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Joe operates a business that locates and purchases specialized assets for clients, among other activities. Joe uses the accrual method of accounting but he doesn’t keep any significant inventories of the specialized assets that he sells. Joe reported the following financial information for his business activities during year 0. Determine the effect of each of the following transactions on the taxable business income.a. Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December, Joe delivers $12,000 worth of gadgets to the city that will be tested in March. Joe purchased the gadgets especially for this contract and paid $8,500.b. Joe paid $180 for entertaining a visiting out-of-town client. The client didn’t discuss business with Joe during this visit, but Joe wants to maintain good relations to encourage additional business next year.c. On November 1, Joe paid $600 for premiums providing for $40,000 of “key man” insurance on the life of Joe’s accountant over the next 12 months.d. At the end of the year (year 1), Joe’s business reports $9,000 of accounts receivable.
Based upon past experience, Joe believes that at least $2,000 of his new receivables will be uncollectible.e. In December of year 0, Joe rented equipment for a large job. The rental agency required a minimum rental of three months ($1,000 per month), but
Joe completed the job before year-end.f. Joe hired a new sales representative as an employee and sent her to Dallas for a week to contact prospective out-of-state clients. Joe ended up reimbursing his employee $300 for airfare, $350 for lodging, $250 for meals, and $150 for entertainment. Joe requires the employee to account for all expenditures in order to be reimbursed.g. Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. Last month, the business vehicle broke down and he was forced to use the BMW both to travel to and from the factory and to visit work sites. He drove 120 miles visiting work sites and 46 miles driving to and from the factory from his home.h. Joe paid a visit to his parents in Dallas over the Christmas holidays. While he was in the city, Joe spent $50 to attend a half-day business symposium. Joe paid $200 for airfare, $50 for meals during the symposium, and $20 on cab fare to the symposium.

Seen 1 years ago Li Smith 0 answers

The Minnetonka Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country skis.
After considerable research, a cross-country ski line has been developed. Because of the conservative nature of the company management, however, Minnetonka’s president has decided to introduce only one type of the new skis for this coming winter. If the product is a success, further expansion in future years will be initiated.
The ski selected is a mass-market ski with a special binding. It will be sold to wholesalers for $80 per pair. Because of availability capacity, no additional fixed charges will be incurred to produce the skis. A $100,000 fixed charge will be absorbed by the skis, however, to allocate a fair share of the company’s present fixed costs to the new product.
Using the estimated sales and production of 10,000 pair of skis as the expected volume, the accounting department has developed the following cost per pair of skis and bindings:
Direct Labor: $35
Direct Material: $30
Total Overhead: $15
Total: $80
Minnetonka has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor would be $5.25 per binding, or $10.50 per pair. If the Minnetonka Corporation accepts the purchase proposal, it is predicted that direct-labor and variable-overhead costs would be reduced by 10% and direct-material costs would be reduced by 20%.
1. Should the Minnetonka Corporation make or buy the bindings? Show calculations to support your answer.
2. What would be the maximum purchase price acceptable to the Minnetonka Corporation for the bindings? Support your answer with an appropriate explanation.
3. Instead of sales of 10,000 pair of skis, revised estimates show sales volume at 12,500 pair. At this new volume, additional equipment, at an annual rental of $10,000 must be acquired to manufacture the bindings. This incremental cost would be the only additional fixed cost required even if sales increased to 30,000 pair. (This 30,000 level is the goal for the third year of production.) Under these circumstances, should the Minnetonka Corporation make or buy the bindings? Show calculations to support your answer.
4. What qualitative factors (i.e. issues with vendors, customers, or within the product itself) should the Minnetonka Corporation consider in determining whether they should make or buy the binding

Seen 1 years ago Wilson Anderson 0 answers

Now that operations for outdoor clinics and TEAM events are running smoothly, Suzie thinks of another area for business expansion. She notices that a few clinicparticipants wear multiuse (MU) watches. Beyond the normal timekeeping features of most watches, MU watches are able to report temperature, altitude, and barometricpressure. MU watches are waterproof, so moisture from kayaking, rain, fishing, or even diving up to 100 feet won’t damage them. Suzie decides to have MU watchesavailable for sale at the start of each clinic. The following transactions relate to purchases and sales of watches during the second half of 2013. All watches aresold for $309 each.

Jul. 17 Purchased 57 watches for $8,037 ($141 per watch) on account.
Jul. 31 Sold 44 watches for $13,596 cash.
Aug. 12 Purchased 43 watches for $6,708 ($156 per watch) cash.
Aug. 22 Sold 22 watches for $6,798 on account.
Sep. 19 Paid for watches ordered on July 17.
Sep 27 Received full payment for watches sold on account on August 22.
Oct. 27 Purchased 81 watches for $13,770 ($170 per watch) cash.
Nov. 20 Sold 105 watches for $32,445 cash.
Dec. 4 Purchased 104 watches for $18,096 ($174 per watch) cash.
Dec. 8 Sold 32 watches for $9,888 on account.




Required:
a. Calculate sales revenue, cost of goods sold, and ending inventory as of December 31, 2013, assuming Suzie uses FIFO to account for inventory. (Omit the "$" sign inyour response.)


Sales revenue $
Cost of goods sold $
Ending inventory $

b. Prepare the gross profit section of a partial income statement for transactions related to MU watches. (Amounts to be deducted should be indicated with minus sign.Omit the "$" sign in your response.)

GREAT ADVENTURES, INC.
Partial Income Statement
For the year ended December 31, 2013
$


$








2. Late in December, the next generation of multiuse (MU II) watches is released. In addition to all of the features of the MU watch, the MU II watches are equippedwith a global positioning system (GPS) and have the ability to download and play songs and videos off the internet. The demand for the original MU watches is greatlyreduced. As of December 31, the estimated market value of MU watches is only $111 per watch.

a. Record any necessary entry on December 31, 2013, related to this information. (Omit the "$" sign in your response.)

Date General Journal Debit Credit
Dec 31


b. For what amount would MU inventory be reported in the December 31, 2013, balance sheet? (Omit the "$" sign in your response.)

MU Inventory $

c. Prepare an updated gross profit section of a partial income statement accounting for this additional information. (Amounts to be deducted should be indicated withminus sign. Omit the "$" sign in your response.)

GREAT ADVENTURES, INC.
Partial Income Statement
For the year ended December 31, 2013
$


$



Seen 1 years ago Wilson Anderson 0 answers

Aug. 1 Purchased merchandise from Abilene Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
4 At Abilene's request, Stone paid $100 cash for freight charges on the August 1 purchase, reducing the amount owed to Abilene.

5 Sold merchandise to Lux Corp. for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,000.

8 Purchased merchandise from Welch Corporation for $5,300 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. The invoice showed that atStone’s request, Welch paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges.)

9 Paid $120 cash for shipping charges related to the August 5 sale to Lux Corp.

10 Lux returned merchandise from the August 5 sale that had cost Stone $500 and been sold for $700. The merchandise was restored to inventory.

12 After negotiations with Welch Corporation concerning problems with the merchandise purchased on August 8, Stone received a credit memorandum from Welch granting aprice reduction of $800.

15 Received balance due from Lux Corp. for the August 5 sale less the return on August 10.

18 Paid the amount due to Welch Corporation for the August 8 purchase less the price reduction granted.

19 Sold merchandise to Trax Co. for $3,600 under credit terms of 1/10, n/30, FOB shipping point, invoice dated August 19. The merchandise had cost $2,500.

22 Trax requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Stone sent Trax a $600 credit memorandum to resolve theissue.

29 Received Trax's cash payment for the amount due from the August 19 sale.

30 Paid Abilene Company the amount due from the August 1 purchase.

Prepare journal entries to record the above merchandising transactions of Stone Company, which applies the perpetual inventory system. (Identify each receivable andpayable; for example, record the purchase on August 1 in Accounts Payable—Abilene.)

Seen 1 years ago William Damian 1 answers

The Bags and Luggage Company had the following account balances as of January 1:
Direct Materials Inventory$9,200Work in Process Inventory78,400Finished Goods Inventory53,600Manufacturing Overhead-0-
During the month of January, all of the following occurred:
1.
Direct labor costs were $42,000 for 1,800 hours worked.2.Direct materials costing $35,750 and indirect materials costing $3,500 were purchased.3.Sales commissions of $16,500 were earned by the sales force.4.$26,000 worth of direct materials were used in production.5.Advertising costs of $6,300 were incurred.6.Factory supervisors earned salaries of $12,000.7.Indirect labor costs for the month were $3,000.8.Monthly depreciation on factory equipment was $4,500.9.Utilities expense of $7,800 was incurred in the factory.10.Luggage with manufacturing costs of $70,100 were transferred to finished goods.11.Monthly insurance costs for the factory were $4,200.12.$5,000 in property taxes on the factory were incurred and paid.13.Luggage with manufacturing costs of $89,000 were sold for $145,000.
a.Assume If Bags and Luggage assigns manufacturing overhead of $34,400, what will be the balances in the Direct Materials, Work in Process, andFinished Goods Inventory accounts at the end of January? (Input all amounts as positive values. Omit the "$" sign in yourresponse.)
Direct materials inventory$ Work in process inventory$ Finished goods inventory$
b.As of January 31, what will be the balance in the Manufacturing Overhead account? (Input allamounts as positive values.Omit the "$" sign in your response.)
Manufacturing overhead$
c.What was Bags and Luggage's operating income for January? (Input all amounts as positivevalues. Omit the "$" sign in your response.)
Operating income$

Seen 1 years ago Margaret 1 answers

Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of25,000 units and transferred them to the next department. The cost of beginning inventory and the costs added during January amounted to $599,780 in total. The endinginventory in January consisted of 3,000 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs perequivalent unit for the month were as follows:

Materials Labor Overhead
Cost per equivalent unit $12.50 $3.20 $6.40
________________________________________

Requirement 1:
Compute the equivalent units of materials, labor, and overhead in the ending inventory for the month.

Materials Labor Overhead
Equivalent units of production



________________________________________

Requirement 2:
(a) Compute the cost of ending inventory.

Materials Labor Overhead Total
Cost of ending inventory $
$
$
$

________________________________________

(b) Compute the units transferred to the next department for January.

Materials Labor Overhead Total
Cost of units completed and transferred out $
$
$
$

________________________________________

******* ********

Builder Products, Inc., manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department,Cooking, is given below for May:


Production data:
Pounds in process, May 1; materials 100% complete;
conversion 80% complete 10,000
Pounds started into production during May 100,000
Pounds completed and transferred out ?
Pounds in process, May 31; materials 60% complete;
conversion 20% complete 15,000
Cost data:
Work in process inventory, May 1:
Materials cost $ 1,500
Conversion cost $ 7,200
Cost added during May:
Materials cost $154,500
Conversion cost $ 90,800
________________________________________

The company uses the weighted-average method.

Requirement 1:
Compute the equivalent units of production.

Materials Conversion
Equivalent units of production


________________________________________

Requirement 2:
Compute the costs per equivalent unit for the month.

Materials Conversion
Cost per equivalent unit $
$

________________________________________

Requirement 3:
(a) Determine the cost of ending work in process inventory.

Materials Conversion Total
Cost of ending work in process inventory $
$
$

________________________________________

(b) Determine the units transferred out to the next department.

Materials Conversion Total
Cost of units completed and transferred out $
$
$



****** ******

Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as aflavoring for drinks and for use in desserts. The bottles are sold for $12 each. (The Mexican currency is the peso and is denoted by $.) The first stage in theproduction process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats.The company uses the weighted-average method in its process costing system. A hastily prepared report for the Mixing Department for April appears below:


Units to be accounted for:
Work in process, April 1 (materials 90%
complete; conversion 80% complete) 30,000
Started into production 200,000
Total units to be accounted for 230,000
Units accounted for as follows:
Transferred to next department 190,000
Work in process, April 30 (materials 75%
complete; conversion 60% complete) 40,000
Total units accounted for 230,000
________________________________________

Cost Reconciliation
Cost to be accounted for:
Work in process, April 1 $ 98,000
Cost added during the month 827,000
Total cost to be accounted for $ 925,000
Cost accounted for as follows:
Work in process, April 30 119,400
Transferred to next department $ 805,600
Total cost accounted for $ 925,000
________________________________________

Management would like some additional information about Cooperative San José's operations.

Requirement 1:
What were the equivalent units for the month?

Materials Conversion
Equivalent units of production


________________________________________

Requirement 2:
What were the costs per equivalent unit for the month? The beginning inventory consisted of the following costs: materials, $67,800; and conversion cost, $30,200. Thecosts added during the month consisted of: materials, $579,000; and conversion cost, $248,000.

Materials Conversion
Cost per equivalent unit $
$

________________________________________

Requirement 3:
How many of the units transferred to the next department were started and completed during the month?

Units started and completed during April



Seen 1 years ago Williams O'Sullivan 0 answers

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