Finsdale Farms, Inc. produces and sells corn dogs

Finsdale Farms, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $215,000. In addition, Austin estimates that the new machine will increase the company’s annual net cash inflows by $33,000. The machine will have a 12-year useful life and no salvage value.

Instructions

(a)   Calculate the cash payback period.

(b)   Calculate the machine’s internal rate of return.

(c)   Calculate the machine’s net present value using a discount rate of 10%.

(d)   Assuming Finsdale Farms, Inc.’s cost of capital is 10%, is the investment acceptable? Why or why not?

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Cherokee, Inc. manufactures one product called tybos

Cherokee, Inc. manufactures one product called tybos. The company uses a standard cost system and sells each tybo for $8. At the start of monthly production, Cherokee estimated 9,500 tybos would be produced in March. Cherokee has established the following material and labor standards to produce one tybo:

Standard Quantity         Standard Price

Direct materials              2.5 pounds                 $3 per pound

Direct labor                      0.6 hours                  $10 per hour

During March 2013, the following activity was recorded by the company relating to the production of tybos:

1.   The company produced 9,000 units during the month.

2.   A total of 24,000 pounds of materials were purchased at a cost of $66,000.

3.   A total of 24,000 pounds of materials were used in production.

4.   5,000 hours of labor were incurred during the month at a total wage cost of $55,000.

Instructions

Calculate the following variances for March for Cherokee, Inc.

(a)   Materials price variance

(b)   Materials quantity variance

(c)   Labor price variance

(d)   Labor quantity variance

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At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts

At January 1, 2002, Betty DeRose, Inc. had an allowance for doubtful accounts with a $2,700 credit balance. During 2002, Betty did not write-off any accounts receivable as uncollectible. Additionally, during 2002, Betty recorded $1,400 of recoveries of accounts receivable written off in prior years. At December 31, 2002, Betty prepared the following aging schedule:

Accounts Receivable % Uncollectible

not past due $150,000 2%

1-30 days past due 35,000 5%

31-60 days past due ? 8%

61-90 days past due 8,000 15%

over 90 days past due 2,000 50%

Based on the above information, Betty DeRose, Inc. estimated its bad debt expense to be $6,210 for 2002. Calculate the amount of accounts receivable that were 31-60 days past due. Do not use decimals in your answer.

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Draper Consulting began operations and completed the following transactions during the first

Draper Consulting began operations and completed the following transactions during the first half of December:

Dec 2 Received $18,000 cash and gave capital to Draper.

2 Paid monthly office rent, $550.

3 Paid cash for a Dell computer, $1,800. This equipment is expected to remain in service for five years.

4 Purchased office furniture on account, $4,200. The furniture should last for five years.
5 Purchased supplies on account, $900.

9 Performed consulting service for a client on account, $1,500.

12 Paid utility expenses, $250.

18 Performed service for a client and received cash of $1,100.

Requirements

1. Analyze the effects of Draper Consulting’s transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts receivable; Supplies; Equipment; Furniture; Accounts payable; and Draper, capital.

2. Prepare the income statement of Draper Consulting for the month ended December 31, 2012.

3. Prepare the statement of owner’s equity for the month ended December 31, 2012.

4. Prepare the balance sheet at December 31, 2012.

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Baseball Products manufactures a single product with the following full unit costs

Baseball Products manufactures a single product with the following full unit costs at a volume of 2,000 units:

Direct materials $   900
Direct labor 360
Manufacturing overhead* 610
Selling expenses (50% variable) 300
Administrative expenses**      290
Total per unit $2,460

 

*Note that per unit manufacturing overhead costs include $840,000 fixed costs

**Note that per unit administrative expenses include $500,000 fixed costs.

A company recently approached Baseball’s management about buying 200 units of product. Baseball currently sells its product to dealers for $2,600 per unit. Capacity is sufficient to produce the extra 200 units. No selling expenses would be incurred on the special order.

What is the minimum price Baseball should charge just to break even on the special order?

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Overhill, Inc., produces one model of mountain bike

Overhill, Inc., produces one model of mountain bike. Partial information for the company follows.

Requirement 1:
Complete Overhill’s cost data table. (Round your answers to 2 decimal places. Omit the “$” sign in your response.)

 

Cost Data
Number of bikes produced and sold 400 800 1,000
Total costs
Variable costs $ 125,000.00 $ $
Fixed costs per year
Total costs $ $ $
Cost per unit
Variable cost per unit $ $ $
Fixed cost per unit
Total cost per unit $ $ 543.75

 

Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $650. (Round your answers to 2 decimal places.)

Calculate Hermosa’s break-even point in units and sales revenue. (Round your “Unit” and “SalesRevenue” answers to the nearest whole number.)

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Friendley’s Miniature Golf and Driving Range Inc. was opened on March

Friendley’s Miniature Golf and Driving Range Inc. was opened on March 1 by Dean Barley. These selected events and transactions occurred during March.

Mar. 1 Stockholders invested $50,000 cash in the business in exchange for common stock of the corporation.
3 Purchased Arnie’s Golf Land for $38,000 cash. The price consists of land $23,000, building $9,000, and equipment $6,000. (Record this in a single entry.)
5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,200 cash.
6 Paid cash $2,400 for a 1-year insurance policy.
10 Purchased golf clubs and other equipment for $5,500 from Golden Bear Company, payable in 30 days.
18 Received golf fees of $1,600 in cash from customers for golf services performed.
19 Sold 100 coupon books for $25 each in cash. Each book contains ten coupons that enable the holder to play one round of miniature golf or to hit one bucket of golf balls. (Hint: The revenue should not be recognized until the customers use the coupons.)
25 Paid a $500 cash dividend.
30 Paid salaries of $800.
30 Paid Golden Bear Company in full for equipment purchased on March 10.
31 Received $900 in cash from customers for golf services performed.

Journalize the March transactions. Friendley’s records golf fees as service revenue.

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Poppycrock, Inc., manufactures large crates of microwaveable

Poppycrock, Inc., manufactures large crates of microwaveable popcorn that are typically sold to distributors. Its main factory has the capacity to manufacture and sell 35,000 crates per month. The following information is available for the factory:

Sales price per crate $ 26.00 Variable cost per crate:

Direct materials 5.50

Direct labor 10.50

Variable overhead 3.90

Fixed costs per month $ 103,000.00

Boys and Girls of Canada is a not-for-profit organization that raises funds each year by selling popcorn door-to-door. It offers to pay Poppycrock $22 per crate for a special-order batch of 5,000 crates. The special-order popcorn would include a unique label with information about the Boys and Girls of Canada. The additional cost of the label is estimated at $1.00 per crate. In addition, the variable overhead for these special-order crates would decrease by $0.50 because there would be no distribution costs.

A.

What is the incremental cost of creating a normal crate of popcorn? A special-order crate of popcorn? (Round your answers to 2 decimal places.)

Incremental Unit CostNormal cratesSpecial order crates

B-1. What is the impact on Poppycrock’s monthly operating profit if it accepts the offer and it is producing and distributing 30,000 normal crates per month. What is the opportunity cost of not accepting the offer?

Impact on operation profit

B-2. What is the opportunity cost of not accepting the offer?

Oportunity Cost

C-1. What is the impact on Poppycrock’s monthly operating profit if it accepts the offer and it is producing and selling 35,000 normal crates per month. What is the opportunity cost of accepting the offer?

Impact on operating profit

C-2. What is the opportunity cost of accepting the offer?

Opotunity Cost

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The General Ledger account balances as of December 31, 20XX, for the Cougar Detective Agency

The General Ledger account balances as of December 31, 20XX, for the Cougar Detective Agency are entered in the Trial Balance columns of the work sheet on pages 78 and 79.

REQUIRED: Complete the work sheet, using the following additional data, and then answer questions 6 through 9. DO NOT send the work sheet to us.

Additional data as of December 31, 20XX (ADJUSTING ENTRIES):

a. Depreciation of $1,050 on the vehicle and $305 on office equipment hasn’t been recorded for the current year $1,355

b. Salaries due but unpaid at year end 250

c. A physical count of unused office supplies showed a balance of $180 180

d. Interest due on notes payable 30

e. Services billed to clients for December haven’t yet been recorded 740

6. On the Balance Sheet for the Cougar Detective Agency, the balance in the Office Supplies account will be shown as a

A. debit of $180. C. debit of $340.

B. credit of $180. D. credit of $340.

7. The balance to be shown in the Fee Revenue account on the Income Statement for the Cougar Detective Agency is a

A. debit of $23,705. C. debit of $24,445.

B. credit of $23,705. D. credit of $24,445.

8. What is the net income for the Cougar Detective Agency for the year ended December 31, 20XX?

A. $8,815. C. $10,170.

B. $9,155. D. $14,175.

9. The balance to be shown in the Accumulated Depreciation—Vehicle account on the Balance Sheet for the Cougar Detective Agency is a credit of

A. $1,050. C. $2,200.

B. $2,100. D. $2,405.

 Base your answers to questions 10 through 15 on the following information:

The Mid-Valley Accounting Agency, owned and operated by Jeffery Thomas, organized for business on January 1, 20XX. It’s assumed, in this problem, that 11 months have elapsed since the company began operations, and that the January 1 through November 30 transactions have been entered in the journal and posted to the ledger. The company’s chart of accounts is as follows:

MID-VALLEY ACCOUNTING AGENCY

10. On December 26, cash in the amount of $175 was received for work performed. When you record this transaction in the General Journal, to which account should the credit entry be made?

A. Cash C. Interest Income

B. Accounts Payable D. Fee Income

11. What is the correct adjusting entry for the expired insurance premium as of December 31?

A. Insurance Expense 1,800

Prepaid Insurance 1,800

B. Prepaid Insurance 1,800

Insurance Expense 1,800

C. Insurance Expense 900

Prepaid Insurance 900

D. Prepaid Insurance 900

Insurance Expense 900

12. What is the net income for the Mid-Valley Accounting Agency for the year ended December 31, 20XX?

A. $13,440. C. $15,240.

B. $14,105. D. $16,350.

13. The balance in the Cash account, as shown on the work sheet in the Balance Sheet debit column, is

A. $4,305. C. $2,995.

B. $3,895. D. $2,305.

14. The balance in the Fee Income account, as shown on the work sheet in the Income Statement credit column, is

A. $35,295. C. $37,860.

B. $37,685. D. $38,130.

15. From the information on the work sheet, determine what the balance in the Jeffery Thomas, Capital account would be if a post-closing trial balance is prepared as of December 31, 20XX.

A. $21,490 C. $10,000

B. $15,185 D. $6,250

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for the Donald Ruddy Company as of December 31, 20XX (A+ Guaranteed)

Here’s a list of adjusted account balances, in alphabetical order, for the Donald Ruddy Company as of December 31, 20XX. Complete an Income Statement for the year ended December 31, 20XX, using the work sheet provided at the back of this unit.

1. The cost of goods sold is

A. $44,580. C. $38,580.

B. $41,580. D. $33,580.

2. The net cost of purchases are

A. $39,080. C. $39,750.

B. $39,580. D. $39,830.

3. The cost of goods available for sale is

A. $39,080. C. $41,580.

B. $39,330. D. $44,580.

4. Net sales for the period amount to

A. $59,830. C. $60,380.

B. $60,180. D. $60,930.

5. What are the total operating expenses?

A. $10,105 C. $10,700

B. $10,490 D. $11,000

A trial balance as of December 31, 20XX, for the Sylvia Goody Company is entered on the work sheet at the back of this unit. Complete the work sheet, using the following data.

6. On the work sheet prepared for the Sylvia Goody Company as of December 31, the debit total under Adjustments is

A. $1,039. C. $926.

B. $1,015. D. $913.

7. Which one of the following statements is true for the ending inventory balance?

A. It will appear as a debit in the Trial Balance column.

B. It will appear as a debit in the Adjusted Trial Balance column.

C. It will appear as a credit in the Balance Sheet column.

D. It will appear as a credit in the Income Statement column.

8. Which one of the following statements applies to the $714 in the Transportation-in account?

A. It will appear in the debit column of the Income Statement.

B. It will appear in the credit column of the Income Statement.

C. It will appear in the debit column of the Balance Sheet.

D. It will appear in the credit column of the Balance Sheet.

9. The cost of goods purchased that would appear on a formal income statement prepared for the Sylvia Goody Company, based on the information in the work sheet, would be

A. $20,939. C. $20,221.

B. $20,423. D. $19,709.

10. The net income for the Sylvia Goody Company for the period ending December 31, 20XX, is

A. $10,382. C. $11,120.

B. $10,406. D. $14,206.

11. When a firm is using a periodic inventory procedure, the cost of goods purchased is equal to

A. Beginning Inventory + Purchases – Purchase Returns and Allowances – Purchase

Discounts + Transportation-in.

B. Ending Inventory + Purchases – Purchase Returns and Allowances – Purchase

Discounts + Transportation-in.

C. Purchases – Purchase Returns and Allowances – Purchase Discounts +

Transportation-in.

D. Purchases – Purchase Returns and Allowances – Purchase Discounts –

Transportation-in.

12. An example of a contra-revenue account found on the Income Statement is the

A. Uncollectible Accounts Expense.

B. Transportation-in.

C. Purchase Returns and Allowances.

D. Sales Returns and Allowances.

13. Company A records purchases using the net price method. If an item is purchased from a supplier for $800 on terms of 3/10, n/30, the correct accounting entry would be

A. Purchases 776

Purchase Discounts 24

Accounts Payable 800

B. Purchases 776

Accounts Payable 776

C. Accounts Payable 800

Purchases 776

Purchase Discounts 24

D. Purchases 800

Accounts Payable 800

in 1,100

Ending Inventory 7,400

Sales 53,500

Beginning Inventory 9,500

Purchases 27,200

14. What account will be debited to record an accounts receivable amount considered to be a bad debt if the direct write-off method of accounting is used?

A. Uncollectible Accounts Expense
B. Cash
C. Allowance for Doubtful Accounts
D. Sales

Base your answers to questions 15 and 16 on the following data:
Here’s a partial record of the J. Shafer Company as of December 31, 20XX.
Purchase Returns $ 1,500
Sales Discounts 900
Operating Expenses 20,000
Transportation-in 1,100
Ending Inventory 7,400
Sales 53,500
Beginning Inventory 9,500
Purchases 27,200

15. The cost of goods sold is

A. $37,800. C. $29,800.

B. $36,700. D. $28,900.

16. The company’s net income is

A. $17,400. C. $4,600.

B. $16,800. D. $3,700.

17. The term used to designate that the buyer of merchandise is responsible for the transportation costs of shipping the merchandise is

A. E.O.M. shipping point. C. E.O.M. destination.

B. F.O.B. shipping point. D. F.O.B. destination.

18. Gross profit on sales minus operating expenses equals

A. net operating income. C. net sales.

B. cost of goods sold. D. net operating expenses.

19. The following information about the Wells Company’s merchandising accounts is available:

Beginning Inventory . . . . . . . . . . . . $100,000

Ending Inventory. . . . . . . . . . . . . . . 40,000

Purchase Discounts . . . . . . . . . . . . . 4,000

Transportation-in . . . . . . . . . . . . . . . 7,500

Purchases. . . . . . . . . . . . . . . . . . . . 55,000

Cost of Goods Sold . . . . . . . . . . . . . 115,000

The information on Purchase Returns and Allowances has been misplaced, and it’s up
to you to determine its final balance from the information given above. The amount of
Purchase Returns and Allowances must be

A. $3,500. C. $11,000.

B. $7,500. D. $15,000.

20. All but one of the following accounts would be credited in the closing process. Which account would not be credited in the closing entries?

A. Sales Discounts

B. Purchases

C. Transportation-in

D. Purchase Returns and Allowances

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