P10-2 (Classification of Acquisition Costs) Selected accounts included in the property, plant (A+ Guaranteed)

P10-2 (Classification of Acquisition Costs) Selected accounts included in the property, plant, and equipment section of Lobo Corporation%u2019s balance sheet at December 31, 2011, had the following balances.

Land $ 300,000

Land improvements 140,000

Buildings 1,100,000

Equipment 960,000

During 2012, the following transactions occurred.

1. A tract of land was acquired for $150,000 as a potential future building site.

2. A plant facility consisting of land and building was acquired from Mendota Company in exchange for 20,000 shares of Lobo%u2019s common stock. On the acquisition date, Lobo%u2019s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Mendota%u2019s books at $110,000 for land and $320,000 for the building at the exchange date. Current appraised values for the land and building, respectively, are $230,000 and $690,000.

3. Items of machinery and equipment were purchased at a total cost of $400,000. Additional costs were
incurred as follows.

Freight and unloading $13,000

Sales taxes 20,000

Installation 26,000

4. Expenditures totaling $95,000 were made for new parking lots, streets, and sidewalks at the corporation%u2019s various plant locations. These expenditures had an estimated useful life of 15 years.

5. A machine costing $80,000 on January 1, 2004, was scrapped on June 30, 2012. Double-declining balance depreciation has been recorded on the basis of a 10-year life.

6. A machine was sold for $20,000 on July 1, 2012. Original cost of the machine was $44,000 on January 1, 2009, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,000.

Instructions
(a) Prepare a detailed analysis of the changes in each of the following balance sheet accounts for 2012.

Land
Land improvements
Buildings
Equipment
(Hint: Disregard the related accumulated depreciation accounts.)

(b) List the items in the fact situation that were not used to determine the answer to (a), showing the pertinent amounts and supporting computations in good form for each item. In addition, indicate where, or if, these items should be included in Lobo%u2019s financial statements.

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Keiper, Inc., is considering a new three-year expansion project (A+ Guaranteed)

Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.7 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,080,000 in annual sales, with costs of $775,000. The tax rate is 35 percent and the required return on the project is 12 percent. What is the project’s NPV? (Round your answer to 2 decimal places. (e.g., 32.16))

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ACCT 346 MIDTERM – (TCO 1) Managerial accounting stresses accounting concepts

1. Question : (TCO 1) Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for

taxing authorities.

internal users of accounting information.

external users of accounting information.

the Securities and Exchange Commission (SEC).

2. Question : (TCO 1) Which of the following costs does not change when the level of business activity changes?

total fixed costs

total variable costs

total direct materials costs

fixed costs per unit

3. Question : (TCO 1) You own a car and are trying to decide whether or not to trade it in and buy a new car. Which of the following costs is an opportunity cost in this situation?

the trip to Cancun that you will not be able to take if you buy the car

the cost of the car you are trading in

the cost of your books for this term

the cost of your car insurance last year

4. Question : (TCO 1) Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00 each. What is the budgeted fixed cost per unit?

$1.06

$1.44

$4.49

$1.94

5. Question : (TCO 1) Which of the following costs is not part of manufacturing overhead?

electricity for the factory

depreciation of factory equipment

salaries for the production supervisors

health insurance for sales staff

6. Question : (TCO 1) Product costs

are also called manufacturing costs.

are considered an asset until the finished goods are sold.

become an expense when the goods are sold.

All of the above answers are correct.

7. Question : (TCO 1) Red Runner’s Work in Process Inventory account has a beginning balance of $50,000 and an ending balance of $40,000. Direct materials used are $70,000 and direct labor used totals $35,000. Cost of goods sold totals $135,000. Manufacturing overhead applied is $20,000. How much is cost of goods manufactured?

$145,000

$115,000

$125,000

$135,000

8. Question : (TCO 2) BCS Company applies manufacturing overhead based on direct labor cost. Information concerning manufacturing overhead and labor for August follows:

Estimated Actual

Overhead cost $174,000 $171,000

Direct labor hours 5,800 5,900

Direct labor cost $87,000 $89,975

How much is the predetermined overhead rate?

2.00

1.90

30.00

1.93

9. Question : (TCO 2) During 2011, Madison Company applied overhead using a job-order costing system at a rate of $12 per direct labor hours. Estimated direct labor hours for the year were 150,000, and estimated overhead for the year was $1,800,000. Actual direct labor hours for 2011 were 140,000 and actual overhead was $1,670,000.

What is the amount of under or over applied overhead for the year?

$10,000 underapplied

$10,000 overapplied

$130,000 underapplied

$130,000 overapplied

10. Question : (TCO 3) Which of the following describes the differences between job-order and process costing?

Job-order costing is used in financial accounting while process costing is used in managerial accounting.

Job-order costing can only be used by manufacturers; service enterprises must use process costing.

Job-order costing is voluntary while process costing is mandatory.

Job-order costing traces costs to jobs while process costing traces costs to departments and averages the costs among the units worked on during the period.

11. Question : (TCO 3) The Blending Department began the period with 45,000 units. During the period the department received another 30,000 units from the prior department and completed 60,000 units during the period. The remaining units were 75% complete. How much are equivalent units in The Blending Department’s work in process inventory at the end of the period?

30,000

22,500

15,000

11,250

12. Question : (TCO 3) Ranger Glass Company manufactures glass for French doors. At the start of May, 2,000 units were in-process. During May, 11,000 units were completed and 3,000 units were in process at the end of May. These in-process units were 90% complete with respect to material and 50% complete with respect to conversion costs. Other information is as follows:

Work in process, May 1:

Direct material $36,000

Conversion costs $45,000

Costs incurred during May:

Direct material $186,000

Conversion costs $255,000

How much is the cost per equivalent unit for direct materials?

$24.00

$16.20

$15.86

$13.58

13. Question : (TCO 4) Total costs were $75,800 when 30,000 units were produced and $95,800 when 40,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units.

$80,115

$76,000

$79,800

$91,800

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CPC-1 The controller for A & A Products, neglected to have her staff accrue (A+)

CPC-1 The controller for A & A Products, neglected to have her staff accrue the payroll for the last week in December, 2012. The following data should have been considered and accounted for in A & A

Products’ books.

Total payroll= $1,350,000

Income taxes to be withheld= $150,000

FICA taxes applicable to the payroll accrual = $28,000

FUTA taxes on accrued payroll= $4,000

Total compensated absences related to the payroll= $75,000 vacation time and $85,000 sick time.

Employees who do not take vacation will receive compensation in lieu of time taken off. Sick time does not vest and if the employee does not use their sick time it is forfeited back to the company. Union dues that should have been withheld from employees’ payroll= $12,000.

Required:

Journalize all entries that are necessary to accrue the above payroll. Include the entries in your adjusted pre-closing trial balance for A & A Products.

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ABC Corporation is authorized to issue 50,000 shares of $50 par value (A+)

ABC Corporation is authorized to issue 50,000 shares of $50 par value, 8% cumulative, participating preferred stock and 750,000 shares of $5 par value common stock. Please prepare journal entries to record the following transactions that occurred during the first year of operations:

January 1
Exchanged 500 shares of common stock for $2,500 worth of services incurred to get the corporation organized.

February 1
Sold 96,000 shares of common stock for $8 per share, cash

March 1
Sold 35,000 shares of common stock for $10 per share, cash.

March 31
Sold 10,000 shares of preferred stock for $85 per share, cash.

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Park Corporation began the month of May with $1,100,000 of current assets (A+)

Park Corporation began the month of May with $1,100,000 of current assets, a current ratio of 2.10:1, and an acid-test ratio of 1.60:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

Required:

Prepare a table showing Park’s (1) current ratio, (2) acid-test ratio, and (3) working capital, after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Omit the “$” sign in your response.)

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GS Cookie Co. forecasts cash receipts for January and February (A+)

GS Cookie Co. forecasts cash receipts for January and February of $18,000 and $20,000, respectively. Cash Payments of $6,000 and $8,000 are expected in these two months. GS Cookie’s cash balance at the beginning of January was $5,000, a level that it attempts to maintain. At the beginning of the year, GS Cookie has a $15,000 balance outstanding on its line of credit at the local bank. Based on its cash budget, how much of the line of credit can GS Cookie repay in January and February?

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HPC, Inc. has developed a standard pricing system for its products (A+ Guaranteed)

  1. HPC, Inc. has developed a standard pricing system for its products.The variable cost standards (based on expected output of 7000 units) are:

3# direct material per unit @ $6 per pound                          $ 18.00

2 hours direct labor @ $15 per hour                                            30.00

In January 20XX, the firm actually produced 7200 units and actual manufacturing costs were as follows:

Direct material purchased & used             21,700# for a total price of $129,115

Direct labor paid                                               14,250 hours @ $15.10 per hour

  1. Compute all direct material and direct labor variances (4 variances in total).Be sure to note if a variance is favorable (F) or unfavorable (U).Note that you need to consider the # of units actually produced when computing your efficiency variances.

Assume that all direct material was purchased on account and those purchases are only recorded at the end of the month. Also assume that the firm uses a standard cost accounting system (with variances recorded). Prepare the journal entry for direct materials purchased during the month.

  • Assume that all direct material used is only recorded at the end of the month. Also assume that the firm uses a standard cost accounting system (with variances recorded). Prepare the journal entry for direct materials used during the month.

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Balls and Bats, Inc. purchased equipment on January 1, 2005, at a cost of $100,000 (A+ Guaranteed)

Balls and Bats, Inc. purchased equipment on January 1, 2005, at a cost of $100,000. The estimated useful life is 4 years with a salvage value of $10,000.

Complete the following tasks for this assignment:

  1. Prepare two different depreciation schedules for the equipment—one using the double-declining balance method, and the other using the straight-line method. (Round to the nearest dollar).
  2. Determine which method would result in the greatest net income for the year ending December 31, 2005.
  3. How would taxes affect management’s choice between these two methods for the financial statements?

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X Inc has a project with 10 year life. The project requires a $1.2M investment (A+ Guaranteed)

X Inc has a project with 10 year life. The project requires a $1.2M investment in equipment. At the end of 10 years, the project is terminated and the equipment has no salvage value. NOI each year as follows: sales: 1.7M, Variable Costs: 1.2M, Contrib. Margin: 500K, Fixed Costs: 200K, Depreciation: 120K, total fixed: 320K, NOI: 180K. All of the above except deprec are cash flows. Company’s real rate of return is 12%.

4 things:

1) what is project’s net Present Value?

2) what is IRR to the nearest percent?

3) what is payback period?

4) Simple Rate of Return?

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