
reduced by $2.05 per unit." Finley thinks this estimate is accurate, but also knows that a higher
quality of direct material will be necessary with the new equipment, costing $0.15 more per
unit. Fixed overhead costs will not change. Finley expects production to continue at 8,400 ships
in each of the next five years. Assume a discount rate of 5%.

THE PRESENT VALUE TABLES


Period 5%
6%
7%
8%
1
0.952 0.943 0,935 0.926
2
0.907 0.890 0.873 0.857
3
0.864 0.840 0.816 0.794
4
0.823 0.792 0.763 0.735
5
0.784 0.747 0.713 0.681

9%
0.917
0.842
0.772
0.708
0.650

10%
0.909
0.826
0.751
0.683
0.621

11%
0.901
0.812
0.731
0.659
0.593

Questions:
1. What is the net present value if Nautical Creations keeps their current tools and produces the
part themselves?
2. What is the net present value if Nautical Creations buys the part from the supplier?
3. What is the net present value if Nautical Creations buys the new tools and produces the part
themselves?

45)
The following information relates to the Town of Johnsonville for the fiscal years ending 9/30/14
and 9/30/15.
Following is selected information from the Statement of Net Position prepared for the Towns
Water and Sewer Utility Fund for the year ended 9/30/14.
? Cash and investments $ 1,800,000
? Restricted cash and investments 1,700,000
? Accounts receivable customers 450,000
? Unbilled water and sewer revenues 400,000
? Accrued interest receivable 50,000
? Property, plant and equipment
o Land 500,000
o Buildings 1,500,000
o Water Plant 5,000,000
o Sewer Plant 8,000,000
o Water Lines 15,000,000
o Sewer Lines 20,000,000
o Machinery and equipment 700,000
o Construction in progress sewer plant upgrade 500,000
? Accumulated depreciation 15,000,000
? Accounts payable 100,000
? Liabilities payable from restricted assets customer deposits 200,000
? Accrued interest payable 400,000

? Accrued salaries and benefits 105,000


? Bonds payable current portion 600,000
? Bonds payable long-term portion 20,000,000
? Net position
o Net investment in capital assets 17,100,000
o Restricted
? Unspent bond proceeds sewer plant upgrade 1,500,000
o Unrestricted 595,000
The following transactions occurred in the Towns Water and Sewer Utility Fund during the
fiscal year ending 9/30/15.
1. Water and sewer revenues billed to customers throughout the year $ 6,000,000
2. Salaries and benefits paid throughout the year - operations $ 1,800,000
3. Salaries and benefits paid throughout the year general/administrative $ 400,000
4. Operating expenses paid throughout the year $ 600,000
5. General/administrative expenses paid throughout the year $ 150,000
6. Investment income received during the year unrestricted investments $ 50,000
7. Investment income received during the year invested customer deposits $ 10,000
8. Recorded estimated depreciation based on actual from prior year $ 1,600,000
9. Completed the sewer treatment plant upgrades in progress 9/30/14 $ 1,500,000
10. Paid interest on bonds $ 1,200,000
11. Paid principal on bonds $ 600,000
12. Information about water and sewer billings for October and

November 2015
a. Amounts billed
i. 10/1/15 for water and sewer service 8/11/15 - 9/10/15 $ 155,200
ii. 10/15/15 for water and sewer service 8/25/15 - 9/24/15 140,500
iii. 11/1/15 for water and sewer service 9/11/15 - 10/13/15 176,550
iv. 11/15/15 for water and sewer service 9/25/15 10/27/15 143,000
13. Additional information at 9/30/15:
a. Interest earned but not received on unrestricted
fixed income investments $ 15,000
b. Interest incurred but not paid on bonds payable 200,000
c. Accrued salaries and benefits incurred but unpaid at 9/30/15 60,000
d. Unrealized gains due to increase in fair value of
i. Unrestricted investments 25,000
ii. Restricted investments 35,000
e. Actual depreciation expense 1,700,000
14. Additional background information
a. During the current year, $5,800,000 was collected from customers for amounts billed.
b. There was no net change in the number of utility customers from 9/30/14 to 9/30/15.
c. All bonds were issued to construct or acquire property, plant, or equipment for the Water and
Sewer Utility Fund.
d. The Town issued $2,000,000 in bonds in June 2014 to provide funds for sewer system
upgrades estimated to cost $2,000,000.

e. All investments consist of U.S. Treasury bonds, municipal bonds, and stocks actively traded on
U.S. exchanges.
f. No assets were retired, traded, or sold during the year ended 9/30/15.
g. The Town is not required to, and therefore does not, allocate/pay interest earned on invested
customer deposits to customers.
h. For purposes of this assignment, ignore the effects of capitalized interest.
i. Water and sewer services are consumed equally throughout a month.
The following information relates to the Towns governmental funds.
1. Total fund balance for all governmental funds at 9/30/15 $ 100,000
2. The following transactions occurred during the year related to governmental funds and
government-type activities
a. General obligation bonds of $5,000,000 were issued on 11/1/14 at 105 the proceeds of which
were used to purchase park land on 12/15/14.
b. An additional $250,000 of general capital assets was purchased during the year.
c. Accounts payable at 9/30/14 amounted to $50,000 and at 9/30/15 amounted to $75,000.
d. Amounts paid on outstanding general obligation bonds were $500,000 for principal and
$400,000 for interest.
e. Depreciation expense for general capital assets for the year ending 9/30/15 is $3,000,000.
f. At 9/30/15, $90,000 of property taxes receivable was expected to be collected in the spring of
2016.

Question 1:
What is the amount of unrestricted Cash and Investments at 9/30/15?

Question 2:
What is the amount restricted Cash and Investments at 9/30/15?

Question 3:
What is the amount of Accounts Receivable - Customers at 9/30/15?
46)
Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the
two products follow:

Rims
Posts

Direct
LaborHours
per
Annual
Unit
Production
0.80 14,000 units
0.40 53,000 units

Additional information about the company follows:


a.Rims require $24 in direct materials per unit, and Posts require $16.
b.The direct labor wage rate is $13 per hour.
c. Rims are more complex to manufacture than Posts, and they require special equipment.
d.The ABC system has the following activity cost pools:

Activity Cost Pool (and activity measure)


Machine setups (number of setups)
Special processing (machine-hours)
General factory (direct labor-hours)

$
$
$

Estimated
Overhead Cost
23,085
294,000
324,000

Activity
Rims
Posts
Total
95
76
171
4,900
0
4,900
11,200 21,200 32,400

Required:
1. Compute the activity rate for each activity cost pool. (Omit the "$" sign in your response.)
Activity Cost Pool
Machine setups
Special processing
General factory

Activity Rate
$
$
$

per setup
per MH
per DLH

2. Determine the unit cost of each product according to the ABC system. (Do not round intermediate
calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Direct materials

Rims
$

Posts
$

Direct labor
Overhead

Unit cost

47)
The following excerpt is from an article reported in the April 27, 2011, online issue of Reuters.
DuPont Co ( DD.N ) said its board of directors has authorized a $2 billion stock repurchase plan
to offset dilution from executive compensation.

The par amount per share for DuPonts common stock is $.30. Paid-in capitalexcess of par is
$9.19 per share on average. The market price was $55 on April 9, 2011.
Required:
1
. Suppose DuPont reacquires 36 million shares through repurchase on the open market at $55
per share. Prepare the appropriate journal entry to record the purchase. DuPont considers the
shares it buys back to be treasury stock. (If no entry is required for a particular event,
select "No journal entry required" in the first account field. Enter your answers in
millions (i.e., 10,000,000 should be entered as 10).)
2.
Suppose DuPont considers the shares it buys back to be retired rather than treated as treasury
stock. Prepare the appropriate journal entry to record the purchase. (If no entry is required
for a particular event, select "No journal entry required" in the first account field.
Enter your answers in millions and rounded to 2 decimal places (i.e., 5,500,000 should

be entered as 5.50).)

48)
Nanovo, Inc., is a manufacturer of low-cost micro batteries for use in a wide variety of compact
electronic devices such as childrens toys, wireless transmitters, and sensors. The growth in the
use of these devices has steadily increased, leading to an ever greater demand for Nanovos
products. Nanovo has responded to this increase in demand by expanding its production capacity,
more than doubling the firms size over the last decade. Despite this growth, however, Nanovo
does not have sufficient capacity to meet the current demand for its ultra-long-life, low-voltage
batteries. You have been asked to evaluate two proposals to expand one of Nanovos existing
plants, and make a recommendation.
Proposal 1 The Current Plant has a capacity of 25,000 cases per month. The first proposal is for a
major expansion that would double the plant's current capacity to 50,000 cases per month. After
talking with the firm's design engineers, sales managers, and plant operators, you have prepared
the following estimates: 1. Expanding the plant will require the purchase of 3.6 million in new
equipment, and entail upfront design and engineering expenses of 3.9 million. These costs will
be paid immediately when the expansion begins. 2. Installing the new equipment and redesigning
the plant to accomodate the higher capacity will require shutting down the plant for nine months.
During that time, the plant's production will cease. After the expansion is finished, the plant will
operate at double it's original capacity. 3. Marketing and selling the additional volume will lead
to 1 million per year in additional sales, marketing, and administrative costs. These costs will
begin in the first year while the plant is shut down.
Proposal 2 The engineers have also put forth a second proposal for a minor expansion that will
increase the firm's capacity by only 50% to 37,500 cases per month. While the capacity is
smaller, such an expansion would be cheaper and less disruptive:
1. The smaller expansion will only require 2.4 million in new equipment, and 1.5 million in
design and engineering expenses.
2. The existing plant will only need to be shut down for four months.
3. Sales, maketing and administrative costs will only increase by $500,000.
Nanovo believes that with or without any expansion, the technology used at the plant will be
obsolete after six years and will have no salvage value, and the plant itself will need to be
completely overhauled at that time. You also have the following additional general information:
With or without eithe proposed expansion, Nanova will be able to sell all it can produce at an
average wholesale price of $80 per case. The price is not expected to change during the next six

years.
Nanovo has a gross profit margin of 55% on these batteries, Nanovo's average net working
capital at the end of each year will be equal 15% of it's annual revenue. Nanovo pays a 40%
corporate tax rate. Whole all design and engineering costs are immediately deductible as
operating expenses, all capital expenditures will be straight-line depreciated for tax purposes
over the subsequent six years.
Management believes the risk of the expansion is similar to the risk of Nanovo's existing
projects, and because Nanovo is all equity financed, the risk of the expansion is also similar to
the risk of Nanovo's stock. You have the following additional information about the stock:
Nanovo has no debt and has 2 million shares outstanding. The firm's current share price is 75$
per share. Analysts are expecting Nanovo to pay a $3 divident at the end of this year, and to raise
it's divident at an average rate of 8% per year in the future.
Determine the annual incremental free cash flow associated with each expansion plan relative to
the status quo (no expansion). 2. Compute the IRR and payback period of each expansion plan.
Which plan has a higher IRR? Which has a shorter payback period? 3. Estimate Nanovos equity
cost of capital. Use it to determine the NPV associated with each expansion plan. Which plan has
a higher NPV? 4. Should Nanovo expand the plant? If so, which plan should Nanovo adopt?
Explain 5. Suppose Nanovo decides to do the major expansion. If investors are not expecting this
expansion, and if they agree with the forecasts above, how will the stock price change when the
expansion is announced? 6. Suppose Nanovo announces the major expansion and the stock price
reacts as in Question 5. Nanovo then issues new shares at this price to cover the upfront free cash
flow required to launch the expansion, and thereafter pays out as dividends the total amount it
expected to pay prior to the expansion, plus the additional free cash flow associated with the
expansion. What dividend per share will Nanovo pay over the next eight years? What is the fair
price today for Nanovos stock given these dividends?

49)
Components of Ending Work-in Process
The Oxford Company uses a job order cost system and applies factory overhead to jobs on the
basis of direct Job labor cost. During the month of July, the following activities took place in the
work-in-process account:

Work-in-process

Beginning

$15,000

Direct materials

10,000
To finished goods

Direct labor

30,000

Overhead applied

15,000

$50,000

At the end of July, only one job (Job #15), was still in process. This job has been charged with
$2,000 of direct materials cost.
Required: Determine the amount of direct labor cost incurred and overhead applied in the ending
inventory of work-in-process on July 31.

5-28
Computation of Work-in-Process Inventory
On June 30, 20X8, a flash flood damaged the warehouse and factory of Padway Corporation,
completely destroying the work-in-process inventory. There was no damage to either the raw
materials or finished goods inventories. A physical inventory taken after the flood revealed the
following valuations:
Raw materials
Work-in-process
Finished goods

$62,000
0
119,000

The inventory on January 1, 20X8, consisted of the following

Raw materials
Work-in-process
Finished goods

$30,000
100,000
140,000
$270,000

A review of the books and records disclosed that the gross profit margin historically
approximately 25% of sales. The sales for the first six months of 20X8 were $340,000. Raw
material purchases were $115,000. Direct labor costs for this period were $80,000 and
manufacturing overhead has historically been applied at 50% of direct labor.

Required: Compute the value of the work-in-process inventory lost at June 30, 20X8. Show
supporting computation in good form.

50)
The Oxford Company uses a job order cost system and applies factory overhead to jobs on the
basis of direct Job labor cost. During the month of July, the following activities took place in the
work-in-process account:

Work-in-process

Beginning

$15,000

Direct materials

10,000

Direct labor

30,000

To finished goods

$50,000

Overhead applied

15,000

At the end of July, only one job (Job #15), was still in process. This job has been charged with
$2,000 of direct materials cost.
Required: Determine the amount of direct labor cost incurred and overhead applied in the
ending inventory of work-in-process on July 31.
Note: Please describe/explain in details with easy to follow steps and calculations.

51)
We Love Coffe Inc

Comparative Balance Sheet

December 31, 2013 and 2012

Assets

2013

2012

Cash

$ 366,520

$ 90,000

Accounts Receivable, Net

$ 160,000

$ 170,000

Inventory

$ 130,000

$ 70,000

Prepaid Rent

$ 70,000

$ 50,000

Current Assets:

Total Current Assets

$ 726,520

$ 380,000

Equipment

$ 240,000

$ 260,000

Less: Accumulated Depreciation - Equipment

$ (60,000)

$ (40,000)

Total Property, Plant, and Equipment

$ 180,000

$ 220,000

Total Assets

$ 906,520

$ 600,000

Accounts Payable

$ 90,000

$ 55,000

Dividends Payable

$-

$-

Unearned Revenue

$ 20,000

$ 80,000

Salaries Payable

$ 70,000

$ 50,000

Federal Income Taxes Payable

$ 30,000

$ 15,000

Total Current Liabilities

$ 210,000

$ 200,000

Property, Plant, and Equipment:

Liabilities and Stockholders Equity

Current Liabilities:

Long Term Liabilities

Mortgage Payable

$ 20,000

$ 100,000

Note Payable

$ 60,000

$-

Total Long Term Liabilities

$ 80,000

$ 100,000

Total Liabilities

$ 290,000

$ 300,000

Common Stock, $1 Par

$ 150,000

$ 100,000

Paid-In Capital in Excess of Par

$ 15,000

$ 10,000

Retained Earnings

$ 451,520

$ 190,000

Total Stockholders Equity

$ 616,520

$ 300,000

Total Liabilities and Stockholders Equity

$ 906,520

$ 600,000

Stockholders Equity:

1. Prepare a statement of cash flows for the current year using the indirect method.
2. Using horizontal analysis, prepare an income statement
3. Calculate the ratios set out below:
a. current ratio

b. quick ratio
c. accounts receivable turnover
d. incentory turnover
e. number of days sales in inventory
f. ratio of liabilities to stockholders equity
g. rate earned on total assets
h. rate earned on stockholders' equity
i earnings per share (assume shares sold on April 30,2013)

5. Identify two strengths and two weaknesses in the company. Make two recommendations to
improve the company's financial position.

Please show work!

52)
A firm makes six types of juice-blends. They are A) Orange-Pineapple, B) Orange-PineappleMango, C) Orange-Kiwi-Strawberry, D) Orange-Pineapple-Strawberry-Mango, and H) Pure
Orange. The following table lists all the relevant data.

The ingredient availability is: Orange-Juice = 28,000 gallons, Pineapple Juice = 140,000 gallons,
Strawberry Juice = 130,000 gallons, Kiwi Juice = 100,000 gallons and Mango Juice = 80,000
gallons.
The sale price of the blends A through E are listed in the table above. Costs of the juices used the
production of the blends are: Orange $1.20/gal, Kiwi $2.20/gal, Pineapple $1.30/gal, Strawberry
= 1.70/gal and Mango is $2.80/gal. Note that you do not have any inventory of the juices and
everything musts be bought.

Other restrictions:
1)Blend A has to be at least 10% of the total production
2)Blend B and C together cannot be more than 20% of the other four blends.
3)Blend F must account for at least 50% of the total of all blends.
4)Consumption of Kiwi Juice cannot exceed 30% of OJ consumption.
5)Consumption of Pineapple Juice cannot exceed 40% of OJ consumption.
Set this up as an Linear Program with the decision variable as quantities of the blends to be
produced with the objective of maximizing profit. Use the names of variables as A, B, C, D, E
and F.
Q1)Write down the complete LP in algebraic form
Q2)Solve it and provide the answer. Write the optimal solution in plain English.

Q3)Provide a picture copy of the xl screen to fit in one page showing the optimal solution.

53)
Please create a 5 year trend data from 2007, 2008, 2009, 2010 and 2011

From the September 24, 2011, and September 25, 2010, consolidated balance sheets
and income statements for the years then ended for Apple Inc. follow. All amounts
are reported in millions.
2011 2010
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $108,249 $65,225
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,431 39,541

Research and development expenses . . . . . . . . . . . . . . . . . . . . 2,429 1,782


Selling, general, and administrative expenses . . . . . . . . . . . . . . 7,599 5,517
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? ?
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? 155
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,283 ?
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,922 $14,013

2011 2010

Net sales: $108,249, $65,225


Cost of sales: $64,431, $39,541
Gross profit: $43,818, $25,685
Gross profit/net sales: 40% , 39%

Apples 5-year trend for these data: 2011 2010 2009 2008 2007

Net sales: $108,249, $65,225


Cost of sales: $64,431, $39,541
Gross profit: $43,818, $25,685
Gross profit/net sales: 40% , 39%

54)
Please create a 5 year trend data from 2007, 2008, 2009, 2010 and 2011
Here is all the info needed.
This is the link for the question.
http://www.chegg.com/homework-help/questions-and-answers/p226-understanding-incomestatement-relationships-apple--selected-data-september-24-2011-s-q4457604

Here is the table info


a.
2011

2010

Net sales

$108,249

$65,225

Cost of sales

$64,431

$39,541

Gross profit

$43,818

$25,685

40%

39%

Gross profit/net sales


Apples 5-year trend for these data:
Net sales

2011

2010

2009

$108,249 $65,225

Cost of sales

$64,431

$39,541

Gross profit

$43,818

$25,685

Gross profit/net sales

55)

40%

39%

2008

2007

1. A company starts with accounts receivable of $64,899 and an allowance for


doubtful accounts of $6,969. During the year, they have $706,436 of credit sales,
$160,736 of cash sales and $5,232 of accounts written off. The company
estimates that 3% of credit sales will be uncollectible. What is the AJE required at
year end? (Do NOT enter any commas, dollar signs, etc. Just enter the number
ROUNDED TO THE NEAREST DOLLAR)

2. A company starts with accounts receivable of $59,006 and an allowance for


doubtful accounts of $6,520. During the year, they have $648,489 of credit sales,
$201,335 of cash sales and $7,801 of accounts written off. The company
estimates that $5,197 of accounts receivable will be uncollectible. What is the
ending balance of the allowance account after all AJEs? (Do NOT enter any
commas, dollar signs, etc. Just enter the number)

3. A company starts with accounts receivable of $66,097 and an allowance for


doubtful accounts of $7,125. During the year, they have $629,878 of credit sales,
$178,473 of cash sales and $5,125 of accounts written off. The company
estimates that $6,911 of accounts receivable will be uncollectible. What is the AJE
required at year end? (Do NOT enter any commas, dollar signs, etc. Just enter the
number)

4. A company starts with accounts receivable of $63,598 and an allowance for


doubtful accounts of $6,749. During the year, they have $746,607 of credit sales,
$168,358 of cash sales and $7,634 of accounts written off. The company
estimates that 3% of credit sales will be uncollectible. What is the ending balance
of the allowance account after all AJEs? (Do NOT enter any commas, dollar signs,
etc. Just enter the number ROUNDED TO THE NEAREST DOLLAR)

5. A company started with A/R of $57,980 and an allowance for uncollectible accounts of
$171,024. During the year, they had credit sales of $898,555, cash sales of $3,823 and wrote-off
accounts receivable of $4,174. At year end, the company had A/R of $61,335. What were cash
collections from customers on account?

56)
Hello,

I need help with this assignment. I need this assignment by Friday 10/18/13 by 3PM
Central Time. I know this assignment is long but I need it by tomorrow. I need ALL
Questions to be answered. Let me know if you have any questions.

Thank you so much for your help.

Chapter 6
Time Value of Money: CM2 (Refer to original file 4a, used for Chapter 5 Case)
The CM2 management team is discussing how it can take control of things before they get out
of hand. For example, they realize that most of their current assets are not readily liquid (they
are not quick assets), so they are considering a number of options to pay back their debt, all of it.
They also need to plan towards some capital expenditures.
Part I
1. Assume, for the years 2012 and 2013 projections, that all the reported interest relate to the
reported longterm debt as of the end of those years, and that the interest incurred will be the
amount paid for in the year. Calculate the interest rates (round your calculation to the nearest
percentage point, e.g. 6% for 6.33% and 5.876%), for
a.

2012 and

b.

2013

2.

How much does CM2 need to raise to pay for its total reported liabilities on the

a.

12/312012 balance sheet if it were to pay on 01/01/2013?

b.

12/312013 balance sheet if it were to pay on 01/01/2014 (ignoring 2a)?

Part II
Assuming that on January 1, 2014, CM2 borrows from Chase bank at 10% and uses this to pay
off the reported total liabilities at 12/31/2013 (the amount in 2b above). Answer the questions
under each of the various terms below:
3. Chase requires the borrowed amount along with interests to be repaid all in one lumpsum
after three years.
a.

What time value of money concept is this?

b.

How much would CM2pay Chase for the 12/31/2013 liabilities and at what date?

4. Chase requires the borrowed amount along with interests to be repaid in equal annual
installments over three years beginning on 1/1/2014.
a.

What time value of money concept is this?

b.

How much would CM2 pay Chase each year?

5. Chase requires the borrowed amount along with interests to be repaid in equal annual
installments over three years beginning on 12/31/2014.
a.

What time value of money concept is this?

b.

How much would CM2 pay each year?

6. Chase requires the borrowed amount along with interests to be repaid in equal annual
installments over three years, beginning on 12/31/2017.
a.

What time value of money concept is this?

b.

How much would CM2 pay each year?

7. CM2 wishes to deposit equal annual amounts at the end of each year from 2014 through
2017 to pay back the money as stipulated in 6 above. The deposits would be made into a Chase
sinking fund account that pays interest at 8% up to 12/31/2017.
a.

What time value of money concept is this?

b. How much equal installment would CM2 have to deposit into the Chase Sinking Fund
account each year?

Part III
8. CM2 is trying to determine the amount to set aside in order to have enough money on hand
in 4 years to overhaul the engines on its vintage trucks. While there is some uncertainty about the
cost of engine overhauls in 4 years, after conducting some research online, CM2 has developed
the following estimates.
Engine Overhaul
Estimated Cash Outflow

Probability
Assessment

$ 50,000

10%

120,000

25%

200,000

50%

250,000

15%

Instructions:
a. How much should CM2 deposit today in a bank account earning 8%, compounded quarterly,
so as to have enough money on hand in 4 years to pay for the overhaul?
b.

What is the yield or effective rate of this bank account?

9. CM2 wishes to expand into manufacturing ice tea and would like to increase its market share
in the North. In order to do so, CM2 has decided to locate a new factory in the Tea Lovers Haven
area. CM2 will either buy or lease a site depending upon which is more advantageous. The site
location committee has narrowed down the available sites to the following three buildings:
Building A: Purchase for a cash price of $1,500,000, useful life 25 years.
Building B: Lease for 25 years with annual lease payments of $125,000 being made at the
beginning of the year.
Building C: Purchase for $1,750,000 cash. This building is larger than needed; however, the
excess space can be sublet for 25 years at a net annual rental of $21,000. Rental payments will be
received at the end of each year. CM2 Inc. has no aversion to being a landlord.

Instructions:

In which building would you recommend that CM2 Inc. locate, assuming that an 8% cost of
funds will be provided by CITIBANK?

57)
Complete the attached worksheet for 2011 for Green Company, given the following
information... then prepare an income statement, statement of owners equity, and balance sheet:

Physical count of inventory on hand on December 31

$189,000

Insurance expired during the accounting period

5,000

Count of supplies on hand on December 31:

Store supplies

1,300

Office supplies

750

Depreciation for the accounting period:

Store equipment

4,500

Office equipment

2,800

Salaries earned, but not paid as of December 31:

Sales salaries

$3,850

Office salaries

1,150

Unearned rent on December 31

5.000

400

Image text transcribed for accessibility Complete the attached worksheet for 2011 for Green
Company, given the following information... then prepare an income statement, statement of
owners equity, and balance sheet:
58)
Using the information from the annual report (https://mega.co.nz/#!kYVRQBxb!
C2i9S0Y7NEi2gY_K7Jm6Z3tTqJYEE7_z4oJseu9d5R0
)
Compute the amount of proceeds (payments) A&F received (paid) from disposal of property,
plant and equipment (PPE) during the fiscal year. Assume the disposal or purchase of PPE is all
by cash. [Hint: you need the information on PPE balance, Accumulated depreciation balances,
Gain/loss on disposal of assets, and Depreciation expense account for the calculation].
59)
No question:

60)
Based on the recommendation of the citizens committee, the City Council authorized an
expansion and extension of Main Street in an amount not to exceed $50,000,000 at its last
meeting in September. The project is to be funded with bonds of $39,000,000, a contribution of
$9,500,000 from the General Fund, and a State grant of $1,500,000 and a separate capital project
fund will be used to account for the project throughout its duration. Upon completion of the
project, any funds remaining in the Capital Project Fund are to be transferred to the Debt Service
Fund.
The following transactions occurred during the fiscal years ending 9/30/14 and 9/30/15.

1. 10/15/13 General Fund transferred $9,500,000 to the newly established Capital Projects
Fund.
2. 3/1/14 Paid architect fees of $2,000,000 associated with the road expansion.

3. 3/31/14 The City issued 5%, 20-year serial bonds dated 3/31/14 in the face amount of
$39,000,000 at 102. Interest is payable semi-annually on March 31 and September 30. Equal
principal payments are due each March 31 with the first principal payment due 3/31/15.
According to the Bond Indenture, any premium on the bonds is to be deposited into a debt
service fund and is restricted for debt service (for accounting purposes, assume the premium is
amortized using the straight-line method). The Bond Indenture also requires the City to transfer
any unspent bond proceeds at the end of the construction project to the Debt Service Fund to be
used for debt service.
4. 4/15/14 City Council awarded a $45,000,000 construction contract to the ABC Construction
Company. A purchase order was issued for the full amount of the contract.
5. 6/1/14 The City paid the Electric Utility Fund $500,000 for wiring associated with street
lights to be placed in the right-of-way of the expanded road.
6. 7/15/14 The City received a check from the State Department of Revenue for $3,500,000 for
the penny sales tax collected through 6/30/14.
7. 7/31/14 ABC Construction Company submitted its first progress billing for $25,000,000.
The City Engineer inspects the work performed to date and approves the pay request in full less
5% for retainage.
8. 8/15/14 The City pays ABC Construction Company the amount billed less the 5% amount
retained.
9. 9/15/14 The City receives $1,500,000 from the State Department of Transportation as a grant
in aid of construction.
10. 9/30/14 Amounts due the bondholders are paid.
11. 1/15/15 - The City received a check from the State Department of Revenue for $2,500,000
for the penny sales tax collected through 12/31/14.
12. 2/12/15 - ABC Construction Company submitted a final bill for the project in the amount of
$20,000,000. The City Engineer inspects the work performed and finds a 500 foot section of the
road needs to have the asphalt re-applied and approves the pay request in full less 5% for
retainage.
13. 3/1/15 - City employees re-apply asphalt to the section of road at a labor and materials cost
of $500,000 which is paid with funds in the Capital Projects Fund.
14. 3/31/15 Amounts due the bondholders are paid.

15. 4/1/15 Public Works employees purchase and install landscape materials in the total
amount of $1,300,000 which are paid with funds in the Capital Projects Fund.
16. 4/15/15 All amounts due ABC Construction Company are paid.
17. 6/1/15 The expansion of Main Street is complete and all costs incurred have been paid.
18. 9/30/15 Amounts due the bondholders are paid.

1.What is the amount of "cash" in the debt service fund at 9/30/15?


2.What is the total "fund balance" in the debt service fund at 9/30/14?
3.What is the total "fund balnce" in the debt service fund at 9/30/15?

61)
Background:
Performance Drinks, LLC is owned by Dave N. Port. Performance Drinks produces a
variety of sports centered drinks. They began operations in 1993 shortly after Mr. Port graduated
with his M.B.A. from Davenport University. The company saw early success as sports and
fitness nutritional products gained new popularity in the 1990s. Financially the company is
sound and has been wise in controlling their growth over the years. However, within the last 18
months Mr. Port has noticed a drop in overall company profitability. This is especially troubling
considering that the company has continued to experience top-line growth. Mr. Port and his
management team have been considering developing a new product line. However, those plans
have been put on hold until they can figure out why their profits are shrinking.
Performance Drinks makes four different kinds of sports drinks. Those drinks are as
follows:

62)

P6-11 (Pension Funding) You have been hired as a benefit consultant by Jean Honore, the owner of
Attic Angels. She wants to establish a retirement plan for herself and her three employees. Jean has
provided the following information: The retirement plan is to be based upon annual salary for the last
year before retire- ment and is to provide 50% of Jeans last-year annual salary and 40% of the lastyear annual salary for each employee. The plan will make annual payments at the beginning of each
year for 20 years from the date of retirement. Jean wishes to fund the plan by making 15 annual
deposits beginning January 1, 2012. Invested funds will earn 12% compounded annually. Information
about plan participants as of January 1, 2012, is as follows.
Jean Honore, owner: Current annual salary of $48,000; estimated retirement date January 1, 2037.
Colin Davis, flower arranger: Current annual salary of $36,000; estimated retirement date January 1,
2042.

350 Chapter 6 Accounting and the Time Value of Money


Anita Baker, sales clerk: Current annual salary of $18,000; estimated retirement date January 1, 2032.
Gavin Bryars, part-time bookkeeper: Current annual salary of $15,000; estimated retirement date
January 1, 2027.
In the past, Jean has given herself and each employee a year-end salary increase of 4%. Jean plans to
con- tinue this policy in the future.
Instructions
(a) Basedupontheaboveinformation,whatwillbetheannualretirementbenefitforeachplanpartici- pant?
(Round to the nearest dollar.) (Hint: Jean will receive raises for 24 years.)
(b) What amount must be on deposit at the end of 15 years to ensure that all benefits will be paid?
(Round to the nearest dollar.)
(c) What is the amount of each annual deposit Jean must make to the retirement plan?

Image text transcribed for accessibility You have been hired as a benefit consultant by Jean
Honore, the owner of Attic Angels. She wants to establish a retirement plan for herself and her
three employees. Jean has provided the following information: The retirement plan is to be based
upon annual salary for the last year before retirement and is to provide 50% of Jean's last-year
annual salary and 40% of the last-year annual salary for each employee. The plan will make
annual payments at the beginning of each year for 20 years from the date of retirement. Jean
wishes to fund the plan by making 15 annual deposits beginning January 1, 2012. Invested funds
will earn 12% compounded annually. Information about plan participants as of January 1, 2012,
is as follows. Jean Honore, owner: Current annual salary of $48,000; estimated retirement date
January 1, 2037. Colin Davis, flower arranger: Current annual salary of $36,000; estimated
retirement date January 1, 2042. Anita Baker, sales clerk: Current annual salary of $18,000;
estimated retirement date January 1, 2032. Gavin Bryars, part-time bookkeeper: Current annual
salary of $15,000; estimated retirement date January 1, 2027. In the past, Jean has given herself
and each employee a year-end salary increase of 4%. Jean plans to continue this policy in the
future. Based upon the above information, what will be the annual retirement benefit for each
plan participant? (Round to the nearest dollar.) (Hint: Jean will receive raises for 24 years.) What
amount must be on deposit at the end of 15 years to ensure that all benefits will be paid? (Round

to the nearest dollar.) What is the amount of each annual deposit Jean must make to the
retirement plan?
63)
Smith-John makes standard sized widgets for the frazzle industry. These widgets are sold for
$235 per thousand. Mr. Smith and Mr. John are asking you to assist with preparations for a
meeting with their banker to arrange for financing the company for possible expansion. Based
on a sales forecast (below) and other data, Mr. Smith and Mr. John would like you to prepare a
monthly cash budget, monthly and quarterly pro forma income statements, a pro forma quarterly
balance sheet, and all necessary supporting schedules for the first quarter of 2012.
Sales forecast (in units):
Jan
Sales Units
Sales$

2,150,000
505,250

Feb

Mar

April

May

2,350,000

1,950,000

1,750,000

2,150,000

552,250

458,250

411,250

505,250

Prior history shows that the company collects 75% of the sales in the first month after the sale,
20% in the second month after the sale, and the remainder in the third month after the sale. The
company pays for materials purchased for production the month after receipt. In general, Mr.
Smith and Mr. John like to keep 1.5 months supply of inventory on-hand at month-end in
anticipation of sales. Inventory at the beginning of December was 2,400,000 units. (This was not
equal to the desired inventory level of the desired 1.5 months supply.) Additionally, the unit sales
for October, November and December were 1,900,000, 1,850,000 and 1,325,000, respectively.
The major cost of production is the purchase of raw materials in the form of steel rods, which are
cut, threaded, and finished. Last year raw material costs were $63 per 1,000 widgets, but Mr.
John was notified by the purchasing department that the cost was going to rise to $68 per 1,000
widgets. The company uses FIFO inventory accounting and the purchases for materials are paid
for in the month following the purchase. Labor costs are relatively constant at $22 per thousand
widgets, since workers are paid on a piecework basis. Overhead is allocated at $12 per thousand
widgets and selling and administrative costs are constant at 28% of sales revenue. Labor
expense and overhead are direct cash outflows paid in the month incurred, while interest and
taxes are paid quarterly. In addition, the company maintains a dividend payout ratio of 40%
which is paid quarterly.
The company usually maintains a minimum cash balance of $45,000, borrows notes payable if
needed, and puts any excess cash into marketable securities. The average tax rate is
30%. Marketable securities are sold before funds are borrowed when a cash shortage is

faced. Ignore the interest on short-term borrowings. Interest on the long-term bonds of $9,000 is
paid in March, but is allocated over each month for accounting purposes. Taxes are paid in
March, but are allocated over each month for accounting purposes. The Dividend payment is
made at the end of March. In addition, the company is projecting the purchase of a new piece of
manufacturing equipment in March for $50,000 that will be cash on delivery.
Required part 1: Prepare a monthly pro forma income statement and cash budget, and a
quarter-ended income statement; make sure to include a sales forecast, production schedule,
schedule of cost of goods sold, schedule of cash receipts, schedule of cash payments, net cash
flow schedule, and the cash budget. All supporting schedules should include all three months of
the quarter.
Required part 2: Based on the date prepared in part 1, prepare a balance sheet as of the quarterended date. Make sure to include a schedule that identifies the calculation of accounts
receivable, inventory, and accounts payable balances for each month and for the quarter-ended
period.
As of the year ended December 31, 2011, the Smith-John balance sheet was as follows:

Current Assets:
Cash
A/R
Inventory
Total Current Assets
Fixed Assets, net
Total Assets
Liabilities
Total Current Liabilities
Long-term debt
Total Liabilities
Equity
Common Stock
Retained Earnings
Total Liab's & Equity

64)
Foundational 3-2

15,000
218,000
322,525
555,525
800,000
1,355,525
125,002
125,002
400,000
525,002

400,000
430,523
1,355,525

Hickory Company manufactures two products13,000 units of Product Y and 5,000 units of
Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is
considering implementing an activity-based costing (ABC) system that allocates all of its
manufacturing overhead to four cost pools. The following additional information is available for
the company as a whole and for Products Y and Z: (The total estimated overhead cost may
not agree with the sum of allocated overhead costs to each product.)

Activity Cost Pool


Activity Measure
Machining
Machine-hours
Machine setups
Number of setups
Production design Number of products
General factory
Direct labor-hours
Activity Measure
Machining
Number of setups
Number of products
Direct labor-hours

Estimated
Overhead
Cost
Expected Activity
$246,000 12,000 MHs
$137,500
250 setups
$ 89,000
2 products
$357,000 14,000 DLHs

Product YProduct Z
7,500
4,500
40
210
1
1
8,500
5,500

Required:
Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to
Product Y and Product Z?(Round your intermediate calculations to 2 decimal places and
final answers to the nearest dollar amount.)
Pro Pro
duc duc
tY tZ
Manufacturing overhead allocated
Problem 3-12A Contrasting ABC and Conventional Product Costs [LO2,
LO3, LO4]
Precision Manufacturing Inc. (PMI) makes two types of industrial component partsthe EX300
and the TX500. It annually produces 62,000 units of EX300 and 12,700 units of TX500. The
companys conventional cost system allocates manufacturing overhead to products using a
plantwide overhead rate and direct labor dollars as the allocation base. Additional information
relating to the companys two product lines is shown below:

Direct
materials
Direct labor

EX300

TX500

Total

$368,325

$164,550

$532,875

$122,000

$ 43,500

$165,500

The company is considering implementing an activity-based costing system that distributes all
of its manufacturing overhead to four activities as shown below:

Activity Cost Pool


(and Activity Measure)
Machining (machinehours)
Setups (setup hours)
Product-level
(number of products)
General factory
(direct labor dollars)

Activity

Manufacturing
Overhead

Total manufacturing
overhead cost

EX300

TX500

$ 217,700

92,000

63,500

170,100

85

320

92,150

66,200

$122,000

$43,500

$ 546,150

Required:
1a. Compute the plantwide overhead rate that would be used in the companys conventional cost
system. (Round your answer to 2 decimal places.)
$

Predetermined overhead
rate

per DL$

1b. Using the plantwide rate, compute the unit product cost for each product.
intermediate calculations. Round your answers to 2 decimal places.)

Unit product
cost

EX300
$

TX500
$

2- Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal
a. places.)
Activity Cost
Pools
Machining
Setups
Product-level
General factory

Activity Rate
$

per MH

per setup hr.

per product

per DL$

2b. Using the activity rates, compute the unit product cost for each product.
intermediate calculations. Round your answers to 2 decimal places.)

EX
300

TX500
$

Foundational 3-9

anufactures two products14,000 units of Product Y and 6,000 units of


pany uses a plantwide overhead
rate based on direct labor-hours. It is
Uni $
nting an activity-based costing (ABC) system that allocates all of its
tprod
ad to four cost pools. The following additional information is available for
uct
ole and for Products Y and Z: (The total estimated overhead cost may
cost
um of allocated overhead costs to each product.)

Activity Measure
Machine-hours
Number of setups
Number of products
Direct labor-hours

Estimated
Overhead
Cost
Expected Activity
$209,000 10,000 MHs
$171,100
290 setups
$ 93,000
2 products
$259,000 10,000 DLHs

Activity Measure
Machining
Number of setups
Number of products
Direct labor-hours

Product YProduct Z
7,900
2,100
50
240
1
1
8,900
1,100

m, how much total manufacturing overhead cost would be assigned to


our intermediate calculations to 2 decimal places and final answers to

Foundational 3-3

anufactures two products14,000 units of Product Y and 6,000 units of


pany uses a plantwide overhead rate based on direct labor-hours. It is
nting an activity-based costing (ABC) system that allocates all of its
ad to four cost pools. The following additional information is available for
ole and for Products Y and Z: (The total estimated overhead cost may
um of allocated overhead costs to each product.)

Activity Measure
Machine-hours
Number of setups
Number of products
Direct labor-hours

Estimated
Overhead
Cost
Expected Activity
$203,000 10,000 MHs
$121,900
230 setups
$ 87,000
2 products
$379,500 15,000 DLHs

Activity Measure
Machining
Number of setups
Number of products
Direct labor-hours

Product YProduct Z
7,300
2,700
50
180
1
1
9,500
5,500

te for the Machining activity cost pool? (Round your answer to 2


Machining activity cost

per MH

65)

ken lumas started his own consulting firm, lumas consulting, on june 1, 2014. the trial balance at
june 30 is as follows.
lumas consulting
trial balance june 30, 2014
debit credit
cash $ 6,850
accounts receivable 7,000
supplies 2,000
prepaid insurance 2,880
equipment 15,000
accounts payable $ 4,230
unearned service revenue 5,200
common stock 22,000
service revenue 8,300
salaries and wages expense 4,000
rent expense 2,000

$39,730 $39,730

in addition to those accounts listed on the trial balance, the chart of accounts for lumas also
contains the following accounts: accumulated depreciationequipment, salaries and wages
payable, depreciation expense, insurance expense, utilities expense, and supplies expense. other
data:
1. supplies on hand at june 30 total $720.
2. a utility bill for $180 has not been recorded and will not be paid until next month.
3. the insurance policy is for a year.
4. services were performed for $4,100 of unearned service revenue by the end of the month.
5. salaries of $1,250 are accrued at june 30.
6. the equipment has a 5-year life with no salvage value and is being depreciated at $250 per
month for 60 months.
7. invoices representing $3,900 of services performed during the month have not been recorded
as of june 30.
(a) prepare the adjusting entries for the month of june.
(b) post the adjusting entries to the ledger accounts. enter the totals from the trial balance as
beginning account balances. (use t-accounts.)
c) prepare an adjusted trial balance at june 30, 2014.
66)
No
67)
Rita Arthurs, the sales manager is discussing the possible outcome of the
forthcoming election with Paulo Farmer, the production manager. She noted that if
one of the major political parties wins the election and forms government, there is a
strong possibility that alternative energy sources such as wind-generated electricity
may no longer be actively supported by the new government as is the case under
the current government. Rita's primary concern is that the current market for
alternative power generation equipment is already volatile and subject to significant
uncertainty. Paulo is also concerned about his plans to build the new highly
automated manufacturing facility on the land to be purchased in February. This new
manufacturing facility will enable him to manufacture, in-house, the major two parts
he is now purchasing for assembly and to significantly automate the assembly
process that is currently somewhat labour intensive. His projections for the new

facility indicate a reduction in direct material and direct labour costs of 25% but that
his fixed manufacturing overheads are likely to increase by 50% due to the
increased
investment
in
production
capacity.
Required: Write a brief report addressing Rita's concerns (approx. 500 words). Your
report should also inclue a discussion of the impact of Paulo's intended investment
in new manufacturing capacity. Support your report with relevant calculations.

68)
P2-Prepare financial statements.
3A
(LO 1, 3), AP
You are provided with the following information for Ramirez Enterprises,
effective as of its April 30, 2014, year-end.
Accounts payable

$? 834

Accounts receivable

810

Accumulated depreciationequipment

670

Cash
Common stock
Cost of goods sold

1,270
900
1,060

Depreciation expense

335

Dividends

325

Equipment

2,420

Income tax expense

165

Income taxes payable

135

Insurance expense

210

Interest expense

400

Inventory

967

Land

3,100

Mortgage payable

3,500

Notes payable

61

Prepaid insurance
Retained earnings (beginning)

$?? 60
1,600

Salaries and wages expense

700

Salaries and wages payable

222

Sales revenue

5,100

Stock investments (short-term)

1,200

Instructions
(a) Prepare an income statement and a retained earnings statement for
Ramirez Enterprises for the year ended April 30, 2014.
Net income

$2,230

(b) Prepare a classified balance sheet for Ramirez Enterprises as of April 30,
2014.
Tot. current assets

$4,307

Tot. assets

$9,157

69)

Uxmaiz Corporation had only one job in process during May-Job X32z- and had
no finished goods inventory on May 1. Job X32Z was started in April and finished
during May. Data concerning that job appear below:
In May, overhead was over applied by $300. The company adjusts its cost of
goods sold every month for the amount of the overhead that was under applied
or over applied.
1. Using the direct method, what is the cost of goods sold for May?
2. What is the total value of the finished goods inventory at the end of May?
3. What is the total value of the work in process inventory at the end of May?

70)

ANSWER THE TWO MULTIPLE CHOICE QUESTIONS


QS 3-12A Preparing adjusting entries LO C3, P4
Calvin Consulting initially records prepaid and unearned items in income statement accounts. Given this
companys accounting practices, which of the following applies to the preparation of adjusting entries at
the end of its first accounting period?
The cost of unused office supplies is recorded with a debit to Supplies Expense and a credit to Office
Supplies.
Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit
to Consulting Fees Earned and a credit to Unearned Consulting Fees.
Earned but unbilled (and unrecorded) consulting fees are recorded with a debit to Unearned Consulting
Fees and a credit to Consulting Fees Earned.
Unpaid salaries are recorded with a debit to Prepaid Salaries and a credit to Salaries Expense.
AND
The following information is taken from Brooke Companys unadjusted and adjusted trial balances.
Unadjusted
Prepaid insurance
Interest payable

Debit
$ 4,100

Credit
$0

Adjusted
Debit
$ 3,700

Credit
$ 800

Given this information, which of the following is likely included among its adjusting entries?
A $400 debit to insurance expense and an $800 debit to interest payable.
A $400 debit to insurance expense and an $800 debit to interest expense.
A $400 credit to prepaid insurance and an $800 debit to interest payable.

AND

In its first year of operations, Roma Co. earned $45,000 in revenues and received $37,000 cash from
these customers. The company incurred expenses of $25,500 but had not paid $5,250 of them at yearend. The company also prepaid $6,750 cash for expenses that would be incurred the next year.
Calculate the first years net income under both the cash basis and the accrual basis of accounting.

71)

Two questions
Financial Analyst Skills" Please respond to the following:

Based on the information presented in the e-Activity, recommend the skills that are required to
be a successful Financial Analyst, indicating how the role of a Financial Analyst adds value to a
company. Provide support for your answer.
Assess the key ratios used by Financial Analyst to evaluate the financial performance of
company, indicating the ratio that you believe to be most indicative of future
performance. Provide support for your rationale

"Financial Analysis" Please respond to the following:


Determine three key ratios that should be used when evaluating the financial performance of a
company, indicating what information this will reveal to an analyst and the impact to decisions
made about the company.
Given that financial analysis is reactive based on events that have already occurred, suggest how
financial analysis may obtain information to be proactive to the decision-making process.
Provide support for your rationale.

72)

ABC Ltd is in the business of providing management consultation services in Parnell area. ABC
bought a property on 1 July 2012 for a cost of $1,500,000. The property consists of land and
building. The value of the land is $800,000 at time of purchase. The property is used as offices
and seminar rooms. ABC renovates the property in order to make it suitable for its operation. The
cost of renovation is $80,000. The renovation is completed in 2 months after the purchase. ABC
has a balance date of 30 June.
1. Determine the cost of the property to be recorded in the accounts. (Explain your answer
with reference to NZ IAS 16).
2. Assume ABC depreciates the building part of the property on a straight-line basis.
Depreciation is $40,000 each year for the building. The company depreciates its PPE to
the nearest month. On 1 July 2013, the property is revalued to $1,700,000, of which the
land portion appreciated by $100,000. Prepare journal entries to reflect the revaluation for
both land and building of the property.