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Accounting 24th Edition Carl S Warren, James M Reeve, Jonathan Duchac - Solutions
Lonesome Dove Construction Co. specializes in building replicas of historic houses. Mike Jahn, president of Lonesome Dove Construction, is considering the purchase of various items of equipment on July 1, 2008, for $200,000. The equipment would have a useful life of five years and no residual
The following is an excerpt from a conversation between the chief executive officer, Harry Balmer, and the chief financial officer, Connie Kenner, of BKXGroup Inc.:Harry (CEO): Connie, as you know, the auditors are coming in to audit our yearend financial statements pretty soon. Do you see any
What two types of transactions cause most current liabilities?
Delta Air Lines’ SkyMiles program allows frequent flyers to earn credit toward free tickets and other amenities. (a) Does Delta Air Lines have a contingent liability for award redemption by its SkyMiles members? (b) When should a contingent liability be recorded?
For each of the following payroll-related taxes, indicate whether it generally applies to(1) Employees only, (2) Employers only, or(3) Both employees and employers:a. Federal income taxb. Federal unemployment compensation taxc. Medicare taxd. Social security taxe. State unemployment compensation tax
A corporation issues $25,000,000 of 5% bonds to yield an effective interest rate of 7½%.a. Was the amount of cash received from the sale of the bonds more or less than $25,000,000? b. Identify the following amounts related to the bond issue: (1) Face amount, (2) Market rate of interest, (3)
a. In what respect does treasury stock differ from unissued stock?b. How should treasury stock be presented on the balance sheet?
I-Generation Co. sold 14,000 annual subscriptions of Climber’s World for $60 during December 2010. These new subscribers will receive monthly issues, beginning in January 2011. In addition, the business had taxable income of $400,000 during the first calendar quarter of 2011. The federal tax rate
A business issued a 30-day, 4% note for $60,000 to a creditor on account. Illustrate the effects on the accounts and financial statements of recording (a) The issuance of the note and (b) The payment of the note at maturity, including interest.
Illustrate the effects on the accounts and financial statements of recording the following selected transactions of Bronson Leather Co.:Apr. 15. Paid the first installment of the estimated income tax for the current fiscal year ending December 31, $120,000. No entry had been made to record the
Mattress System Inc. recognized service revenue of $500,000 on its financial statements in 2009. Assume, however, that the tax code requires this amount to be recognized for tax purposes in 2010. The taxable income for 2009 and 2010 is $1,800,000 and $2,400,000, respectively. Assume a tax rate of
Ford Motor Company disclosed estimated product warranty payable for 2008 and 2007 as follows: Ford's sales were $154,379 million in 2007 and decreased to $129,166 million in 2008. Assume that the total paid on warranty claims during 2008 was $3,076 million.a. Illustrate the effects on the
Several months ago, Welker Chemical Company experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $410,000. The company is contesting the fine. In addition, an employee is seeking $400,000 damages related to the spill.
The following note accompanied recent financial statements for Goodyear Tire and Rubber Company:We are a defendant in numerous lawsuits alleging various asbestos-related personal injuries purported to result from alleged exposure to certain asbestos products manufactured by us or present in
An employee earns $40 per hour and 1.75 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 60 hours during the week, and that the gross pay prior to the current week totaled $58,000. Assume further that the social security tax rate was 6.0% (on earnings up
In the following summary of data for a payroll period, some amounts have been intentionally omitted:Earnings:1. At regular rate…………………. ?2. At overtime rate………………. $ 60,0003. Total earnings………………… ?Deductions:4. FICA
According to a summary of the payroll of Newman Publishing Co., $600,000 was subject to the 7.5% FICA tax. Also, $50,000 was subject to state and federal unemployment taxes.a. Calculate the employer’s payroll taxes, using the following rates: state unemployment,4.3%; federal unemployment, 0.8%.b.
A business provides its employees with varying amounts of vacation per year, depending on the length of employment. The estimated amount of the current year’s vacation pay is $375,000. Illustrate the effects on the accounts and financial statements of the adjustment required on January 31, the
Walt Disney 7% bonds due in 2032 were selling for 118.29 as for March, 29, 2009. Were the bonds selling at a premium or at a discount? Explain.
Grodski Inc. produces and distributes fiber optic cable for use by telecommunications companies. Grodski Inc. issued $24,000,000 of 20-year, 10% bonds on April 1 at their face amount, with interest payable on April 1 and October 1. The fiscal year of the company is the calendar year. Illustrate the
Fairmount Inc., a developer of radiology equipment, has stock outstanding as follows: 15,000 shares of 2% preferred stock of $150 par, and 50,000 shares of $5 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $30,000; second
Michelangelo Inc., a software development firm, has stock outstanding as follows: 20,000 shares of 1% preferred stock of $25 par, and 25,000 shares of $100 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $3,000; second year,
On February 10, Peerless Rocks Inc., a marble contractor, issued for cash 40,000 shares of $10 par common stock at $34, and on May 9, it issued for cash 100,000 shares of $5 par preferred stock at $7. a. Illustrate the effects on the accounts and financial statements of the February 10 and May 9
On January 30, Lift Time Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 18,000 shares of $10 par common stock with a current market price of $15.Illustrate the effect on the accounts and financial statements of the purchase of the land.
Beaverhead Creek Inc. bottles and distributes spring water. On March 4 of the current year, Beaverhead Creek reacquired 5,000 shares of its common stock at $90 per share.a. What is the balance of Treasury Stock on December 31 of the current year?b. Where will the balance of Treasury Stock be
Augusta Gardens Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On August 30 of the current year, Augusta Gardens Inc. reacquired 17,500 shares of its common stock at $42 per share. a. What is the balance of Treasury Stock on December 31 of the current
Sweet Water Inc. bottles and distributes spring water. On July 15 of the current year, Sweet Water Inc. reacquired 24,000 shares of its common stock at $60 per share.a. What is the balance of Treasury Stock on December 31 of the current year?b. Where will the balance of Treasury Stock be reported
The dates of importance in connection with a cash dividend declared and paid of $69,500 on a corporation’s common stock are May 3, June 17, and August 1. Illustrate the effects on the accounts and financial statements for each date.
Indicate whether the following actions would (+) increase, (?) decrease, or (0) not affect Pillar Falls Inc.'s total assets, liabilities, and stockholders' equity:
The following accounts and their balances appear in the ledger of NewberryProperties Inc. on June 30 of the current year:Common Stock, $75 par…………………………….. $1,350,000Paid-In Capital in Excess of Par………………...…….. 108,000Paid-In Capital from Sale of
Race Car Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Race Car Inc. on April 30, the end of the current year:Common Stock, $10 par………………………………………………. $ 400,000Paid-In Capital
Miller Co., which produces and sells skiing equipment, is financed as follows:Bonds payable, 10% (issued at face amount)……… $10,000,000Preferred 1% stock, $10 par………………………………… 10,000,000Common stock, $25 par……………………………………..
Based on the data in Exercise 8-27, discuss factors other than earnings per share that should be considered in evaluating such financing plans.
Differences between the accounting methods applied to accounts and financial reports and those used in determining taxable income yielded the following amounts for the first four years of a corporation's operations: The income tax rate for each of the four years was 40% of taxable income, and
The following information about the payroll for the week ended March 17 was obtained from the records of Butte Mining Co.: Instructions1. For the March 17 payroll, determine the employee FICA tax payable.2. Illustrate the effect on the accounts and financial statements of paying and recording
Sierra Vaults Corporation produces and sells burial vaults. On July 1, 2010, Sierra Vaults Corporation issued $18,000,000 of 10-year, 6% bonds at par. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions1.
Sheldon Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Sheldon Optics on October 31 of the current year as follows:Preferred 2% Stock, $80 par (50,000 shares authorized,25,000 shares issued)................. $ 2,000,000Paid-In
Bridger Bike Corp. manufactures mountain bikes and distributes them through retail outlets in Montana, Idaho, Oregon, and Washington. Bridger Bike Corp. has declared the following annual dividends over a six-year period ending December 31 of each year: 2005, $5,000; 2006, $18,000; 2007, $45,000;
Three different plans for financing a $10,000,000 corporation are under consideration by its organizers. Under each of the following plans, the securities will be issued at their par or face amount, and the income tax rate is estimated at 40% of income. Instructions1. Determine for each plan the
Fio Barellis was discussing summer employment with Sara Rida, president of Xanadu Construction Service:Sara: I’m glad that you’re thinking about joining us for the summer. We could certainly use the help.Fio: Sounds good. I enjoy outdoor work, and I could use the money to help with next
Altria Group, Inc., has over 24 pages dedicated to describing contingent liabilities in the notes to recent financial statements. These pages include extensive descriptions of multiple contingent liabilities. Use the Internet to research Altria Group, Inc., at www.altria.com.a. What are the major
Biosciences Unlimited Inc. began operations on January 2, 2010, with the issuance of 100,000 shares of $50 par common stock. The sole stockholders of Biosciences Unlimited Inc. are Rafel Baltis and Dr. Oscar Hansel, who organized Biosciences Unlimited Inc. with the objective of developing a new flu
Beacon Inc. has decided to expand its operations to owning and operating long-term health care facilities. The following is an excerpt from a conversation between the chief executive officer, Frank Forrest, and the vice president of finance, Rachel Tucker. Frank: Rachel, have you given any thought
You hold a 25% common stock interest in the family-owned business, a vending machine company. Your sister, who is the manager, has proposed an expansion of plant facilities at an expected cost of $7,500,000. Two alternative plans have been suggested as methods of financing the expansion. Each plan
For a company that produces desktop computers, would memory chips be considered a direct or an indirect materials cost of each computer produced?
How is product cost information used by managers? Discuss.
a. Name two principal types of cost accounting systems.b. Which system provides for a separate record of each particular quantity of product that passes through the factory? c. Which system accumulates the costs for each department or process within the factory?
How does the use of the materials requisition help control the issuance of materials from the storeroom? Discuss in detail.
a. Differentiate between the clock card and the time ticket.b. Why should the total time reported on an employee’s time tickets for a payroll period be compared with the time reported on the employee’s clock cards for the same period? Discuss.
Describe the source of the data for increasing Work in Process for (a) Direct materials,(b) Direct labor, and (c) Factory overhead.
Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs. Discuss in detail.
a. How is a predetermined factory overhead rate calculated?b. Name three common bases used in calculating the rate. Discuss.
a. What is (1) overapplied factory overhead and (2) underapplied factory overhead?b. If the factory overhead account has a positive balance, was factory overhead underapplied or overapplied?
What is the difference between a product cost and a period cost?
How can job cost information be used to identify cost improvement opportunities? Discuss.
Describe how a job order cost system can be used for professional service businesses. Discuss.
Why do just-in-time manufacturers favor pull or make-to-order manufacturing?
Why would a just-in-time manufacturer strive to produce zero defects?
How is supplier partnering different from traditional supplier relationships?
How can activity-based costing be used in service companies?
Indicate whether each of the following costs of an airplane manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost:a. Controls for flight deckb. Aircraft enginesc. Depreciation of welding equipmentd. Welding machinery lubricantse. Salary of test
Indicate whether the following costs of Colgate-Palmolive Company would be classified as direct materials cost, direct labor cost, or factory overhead cost:a. Wages paid to Packaging Department employeesb. Maintenance suppliesc. Plant manager salary for the Morristown, Tennessee, toothpaste plantd.
Which of the following items are properly classified as part of factory overhead for Caterpillar?a. Factory supplies used in the Morganton, North Carolina, engine parts plantb. Amortization of patents on new assembly processc. Steel plated. Vice president of finance’s salarye. Sales incentive
For apparel manufacturer Ann Taylor, Inc., classify each of the following costs as either a product cost or a period cost:a. Sales commissionsb. Advertising expensesc. Fabric used during productiond. Property taxes on factory building and equipmente. Depreciation on sewing machinesf. Factory
From the choices presented in the parentheses, choose the appropriate term for completing each of the following sentences:a. Advertising expenses are usually viewed as (period, product) costs.b. The balance sheet of a manufacturer would include an account for (cost of goods sold, work-in-process
Five selected transactions for the current month are indicated by letters in the following accounts in a job order cost accounting system: Describe each of the fivetransactions.
The following information is available for the first month of operations of Url Inc., a manufacturer of art and craft items:Sales.................... $1,200,000Gross profit.................. 320,000Indirect labor.................. 110,000Indirect
An incomplete subsidiary ledger of wire cable for May is as follows: a. Complete the materials issuances and balances for the wire cable subsidiary ledger.b. Determine the balance of wire cable at the end of August.c. Determine the total amount of materials transferred to work-in-process for
Materials issued for the current month are as follows: a. Determine the amount of materials transferred to work-in-process and factory overhead for the current month.b. Illustrate the effect on the accounts and financial statements of the materials transferred in(a).
Bullock Furniture Company manufactures furniture. Bullock uses a job order cost system. Balances on June 1 from the materials ledger are as follows:Fabric............ $ 25,000Polyester filling........ 7,500Lumber............ 56,000Glue.............. 2,400The
A summary of the time tickets for the current month follows: a. Determine the amounts of factory labor costs transferred to Work in Process and Factory Overhead for the current month.b. Illustrate the effect on the accounts and financial statements of the factory labor costs transferred in(a).
The weekly time tickets indicate the following distribution of labor hours for three direct labor employees: The direct labor rate earned by the three employees is as follows:Washington...... $20Jefferson.......... 22Adams....... 18The process improvement category includes
Moura Industries Inc. manufactures recreational vehicles. Moura uses a job order cost system. The time tickets from August jobs are summarized below.Job 410........$3,400Job 411.......1,700Job 412.......1,400Job 413......... 2,500Factory supervision.. 1,900Factory overhead is applied to jobs on the
Hudson Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine hours are as follows: a. Determine the factory
Willie’s Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:Engine parts................. $ 875,000Shop direct labor............... 640,000Shop and repair
The Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical devices), physician surgical time, and operating
The following account appears in the ledger after only part of the postings have been completed for January: Work in ProcessBalance, January........... 1 $14,200Direct materials............. 115,400Direct labor............. 124,500Factory overhead............ 65,400Jobs finished during
Munch Printing Inc. began printing operations on July 1. Jobs 10 and 11 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 12 and 13 are still in process at the end of the month, and all applicable costs except factory overhead have been
The following events took place for Salsa Inc. during May 2010, the first month of operations, as a producer of road bikes:● Purchased $244,000 of materials.● Used $210,000 of direct materials in production.● Incurred $180,000 of direct labor wages.● Applied factory overhead at a rate of
Letson Manufacturing Inc. is a job shop. The management of Letson Manufacturing uses the cost information from the job sheets to assess its cost performance. Information on the total cost, product type, and quantity of items produced is as follows: a. Develop a graph for each product (three
Duncan Trophies Inc. uses a job order cost system for determining the cost to manufacture award products (plaques and trophies). Among the company??s products is an engraved plaque that is awarded to participants who complete an executive education program at a local university. The company sells
The Ad Guys Inc. provides advertising services for clients across the nation. The Ad Guys is presently working on four projects, each for a different client. The Ad Guys accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs
The chief executive officer (CEO) of Gemini Inc. has just returned from a management seminar describing the benefits of the just-in-time philosophy. The CEO issued the following statement after returning from the conference: This company will become a just-in-time manufacturing company. Presently,
The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs. Textile imports have risen from 2% of all textile production in 1962 to over 70% in 2008. Offshore manufacturers make long runs of standard mass-market apparel items. These are then brought
AAA Insurance Company takes ten days to make payments on insurance claims. Claims are processed through three departments: Data Input, Claims Audit, and Claims Adjustment. The three departments are on different floors, approximately one hour apart from each other. Claims are processed in batches of
Galaxy Shirt Company manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that workers are paid according to the amount of work completed during a period of time. To illustrate, if the piece rate is $0.10 per sleeve
The following is an excerpt from a recent article discussing supplier relationships with the Big Three North American automakers. “The Big Three select suppliers on the basis of lowest price and annual price reductions,” said Neil De Koker, president of the Original Equipment Suppliers
Quickie Designs Inc. uses teams in the manufacture of lightweight wheelchairs. Two features of its team approach are team hiring and peer reviews. Under team hiring, the team recruits, interviews, and hires new team members from within the organization. Using peer reviews, the team evaluates each
St. Luke Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:Activity ..............Activity RateRoom and meals............ $170 per
Shield Insurance Company carries three major lines of insurance: auto, workers?? compensation, and homeowners. The company has prepared the following report for 2011: Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the
The following is a list of costs that were incurred in the production and sale of lawn mowers:a. Attorney fees for drafting a new lease for headquarters offices.b. Commissions paid to sales representatives, based on the number of lawn mowers sold.c. Property taxes on the factory building and
Staircase Equipment Company uses a job order cost system. The following data summarize the operations related to production for April 2010, the first month of operations: a. Materials purchased on account, $23,400. b. Materials requisitioned and factory labor used: c. Factory overhead costs
Lynch Furniture Company refinishes and reupholsters furniture. Lynch uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the
Big Wave Company manufactures surf boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for July: In addition, the following information is available:a. Materials and direct labor were applied to six jobs in July: b.
Digital Tunes Inc. is in the business of developing, promoting, and selling musical talent on compact disc (CD). The company signed a new group, called Smashing Britney, on January 1, 2010. For the first six months of 2010, the company spent $4,000,000 on a media campaign for Smashing Britney and
Earnhart Manufacturing Company allows employees to purchase, at cost, manufacturing materials, such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form, which must then be approved by the employee’s immediate
The following statement was made by the vice president of finance of Orville Inc.: “The managers of a company should use the same information as the shareholders of the firm. When managers use the same information in guiding their internal operations as shareholders use in evaluating their
The Nerd Squad provides computer repair services for the community. Jane Doe’s computer was not working, and she called The Nerd Squad for a home repair visit. The Nerd Squad’s technician arrived at 2:00 P.M. to begin work. By 4:00 P.M. the problem was diagnosed as a failed circuit board.
The controller of the plant of Berry Building Supplies prepared a graph of the unit costs from the job cost reports for Product X-S1. The graph appeared as follows: How would you interpret this information? What further information would yourequest?
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