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Principles of Accounting 11th Edition Needles, Powers, crosson - Solutions

Ernie, Ron, and Denis have equity in a partnership of $40,000, $40,000, and $60,000, respectively, and they share income and losses in a ratio of 1:1:3. The partners have agreed to admit Henry to the partnership. Prepare entries in journal form to record the admission of Henry to the partnership
Danny, Steve, and Luis are partners. They share income and losses in the ratio of 3:2:1. Luis’s Capital account has a $120,000 balance. Danny and Steve have agreed to let Luis take $160,000 of the company’s cash when he retires from the business. What entry in journal form must be made on the
Assume the following assets, liabilities, and partners' equity in the Ming and Demmick partnership on December 31, 2011:The partnership has no cash. When the partners agree to liquidate the business, the assets are sold for $120,000, and the liabilities are paid. Ming and Demmick share income and
Ariel, Mandy, and Tisha are partners in a tanning salon. The assets, liabilities, and capital balances as of July 1, 2010, are as follows:Assets ........ $480,000Liabilities ......... 16,000Ariel, Capital ...... 140,000Mandy, Capital ....... 40,000Tisha, Capital ...... 140,000Because competition is
In January 2010, Edie Rivera and Babs Bacon agreed to produce and sell chocolate candies. Rivera contributed $240,000 in cash to the business. Bacon contributed the building and equipment, valued at $220,000 and $140,000, respectively. The partnership had an income of $84,000 during 2010 but was
Naomi and Petri are partners in a tennis shop. They have agreed that Naomi will operate the store and receive a salary of $104,000 per year. Petri will receive 10 percent interest on his average capital balance during the year of $500,000. The remaining income or losses are to be shared by Naomi
Marnie, Stacie, and Samantha are partners in Woodware Company. Their capital balances as of July 31, 2011, are as follows:Each partner has agreed to admit Connie to the partnership.Required1. Prepare the entries in journal form to record Connie's admission to or Marnie's withdrawal from the
Caruso, Evans, and Weisman are partners in a retail lighting store. They share income and losses in the ratio of 2:2:1, respectively. The partners have agreed to liquidate the partnership. Here is the partnership balance sheet before the liquidation:The other assets were sold on September 1, 2010,
Jacob, Deric, and Jason are partners in the South Central Company. The partnership agreement. states that Jacob is to receive 8 percent interest on his capital balances at the beginning of the year, Deric is to receive a salary of $100,000 a year, and Jason will be paid interest of 6 percent on his
Peter, Mara, and Vanessa are partners in the Image Gallery. As of November 30, 2011, the balance in Peter’s Capital account was $50,000, the balance in Mara’s was $60,000, and the balance in Vanessa’s was $900,000. Peter, Mara, and Vanessa share income and losses in a ratio of
The balance sheet of the Rose Partnership as of July 31, 2011, follows.The partners-Gerri, Susi, and Mari-Share income and losses in the ratio of 5:3:2. Because of a mutual disagreement, Gerri, Susi, and Mari have decided to liquidate the business.Assume that Gerri cannot contribute any additional
The following events pertain to a partnership formed by Mark Raymond and Stan Bryden to operate a floor-cleaning company:2011Feb 14 The partnership was formed. Raymond transferred to the partnership $80.000 cash, land worth $800,000, a building worth $480,000, and a mortgage on the building of
Landow, Donovan, and Hansa, who are forming a partnership to operate an antiques gallery, are discussing how income and losses should be distributed. Among the facts they are considering are the following:a. Landow will contribute cash for operations of $100,000, Donovan will contribute a
Form a partnership with one or two of your classmates. Assume that the two or three of you are forming a small service business. For Example, you might form a company that hires college students to paint houses during the summer or to provide landscaping services.Working together, draft a
South Shore Realty was started 20 yeas ago when T. S. Tyler, R. C. Strong, and A. J. Hibbert established a partnership to sell real estate near Galveston, Texas. The partnership has been extremely successful. In 2011, Tyler, the senior partner, who in recent years had not been very active in the
The Springfield Clinic is owned and operated by ten local doctors as a partnership. Recently, a paralyzed patient sued the clinic for malpractice, for a total of $20 million. The clinic carries malpractice liability insurance in the amount of $10 million. There is no provision for the possible loss
Nokia (www.nokia.com), the Finnish telecommunications company, has formed an equally owned joint venture with capital corporation, a state-owned Chinese company, to develop a center for the manufacturing and development of telecommunications equipment in China, the world’s fastest-growing market
Accounting firms are among the world’s largest partnerships and provide a wide range of attractive careers for business and accounting majors. Through the needles website at http;//www.cengage.com/accounting/needles, you can explore careers in public accounting by linking to the website of one of
Thom Lutz started a retail clothing business two years ago. Lutz’s first year was very successful, but sales dropped 50 percent in the second year. A friend who is a business consultant analyzed Lutz’s business and came up with two basic reasons for the decline in sales:(1) Lutz has been
Which of the following activities would be part of the value chain of a manufacturing company? Which activities do not add value?1. Product marketing2. Machine drilling3. Materials storage4. Product design5. Product packing6. Cost accounting7. Moving work in process8. Inventory control
Jack DuBois is developing plans to open a restaurant called Ribs ‘n Slaw. He has located a building and will lease all the furniture and equipment he needs for the restaurant. Food Servers, Inc. will supply all the restaurant’s personnel. Identify the components of Ribs ‘n Slaw’s supply
Indicate whether the following activities of a submarine sandwich shop are value-adding (V) or non-value-adding (NV):1. Purchasing sandwich ingredients2. Storing condiments3. Making sandwiches4. Cleaning up the shop5. Making home deliveries6. Accounting for sales and costs
Engineering design is an activity that is vital to the success of any motor vehicle manufacturer. Identify the level at which engineering design would be classified in the cost hierarchy used with ABC for each of the following:1. A maker of unique editions of luxury automobiles2. A maker of
Match the four levels of the cost hierarchy to the following activities of a blue jeans manufacturer that uses activity-based management:1. Routine maintenance of sewing machines2. Designing a pattern for a new style3. Sewing seams on a garment4. Producing 100 jeans of a certain style in a certain
Maintaining minimum inventory levels and using pull-through production are important elements of a just-in-time operating environment. How does pull-through production help minimize inventories?
Aromatherapy Products Company is in the process of adopting the just-in-time operating environment for its lotion-making operations. Indicate which of the following overhead costs are non-value-adding costs (NVA) and which can be traced directly to the new lotion-making work cell (D):1. Storage
For work done during August, Pansey Company incurred direct materials costs of $120,000 and conversion costs of $260,000. The company employs a just-in-time operating philosophy and back-flush costing. At the end of August, it was determined that the Work in Process Inventory account had been
Hwang Corp. recently installed three just-in-time work cells in its screen making division. The work cells will make large quantities of similar products for major window and door manufacturers. Should Hwang use lean with JIT and back-flush costing or ABM and ABC to account for product costs?
The reports that follow are from a department in an insurance company. Which report would be used for financial purposes, and which would be used for activity-based decision making?Why?
Indicate which of the following persons and activities associated with a lawn and garden nursery are part of the supply chain (S) and which are part of the value chain (V):1. Plant and tree vendor2. Purchasing potted trees3. Computer and software company4. Creating marketing plans5. Advertising
The items in the following list are associated with a bank. Indicate which are part of the supply chain (S) and which are part of the value chain (V).1. Federal Reserve Bank2. Student loan processing3. Investment services4. ATM5. Customer
Libbel Enterprises has been in business for 30 years. Last year, the company purchased Chemcraft Laboratory and entered the chemical processing business. Libbel€™s controller prepared a process value analysis of the new operation and identified the following activities:Identify the
When Courtney Tybee prepared a process value analysis for her company, she identified the following primary activities. Identify the value-adding activities (VA) and the non-value-adding activities (NVA).1. Production scheduling2. Customer follow-up3. Materials moving4. Product inspection5.
Copia Electronics makes speaker systems. Its customers range from new hotels and restaurants that need specifically designed sound systems to nation-wide retail outlets that order large quantities of similar products. The following activities are part of the company€™s operating
Lake Corporation has received an order for handheld computers from Union, LLC. A partially complete bill of activities for that order appears below. Fill in the missingdata.
Compute the activity cost rates for materials handling, assembly, and design based on these data:MaterialsCloth..........$26,000Fasteners........4,000Purchased parts.....40,000Materials HandlingLabor.......... 8,000Equipment depreciation... 5,000Electrical power...... 2,000Maintenance......
The following numbered items are concepts that underlie value-based systems, such as ABM and lean. Match each concept to the related lettered elements (s) of a lean operating environment.1. Business processes are simplified.2. The quality of the product or service is critical.3. Employees are
Identify which of the following exist in a traditional manufacturing environment and which exist in a JIT environment:1. Large amounts of inventory2. Complex manufacturing process3. A multi-skilled labor force4. Flexible work cells5. Push-through production methods6. Materials purchased
The cost categories in this list are typical of many manufacturing operations:Identify each cost as direct or indirect, assuming that it was incurred in(1) A traditional manufacturing setting and(2) A JIT environment. State the reasons for changes in classification.
Conda Products Company implemented a JIT work environment in its trowel division eight months ago, and the division has been operating at near capacity since then. At the beginning of May, Work in process Inventory and Finished Goods Inventory had zero balance. The following transactions took place
Good Morning Enterprises produces digital alarm clocks. It has a just-in-time assembly process and uses back-flush costing to record production costs. Overhead is assigned at a rate of $17 per assembly labor hour. There were no beginning inventories in March. During Match, the following operating
Identify each of the following as a characteristic of ABM or lean:1. Back-flush costing2. ABC used to assign overhead costs to the product cost3. ABC integrated with job order or process costing systems4. Complexity reduced by using work cells, minimizing inventories, and reducing or eliminating
The following are excerpts from a conversation between two mangers about their companies’ activity-based systems. Identify the manger who works for a company that emphasizes ABM and the one who work for a company the emphasizes a lean system.Manager 1: We try to manage our resources effectively
Lindstrom Industries, Inc. produces chain saws, weed whackers, and lawn mowers for major retail chains. Lindstrom makes these products to order in large quantities for each customer. It has adopted activity0vased management, and its controller is in the process of developing an ABC system. The
Boulware Products, Inc. produces printers for wholesale distributors. It has just completed packaging an order from Shawl Company for 450 printers. Before the order is shipped, the controller wants to compare the unit costs computed under the company's new activity-based costing system with the
Noir Company produces four versions of its model J17-21 bicycle seat. The four versions have different shapes, but their processing operations and production costs are identical. During July, these costs were incurred:Direct materialsLeather............$25,430Metal frame...........
Funz Company, which produces wooden toys, is about to adopt a lean operating environment. In anticipation of the change, Letty Hernandez, Funz's controller, prepared the following list of costs for December:Required1. Identify each cost as direct or indirect, assuming that it was incurred in a
Automotive Parts Company produces 12 parts for car bodies and sells them to three automobile assembly companies in the United States. The company implemented lean operating and costing procedures three years ago. Overhead is applied at a rate of $26 per work cell hour used. All direct materials and
Direct Marketing Inc. (DMI) offers database marketing strategies to help companies increase their sales. DMI’s basic package of services includes the design of a mailing piece (either a Direct Mailer or a Store Mailer), creation and Maintenance or marketing databases containing information about
Kauli Company produces cellular phones. It has just completed an order for 10,000 phones placed by Stay connect, Ltd. Kauli recently shifted to an activity based costing system, and its controller is interested in the impact that the ABC system had on the Stay Connect order. Data for that order are
Meanwhile Company produces three models of aluminum skateboards. The models have minor differences, but their processing operations and production costs are identical. During June, these costs were incurred:Direct materialsAluminum frame......$162,524Bolts.......... 3,876Purchased partsWheels
Caffene Company, which processes coffee beans into ground coffee, is about to adopt a JIT operating environment. In anticipation of the change, Hattie Peralto, Caffene's controller, prepared the following list of costs for the month:Required1. Identify each cost as direct or indirect, assuming that
Reilly Corporation produces metal fasteners using six work cells, one for each of its product lines. It implemented just-in-time operations and costing methods two years ago. Overhead is assigned using a rate of $14 per machine hour for the Machine Snap Work Cell. There were no beginning
MUF, a CPA firm, has provided audit and tax services to businesses in the London area for over 50 years. Recently, the firm decided to use ABM and activity-based costing to assign its overhead costs to those service functions. Gemma Fior is interested in seeing how the change from the traditional
Sandee Star, the owner of Star Bakery, wants to know the profitability of each of her bakery's customer groups. She is especially interested in the State Institutions customer group, which is one of the company's largest. Currently, the bakery is selling doughnuts and snack foods to ten state
Refer to the income statement in C 2 for the state Institutions customer group for the year ended December 31, this year. Sandee Star, the owner of Star Bakery, is in the process of budgeting income for next year. She has asked the controller to prepare a budgeted income statement for the State
The initiation banquet for new members of your business club is being held at an excellent restaurant. You are sitting next to two college students who are majoring in marketing. In discussing the accounting course they are taking, they mention that they are having difficulty understanding the lean
Fifteen years ago, Bruce Sable, together with 10 financial supporters, founded Sable Corporation. Located in Atlanta, the company originally manufactured roller skates, but 12 years ago, on the advice of its marketing department, it switched to making skateboards. More than 4 million skateboards
As we continue with this case, assume that your company has been using a continuous manufacturing process to make chocolate chip cookies. Demand has been so great that the company has built a special plant that makes only custom ordered cookies. The cookies are shaped by machines but vary according
The supervisor of the Logistics Department has suggested to the plant manager that a new machine costing $285,000 be purchased to improve material handling operations for the plant’s newest product line. How should the plant manager proceed with this request?
Gatwick Industries is considering a $1 million plant expansion. Management needs to know the average cost of capital to use in evaluating this capital investment decision. The company’s capital structure consists of $3,000,000 of debt at 4 percent interest and $2,000,000 of stockholders’
Zelolo Corp. has the following capital investment requests pending from its three divisions: Request 1, $60,000, 11 percent projected return; Request 2, $110,000, 14 percent projected return; Request 3, $130,000, 16 percent projected return; Request 4, $160,000, 13 percent projected return; Request
Daize Corp. is analyzing a proposal to switch its factory over to a lights-out operation similar to the one discussed in this chapter’s Decision Point. To do so, it must acquire a fully automated machine. The machine will be able to produce an entire product line in a single operation. Projected
Heidi Layne recently inherited a trust fund from a distant relative. On January 2, the bank managing the trust fund notified Layne that she has the option of receiving a lump-sum check for $200,000 or leaving the money in the trust fund and receiving an annual year-end check for $20,000 for each of
Annelle Coiner is developing a capital investment analysis for her supervisor. The proposed capital investment has an estimated residual value of $5,500 at the end of its five-year life. The company uses an 8 percent minimum rate of return. What is the present value of the residual value? Use Table
Noway Jose Communications, Inc., is considering the purchase of a new piece of computerized data transmission equipment. Estimated annual net cash inflows for the new equipment are $ 590,000. The equipment costs $2 million, it has a five-year life, and it will have no residual value at the end of
Using the information about Noway Jose Communications, Inc., in SE 7, compute the payback period for the piece of equipment. Does this method yield a positive or a negative response to the proposal to buy the equipment, assuming that the company sets a maximum payback period of four years?
East-West Cable, inc., is considering the purchase of new data transmission equipment. Estimated annual cash revenues for the new equipment are $1 million, and operating costs (including depreciation of $400,000) are $825,000. The equipment costs $2 million, it has a five-year life, and it will
Best Cleaners is considering whether to purchase a delivery truck that will cost $50,000, last six years, and have an estimated residual value of $5,000. Average annual net income from the delivery service is estimated to be $4,000. Best Cleaners’ owners seek to earn an accounting rate of return
Genette Henderson was just promoted to supervisor of building maintenance for the Ford Valley Theater complex. Allpoints Entertainment, Inc., Henderson’s employer, uses a company-wide system for evaluating capital investment requests from its 22 supervisors. Henderson has approached you, the
The controller of Olaf Corporation wants to establish a minimum rate of return and would like to use a weighted-average cost of capital. Current data about the corporation’s financing structure are as follows: debt financing, 40 percent; preferred stock, 30 percent; common stock, 20 percent; and
Managers of the Emerald Bay Furniture Company have gathered all of the capital investment proposals for the year, and they are ready to make their final selections. The following proposals and related rate-of-return amounts were received during the period:Assume that the company's minimum rate of
Santa Cruz Company has a tax rate of 20 percent on taxable income. It is considering a capital project that will make the following annual contribution to operating income:1. Determine the net cash Inflows for this project in two different ways. Are net cash flows the same under either approach?2.
For each of the following situations, identify the correct factor to use from Tables 1 or 2 in the appendix on present value table. Also, compute the appropriate present value.1. Annual net cash inflows of $5,000 for five years, discounted at 6 percent2. An amount of $25,000 to be received at the
For each of the following situations, identify the correct factor to use from Tables 1 or 2 in the appendix on present value tables. Also, compute the appropriate present value.1. Annual net cash inflows of $22,500 for a period of twelve years, discounted at 14 percent2. The following five years of
Two machines-Machine M and Machine P-are being considered in a replacement decision. Both machines have about the same purchase price and an estimated ten-year life. The company uses a 12 percent minimum rate of return as its acceptance-rejection standard. Following are the estimated net cash
Qen and Associates wants to buy automated coffee roaster/grinder/ brewer. This piece of equipment would have a useful life of six years, would cost $218,500, and would increase annual net inflows by $57,000. Assume that there is no residual value at the end of six years. The company’s minimum
H and Y service Station is planning to invest in automatic car wash equipment values at $240,000. The owner estimates that the equipment will increase annual net cash inflows by $46,000. The equipments is expected to have a ten-year useful life with an estimated residual value of $50,000. The
Assume the same facts for H and Y Service Station as in E 9, except assume that the company requires a 20 percent minimum rate of return.Using the net present value method, prepare an analysis to determine whether the company should purchase the equipment. Use Table 1 and 2 in the Appendix on
Perfection Sound, Inc., a manufacturer of stereo speakers, is thinking about adding a new plastic-injection molding machine. This machine can produce speaker parts that the company now buys from outsiders. The machine has an estimated useful life of 14 years and will cost $425,000. The residual
Soaking Wet, Inc., a manufacturer of gears for lawn sprinklers, is thinking about adding a new fully automated machine. This machine can produce gears that the company now produces on its third shift. The machine has an estimated useful life of ten years and will cost $800,000. The residual value
Assume the same facts as in E 11 for Perfection Sound, Inc. Management has decided that only capital investments that yield at least a 20 percent return will be accepted.Using the accounting rate-of-return method, decide whether the company should invest in the machine. Show all computations to
Assume the same facts as in E 12 for Soaking Wet, Inc. Management has decided that only capital investments that yield at least a 5 percent return will be accepted.Using the accounting rate-of-return method, decide whether the company should invest in the machine. Show all computations to support
Boink Corporation manufactures metal hard hats for on-site construction workers. Recently, management has tried to raise productivity to meet the growing demand from the real estate industry. The company is now thinking about buying a new stamping machine. Management has decided that only capital
Capital investment analysis is the main responsibility of Ginny Weiss, the special assistant to the controller of Nazzaro Manufacturing Company. During the previous 12-month period, the company's capital mix and the respective costs were as follows:Plans for the current year call for a 10 percent
Sonja and Sons, Inc., owns and operates a group of apartment buildings. Management wants to sell one of its older four-family buildings and buy a new building. The old building, which was purchased 25 years ago for $100,000, has a 40-year estimated life. The current market value is $80,000, and if
The management of Better Plastics has recently been looking at a proposal to purchase a new plastic-injection-style molding machine. With the new machine, the company would not have to buy small plastic parts to use in production. The estimated useful life of the machine is 15 years, and the
The Raab Company is expanding its production facilities to include a new product line, a sporty automotive tire rim. Tire rims can now be produced with little labor cost using new computerized machinery. The controller has advised management about two such machines. The derails about each machine
The Arcadia Manufacturing Company, based in Arcadia, Florida, is one of the fastest-growing companies in its industry. According to Ms. Prinze, the company's production vice president, keeping up-to-date with technological changes is what makes the company successful.Prinze feels that a machine
Capital investment analysis is the main responsibility of the controller of Glory Company. During the previous 12-month period, the company's capital mix and the respective costs were as follows:Plans for the current year call for a 10 percent shift in total financing from debt financing to common
City Sights, Ltd., operates a tour and sightseeing business. Its trademark is the use of trolley buses. Each vehicle has its own identity and is specially made for the company. Gridlock, the oldest bus, was purchased 15 years ago and has 5 years of its estimated useful life remaining. The company
Mansion is a famous restaurant in the French Quarter of New Orleans. Bouillabaisse Sophie is Mansion’s house specialty. Management is considering the purchase of a machine that would prepare all the ingredients, mix them automatically, and cook the dish to the restaurant’s specifications. The
The Cute Car Company is expanding its production facilities to include a new product line, an energy-efficient sporty convertible. The car can be produced with little labor cost using computerized machinery. There are two such machines to choose from. The details about each machine are as
Pressed Corporation wants to buy a new stamping machine. The machine will provide the company with a new product line: pressed rubber food trays for kitchens. Two machines are being considered; the data for each machine are as follows:The company's minimum rate of return is 16 percent, and the
The board of directors of the Tanashi Corporation met to review a number of proposed capital investments that would improve the quality of company products. One production-line manager requested the purchase of new computer-integrated machines to replace the older machines in one of the ten
The McCall Syndicate owns four resort hotels in Europe. Because the Paris operation (Hotel 1) has been booming over the past five years, management has decided to build an addition to the hotel. This addition will increase the hotel’s capacity by 20 percent. A construction company has bid to
Automated teller machines (ATMs) have become common in the banking industry. San Angelo Federal Bank is planning to replace some old teller machines and has decided to use the York Machine. Nola Chavez, the controller, has prepared the analysis shown at the top of the opposite page. She has
CPC Corporation is an international plumbing equipment and supply company located in southern California. The manger of the Pipe Division is considering the purchase of a computerized copper Pipe machine that costs $120,000.The machine has a six-year life, and its expected residual value after six
Marika Jonssen is the controller of Bramer Corporation, a globally competitive producer of standard and custom-designed window units for the housing industry. As part of the corporation’s move to become automated, Jonssen was asked to prepare a capital investment analysis for a robot-guided
Suppose your cookie company is now a corporation that has granted franchises to more than 50 stores. Currently, only 10 of the 50 stores have computerized machines for mixing cookie dough. Because of a tremendous increase in demand for cookie dough, you, as the corporation's president, are

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