Candro corp. began operations on May 1,2010 and completed the following transactions (A+ Guaranteed)

Candro corp. began operations on May 1,2010 and completed the following transactions during its first month of operations:

Sold capital stock for $30,000

Purchased land and a building valued at $35,000 and $165,000, respectively, by paying $10,000 cash and signing a 20 year mortgage for the balance.

Purchased office equipment on account , $7,500

Billed a customer for services performed , $5,000

Received an $800 deposit from a customer for services to be performed next month

Made a partial payment on account for the office equipment purchased in transaction (C),$1,500

Performed a service and immediately collected $2,000

Received and immediately paid the telephone bill for the month, $380.

Paid a dividend to owners, $3,000

Received but did not pay, the monthly utility bill, $450

Question:

A)Determine the effect of each of the preceding events on the accounting equation

B)Prepare the general journal entries to record each of these events. You may set up T accounts to keep track of some accounts. Do not prepare adjusting entries!

C)Prepare the income statement for the period

D)Prepare the statement of retained earnings for the period

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Northern Company has budgeted sales for the upcoming months as follows (A+ Guaranteed)

Northern Company has budgeted sales for the upcoming months as follows:

April                $456,000
May                 $468,000
June                $491,000
July                 $521,000
August            $504,000
September     $481,000

40% of the sales are credit sales, the remainder are cash sales. Credit sales are collected 45% in the month of sale, 35% in the month following the sale, and 7% in the second month following the sale.

a. Compute Northern Company’s cash receipts for June. (Do not round intermediate calculations. Omit the “$” sign in your response.)

b. Compute Northern Company’s cash receipts for July. (Do not round intermediate calculations. Omit the “$” sign in your response.)

c. Compute Northern Company’s cash receipts for August. (Do not round intermediate calculations. Omit the “$” sign in your response.)

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Grisham Products expects the following sales of its single product (A+ Guaranteed)

Grisham Products expects the following sales of its single product:
Units
March 5,200
April 6,400
May     7,750
June     8,050
July     8,800

Grisham Products desires an ending finished goods inventory to be equal to 30% of the next month’s sales needs. Actual March 1 inventory is projected to be 1,560 units.

Required:

Prepare a production budget for Grisham Products for as many months as is possible. (Input all answers as positive values.)

Here’s the SOLUTION

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Stanford Coop uses a standard cost system to account for the costs of its one product (A+ Guaranteed)

Stanford Coop uses a standard cost system to account for the costs of its one product. Materials standards are 2.8 pounds of material at $13 per pound and 1 hours of labor at a standard wage rate of $11. During July Stanford Coop produced 3,280 units. Materials purchased and used totaled 10,080 pounds at a total cost of $132,390. Payroll totaled $147,680 for 13,180 hours worked

a.Direct Materials Price Variance?(Unfavorable, Favorable, None)

b.Direct Materials Quanity Variance?(Unfavorable, Favorable, None)

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Superior Coop uses a standard cost system to account for the costs of its one product (A+ Guaranteed)

Superior Coop uses a standard cost system to account for the costs of its one product. Variable overhead is applied using direct labor hours. Standards allowed for each unit are 3.0 hours of labor at a variable overhead rate of $11. During November, Superior Coop produced 2,250 units. Payroll totaled $97,730 for 7,140 hours worked. Variable overhead incurred totaled $80,390

Calculate

a.Variable overhead rate variance (U or F or none)

b. Variable overhead efficiency variance (U or F or none)

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Drenthe BV of the Netherlands is a wholesale distributor of Dutch cheeses (A+ Guaranteed)

Drenthe BV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company’s profits have been declining, which has caused considerable concern. To help understand the condition of the company, the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company’s accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)

 

 

Sales Territory

Southern Europe

Middle Europe

Northern Europe

Sales ……………………………………………………..

€300,000

€800,000

€700,000

Territorial expenses (traceable):

          Cost of goods sold ………………………………..

93,000

240,000

315,000

          Salaries ………………………………………………

54,000

56,000

112,000

          Insurance ……………………………………………

9,000

16,000

14,000

          Advertising ………………………………………….

105,000

240,000

245,000

          Depreciation ………………………………………..

21,000

32,000

28,000

          Shipping ……………………………………………..

    15,000

    32,000

     42,000

Total territorial expenses …………………………….

  297,000

  616,000

   756,000

Territorial income (loss)
before corporate expenses ………………………

 

    3,000

 

  184,000

 

  (56,000)

Corporate expenses:

          Advertising (general) ……………………………..

15,000

40,000

35,000

          General administrative ……………………………

    20,000

    20,000

    20,000

Total corporate expenses…………………………….

    35,000

    60,000

    55,000

Net operating income (loss) ………………………..

€(32,000)

€124,000

€(111,000)

       

Cost of goods sold and shipping expenses are both variable; other costs are all fixed. Drenthe BV purchases cheeses at auction and from farmers’ cooperatives, and it distributes them in the three territories listed above. Each of the three sales territories has its own manager and sales staff. The cheeses vary widely in profitability; some have a high margin and some have a low margin. (Certain cheeses, after having been aged for long periods, are the most expensive and carry the highest margins.)

 Required:

1. List any disadvantages or weaknesses that you see to the statement format illustrated above.

2. Explain the basis that is apparently being used to allocate the corporate expenses to the territories. Do you agree with these allocations? Explain.

3. Prepare a new segmented contribution format income statement for May. Show a Total column as well as data for each territory. In addition, for the company as a whole and for each sales territory, show each item on the segmented income statement as a percent of sales.

4. Analyze the statement that you prepared in (3) above. What points that might help to improve the company’s performance would you bring to management’s attention?

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Erik Rekdahl, senior-in-charge, is auditing Koonce Katfood (A+ Guaranteed)

Erik Rekdahl, senior-in-charge, is auditing Koonce Katfood, Inc.’s, long-term debt for the year ended December 31. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively. The debt is held by two insurance companies. Rekdahl has examined the bond agreements for each issue. The agreements provide that if Koonce fails to comply with the covenants of the contract, the debt becomes payable immediately. Rekdahl identified the following covenants when reviewing the bond agreements: “The debtor company shall endeavor to maintain a working capital ratio of 2 to 1 at all times, and in any fiscal year following a failure to maintain said ratio, the company shall restrict compensation of officers to a total of $650,000. Officers include the chairperson of the board and the president.” “The debtor company shall keep all property that is security for these debt agreements insured against loss by fire to the extent of 100 percent of its actual value. Policies of insurance comprising this protection shall be filed with the trustee.” “The company is required to restrict 40 percent of retained earnings from availability for paying dividends.” “A sinking fund shall be established with the First Morgan Bank of Austin, and semiannual payments of $500,000 shall be deposited in the fund. The bank may, at its discretion, purchase bonds from either issue.”

a. Provide any audit steps that Rekdahl should conduct to determine if the company is in compliance with the bond indentures.

b. List any reporting requirements that the financial statements or footnotes should include.

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Natco Aluminum Company uses a process cost system to record the costs (A+ Guaranteed)

Natco Aluminum Company uses a process cost system to record the costs of manufacturing rolled aluminum, which consists of the smelting and rolling processes. Materials are entered from smelting at the beginning of the rolling process. The inventory of Work in Process—Rolling on June 1, 2012, and debits to the account during June were as follows:

wrfm11h_ch18_c_pr20_4b1.gif

During June, 3,300 units in process on June 1 were completed, and of the 32,500 units entering the department, all were completed except 3,700 units that were 4/5 completed. Charges to Work in Process—Rolling for July were as follows:

wrfm11h_ch18_c_pr20_4b2.gif

During July, the units in process at the beginning of the month were completed, and of the 33,000 units entering the department, all were completed except 2,900 units that were 2?5 completed.

1. Enter the balance as of June 1, 2012, in a four-column account for Work in Process— Rolling. Record the debits and the credits in the account for June. Construct a cost of production report and present computations for determining (a) equivalent units of production for materials and conversion, (b) costs per equivalent unit, (c) cost of goods finished, differentiating between units started in the prior period and units started and finished in June, and (d) work in process inventory. If an amount box does not require an entry, leave it blank or enter “0″.

2. Provide the same information for July by recording the July transactions in the four-column work in process account. Construct a cost of production report, and present the July computations (a through d) listed in part (1). If an amount box does not require an entry, leave it blank or enter “0″.

3. Comment on the change in costs per equivalent unit for May through July for direct materials and conversion cost.

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Presented below are selected account balances for Homer Winslow Co (A+ Guaranteed)

Exercise 3-16 Presented below are selected account balances for Homer Winslow Co. as of December 31, 2014.

Inventory 12/31/14 $60,180 Cost of Goods Sold $225,870
Common Stock 75,870 Selling Expenses 17,400
Retained Earnings 48,850 Administrative Expenses 39,150
Dividends 19,080 Income Tax Expense 30,180
Sales Returns and Allowances 13,650
Sales Discounts 15,290
Sales Revenue 411,940

Prepare closing entries for Homer Winslow Co. on December 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No entry” for the account titles and enter 0 for the amounts.)

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Lon Timur is an accounting major at a midwestern state university located approximately 60 miles (A+ Guaranteed)

Lon Timur is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and visit their homes regularly on the weekends. Lon, an entrepreneur at heart, realizes that few good commuting alternatives are available for students doing weekend travel. He believes that a weekend commuting service could be organized and run profitably from several suburban and downtown shopping mall locations. Lon has gathered the following investment information.

1. Five used vans would cost a total of $74,700 to purchase and would have a 3-year useful life with negligible salvage value. Lon plans to use straight-line depreciation.
2. Ten drivers would have to be employed at a total payroll expense of $48,001.
3. Other annual out-of-pocket expenses associated with running the commuter service would include Gasoline $16,002, Maintenance $3,297, Repairs $4,010, Insurance $4,209, Advertising $2,508.
4. Lon has visited several financial institutions to discuss funding. The best interest rate he has been able to negotiate is 15%. Use this rate for cost of capital.
5. Lon expects each van to make ten round trips weekly and carry an average of six students each trip. The service is expected to operate 30 weeks each year, and each student will be charged $12.02 for a round-trip ticket.

Determine the annual (1) net income and (2) net annual cash flows for the commuter service.(Round answers to 0 decimal places, e.g. 125.)

Compute (1) the cash payback period and (2) the annual rate of return. (Round answers to 2 decimal places, e.g. 10.50.)

Compute the net present value of the commuter service. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45).)

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