Special Order Decision- Jens sporting Goods, Inc., manufactures a complete line- ANSWER KEY

Special Order Decision

Jens sporting Goods, Inc., manufactures a complete line of sporting equipment. Leiden Enterprises operates a large chain of discount stores. Leiden has approached Jens with a special order for 30,000 deluxe baseballs. Instead of being packaged separately, the balls are to be packed in boxes containing 500 baseballs each. Leiden is willing to pay $2.45 per baseball. Jens knows that annual expected production is 400,000 baseballs. It also knows that the current year's production is 410,000 baseballs and that the maximum production capacity is 450,000 baseballs. The following additional information is available:

Standard unit cost for 400,000 baseballs
Direct materials $0.90
Direct labor $0.60
Overhead:
Variable $0.50
Fixed ($100,000 ÷ 400,000) $0.25
Packaging per unit $0.30
Advertising ($60,000 ÷ 400,000) $0.15
Other fixed selling and administrative expenses ($120,000 ÷ 400,000) $0.30
Product unit cost $3.00
Unit selling price $4.00
Total estimated bulk packaging costs for special order
(30,000 baseballs: 500 per box) $2,500

Questions

Should Jens Sporting Goods, Inc., accept Leiden’s offer?
What would be the minimum order price per baseball if Jens would like to earn a profit of $3,000 from the special order?
Please show working

Here's the SOLUTION

ACC 423 E15-18 (Dividends and Stockholders’ Equity Section) Anne Cleves Company - ANSWER KEY

E15-18 (Dividends and Stockholders’ Equity Section) Anne Cleves Company reported the following

amounts in the stockholders’ equity section of its December 31, 2006, balance sheet.

Preferred stock, 10%, $100 par (10,000 shares

authorized, 2,000 shares issued) $200,000

Common stock, $5 par (100,000 shares authorized,

20,000 shares issued) 100,000

Additional paid-in capital 125,000

Retained earnings 450,000

Total $875,000

(L0 4,

7, 8)

(L0 6,

7, 8)

During 2007, Cleves took part in the following transactions concerning stockholders’ equity.

1. Paid the annual 2006 $10 per share dividend on preferred stock and a $2 per share dividend on

common stock. These dividends had been declared on December 31, 2006.

2. Purchased 1,700 shares of its own outstanding common stock for $40 per share. Cleves uses the

cost method.

3. Reissued 700 treasury shares for land valued at $30,000.

4. Issued 500 shares of preferred stock at $105 per share.

5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45

per share.

6. Issued the stock dividend.

7. Declared the annual 2007 $10 per share dividend on preferred stock and the $2 per share dividend

on common stock. These dividends are payable in 2008.

Instructions

(a) Prepare journal entries to record the transactions described above.

(b) Prepare the December 31, 2007, stockholders’ equity section. Assume 2007 net income was

$330,000

Here's the SOLUTION

ACC 423 E15-13 (Stock Split and Stock Dividend) The common stock of Alexander Hamilton Inc- ANSWER KEY

E15-13 (Stock Split and Stock Dividend) The common stock of Alexander Hamilton Inc. is currently

selling at $120 per share. The directors wish to reduce the share price and increase share volume prior to

a new issue. The per share par value is $10; book value is $70 per share. Nine million shares are issued

and outstanding.

Instructions

Prepare the necessary journal entries assuming the following.

(a) The board votes a 2-for-1 stock split.

(b) The board votes a 100% stock dividend.

(c) Briefly discuss the accounting and securities market differences between these two methods of

increasing the number of shares outstanding.

Here's the SOLUTION

Acc 423 P15-1 (Equity Transactions and Statement Preparation) On January 5, 2007, Drabek Corporation- ANSWER KEY

Ch. 15: Problem P15-1

P15-1 (Equity Transactions and Statement Preparation) On January 5, 2007, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.

Jan. 11 Issued 20,000 shares of common stock at $16 per share.

Feb. 1 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an appraised value of $270,000.

July 29 Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)

Aug. 10 Sold the 1,800 treasury shares at $14 per share.

Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.

Dec. 31 Closed the Income Summary account. There was a $175,700 net income.

Instructions

(a) Record the journal entries for the transactions listed above.

(b) Prepare the stockholders’ equity section of Drabek Corporation’s balance sheet as of December 31, 2007.

Ch. 16: Problems P16-6

P16-6 (EPS Computation of Basic and Diluted EPS) Edmund Halvor of the controller’s office of East

Aurora Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2007. Halvor has compiled the information listed below.

1. The company is authorized to issue 8,000,000 shares of $10 par value common stock. As of

December 31, 2006, 3,000,000 shares had been issued and were outstanding.

2. The per share market prices of the common stock on selected dates were as follows.

Price per Share

July 1, 2006 $20.00

January 1, 2007 21.00

April 1, 2007 25.00

July 1, 2007 11.00

August 1, 2007 10.50

November 1, 2007 9.00

December 31, 2007 10.00

3. A total of 700,000 shares of an authorized 1,200,000 shares of convertible preferred stock had been issued on July 1, 2006. The stock was issued at its par value of $25, and it has a cumulative dividend of $3 per share. The stock is convertible into common stock at the rate of one share of convertible preferred for one share of common. The rate of conversion is to be automatically adjusted for stock splits and stock dividends. Dividends are paid quarterly on September 30, December 31, March 31, and June 30.

4. East Aurora Corporation is subject to a 40% income tax rate.

5. The after-tax net income for the year ended December 31, 2007 was $13,550,000.

The following specific activities took place during 2007.

1. January 1—A 5% common stock dividend was issued. The dividend had been declared on

December 1, 2006, to all stockholders of record on December 29, 2006.

2. April 1—A total of 200,000 shares of the $3 convertible preferred stock was converted into common stock. The company issued new common stock and retired the preferred stock. This was the only conversion of the preferred stock during 2007.

3. July 1—A 2-for-1 split of the common stock became effective on this date. The board of directors had authorized the split on June 1.

4. August 1—A total of 300,000 shares of common stock were issued to acquire a factory building.

5. November 1—A total of 24,000 shares of common stock were purchased on the open market at $9 per share. These shares were to be held as treasury stock and were still in the treasury as of

December 31, 2007.

6. Common stock cash dividends—Cash dividends to common stockholders were declared and paid as follows.

April 15—$0.30 per share

October 15—$0.20 per share

7. Preferred stock cash dividends—Cash dividends to preferred stockholders were declared and paid as scheduled.

Instructions

(a) Determine the number of shares used to compute basic earnings per share for the year ended

December 31, 2007.

(b) Determine the number of shares used to compute diluted earnings per share for the year ended December 31, 2007.

(c) Compute the adjusted net income to be used as the numerator in the basic earnings per share

calculation for the year ended December 31, 2007.


P16-7

The information below pertains to Prancer Company for 2007.

Net income for the year $1,200,000

8% convertible bonds issued at par ($1,000 per bond). Each bond is convertible into

40 shares of common stock. 2,000,000

6% convertible, cumulative preferred stock, $100 par value. Each share is convertible

into 3 shares of common stock. 3,000,000

Common stock, $10 par value 6,000,000

Common stock options (granted in a prior year) to purchase 50,000 shares of common

stock at $20 per share 500,000

Tax rate for 2004 40%

Average market price of common stock $25 per share

There were no changes during 2007 in the number of common shares, preferred shares, or convertible bonds outstanding. There is no treasury stock.

Instructions

(a) Compute basic earnings per share for 2007.

(b) Compute diluted earnings per share for 2007.

Concepts for Analysis CA16-4
CA16-4 (Stock Compensation Plans) The following two items appeared on the Internet concerning the passage of SFAS No. 123(R).

WASHINGTON, D.C.—February 17, 2005 Congressman David Dreier (R–CA), Chairman of the House Rules Committee, and Congresswoman Anna Eshoo (D–CA) reintroduced legislation today that will preserve broad-based employee stock option plans and give investors critical information they need to understand how employee stock options impact the value of their shares.

“Last year, the U.S. House of Representatives overwhelmingly voted for legislation that would have ensured the continued ability of innovative companies to offer stock options to rank-and-file employees,” Dreier stated. “Both the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) continue to ignore our calls to address legitimate concerns about the impact of FASB’s new standard on workers’ ability to have an ownership stake in the New Economy, and its failure to address the real need of shareholders: accurate and meaningful information about a company’s use of stock options.”

“In December 2004, FASB issued a stock option expensing standard that will render a huge blow to the 21st century economy,” Dreier said. “Their action and the SEC’s apparent lack of concern for protecting shareholders, requires us to once again take a firm stand on the side of investors and economic growth. Giving investors the ability to understand how stock options impact the value of their shares is critical. And equally important is preserving the ability of companies to use this innovative tool to attract talented employees.”

“Here We Go Again!” by Jack Ciesielski (2/21/2005, http://www.accountingobserver.com/blog/2005/02/herewe- go-again) On February 17, Congressman David Dreier (R–CA), and Congresswoman Anna Eshoo (D–CA), officially entered Silicon Valley’s bid to gum up the launch of honest reporting of stock option compensation: They co-sponsored a bill to “preserve broad-based employee stock option plans and give investors critical information they need to understand how employee stock options impact the value of their shares.” You know what “critical information” they mean: stuff like the stock compensation for the top five officers in a company, with a rigged value set as close to zero as possible. Investors crave this kind of information. Other ways the good Congresspersons want to “help” investors: The bill “also requires the SEC to study the effectiveness of those disclosures over three years, during which time, no new accounting standard related to the treatment of stock options could be recognized. Finally, the bill requires the Secretary of Commerce to conduct a study and report to Congress on the impact of broad-based employee stock option plans on expanding employee corporate ownership, skilled worker recruitment and retention, research and innovation, economic growth, and international competitiveness.”

It’s the old “four corners” basketball strategy: stall, stall, stall. In the meantime, hope for regime change at your opponent, the FASB.

Instructions

(a) What are the major recommendations of SFAS No. 123(R), “Share-Based Payment”?

(b) How do the provisions of SFAS No. 123(R) differ from the bill introduced by members of Congress (Dreier and Eshoo), which would require expensing for options issued to only the top five officers in a company? Which approach do you think would result in more useful information? (Focus on comparability.)

(c) The bill in Congress urges the FASB to develop a rule that preserves “the ability of companies to use this innovative tool to attract talented employees.” Write a response to these Congress-people explaining the importance of neutrality in financial accounting and reporting.

Here's the SOLUTION

Exercise 18-17 The following information is avaliable for the first month of operations of Enders, Company

Exercise 18-17 The following information is avaliable for the first month of operations of Enders, Company, a manufacturer of mechnical pencils:

Sales: 630,000

Gross Profit: 370,000

Cost of goods manufactured: 315,000

Indirect labor: 84,000

Factory depreciation:22,000

Materials purchased: 164,000

Total manufacturing costs for the period: 362,000

Materials Inventory: 22,000

Using the above information, determine the following missing amounts:

a. cost of goods sold: 260,000 (this one is already done)

b. Finished goods inventory:

c. Direct materials coast:

d.Direct labor cost:

e.Work in process Inventory:

Here's the SOLUTION

Ethical Issue 12-1 Stan Sewell paid $50,000 for a franchise that entitled him- ANSWER KEY

Ethical Issue 12-1

Note: This case is based on an actual situation.

Stan Sewell paid $50,000 for a franchise that entitled him to market software programs in the countries of the European Union. Sewell intended to sell individual franchises for the major language groups of Western Europe—German, French, English, Spanish, and Italian. Naturally, investors considering buying a franchise from Sewell asked to see the financial statements of his business.
Believing the value of the franchise to be $500,000, Sewell sought to capitalize his own franchise at $500,000. The law firm of St. Charles & LaDue helped Sewell form a corporation chartered to issue 500,000 shares of common stock with par value of $1 per share. Attorneys suggested the following chain of transactions:
a. Sewell's cousin, Bob, borrows $500,000 from a bank and purchases the franchise from Sewell.
b. Sewell pays the corporation $500,000 to acquire all its stock.
c. The corporation buys the franchise from Cousin Bob.
d. Cousin Bob repays the $500,000 loan to the bank.
In the final analysis, Cousin Bob is debt-free and out of the picture. Sewell owns all the corporation's stock, and the corporation owns the franchise. The corporation's balance sheet lists a franchise acquired at a cost of $500,000. This balance sheet is Sewell's most valuable marketing tool.

Requirements

1. What is unethical about this situation?
2. Who can be harmed? How can they be harmed? What role does accounting play?

Here's the SOLUTION

PROBLEM 20-5A Near the end of 2011, the management of Simid Sports Co- ANSWER KEY

PROBLEM 20-5A Preparation of a complete master budget

Near the end of 2011, the management of Simid Sports Co, a merchandising company, prepared the following estimated balance sheet
for December 31, 2011

Simid Sports Company
Estimated Balance Sheet
December 31,2011

Assets
Cash $18,000
Accounts Receivable 262,500
Inventory 75,000
Total Current Assets 355,500
Equipment $270,000
Less accumulted depreciation 33,750 236,250
Total Assets $591,750

Liabilities and Equity
Accounts Payable $180,000
Bank loan payable 7,500
Taxes payable (due 33/15/2012) 45,000
Total liabilities $232,500
Common Stock 236,250
Retained Earnings 123,000
Total stockholders equity 359,250
Total liabilities and equity $591,750

To prepare a master budget for January, February and March 2012, management gathers the following information

a. Simid Sprts single product is purchased for $30 per unit and resold for $55 per unit. The expected inventory level of 2,500 units on
December 1,2011, is more than management's desired level for 2012, which is 20% of the next months expected sales (in units). Expected
sales are: January, 3,500 units, February, 4,500 units, March, 5,000 units, and April, 5,000 units.

b. Cash slaes nd credit sales represent 25% and 75%, respectively, of total sales. Of the credit sales, 60% is collected in the first month after
the month of sale and 40% in the second month, after the month of sale. For the December 31, 2011, accounts receivable balance, $62,500 is
collected in January and the remaining $200,000 is collected in February.
c. Merchandise purchases are paid for as follows: 20% in the first month after the month of purchase and 80% in the second month after the
month of purhase. For the December 31, 201, accounts payable balance, $40,000 is paid in January and the remaining $140,000 is paid in
February.

d. Sales commissions equal to 20% of sales ar paid each month. Sales salaries (excluding commissions) are $30,000 per year.

e. general and administrative salaries are $72,000 per year. Maintenance expense equals $1,000 per month and is paid in cash.
f. Equipment reported in the December 31, 2011, balance sheet was purchased January 2011. It is being depreciated over eight years under
the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter:
January, $18,000, February, $48,000, and March, $14,400. This equipment will be depreciated under the straight-line method over eight years
with no salvage value. A full month's deprecation is taken for the month is which the equipment is purchased.

g. The company plans to acquire land at the end of March at a cost of $75,000, which will be paid with cash on the last day of the month.
h. Simid Sports has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at the end of each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month.
The company has agreed to maintain a minimum ending cash balance of $12,500 each month.

i. The income tax rate for the company is 40%. Income taxes on the first quarter's income will not be paid until Apri l15.

Required.

Prepare a master budget for each of the first three months of 2012; include the following component budgets (show supporting calcuations as
needed, and round amounts to the nearest dollar).

1. Monthly sales budgets (showing both budgeted unit sales and dollar sales)

2. Monthly merchandise purchases budget.
3. Monthly selling expense budget.

4. Monthly general and administrative expense budgets.

5. Monthly capitla expenditures budgets.

6. Monthly cash budgets.

7. Budgeted income statement for the entire first quarter (not for each month)

8. Budget balance sheet as of March 31, 2012.

Here's the SOLUTION

ACCT200 WEEK 7- ANSWER KEY

E11-12, Prepare payroll register and record payroll and payroll tax expense.
Alvarez Company has the following data for the weekly payroll ending January 31.
Hours: Hourly
Rate: Federal Income
Tax Withheld: Health
Insurance:

Employee: Monday: Tuesday: Wednesday: Thursday: Friday: Saturday:
L. Donnon 8 8 9 8 10 3 $12 $34 $10
L. Gregoire 8 8 8 8 8 2 13 37 25
D. Alcazar 9 10 8 8 9 15 58 25
Employees are paid 1 1/2 times the regular rate for all hours worked in excess of 40 hours per week. FICA taxes are 8.00% on the first $100,000 of gross earnings. Alvarez Company is subject to 5.40% state unemployment taxes and 0.80% federal unemployment taxes on the first $7,000
of gross earnings.

Instructions:
(a) Prepare the payroll register for the weekly payroll.
ALVAREZ COMPANY
Payroll Register
For the Week Ending January 31
Employee Total
Hours Earnings Deductions Net
Pay
Regular Overtime Gross
Pay FICA
Taxes Federal
Income
Taxes Health
Insurance Total


Name Hours Amount Amount Formula Formula Amount Amount Formula Formula
Name Hours Amount Amount Formula Formula Amount Amount Formula Formula
Name Hours Amount Amount Formula Formula Amount Amount Formula Formula
Totals Formula Formula Formula Formula Formula Formula Formula Formula

(b) Prepare the journal entries to record the payroll and Alverez's payroll tax expense.

Jan 31 Account title Amount
Account title Amount
Account title Amount
Account title Amount
Account title Amount

Jan 31 Account title Formula
Account title Amount
Account title Amount
Account title Amount

E12-4, Prepare schedule showing distribution of net income and closing entry.

Martha and Jones have capital balances on January 1 of $50,000 and $40,000 , respectively. The partnership income-sharing agreement provides for (1) annual salaries of $20,000 for
Martha and $12,000 for Jones, (2) interest at 10% on beginning capital balances, and
(3) remaining income or loss to be shared 60% by Martha and 40% by Jones.

Instructions:

(a)(1) Prepare a schedule showing the distribution of net income, assuming net income is $55,000 .

Martha Jones Total
Salary allowance Amount Amount Formula
Title
Title Amount
Title Amount
Total interest Formula
Total salaries and interest Formula Formula Formula
Title
Title Amount
Title Amount
Total remainder Formula
Total division Formula Formula Formula

(a)(2) Prepare a schedule showing the distribution of net income, assuming net income is $30,000

Martha Jones Total
Salary allowance Amount Amount Formula
Title
Title Amount
Title Amount
Total interest Formula
Total salaries and interest Formula Formula Formula
Title
Title Amount
Title Amount
Total remainder Formula
Total division Formula Formula Formula

(b) Journalize the allocation of net income in each of the situations above.

(b) (1) Account title Amount
Account title Amount
Account title Amount

(b) (2) Account title Amount
Account title Amount
Account title Amount

Here's the SOLUTION

ACCT200 WEEK 6- ANSWER KEY

Accounting Principles, Tenth Edition by Weygandt, Kieso, and Kimmel

P9-3A, Journalize entries to record transactions related to bad debts.
Presented below is an aging schedule for McCann Company.:
Number of Days Past Due
Customer: Total: Not yet due: 1 ~ 30 31 ~ 60 61 ~ 90 Over 90
Amos $22,000 $10,000 $12,000
Brian 40,000 $40,000
Chevy 57,000 16,000 6,000 $35,000
Drake 34,000 $34,000
Others 132,000 96,000 16,000 14,000 6,000
$285,000 $152,000 $32,000 $26,000 $35,000 $40,000
Estimated % Uncollectible 3% 6% 13% 25% 60%
Total Est. Bad Debts $42,610 $4,560 $1,920 $3,380 $8,750 $24,000

At December 31, 2012, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000

Instructions:
(a) Journalize and post the adjusting entry for bad debts at December 31, 2012.
(b) Journalize and post to the allowance account the following events and transactions in the year 2013:

(1) March 31, a $1,000 customer balance originating in 2012 is judged uncollectible.
(2) May 31, a check for $1,000 is received from the customers whose account was written
off as uncollectible on March 31.

(a) 12/31/12 Account title Amount
Account title Amount

(a) & (b)
Bad Debts Expense
Date Explanation Ref. Debit Credit Balance
12/31/12

Allowance for Doubtful Accounts
Date Explanation Ref. Debit Credit Balance
12/31/12
12/31/12
03/31/13
05/31/13

(b) (1)
03/31/13 Account title Amount
Account title Amount

(b) (2) 05/31/13 Account title Amount
Account title Amount

05/31/13 Account title Amount
Account title Amount

(c) Journalize the adjusting entry for bad debts on December 31, 2013. Assume that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $800 , and the aging schedule indicates that total estimated bad debts will be $28,600

(c) 12/31/13 Account title Amount
Account title Amount

P10-5A, Journalize a series of equipment transactions related to purchase, sale, retirement, and depreciation.
At December 31, 2012, Alina Company reported the following as plant assets.
Land $4,000,000
Buildings $28,500,000
Less: Accumulated Depreciation - Buildings 12,100,000 16,400,000
Equipment 48,000,000
Less: Accumulated Depreciation - Equipment 5,000,000 43,000,000
Total plant assets $63,400,000
During 2013, the following selected cash transactions occurred:
Apr 1 Purchased land for $2,130,000
May 1 Sold equipment that cost $780,000 when purchased on January 1, 2009. The equipment was sold for $450,000
Jun 1 Sold land purchased on June 1, 2003, for $1,500,000 The land cost was $400,000
Jul 1 Purchased equipment of $2,000,000
Dec 31 Retired equipment that cost $500,000 when purchased on December 31, 2003. No salvage
value was received.

Instructions:
(a) Journalize the above transactions. Walton uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement.



(a) Apr 1 Account title Amount
Account title Amount

May 1 Account title Amount
Account title Amount
Area for computation

May 1 Account title Amount
Account title Amount
Account title Amount
Account title Amount

Cost $780,000
Title Amount
Title Formula
Title Amount
Title Formula

Jun 1 Account title Amount
Account title Amount
Account title Amount

Jul 1 Account title Amount
Account title Amount

Dec 31 Account title Amount
Account title Amount
Area for computation

Dec 31 Account title Amount
Account title Amount

Title - Area for computation Amount
Title - Area for computation Amount
Book value Formula

(b) Record adjusting entries for depreciation for 2013.

Dec 31 Account title Amount
Account title Amount
Area for computation

Dec 31 Account title Amount
Account title Amount

Title / computation area Amount
Title / computation area Amount
Total: Formula

(c) Prepare the plant assets section of Alina’s balance sheet at December 31, 2013.
ALINA COMPANY
Partial Balance Sheet
December 31, 2013
Plant Assets
Account title Amount
Account title Amount
Account title Amount Formula
Account title Amount
Account title Amount Formula
Total plant assets Formula

T Accounts below for illustrative information.

Here's the SOLUTION

BE17-2 Classify each item as an operating, investing, or financing activity- ANSWER KEY

BE17-2

Classify each item as an operating, investing, or financing activity. Assume all items involve cash unless there is information to the contrary.

(a) Purchase of equipment.
(b) Sale of building.
(c) Redemption of bonds.
(d) Depreciation.
(e) Payment of dividends.
(f) Issuance of capital stock.

Here's the SOLUTION

ACC 206 Week 3- P17A-11A Amy Electronics makes CD players in three processes- ANSWER KEY

ACC 206 Week 3

P17A-11A

Computing equivalent units and assigning costs to completed units and ending work in process; no beginning work in process inventory or cost transferred in

Amy Electronics makes CD players in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The assembly Department had no work in process inventory on October 31. In mid-November, Amy Electronics started production on 125,000 CD players. Of this number, 98,800 CD players were assembled during November and transferred out to the Programming Department. The November 30 work in process inventory in the Assembly Department was 25% of the way through the assembly process. Direct materials costing $437,500 were placed in production in Assembly during November, and Direct labor of $200,800 and Manufacturing overhead of $134,275 were assigned to that department.

Requirements:

1. Compute the number of equivalent units and the cost per equivalent unit in the Assembly Department for November.
2. Assign total costs in the Assembly Department to (a) units completed and transferred to Programming during November and (b) units still ill process at November 30.
3. Prepare a T-account for Work in process inventory-Assembly to show its activity during November, including the November 30 balance.

Here's the SOLUTION

ACC 206 Week 3- P17-26A Lu Technology, Co., manufactures CDs and DVDs for computer- ANSWER KEY

ACC 206 Week 3

P17-26A

Preparing and using a job cost record

Lu Technology, Co., manufactures CDs and DVDs for computer software and entertainment companies. Lu uses job order costing and has a perpetual inventory system.
On April 2, Lu began production of 5,900 DVDs, Job 423, for Stick People Pictures for $1.30 sales price per DVD. Lu promised to deliver the DVD’s to Stick People by April 5. Lu incurred the following costs:

Date Labor Time Record No. Description Amount

4/2 655 10 hours @ $14 $ 140
4/3 656 20 hours @ $13 260


Materials
Requisition

Date No. Description Amount

4/2 63 31 lbs, polycarbonate plastic @ $11 $341
4/2 64 25 lbs. acrylic plastic @ $27 675
4/3 74 3 lbs. refined aluminum @ $42 126


Stick People provides the movie file for Lu to burn onto the DVD’s at a cost of $0.50 per DVD. Lu Technology allocates manufacturing overhead to jobs base on the relation between estimated overhead of $540,000 and estimated direct labor cost of $432,000. Job 423 was completed and shipped on April 3.


Requirements:

1. Prepare a job cost record similar to Exhibit 17-6 for job 423. Calculate the pre-determined overhead rate; then allocate manufacturing overhead to the job.
2. Journalize in summary form the requisition of direct material (including the movie files) and the assignment of direct labor and manufacturing overhead to Job 423.
3. Journalize completion of the job and the sale of the 5,900 DVD’s.

Here's the SOLUTION

ACC 206 Week 3- P16-25A Charlie's Pets succeeded so well that Charlie decided- ANSWER KEY

ACC 206 Week 3

P16-25A

Preparing cost of goods manufactured schedule and Income statement for a manufacturing company

Charlie's Pets succeeded so well that Charlie decided to manufacture his own brand of chewing bone-Fido Treats. At the end of December 2012, his accounting records showed the following:

Inventories: Beginning Ending

Materials $ 13,400 $9,500
Work in process 0 2,000
Finished goods 0 5,300

Other information:

Direct material purchases $ 33,000 Utilities for plant $1,600
Plant janitorial services 800 Rent of plant 13,000
Sales salaries expense 5,000 Cust.Serv. HotLine Exp 1,400
Delivery expense 1,700 Direct labor 22,000
Sales revenue 109,000


Requirements:

1. Prepare a schedule of cost of goods manufactured for Fido Treats for the year
ended December 31, 2012.
2. Prepare an income statement for Fido Treats for the year ended December 31, 2012.
3. How does the format of the income statement for Fido Treats differ from the income statement of a merchandiser?
4. Fido Treats manufactured 18,075 units of its product in 2012. Compute the company’s unit product cost for the year.

Here's the SOLUTION

ACC 206 Week 3- E16-17 Fido Grooming provides grooming services- ANSWER KEY

ACC 206 Week 3

E16-17

Calculating income and cost per unit for a service company

Fido Grooming provides grooming services in the local community, In April, Kevin Oliver, the owner, incurred the following operating costs to groom 650 dogs:

Wages …………………………………………………………………… $3,900
Grooming supplies expense …………………………………. 1,625
Building rent expense ………………………………………….. 1,300
Utilities …………………………………………………………………. 325
Depreciation on equipment .............................. 130


Fido Grooming earned $16,300 in revenues from grooming for the month of April.

Requirements:

1. What is Fido's net operating income for April?
2. What is the cost to groom one dog?

Here's the SOLUTION

ACC 206 Week 2- P15-26A Comparative financial statement data of Danfield, Inc.- ANSWER KEY

ACC 206 Week 2

P15-26A

Using ratios to evaluate a stock investment

Comparative financial statement data of Danfield, Inc., follow:


DANFIELD, INC.
Comparative Income Statement
Years Ended December 31, 2012 and 2011
2012 2011

Net sales $ 467,000 $ 428,000
Cost of goods sold 237,000 218,000
---------------------------------------
Gross profit $ 230,000 $ 210,000
Operating expenses 136,000 134,000
---------------------------------------
Income from operations $ 94,000 $ 76,000
Interest expense 9,000 10,000
---------------------------------------
Income before income tax $ 85,000 $ 66,000
Income tax expense 24,000 27,000
---------------------------------------
Net income $ 61,000 $ 39,000
____________________________
DANFIELD, INC.
Comparative Balance Sheet
December 31, 2012 and 2011

2012 2011 2010
Current assets:
Cash $ 97,000 $ 95,000
Current receivables, net 112,000 118,000 $ 102,000
Inventories 145,000 163,000 203,000
Prepaid expenses 12,000 5,000
------------- -----------
Total current assets $ 366,000 $ 381,000
Property, plant, and equipment, net 211,000 179,000
------------- -----------
Total assets $ 577,000 $ 560,000 598,000
------------- ------------
Total current liabilities $ 225,000 $ 246,000
Long-term liabilities 114,000 97,000
------------- -----------
Total liabilities $ 339,000 $ 343,000
Preferred stock, 3% 108,000 108,000
Common stockholders' equity, no par 130,000 109,000 85,000
-------------- -----------
Total liabilities and stockholders' equity $ 577,000 $ 560,000
-------------- ------------
*Selected 2010 amounts

Market price of Danfield's common stock: $86.58 at December 31, 2012, and
$46.54 at December 31, 2011.
Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and
2010.
3. All sales on credit.

Requirements:

1. Compute the following ratios for 2012 and 2011:
a. Current ratio
b. Times-interest-earned ratio
c. Inventory turnover
d. Gross profit percentage
e. Debt to equity ratio
f. Rate of return on common stockholders' equity
g. Earnings per share of common stock
h. Price/earnings ratio

Decide (a) whether of Danfield's ability to pay debts and to sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.

Here's the SOLUTION

ACC 206 Week 2- E15-18 Large Land Photo Shop has asked you to determine- ANSWER KEY

ACC 206 Week 2

E15-18

Analyzing the ability to pay liabilities

Large Land Photo Shop has asked you to determine whether the company's ability to
Pay current liabilities and total liabilities improved or deteriorated during 2012. To
Answer this question, you gather the following data:


2012 2011

Cash ……………………………………………………………………………………………… $ 58,000 $ 57,000
Short-term investments ……………………………………………………………... 31,000 ---
Net receivables ……………………………………………………………………………. 110,000 132,000
Inventory …………………………………………………………………………………….. 247,000 297,000
Total assets ………………………………………………………………………………….. 585,000 535,000
Total current liabilities ………………………………………………………………... 255,000 222,000
Long-term note payable ………………………………………………………………. 46,000 48,000
Income from operations ……………………………………………………………... 180,000 153,000
Interest expense …………………………………………………………………………. 52,000 39,000

Requirements:
Compute the following ratios for 2012 and 2011:
a. Current ratio
b. Acid-test ratio
c. Debt ratio
d. Debt to equity ratio

Here's the SOLUTION

ACC 206 Week 2- P14-25A Accountants for Johnson, Inc., have assembled-ANSWER KEY

ACC 206 Week 2

P14-25A

Preparing the statement of cash flows-indirect method

Accountants for Johnson, Inc., have assembled the following data for the year ended
December 31, 2012:

December 31,
_____________________
2012 2011

Current Accounts:
Current assets:
Cash and cash equivalents …………………………………………… $92,100 $ 17,000
Accounts receivable ………………………………………………………. $64,500 $ 69,200
Inventories ……………………………………………………………………. $87,000 $ 80,000
Current liabilities:
Accounts payable ………………………………………………………….. $57,900 $56,200
Income tax payable ………………………………………………………. $14,400 $17,100



Transaction Data for 2012

Issuance of common stock Payment of note payable …………. $48,100
for cash……………………………… $40,000 Payment of cash dividends ………. $54,000
Depreciation expense………………. $25,000 Issuance of note payable
Purchase of equipment……………..$75,000 to borrow cash ………………… $67,000
Acquisition of land by issuing Gain on sale of building.……………… $5,500
long-term note payable…….$122,000 Net income…………………………………. $70,500
Cost basis of building sold ………. $53,000

Requirement:

Prepare Johnson's statement of cash flows using the indirect method. Include an accompanying schedule of noncash investing and financing activities.

Here's the SOLUTION

ACC 206 Week 2- E14-13 Classifying items on the indirect statement of cash flows- ANSWER KEY

ACC 206 Week 2 9th ed

E14-13

Classifying items on the indirect statement of cash flows

The cash flow statement categorizes like transactions for optimal reporting.

Requirement:

1. Identify each of the following transactions as one of the following:

• Operating activity (0)
• Investing activity (I)
• Financing activity (F)
• Noncash investing and financing activity (NIF)
• Transaction that is not reported on the statement of cash flows (N)
For each cash flow, indicate whether the item increases (+) or decreases (-) cash.
The indirect method is used to report cash flows from operating activities.

___ a. Loss on sale of land.
___ b. Acquisition of equipment by issuance of note payable.
___ c. Payment of long-term debt.
___ d. Acquisition of building by issuance of common stock. J
___ e. Increase in salary payable.
___ f. Decrease in inventory.
___ g. Increase in prepaid expenses.
___ h. Decrease in accrued liabilities.
___ i. Cash sale of land.
___ j. Issuance of long-term note payable to borrow cash.
___ k. Depreciation
___ 1. Purchase of treasury stock.
___ m. Issuance of common stock.
___ n. Increase in accounts payable.
___ o. Net income.
___ p. Payment of cash dividend.

Here's the SOLUTION

ACC 206 Week 3- P17-32B True Technology, Co., manufactures CDs and DVDs- ANSWER KEY

ACC 206 Week 3

P17-32B

Preparing and using a job cost record

True Technology, Co., manufactures CDs and DVDs for computer software and
entertainment companies. True Technology uses job order costing and has a perpetual inventory system.

On November 2, True began production of 5,500 DVDs, Job 423, for Leopard pictures for $1.60 sales price per DVD. True promised to deliver the DVD’s to Leopard by November 5. True incurred the following costs:

Date Labor Time Record No. Description Amount
11/2 655 10 hours @ $18 $ 180
11/3 656 20 hours @ $14 280

Materials
Requisition

Date No. Description Amount
11/2 63 311 bs. polycarbonate plastic @ $12 $ 372
11/2 64 25 lbs. acrylic plastic @ $29 725
11/3 74 3 lbs. refined aluminum @ $48 144
Leopard Pictures provides the movie file for True to burn onto the DVDs at a cost of
$0.45 per DVD. True Technology allocates manufacturing overhead to jobs based on
the relation between estimated overhead of $550,000 and estimated direct labor
costs of $500,000. Job 423 was completed and shipped on November 3.

Requirements:

1. Prepare a job cost record similar to Exhibit 17-6 for Job 423. Calculate the predetermined
overhead rate, then allocate manufacturing overhead to the job.
2. Journalize in summary form the requisition of direct materials (including the
movie files) and the assignment of direct labor and manufacturing overhead to
Job 423.
3. Journalize completion of the job and the sale of the 5,500 DVDs.

Here's the SOLUTION

ACC 206 Week 3- E16-20 Knight, Corp., a lamp manufacturer, provided- ANSWER KEY

ACC 206 Week 3

E16-20

Preparing a statement of cost of goods manufactured

Knight, Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2012:

Inventories: Beginning Ending

Materials $ 56,000 $23,000
Work in process 103,000 63,000
Finished goods 41,000 48,000


Other information:
Depreciation: plant building & equipment $16,000 Repairs & maint-plant $8,000
Materials purchases 159,000 Indirect labor $32,000
Insurance on plant 22,000 Direct labor 122,000
Sales salaries expense 46,000 Administrative Exp. 59,000

Requirements:

Prepare a schedule of cost of goods manufactured.
What is the unit product cost if Knight manufactured 2,160 lamps for the year?

Here's the SOLUTION

ACC 206 Week 3- E16-18 Snyder Brush Company sells standard hair brushes- ANSWER KEY

ACC 206 Week 3 9th ed.

E16-18

Preparing an income statement and computing the unit cost for a
merchandising company

Snyder Brush Company sells standard hair brushes. The following information summarizes
Snyder's operating activities for 2012:


Selling and administrative expenses …………………………………… $ 49,680
Purchases …………………………………………………………………………….. 78,000
Sales revenue ………………………………………………………………………. 138,000
Merchandise inventory, January 1,2012 …………………………….. 7,500
Merchandise inventory, December 31, 2012 ……………………… 12,360
Requirements:

1. Prepare an income statement for 2012. Compute the ratio of operation expense to total revenue and operating income to total revenue.
2. Snyder sold 6,000 brushes in 2012. Compute the unit cost for one brush

Here's the SOLUTION

Acct 560 Week 9- E13-6 The three accounts shown below appear in the general ledger of Cesar Corp.

E13-6 The three accounts shown below appear in the general ledger of Cesar Corp. during 2008.


Equipment
Date Debit Credit Balance
Jan. 1 Balance 160,000
July 31 Purchase of equipment 70,000 230,000
Sept. 2 Cost of equipment constructed 53,000 283,000
Nov. 10 Cost of equipment sold 49,000 234,000

Accumulated Depreciation-Equipment
Date Debit Credit Balance
Jan. 1 Balance 71,000
Nov. 10 Accumulated depreciation on
equipment sold 30,000 41,000
Dec. 31 Depreciation for year 28,000 69,000

Retained Earnings
Date Debit Credit Balance
Jan. 1 Balance 105,000
Aug. 23 Dividends (cash) 14,000 91,000
Dec. 31 Net income 67,000 158,000
From the postings in the accounts, indicate how the information is reported on a statement of cash flows using the indirect method. The loss on sale of equipment was $5,000. (Hint: Cost of equipment constructed is reported in the investing activities section as a decrease in cash of $53,000.)

CESAR CORPPartial Statement of Cash Flows
For the Year Ended December 31, 2008
Cash flows from operating activities $ Adjustments to reconcile net income to net cash provided by operating activities $


Net cash provided by operating activities Cash flows from investing activities

Net cash used by investing activities
Cash flows from financing activities

Here's the SOLUTION

Exercise 15-9 Sigel Corporation retired- ANSWER KEY

Exercise 15-9

Presented below are three independent situations.

1. Sigel Corporation retired $130,000 face value, 12% bonds on June 30, 2010, at 102. The carrying value of the bonds at the redemption date was $117,500. The bonds pay semiannual interest, and the interest payment due on June 30, 2010, has been made and recorded.

2. Diaz Inc. retired $150,000 face value, 12.5% bonds on June 30, 2010, at 98. The carrying value of the bonds at the redemption date was $151,000. The bonds pay semiannual interest, and the interest payment due on June 30, 2010, has been made and recorded.

3. Haas Company has $80,000, 8%, 12-year convertible bonds outstanding. These bonds were sold at face value and pay semiannual interest on June 30 and December 31 of each year. The bonds are convertible into 30 shares of Haas $5 par value common stock for each $1,000 worth of bonds. On December 31, 2010, after the bond interest has been paid, $20,000 face value bonds were converted. The market value of Haas common stock was $44 per share on December 31, 2010.


Instructions

For each independent situation above, prepare the appropriate journal entry for the redemption or conversion of the bonds. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Here's the SOLUTION

BE15-1 Mareska Inc. is considering two alternatives- ANSWER KEY

BE15-1 Mareska Inc. is considering two alternatives to finance its construction of a new $2 million plant.
Issuance of 200,000 shares of common stock at the market price of $10 per share.
Issuance of $2 million, 8% bonds at par.
Complete the following table. (If answer is zero, please enter 0. Do not leave any fields blank. Round earnings per share to 2 decimal places, e.g. 10.50.)

Issue Stock Issue Bond
Income before interest and taxes $700,000 $700,000
Interest expense from bonds
Income before income taxes
Income tax expense (30%)
Net income $ $

Outstanding shares 500,000

Earnings per share $ $

Here's the SOLUTION

BE15-3 Ratzlaff Company issues $2 million, 10-year, 8% bonds- ANSWER KEY

BE15-3 Ratzlaff Company issues $2 million, 10-year, 8% bonds at 97, with interest payable on July 1 and January 1.


Prepare the journal entry to record the sale of these bonds on January 1, 2010. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account/Description Debit Credit
Jan. 1

Here's the SOLUTION

BE15-6 Pickeril Inc. issues a $600,000, 10%, 10-year mortgage- ANSWER KEY

BE15-6 Pickeril Inc. issues a $600,000, 10%, 10-year mortgage note on December 31, 2010, to obtain financing for a new building. The terms provide for semiannual installment payments of $48,145. Prepare the entry to record the mortgage loan on December 31, 2010, and the first installment payment. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account/Description Debit Credit

Dec. 31

June 30

Here's the SOLUTION

E15-6 Nocioni Company issued- ANSWER KEY

E15-6 Nocioni Company issued $1,000,000 of bonds on January 1, 2010.


Prepare the journal entry to record the issuance of the bonds if they are issued at (1) 100, (2), 98, and (3) 103. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account/Description Debit Credit
At 100

At 98


At 103


Prepare the journal entry to record the retirement of the bonds at maturity, assuming the bonds were issued at 100.

Account/Description Debit Credit

Prepare the journal entry to record the retirement of the bonds before maturity at 98. Assume the balance in Premium on Bonds Payable is $9,000. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account/Description Debit Credit


Prepare the journal entry to record the conversion of the bonds into 30,000 shares of $10 par value common stock. Assume the bonds were issued at par. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Account/Description Debit Credit

Here's the SOLUTION

E15-11 TPo1 Company borrowed- ANSWER KEY

E15-11 TPo1 Company borrowed $300,000 on January 1, 2010, by issuing a $300,000, 8% mortgage note payable. The terms call for semiannual installment payments of $20,000 on June 30 and December 31.


Prepare the journal entries to record the mortgage loan and the first two installment payments. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account/Description Debit Credit
Jan. 1

June 30


Dec. 31

Indicate the amount of mortgage note payable to be reported as a current liability and as a long-term liability at December 31, 2010. (Round computations and final answer to 0 decimal places, e.g. 125.)

Current Liabilities $
Long-term liabilities $

Here's the SOLUTION

P15-1A On May 1, 2010, Newby Corp.- ANSWER KEY

P15-1A On May 1, 2010, Newby Corp. issued $600,000, 9%, 5-year bonds at face value. The bonds were dated May 1, 2010, and pay interest semiannually on May 1 and November 1. Financial statements are prepared annually on December 31.


Prepare the journal entry to record the issuance of the bonds.

Date Account/Description Debit Credit
May 1


Prepare the adjusting entry to record the accrual of interest on December 31, 2010.

Date Account/Description Debit Credit
Dec. 31


Show the balance sheet presentation on December 31, 2010.

Current liabilities
$

Long-term liabilities
$

Prepare the journal entry to record payment of interest on May 1, 2011, assuming no accrual of interest from January 1, 2011, to May 1, 2011. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account/Description Debit Credit
May 1


Prepare the journal entry to record payment of interest on November 1, 2011.

Date Account/Description Debit Credit
Nov. 1

Assume that on November 1, 2011, Newby calls the bonds at 102. Record the redemption of the bonds. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Date Account/Description Debit Credit
Nov. 1

Here's the SOLUTION

Comprehensive Problem 3 Selected transactions completed by Blackwell Company - ANSWER KEY

Comprehensive Problem 3 Selected transactions completed by Blackwell
Company during its first fiscal year ending December 31 were as follow:

Jan. 2. Issued a check to establish a petty cash fund of $2,000.
Mar. 4. Replenished the petty cash fund, based on the following summary of petty cash receipts: office supplies, $789; miscellaneous selling expense,$256; miscellaneous administrative expense, $378.

AND SO ON

Check: 5. Total Assets $1,567,300

Here's the SOLUTION

C9-26 Formation of a Partnership. On May 31, six brothers decided to form the Grimm Brothers - ANSWER KEY

9-26 Formation of a Partnership. On May 31, six brothers decided to form the Grimm Brothers Partnership to publish and print children's stories. The contributions of the brothers and their partnership interests are listed below. They share the economic risk of loss from liabilities according to their partnership interests. Individual Asset Basis FMV Partnership to Partner Interest Al Cash $15,000 $15,000 15% Bob accounts Receiv. 0 20,000 20% Clay Office equip. 13,000 15,000 15% Dave Land 50,000 15,000 15% Ed Building 15,000 150,000 20% Fred Services ? 15,000 15% The following other information about the contributions may be of interest: 1. Bob contributes accounts receivable from this proprietorship, which uses the cash method of accounting. 2. Clay uses the office equipment in a small business he owns. When he joins the partnership, he sells the remaining business assets to an outsider. He has claimed $8,000 of MACRS depreciation on the office equipment. 3. The partnership assumes a $130,000 mortgage on the building Ed contributes. Ed claimed $100,000 of straight-line MACRS depreciation on the commercial property. 4. Fred, an attorney, drew up all the partnership agreements and filed the neccessary paperwork. He receives a full 15% capital and profits interest for his services. a. How much gain, loss or income must each partner recognize as a result of the formation? b. How much gain, loss, or income must the partnership recognize as a result of the formation? c. What is each partner's basis in the partnership interest? d. What is the partnership's basis in its assets? e. What is the partnership's initial book value of each asset? f. What effects do the depreciation recapture provisions have on the property contributions? g. How would your answer to Part a change if Fred received only a profits interest? h. What are the tax consequences to the partners and the partnership when the partnership sells for $9,000 the land contributed by Dave? Prior to the sale, the partnership held the land as an investment for two years.

Here's the SOLUTION

Fraud Case 14-1 Frank Lou had recently been promoted to construction manager- ANSWER KEY

ACC 206 Week 2

The Statement of Cash Flows

From Chapter 14, Fraud Case 14-1. Complete all parts of the case.

Frank Lou had recently been promoted to construction manager at a development firm. He was responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for the new high-rise. Times were tough, several contractors had gone under recently, and the ones left standing were viciously competitive. That morning, four bids were sitting on Frank’s desk. The deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely, was a tough but personable character that Frank had known for years. Frank had lunch with him today, and after a few beers, Bo hinted that if Frank "inadvertently" mentioned the amount of the lowest bid, he'd receive a "birthday card" with a gift of cash. After lunch, Frank carefully unsealed the bids and noticed that another firm had underbid Bo's company by a small margin. Frank took Bo's bid envelope, wrote the low bid amount in pencil on it, and carried it downstairs where Bo's son William was waiting. Later that afternoon, a new bid came in from Bo's company. The next day, Bo's company got the job, and Frank got a birtthday card in his mailbox.


Requirements

• Was Frank's company hurt in any way by this fraudulent action?
• How could this action hurt Frank?
• How can a business protect against this kind of fraud?

Here's the SOLUTION

South-Western Federal Taxation: Individual Income Taxes 2011 (34e) TESTBANK

South-Western Federal Taxation: Individual Income Taxes 2011 (34e) test bank


Here's the SOLUTION

The Rite-Way Plumbing Co. began business March 1, 2007 in Sarasota- ANSWER KEY

Taxation For Decision Makers 2011

Appendix D: Tax Return problem 2

Entity Tax Case


The Rite-Way Plumbing Co. began business March 1, 2007 in Sarasota. Its business address is 124 Division Lane, Sarasota, FL 33645. Its employer identification number is 69-3456789. Its principal business activity is plumbing installation and repair and its business code number is 238220. It files its income tax returns on the calendar-year basis.

The business was formed as a limited partnership by two brothers, John Henry (SSN 555-55-5555) and James Henry (SSN 666-66-6666), who work full-time in the business, and their father Tom Henry (SSN 888-88-8888), the limited partner. The brothers each have a 25% interest in the income, loss, and capital of the business while their father owns a 50% interest in income, loss, and capital, but takes no active interest in the business other than as that of an investor.

At the end of 2010, its operations showed cash gross receipts of $1,240,000 and the following cash expenditure items:

Salaries and wages (excluding John and James) $378,000
Repairs and Maintenance 2,000
Rent 28,000
Taxes and Licenses 38,000
Advertising 3,000
Pension Plans (excluding John and James) 15,000
Health/Dental Insurance 16,000
Material Purchases 220,000
Truck Expense 45,000
Insurance (excluding health/dental) 65,000
Legal/Professional Fees 3,000
Office Expenses 6,000
Utilities/Telephone 8,000
Meals/Entertainment 4,000
Draw John 75,000
Draw James 60,000
Total Cash Expenditures $966,000

John and James each receive a guaranteed payment of $75,000 in addition to the payment of their health and dental insurance premiums, which were $3,000 each. The other insurance payments include the $1,500 premiums for $200,000 term life insurance policies each on John and James that name the partnership as beneficiary.

Although the company maintains a certain level of plumbing supplies for its business inventory is not a material income producing factor; thus, material purchases are expenses. The partnership uses the cash method of accounting for revenue and expenses.

The company purchased the following items for use solely in the business during 2010: a new truck (weighing over 6,000 pounds) bought on June 21 that cost $21,250; a new computer system bought on August 17 costing $3,200; additional new office furniture bought on December 4 costing $2,500.

At the beginning of 2010, the company owned the following items that were all purchased the month the company began business. In that year, the company did not elect bonus depreciation or Section 179 expensing for any of its truck, equipment, or furniture purchases:

Asset Cost basis
Trucks $78,000
Plumbing equipment (7 year property) 23,000
Office furniture 16,000
Computer system 4,000

On March 12, 2010, it sold one of its old trucks for $6,000 that had originally cost $17,000. It also was able to sell its old computer system on September 12, 2010 for $250. It donated two pieces of its old office furniture to Goodwill Industries. This furniture had cost $1,500 and had a current value of $600.

REQUIRED

Using the 2010 fill-in forms (the latest available) on the IRS website (www.irs.gov), prepare pages 1, 2, and 3 of Form 1065 (you are not required to complete Schedules L, M-1, or M-2) for the Rite-Way Plumbing Co. along with the Schedule K-1s for each of the three partners and any other required forms. The partnership wants to maximize its cost recovery deductions for tax purposes.

Here's the SOLUTION

E12-16 (Accounting for R&D Costs) Leontyne Price Company- ANSWER KEY

E12-16 (Accounting for R&D Costs) Leontyne Price Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2006 the company expends $325,000 on a research project, but by the end of 2006 it is impossible to determine whether any benefit will be derived from it.

Instructions

(a) What account should be charged for the $325,000, and how should it be shown in the financial statements?

(b) The project is completed in 2007, and a successful patent is obtained. The R&D costs to complete the project are $110,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2007 total $16,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2007.

(c) In 2008, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2015. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2008.

(d) Additional engineering and consulting costs incurred in 2008 required to advance the design of a product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably. Discuss the proper accounting treatment for this cost.

Here's the SOLUTION

Which of the following describes the term outstanding stock

ACC 206 Week 1 Quiz 9th ed.

1. Which of the following describes the term outstanding stock? (Points : 1)
The shares of stock that are held by the stockholders
The shares of stock that have been sold for the highest price
The total amount of stock that has been authorized by state law
The total amount of stock that has not been sold yet

2. Please refer to the following information for Petra Sales Company:


Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
Paid-in capital in excess of par: $1,600,000
Retained earnings: $2,440,000
Treasury stock: 20,000 shares purchased at $12 per share


If Petra Sales purchases an additional 5,000 shares of treasury stock at $14 per share, the total equity of the company will go down by $70,000. (Points : 1)
True
False

3. Which of the following statements is TRUE? (Points : 1)
The purchase of treasury stock decreases assets and decreases stockholders' equity.
The purchase of treasury stock increases assets and increases stockholders' equity.
The purchase of treasury stock increases assets and decreases stockholders' equity.
The purchase of treasury stock decreases assets and increases stockholders' equity.

4. Occidental Produce Company has 40,000 shares of common stock outstanding and 2,000 shares of preferred stock outstanding. The common stock is $0.01 par value; the preferred stock is 4% non-cumulative, with $100 par value. On October 15, 2014, the company declares a total dividend payment of 40,000. What is the amount of dividend which will be paid for each share of common stock? (Points : 1)
$ 0.80
$400.00
$ 4.00
$ 1.00
None of these is correct

5. The two basic sources of equity are: (Points : 1)
common stock and bonds.
common stock and preferred stock.
paid-in capital and retained earnings.
loans from banks and gifts from donors.

6. Cash dividends affect only stockholders' equity accounts. (Points : 1)
True
False

7. If a company does not have enough cash to pay out regular dividends, but still wishes to give the shareholders something that they would consider of value, the company should consider doing a stock split. (Points : 1)
True
False

8. If preferred stock is non-cumulative, then the company does NOT need to pay dividends that were passed in previous years. (Points : 1)
True
False

9. On March 1, 2013, Parkinson Company originally issued 10,000 shares of common stock at $4.00 per share. The stock had a par value of $0.01 per share. On March 1, 2012, Parkinson distributed a 12% stock dividend; the market price at that time had dropped to $3.75 per share. Parkinson must record a loss of $300. (Points : 1)
True
False

10. Treasury stock is a corporation's own stock that it has issued and later reacquired. (Points : 1)
True
False

Here's the SOLUTION

P13-25A Journalizing dividend and treasury stock transactions, and preparing stockholders' equity- ANSWER KEY

P13-25A Journalizing dividend and treasury stock transactions, and preparing stockholders' equity

The balance sheet of Lennox Health Foods, at December 31, 2011 reported 120,000 shares of no-par common stock authorized, with 25,000 shares issued and a Common stock balance of $190,000. Retained earnings had a balance of $115,000. During 2012, the company completed the following selected transactions:

Mar 15 - Purchased 9,000 shares of treasury stock at $8 per share.
Apr 30 - Distributed a 10% stock dividend on the outstanding shares of common stock.
The market value of common stock was $9 per share.
Dec 31 - Earned net income of $110,000 during the year. Closed net income to Retained

Requirements:

Record the transactions in the general journal. Explanations are not required.
Prepare the stockholders' equity section of Lennox Health Foods' balance sheet at December 31, 2012.

Here's the SOLUTION

P13-24A Journalizing stockholders' equity transactions- ANSWER KEY

P13-24A Journalizing stockholders' equity transactions

Summerborn Manufacturing, Co., completed the following transactions during 2012.

Jan 16 - Declared a cash dividend on the 5%, $100 par preferred stock
(900 shares outstanding). Declared a $0.30 per share dividend on the
80,000 shares of common stock outstanding. The date of record is January 31, ,and the payment due date is February 15.

Feb 15 - Paid the cash dividends.
Jun 10 - Split common stock 2 for 1. Before the split, Summerborn had 80,000 shares of $6 par common stock outstanding.
Jul 30 - Distributed a 50% stock dividend on the common stock. The market value of the common stock was $9 per share.
Oct 26 - Purchased 1,000 shares of treasury stock at $13 per share.
Nov 8 - Sold 500 shares of treasury stock for $15 per share.
Nov30 - Sold 300 shares of treasury stock for $8 per share,

Requirement

1. Record the transactions in Surnmerborn's general journal.

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P12-32A Computing dividends on preferred and common stock- ANSWER KEY

P12-32A Computing dividends on preferred and common stock.

Fashionista Skincare has 10,000 shares of 3%, $20 par value preferred stock and 90,000 shares $2 par common stock outstanding. During a three-year period, Fashionista declared and paid cash dividends as follows: 2010, $3,000; 2011, $13,000; and 2012, $17,000.

Requirements:

Compute the total dividends to preferred and to common for each of the three years if
-preferred is noncumulative.
-referred is cumulative,

For requirement 1.b., journalize the declaration of the 2012 dividends on December 22, 2012, and payment on January 14,2013. Use separate Dividends payable accounts for preferred and common.

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P12-30A Issuing stock and preparing the stockholders' equity section of the balance sheet- ANSWER KEY

ACC 206 Week 1 Discussions 1 9th ed.

P12-30A Issuing stock and preparing the stockholders' equity section of the balance sheet

Lincoln-Priest, Inc., was organized in 2011. At December 31, 2011, the Lincoln-Priest balance sheet reported the following stockholders' equity:

LINCOLN-PRIEST, INC.
Stockholders' Equity
December 31,2011

Paid-in Capital:
Preferred stock, 7%, $40 par, 110,000 shares authorized, none issued $0
Common stock, $1 par, 520,000 shares authorized, 61,000 shares issued and outstanding
………………………………………………………………………. $61,000
Paid-in capital in excess of par—common $41,000
Total paid-in capital $102,000
Retained earnings $29,000
Total stockholders' equity………………………………. $131,000

Requirements

1. During 2012, the company completed the following transactions. Journalize each transaction. Explanations are not required.

a. Issued for cash 1,300 shares of preferred stock at par value.
b. Issued for cash 2,400 shares of common stock a a price of $5 per share.
c. Net income for the year was $74,000, and the company declared no dividends. Make the closing entry for net income.

2. Prepare the stockholders' equity section of the Lincoln-Priest
December 31, 2012.

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