Acc 557 week 6 homework3

Due Week 6 and worth 70 points

Directions: Answer the following questions on a separate Microsoft Word or Excel document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your assignment using the assignment link in Blackboard.

Exercises

E9-9.Presented below are selected transactions at Ridge Company for 2015.

Jan. 1               Retired a piece of machinery that was purchased on January 1, 2005. The machine cost $62,000 on that date. It had a useful life of 10 years with no salvage value.

June 30            Sold a computer that was purchased on January 1, 2012. The computer cost $45,000. It had a useful life of 5 years with no salvage value. The computer was sold for $14,000.

Dec. 31            Discarded a delivery truck that was purchased on January 1, 2011. The truck cost $33,000. It was depreciated based on a 6-year useful life with a $3,000 salvage value.

Instructions

Journalize all entries required on the above dates, including entries to update depreciation, where applicable, on assets disposed of. Ridge Company uses straight-line depreciation. (Assume depreciation is up to date as of December 31, 2014.)

E9-11.On July 1, 2015, Friedman Inc. invested $720,000 in a mine estimated to have 900,000 tons of ore of uniform grade. During the last 6 months of 2015, 100,000 tons of ore were mined and sold.

Instructions

a)      Prepare the journal entry to record depletion expense.

b)      Assume that the 100,000 tons of ore were mined, but only 80,000 units were sold. How are the costs applicable to the 20,000 unsold units reported?

E10-12.Whitmore Company issued $500,000 of 5-year, 8% bonds at 97 on January 1, 2015. The bonds pay interest twice a year.

Instructions

a)      (1) Prepare the journal entry to record the issuance of the bonds.

(2) Compute the total cost of borrowing for these bonds.

b)      Repeat the requirements from part (a), assuming the bonds were issued at 105.

E10-15.Jernigan Co. receives $300,000 when it issues a $300,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2015. The terms provide for semiannual installment payments of $25,000 on June 30 and December 31.

Instructions

Prepare the journal entries to record the mortgage loan and the first two installment payments.

Problems

P9-7A.The intangible assets section of Sappelt Company at December 31, 2015, is presented below.

The patent was acquired in January 2015 and has a useful life of 10 years. The franchise was acquired in January 2012 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2016.

Jan. 2               Paid $27,000 legal costs to successfully defend the patent against infringement by another company.

Jan.–June         Developed a new product, incurring $140,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.

Sept. 1             Paid $50,000 to an extremely large defensive lineman to appear in commercials advertising the company’s products. The commercials will air in September and October.

Oct. 1               Acquired a franchise for $140,000. The franchise has a useful life of 50 years.

Instructions

a)      Prepare journal entries to record the transactions above.

b)      Prepare journal entries to record the 2016 amortization expense.

c)      Prepare the intangible assets section of the balance sheet at December 31, 2016.

P10-1A.On January 1, 2015, the ledger of Accardo Company contains the following liability accounts.

Accounts Payable                       $52,000

Sales Taxes Payable                    7,700

Unearned Service Revenue         16,000

During January, the following selected transactions occurred.

Jan. 5  Sold merchandise for cash totaling $20,520, which includes 8% sales taxes.

12 Performed services for customers who had made advance payments of $10,000. (Credit Service Revenue.)

14Paid state revenue department for sales taxes collected in December 2014 ($7,700).

20Sold 900 units of a new product on credit at $50 per unit, plus 8% sales tax.

21Borrowed $27,000 from Girard Bank on a 3-month, 8%, $27,000 note.

25Sold merchandise for cash totaling $12,420, which includes 8% sales taxes.

Instructions

a)      Journalize the January transactions.

b)      Journalize the adjusting entry at January 31 for the outstanding note payable. (Hint: Use one-third of a month for the Girard Bank note.)

c)      Prepare the current liabilities section of the balance sheet at January 31, 2015.  Assume no change in accounts payable.

TUTORIAL PREVIEW

Jan. 1	Accumulated Depreciation—Machinery	62,000
	Machinery		62,000
June 30	Depreciation Expense	4,500
	Accumulated Depreciation—
	Computer ($45,000 X 1/5 X 6/12)		4,500

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Assignment 5 Greenwood Village Fridge Company and Grande Sonido is a merchandising company

Assignment 5

During the first year of operations , Greenwood Village Fridge Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the year are summarized as follows:

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $6,480,000

Manufacturing cost:

  Cost of goods manufactured including:

          Direct materials. . . . . . . ………………………. 3,200,000

          Direct labor . . . . . ……… ………………………..1,120,000

          Variable manufacturing overhead. . . . . . .  880,000

          Fixed manufacturing overhead . . . . ………560,000                                      

          Variable Selling and administrative expenses . . . . . . .  648,000

          Fixed Selling and administrative expenses …………………288,000

Required

Prepare the company’s income statement under absorption costing.

Prepare the company’s income statement under variable costing.

Explain any difference between the company’s income under costing from parts a and b above.

Grande Sonido is a merchandising company specializing in home computer speakers. The company budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory in each month to equal 20% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 25% of the purchases in a month is paid for in the same month. Another 60% is paid for during the first month after purchase, and the remaining 15% is paid for in the second month after purchase. The following sales budgets are set: July, $ 350,000; August, $ 290,000; September, $ 320,000; October, $ 275,000; and November, $ 265,000.

Required:

Compute the following. (Hint: For part a, you can use Exhibits 7.7 and 7.8 in our textbook for guidance, but note that budgeted sales are in dollars for this assignment.)

a Budgeted merchandise purchases for July, August, September, and October;

b  Budgeted payments on accounts payable for September and October; and

c. Budgeted ending balances of accounts payable for September and October

TUTORIAL PREVIEW

GREENWOOD VILLAGE FRIDGE COMPANY

Absorption Costing Income Statement

Sales.....................................................................................................                 $6,480,000

Cost of goods sold (36,000 units × $142.00*).....................................                  5,112,000

Gross profit...........................................................................................                $ 1,368,000

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Week4 BA225 Assignment Application Problem 4

W4 Assignment “Application Problems 4”

 Application Problems Week 4

Page 209: Brief Exercises 5-1, 5-2, 5-4

BE5-1 Monthly production costs in Dilts Company for two levels of production are as

follows.

Cost 2,000 Units4,000 Units

Indirect labor $10,000 $20,000

Supervisory salaries 5,000 5,000

Maintenance 4,000 6,000

Indicate which costs are variable, fixed, and mixed, and give the reason for each answer.

BE5-2 For Lodes Company, the relevant range of production is 40–80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the relevant range assuming the behavior is linear.

BE5-4 Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level.

Miles                Total                                        Miles                Total

Driven             Cost                                         Driven Cost

 January           8,000               $14,150           March              8,500               $15,000

 February         7,500               13,500             April                8,200               14,490

Compute the variable- and fixed-cost elements using the high-low method.

Pages 260-261: Exercises 6-2, 6-5, 6-7

E6-2 In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of sales.

Instructions

(a) Determine the contribution margin in dollars, per unit and as a ratio.

(b) Using the contribution margin technique, compute the break-even point in dollars and in units.

(c) Compute the margin of safety in dollars and as a ratio.

E6-5 Carey Company had sales in 2016 of $1,560,000 on 60,000 units. Variable costs totaled $900,000, and fixed costs totaled $500,000.

 A new raw material is available that will decrease the variable costs per unit by 20% (or $3). However, to process the new raw material, fixed operating costs will increase by $100,000. Management feels that one-half of the decline in the variable costs per unit should be passed on to customers in the form of a sales price reduction. The marketing department expects that this sales price reduction will result in a 5% increase in the number of units sold.

Instructions

Prepare a projected CVP income statement for 2017 (a) assuming the changes have not been made, and (b) assuming that changes are made as described.

E6-7 PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 40% contribution margin ratio. The company’s fixed costs are $15,600,000 (that is, $78,000 per service outlet).

Instructions

(a) Calculate the dollar amount of each type of service that the company must provide in order to break even.

(b) The company has a desired net income of $52,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet? 

TUTORIAL PREVIEW

Cost	2,000 Units	4,000 Units	Reason
Indirect labor	$10,000	$20,000	Variable cost as the cost increases proportionately with increase in output.
Supervisory salaries	5,000	5,000	Fixed cost as the cost does not change with change in output.

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Java manufactures coffee mugs that it sells to other companies for customizing with their own logos.

P23-28A Computing and journalizing standard cost variances [45 min]

P23-28A Java manufactures coffee mugs that it sells to other companies for customizing with their own logos. Java prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month:

Actual cost and production information for July 2012 follow:

a. Actual production and sales were 62,900 coffee mugs.

b. Actual direct materials usage was 10,000 lbs., at an actual price of $0.17 per lb.

c. Actual direct labor usage was 202,000 minutes at a total cost of $30,300.

d. Actual overhead cost was $10,000 variable and $30,500 fixed.

e. Marketing and administrative costs were $115,000.

Requirements
1. Compute the price and efficiency variances for direct materials and direct labor.

2. Journalize the usage of direct materials and the assignment of direct labor, including the related variances.

3. For manufacturing overhead, compute the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances.

4. Journalize the actual manufacturing overhead and the applied manufacturing overhead. Journalize the movement of all production from WIP. Journalize the closing of the manufacturing overhead account.
5. Java intentionally hired more-skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise?

TUTORIAL PREVIEW

1. Compute the price and efficiency variances for direct materials and direct labor.

Although not required, it is helpful to begin the variance computations by organizing the data:

Direct materials:

Actual price………………………………………                        $0.17 / lb.

Standard price…………………………………...                                  $0.25 / lb.

Actual quantity………………………..…………                     10,000 lbs.

Standard quantity (62,900units × 0.2 lb./unit)        12,580 lbs.

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W3 BA 225 Assignment Application Problems 3

W3 BA 225 Assignment Application Problems 3

Page 120: Brief Exercises 3-7 and 3-9

BE3-7 Trek Company has the following production data for April: units transferred out 40,000, and ending work in process 5,000 units that are 100% complete for materials and 40% complete for conversion costs. If unit materials cost is $4 and unit conversion cost is $7, determine the costs to be assigned to the units transferred out and the units in ending work in process.

BE3-9 Data for Hollins Company are given in BE3-8. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50% complete as to conversion costs and 100% complete as to materials. Prepare a cost reconciliation schedule.

Page 123: Exercise 3-7

E3-7 The Sanding Department of Quik Furniture Company has the following production and manufacturing cost data for March 2017, the first month of operation.

Production: 7,000 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs.

Manufacturing costs: Materials $33,000; labor $21,000; and overhead $36,000.

Instructions

Prepare a production cost report.

Pages 164-165: Brief Exercise 4-2, and 4-8

BE4-2 Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume-based) and an activity-based costing system. Here are its results.

Traditional Costing ABC

Sales revenue $600,000$600,000

Overhead costs:

Product RX3 $ 34,000$ 50,000

 Product Y12 36,00020,000

$ 70,000$ 70,000

Explain how a difference in the overhead costs between the two systems may have occurred.

BE4-8 Rich Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non–value-added.

(a) Machine setup. (d) Moving work in process.

(b) Design engineering. (e) Inspecting and testing.

(c) Storing inventory. (f) Painting and packing.

Page 170: Exercise 4-8

E4-8 Wilmington, Inc. manufactures five models of kitchen appliances. The company is installing activity-based costing and has identified the following activities performed at its

Mesa plant.

 1. Designing new models.

 2. Purchasing raw materials and parts.

 3. Storing and managing inventory.

 4. Receiving and inspecting raw materials and parts.

 5. Interviewing and hiring new personnel.

 6. Machine forming sheet steel into appliance parts.

 7. Manually assembling parts into appliances.

 8. Training all employees of the company.

 9. Insuring all tangible fixed assets.

10. Supervising production.

 11. Maintaining and repairing machinery and equipment.

 12. Painting and packaging finished appliances.

Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Wilmington, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products.

Instructions

Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Wilmington’s five products.

Activities	Cost driver(s)
1. Designing new models.
2. Purchasing raw materials and parts.
3. Storing and managing inventory.
4. Receiving and inspecting raw materials and parts.
5. Interviewing and hiring new personnel.
6. Machine forming sheet steel into appliance parts.
7. Manually assembling parts into appliances.
8. Training all employees of the company.
9. Insuring all tangible fixed assets.
10. Supervising production.
11. Maintaining and repairing machinery and equipment.
12. Painting and packaging finished appliances.

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