Accounting

Problem 3 – Variable costing (40 points) (265) Miller Corporation produces a single product. The company had the following results for its first two years of operation: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Year 1 $1,200,000 800,000 400,000 300,000 $100,000 Year 2 $1,200,000 680,000 520,000 300,000 $220,000 In Year 1, the company produced and sold 40,000 units of its only product; in Year 2, the company again sold 40,000 units, but increased production to 50,000 units. Fixed manufacturing overhead cost is $600,000 a year and was applied to the product on the basis of each year’s unit production (i.e., a new fixed manufacturing overhead rate is computed each year). Variable selling and administrative expenses are $2 per unit sold. Required: a. Compute the unit product cost for each year under absorption costing and under variable costing. b. Prepare a contribution format income statement for each year using variable costing. c. Explain why the net operating income for Year 2 under absorption costing was higher than the net operating income for Year 1, although the same number of units were sold in each year.

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Brief Exercise 4-06 al-a2 The income statement for Salt Creek Golf Club for the month ending July 31 shows Service Revenue $17,800, Salaries and Wages Expense $9,66 Maintenance and Repairs Expense $2,500, and Net Income $5,700. Prepare the entries to close the revenue and expense accounts. (Credit account titles are automatically indented when amount entered. Do not indent manually.) Date Account Thules and Explanation Debit Credit July 31 (To close revenue account) July 31 (Todose expense accounts) OUT OF ACCOUNTS Post the entries to the revenue and expense accounts, and complete the closing process for these accounts using the three-column form of account. Service Revenue Debit Credit Balance Date Explanation Ref. 7/31 Balance 7/31 Closing entry Salaries and Wages Expense Date Explanation Ref. Debit Credit Balance 7/31 Balance 7/31 Closing entry dy Maintenance and Repairs Expense Date Explanation Ref. Debit Credit 7/31 Balance Balance */31 Closing entry Click if you would like to show Work for this question: Qren Show Work

EXPERT ANSWER Date Account Titles and Explanations Debit Credit July 31 Service Revenue $ 17,800 Income Summary $ 17,800 (To close Revenue account) July 31 Income Summary $ 12,100 Salaries and Wages expense $ 9,600 Maintenance and Repairs expense $ 2,500 (To close expense accounts) Service Revenue Date Explanaation Ref. Debit Credit Balance 7/31 Balance …

Brief Exercise 4-06 al-a2 The income statement for Salt Creek Golf Club for the month ending July 31 shows Service Revenue $17,800, Salaries and Wages Expense $9,66 Maintenance and Repairs Expense $2,500, and Net Income $5,700. Prepare the entries to close the revenue and expense accounts. (Credit account titles are automatically indented when amount entered. Do not indent manually.) Date Account Thules and Explanation Debit Credit July 31 (To close revenue account) July 31 (Todose expense accounts) OUT OF ACCOUNTS Post the entries to the revenue and expense accounts, and complete the closing process for these accounts using the three-column form of account. Service Revenue Debit Credit Balance Date Explanation Ref. 7/31 Balance 7/31 Closing entry Salaries and Wages Expense Date Explanation Ref. Debit Credit Balance 7/31 Balance 7/31 Closing entry dy Maintenance and Repairs Expense Date Explanation Ref. Debit Credit 7/31 Balance Balance */31 Closing entry Click if you would like to show Work for this question: Qren Show Work Read More »

Case Study -Adjusting and closing entries and Preparing Statements The following trial balance was taken from the books of Fisk Corporation on December 31, 2022. At year end, the following items have not yet been recorded. a. Insurance expired during the year, ∈2,000 . b. Estimated bad debts, €2,600 . c. Depreciation on equipment, 10% per year. d. Interest at 5% is receivable on the note for one full year. e. Services provided but not yet billed, 65,400 . f. Accrued salaries and wages at December 31,€5,800 . Instructions (a) Prepare the necessary adjusting entries. (b) Prepare the necessary closing entries. (C) Prepare Income Statement. (d) Prepare Statement of Owner’s equity. (e) Prepare Classified Balance Sheet.

EXPERT ANSWER a) adjusting Entries Date Account Dr Cr 2022-12-31 Insurance Expense $2,000 Prepaid Insurance $2,000 Date Account Dr Cr 2022-12-31 Bad Debts $2,600 aallowance for doubtful debts $2,600 Being Bad Debts provision created Date Account Dr Cr 2022-12-31 Depreciation Expense $10,500 Accumulated Depreciation – Equipment $10,500 being depreciation provided on equipment Date Account Dr …

Case Study -Adjusting and closing entries and Preparing Statements The following trial balance was taken from the books of Fisk Corporation on December 31, 2022. At year end, the following items have not yet been recorded. a. Insurance expired during the year, ∈2,000 . b. Estimated bad debts, €2,600 . c. Depreciation on equipment, 10% per year. d. Interest at 5% is receivable on the note for one full year. e. Services provided but not yet billed, 65,400 . f. Accrued salaries and wages at December 31,€5,800 . Instructions (a) Prepare the necessary adjusting entries. (b) Prepare the necessary closing entries. (C) Prepare Income Statement. (d) Prepare Statement of Owner’s equity. (e) Prepare Classified Balance Sheet. Read More »

Flying Tomato sells a snowboard, WhiteOut, that is popular with snowboard enthusiasts. Presented below is information relating to Flying Tomato’s purchases of WhiteOut snowboards during September. During the same month, 121 WhiteOut snowboards were sold at $170 each. Flying Tomato uses a periodic inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 Explanation Units Unit Cost Total Cost Inventory Purchases45106 Purchases Purchases 50112 25 $100 S 2,500 4,770 2,640 5.600 $15.510 24 110 Totals 144 Instructions: a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method sold. What do you notice about the answers you found for each method? sheet? Which results in a larger amount reported for stockholders equity on the b) For both FIFO and LIFO, caiculate the sum of ending inventory and cost of goods c) What is gross profit under each method? d) Which method results in a larger amoupt reported for assets on the balance balance sheet?

EXPERT ANSWER a) Ending inventory at September 30 = Total units available – Units sold = 144 – 121 = 23 units Ending inventory: FIFO = 23 X $112 = $2576 LIFO = 23 x $100 = $2300 Cost of good sold: FIFO = $15510 – $2576 = $12934 LIFO = $15510 – $2300 = …

Flying Tomato sells a snowboard, WhiteOut, that is popular with snowboard enthusiasts. Presented below is information relating to Flying Tomato’s purchases of WhiteOut snowboards during September. During the same month, 121 WhiteOut snowboards were sold at $170 each. Flying Tomato uses a periodic inventory system. Date Sept. 1 Sept. 12 Sept. 19 Sept. 26 Explanation Units Unit Cost Total Cost Inventory Purchases45106 Purchases Purchases 50112 25 $100 S 2,500 4,770 2,640 5.600 $15.510 24 110 Totals 144 Instructions: a) Compute the ending inventory at September 30 and cost of goods sold using the FIFO and LIFO methods. Prove the amount allocated to cost of goods sold under each method sold. What do you notice about the answers you found for each method? sheet? Which results in a larger amount reported for stockholders equity on the b) For both FIFO and LIFO, caiculate the sum of ending inventory and cost of goods c) What is gross profit under each method? d) Which method results in a larger amoupt reported for assets on the balance balance sheet? Read More »

7-36 Comprehensive variance analysis review. Andrew Scheid Ltd manufactures kitchen cabinets. The company’s budget for fixed costs per month is $7,500 and budgeted variable costs per cabinet are: The company had budgeted to make and sell 1,000 cabinets per month at a selling price of $150 each. However, in June, the actual figures were as follows: The company had budgeted to make and sell 1,000 cabinets per month at a selling price of $150 each. However, in June, the actual figures were as follows: Calculate the following: Calculate the following: 1. Static-budget and actual operating income 2. Static-budget variance for operating income 3. Flexible-budget operating income 4. Flexible-budget variance for operating income 5. Sales-volume variance for operating income 6. Price and efficiency variances for direct manufacturing labor 7. Flexible-budget variance for direct manufacturing labor

EXPERT ANSWER Question 1 & Question 2. :Static-budget and actual operating income and and Static-budget variance for operating income Static-budget and actual operating income and Variance Static-budget Actual-June Variance 1400 Units Actual-static A Sales(1,000 Cabinets x$150) $150,000 $212,800 $62,800 Favorable Direct material (1,000 Cabinetsx$67.50) $67,500 $121,000 $53,500 Unfavorable Direct labour (1,000 Cabinetsx $30) $30,000 $34,000 …

7-36 Comprehensive variance analysis review. Andrew Scheid Ltd manufactures kitchen cabinets. The company’s budget for fixed costs per month is $7,500 and budgeted variable costs per cabinet are: The company had budgeted to make and sell 1,000 cabinets per month at a selling price of $150 each. However, in June, the actual figures were as follows: The company had budgeted to make and sell 1,000 cabinets per month at a selling price of $150 each. However, in June, the actual figures were as follows: Calculate the following: Calculate the following: 1. Static-budget and actual operating income 2. Static-budget variance for operating income 3. Flexible-budget operating income 4. Flexible-budget variance for operating income 5. Sales-volume variance for operating income 6. Price and efficiency variances for direct manufacturing labor 7. Flexible-budget variance for direct manufacturing labor Read More »

The income statement and other selected data for Frish Company follow:

The Income Statement And Other Selected Data For Frish Company Follow: Required a. Prepare a schedule of change from accrual basis to cash basis income statement. b. Using the schedule of change from accrual basis to cash basis income statement computed in (a), present the cash provided by operations, using (1) the direct approach and …

The income statement and other selected data for Frish Company follow: Read More »

preparing a report for June Bancock, manager of the Kula Department Store, you statistics from last year’s sales in thousands of dollars) shown below. Upon secin Bancock says, “This report confirms what I’ve been telling you: Business is getting better and better.” Is this statement accurate? Why or why no 4. (15) In preparing a report include the statistics from last them, Ms. Bancock says, The Month January Seasonal Index Seasonal Index .96 .51 .50 February Sales ($1.000s) 230 245 271 Sales ($1,000s) 125 113 189 201 206 241 .87 Month July August September October November December March April May June 291 .89 1.03 1.20 1.31 1.89 .95 320 419 .99

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DFG Ltd uses material BEE in its production of product BETA. A unit of product BETA requires 5 kg of material BEE and the cost per kg of material BEE is K12.50. The annual production of product BETA has always been 10,000 units. The cost of ordering material BEE is K25 per order and the cost of holding the material is K0.10 per kg per annum. Usage of material BEE is at an even rate throughout each year and there are no changes that are expected to occur in the demand for product BETA in the foreseeable future. Currently, DFG Ltd places orders of material BEE in sizes of 8,000 kg and now management would like to establish whether the use of the economic order quantity model would result in any cost reduction. Required: (a) Calculate the annual cost of current ordering policy. [6 Marks] (b) Calculate the economic order quantity and calculate the cost saving that would arise if the company had to change the ordering policy to the use of the economic order quantity model.

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Question 5 (10 Marks) Jude Corporation has been authorized to issue 20,000 $100 par value, 10%, non-cumulative preference shares and 1,000,000 no-par ordinary shares. The corporation assigned a $2.50 stated value to the ordinary shares. A December 31, 2014, the ledger contained the following balances pertaining to equity Share Captial-Preference Share Premium-Preference Share Capital Ordinary Share Premium-Ordinary Treasury Shares-Ordinary (1,000 shares) Share Premium-Treasury Retained Earnings 120,000 12,000 1,000,000 1,600,000 9,000 1,000 82,000 The preference shares were issued for land having a fair value of $132,000. All ordinary shares issued were for cash. In November,500ordinary shares were purchased for the treasury at a per share cost of S9. In December, 500 treasury shares were sold for $11 per share. No dividends were declared in 2014 Required Prepare the journal entries for the: 1. 2. 3. 4. Issuance of preference shares for land Issuance of ordinary shares for cash Purchase of treasury shares (ordinary) for cash Sale of treasury shares for cash

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P12.3 (LO 2, 4) The equity accounts of Terrell SE on January 1, 2020, were as follows. Share Capital Preference (9%, €50 par, cumulative, 10,000 shares authorized) € 400,000 1,000,000 Share Capital-Ordinary (€ 1 stated value, 2,000,000 shares authorized) Share Premium-Preference 60- 100.000 Share Premium Ordinary 1,450,000 Retained Earnings 1,816,000 Treasury Shares-Ordinary (20,000 shares) 50.000 During 2020, the company had the following transactions and events pertaining to its equity. Feb. 1 Issued 30,000 ordinary shares for €120,000. Apr. 14 Sold 9,000 treasury shares-ordinary for €42.000. Sept. 3 Issued 7.000 ordinary shares for a patent valued at €32,000. Nov. 10 Purchased 1.000 ordinary shares for the treasury at a cost of €6.000. Dec. 31 Determined that net income for the year was €452,000. bo No dividends were declared during the year. Instructions a. Journalize the transactions and the closing entry for net income. b. Enter the beginning balances in the accounts, and post the journal entries to the equity accounts. (Use J5 for the posting reference.) c. Prepare an equity section at December 31, 2020, including the disclosure of the preference divi- dends in arrears.

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