Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank

Scratch Miniature Golf and Driving Range Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.

Mar. 1 Invested $50,000 cash in the business in exchange for common stock.

3 Purchased Michelle Wie’s Golf Land for $38,000 cash. The price consists of land

$10,000; building $22,000; and equipment $6,000. (Make one compound entry.)

5 Advertised the opening of the driving range and miniature golf course, paying

advertising expenses of $1,600.

6 Paid cash $1,480 for a one-year insurance policy.

10 Purchased golf equipment for $2,500 from Singh Company, payable in 30 days.

18 Received golf fees of $1,200 in cash.

25 Declared and paid a $500 cash dividend.

30 Paid wages of $900.

30 Paid Singh Company in full.

31 Received $750 of fees in cash.

Scratch uses the following accounts: Cash; Prepaid Insurance; Land; Buildings; Equipment; Accounts

Payable; Common Stock; Dividends; Service Revenue; Advertising Expense; and Wages Expense.

Instructions

Journalize the March transactions. (Provide explanations for the journal entries.)

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Frank Weston, supervisor of the Freemont Corporation’s Machining Department

Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost control report is given below: Freemont Corporation-Machining Department Cost Control Report For the Month Ended June 30 Planning Budget Actual Results Variances Machine-hours 35,000 38,000 Direct labor wages $80,500 $86,100 $5,600 U Supplies 21,000 23,100 2,100 U Maintenance 134,000 137,300 3,300 U Utilities 15,200 15,700 500 U Supervision 38,000 38,000 0 Depreciation 80,000 80,000 0 Total $368,700 $380,200 “I just can’t understand all the red ink,”

Weston complained to the supervisor of another department. “When the boss called me in, I thought he was going to give me a pat on the back because I know for a fact that my department worked more efficiently last month than it has ever worked before, instead, he tore me apart. I thought for a minute that it might be over the supplies that were stolen out of our warehouse last month. But they only amounted to a couple of hundred dollars, and just look at this report. Everything is unfavorable.” Direct labor wages and supplies are variable costs; supervision and depreciation are fixed costs; and maintenance and utilities are mixed costs. The fixed component of the budgeted maintenance cost is $92,000; the fixed component of the budgeted utilities cost is $11,700. *

Evaluate the company’s cost control report and explain why the variances were all unfavorable. *

Prepare a performance report that will help Mr. Weston’s superiors assess how well costs were controlled in the Machining Department.

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Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah

Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the extra capacity will be needed. (Assume that Deer Valley Lodge will sell all 300 lift tickets on those 40 days.) Running the new lift will cost $500 a day for the entire 200 days the lodge is open. Assume that the lift tickets at Deer Valley cost $55 a day. The new lift has an economic life of 20 years.

Assume that the before-tax required rate of return for Deer Valley is 14%. Compute the before-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer. Assume that the after-tax required rate of return for Deer Valley is 8%, the income tax rate is 40%, and the MACRS recovery period is 10 years. Compute the after-tax NPV of the new lift and advise the managers of Deer Valley about whether adding the lift will be a profitable investment. Show calculations to support your answer What subjective factors would affect the investment decision?

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Nancy Tai has recently opened a revolving charge account with MasterCard

Nancy Tai has recently opened a revolving charge account with MasterCard. Her credit limit is $1000, but she has not charged that much since opening the account. Nancy hasn’t had the time to review her monthly statements as promptly as she should, but over the upcoming weekend, she plans to catch up on her work.

In reviewing November’s statement, she notices that her beginning balance was $600 and that she made a $200 payment on November 10. She also charged purchases of $80 on November 5, $100 on November 15, and $50 on November 30. She can’t tell how much interest she paid in November because she spilled watercolor paint on that portion of the statement. She does remember, though, seeing the letters APR and the number 24%. Also, the back of her statement indicates that interest was charged using the average daily balance method including current purchases, which considers the day of a charge or credit.

 1. Assuming a 30-day period in November, calculate November’s interest using the average daily balance method. Also, calculate the interest Nancy would have paid with: a) the previous balance method, b) the adjusted balance method.

2. Going back in time, when Nancy was just about to open her account, and assuming she could choose among credit sources that offered different monthly balance determinations, and assuming further that Nancy would increase her outstanding balance over time, which credit source would you recommend? Explain.

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Daniels Company deposits all receipts and makes all payments by check (A+ Guaranteed)

Daniels Company deposits all receipts and makes all payments by check. The following information is available from the cash records: MARCH 31 BANK RECONCILIATION Balance per bank $26,746 Add: Deposits in transit 2,100 Deduct: Outstanding checks (3,800) Balance per books $25,046 Month of April Results Per Bank Per Books Balance April 30 $27,995 $24,355 April deposits 8,864 13,889 April checks 13,100 14,080 April note collected 3,000 -0- (not included in April deposits) April bank service charge 35 -0- April NSF check of a customer returned by the bank (recorded by bank as a charge) 900

Instructions

Calculate the amount of the April 30: 1. Deposits in transit 2. Outstanding checks Show all your work for potential partial credit.

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The following income statement items appeared on the adjusted trial balance of Schembri (A+ Guaranteed)

Problem 4-7 Income statement presentation; statement of comprehensive income; unusual items

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2013 ($ in 000s): sales revenue, $15,300; cost of goods sold, $6,200; selling expenses, $1,300; general and administrative expenses, $800; interest revenue, $85; interest expense, $180. Income taxes have not yet been accrued. The company’s income tax rate is 40% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2013 ($ in 000s). All transactions are material in amount.

1. Investments were sold during the year at a loss of $220. Schembri also had unrealized gains of $320 for the year on investments.

2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,200.

3. An earthquake destroyed a warehouse causing $2,000 in damages. The event is considered to be unusual and infrequent.

4. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $560 in 2013 prior to the sale, and its assets were sold at a gain of $1,400.

5. In 2013, the company’s accountant discovered that depreciation expense in 2012 for the office building was understated by $200.

6. Foreign currency translation losses for the year totaled $240.

Required:

Prepare Schembri’s combined statement of income and comprehensive income for 2013, including basic earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 400,000 shares were issued on July 1, 2013. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands. Round EPS answers to 2 decimal places.)

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Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity (A+ Guaranteed)

Heritage Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant’s full capacity of 3,900 bookcases per year. Annual cost data at full capacity follow:

  Direct materials used (wood and glass) $ 426,000
  Administrative office salaries $ 108,000
  Factory supervision $ 72,000
  Sales commissions $ 60,000
  Depreciation, factory building $ 102,000
  Depreciation, administrative office equipment $ 2,000
  Indirect materials, factory $ 20,000
  Factory labor (cutting and assembly) $ 93,000
  Advertising $ 96,000
  Insurance, factory $ 5,000
  Administrative office supplies (billing) $ 5,000
  Property taxes, factory $ 21,000
  Utilities, factory $ 43,000

Required:

1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold; and second, as either a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classified as either direct or indirect.) (Leave no cells blank – be certain to enter “0″ wherever required. Omit the “$” sign in your response.)

2. Compute the average product cost per bookcase. (Round your answer to the nearest dollar amount. Omit the “$” sign in your response.)

3. Due to a recession, assume that production drops to only 2,000 bookcases per year. Would you expect the average product cost per bookcase to increase, decrease, or remain unchanged?

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Mighty muffler inc operates an automobile service facility that specializes in replacing mufflers (A+ Guaranteed)

Mighty muffler inc operates an automobile service facility that specializes in replacing mufflers in compact cars. The following table shows the cost incurred during a month when 700 mufflers were replaced.

Muffler replacements
600 700. 800

Total cost
Fixed cost. a. $56,000 b
Variable cost. c. 28,000 d
Total cost. e 84000 f

Cost per muffler replacement
Fixed cost. g h i
Variable cost. j k l
Total cost per muffler m n o

Required : Fill in the missing amounts, labeled A through O, in the table.

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Alberta Company produces a product that is sold for $40 per unit (A+ Guaranteed)

E3-17 Contribution Income Statement and Cost-Volume-Profit Graph (LO2, 3)

Alberta Company produces a product that is sold for $40 per unit. The company produced and sold 6,000 units during May 2012. There were no beginning or ending inventories. Variable and fixed costs follow.

Variiable Costs per Unit                                       Fixed Costs per Month

Manufacturing                                                     Manufacturing Overhead $40,000

Direct Materials $10                                           Selling and administrative $20,000

Direct Labor $2                                                  Total $60,000

Manufacturing overhead $5     = $17

Selling and administrative $5

Total $22

  1. Prepare a contribution income statement for May.
  2. Prepare a cost-volume-profit graph. Label the horizontal axis units with a maximum value of 10,000. Label the vertical axes in dollars with a maximum value of $400,000. Draw a vertical line of the graph for the current (6,000) unit sales level, and label total variable costs, total fixed costs, and total profits at 6,000 units.

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Jefferson County Airport handles several daily commuter flights and many private flights

Jefferson County Airport handles several daily commuter flights and many private flights. The county budget officer has compiled the following data regarding airport costs and activity over the past year.

Flights

Required:
1. Draw a scatter diagram of the airport costs shown above.
2. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the variable- and fixed-cost components in the airport’s cost behavior pattern.
3. Write the least-squares regression equation for the airport’s costs.
4. Predict the airport’s costs during a month when 1,500 flights originate at the airport.
5. Using the Excel spreadsheet prepared for requirement (2), compute the coefficient of determination (R2) for the regression equation. Briefly interpretR2.

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