Basic Accounting Assignment Questions

1. Supply the missing data in the following cases. Each case is independent of the others. Case 1 Schedule of Cost of Goods Manufactured Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . 4,500 Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing overhead . . . . . . . . . . . . . . . . . . 5,000 Total manufacturing costs . . . . . . . . . . . . . . . . . 18,500 Beginning work in process inventory . . . . . . . . . 2,500 Ending work in process inventory . . . . . . . . . . . Cost of goods manufactured . . . . . . . . . . . . . . . 18,000 Income Statement Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 Beginning finished goods inventory . . . . . . . . . . 1,000 Cost of goods manufactured . . . . . . . . . . . . . . . 18,000 Goods available for sale. . . . . . . . . . . . . . . . . . . Ending finished goods inventory . . . . . . . . . . . . Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 17,000 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000 Selling and administrative expenses . . . . . . . . . Net operating income. . . . . . . . . . . . . . . . . . . . . 4,000 2 $ $ $ 6,000 5,000 $ $ 3,000 7,000 $ $ 4,000 $ ? $ 20,000 $ ? $ 3,000 $ $ 1,000 4,000 $ $ 14,000 3 4 $ 3,000 $ 4,000 $ 9,000 $ 3,000 $ $ $ $ 21,000 36,000 40,000 $ $ $ 2,500 2,000 $ $ $ 14,000 17,500 ? $ $ $ 1,500 4,000 3,500 $ ? $ 18,500 $ ? $ 17,500 $ 3,500 $ ? $ $ 5,000 9,000 2. The following information has been taken from the accounting records of Klear-Seal Corporation for last year: Selling expenses...............$140,000 Raw materials inventory, January 1 . . . . . . . . . . . $90,000 Raw materials inventory, December 31 . . . . . . . . $60,000 Direct labor cost.............$150,000 Purchases of raw materials $750,000 Sales..................................$2,500,000 Administrative expenses $270,000 Manufacturing overhead $640,000 Work in process inventory, January 1 $180,000 Work in process inventory, December 31 $100,000 Finished goods inventory, January 1 $260,000 Finished goods inventory, December 31 $210,000 Management wants these data organized in a better format so that financial statements can be prepared for the year. Required: 1. Prepare a schedule of cost of goods manufactured as in Exhibit 2–6. Assume raw materials consist entirely of direct materials. 2. Compute the cost of goods sold as in Exhibit 2–4. 3. Prepare an income statement. 3. Morrisey & Brown, Ltd., of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company’s income statements for the three most recent months follow: Morrisey & Brown, Ltd. Income Statements For the Three Months Ended September 30 July August Sales in units . . . . . . . . . . . . . . . . . . . . . 4,000 4,500 Sales revenue . . . . . . . . . . . . . . . . . . . . A$400,000 A$450,000 September 5,000 A $500,000 Cost of goods sold . . . . . . . . . . . . . . . . . 240,000 270,000 3 00,000 Gross margin . . . . . . . . . . . . . . . . . . . . . 160,000 180,000 2 00,000 Selling and administrative expenses: Advertising expense . . . . . . . . . . . . . . 21,000 21,000 2 1,000 Shipping expense. . . . . . . . . . . . . . . . 34,000 36,000 3 8,000 Salaries and commissions . . . . . . . . . 78,000 84,000 9 0,000 Insurance expense . . . . . . . . . . . . . . . 6,000 6,000 6 ,000 Depreciation expense. . . . . . . . . . . . . 15,000 Total selling and administrative expenses 15,000 154,000 Net operating income. . . . . . . . . . . . . . . 1 5,000 1 70,000 $ 30,000 162,000 A$ 6,000 A$ 18,000 (Note: Morrisey & Brown, Ltd.’s Australian-formatted income statement has been recast in the format common in the United States. The Australian dollar is denoted here by A$.) Required: 1. Identify each of the company’s expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. State the cost formula for each mixed expense. 3. Redo the company’s income statement at the 5,000-unit level of activity using the contribution format. 4. Nova Company’s total overhead cost at various levels of activity are presented below: Month Machine- Hours April . . . . . . . . . May. . . . . . . . . . June . . . . . . . . . July . . . . . . . . . . Total Overhead Cost 70,000 60,000 80,000 90,000 $198,000 $174,000 $222,000 $246,000 Assume that the total overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 60,000 machine-hour level of activity is: Utilities (variable) . . . . . . . . . . . . Supervisory salaries (fixed). . . . Maintenance (mixed) . . . . . . . . . $ 48,000 21,000 105,000 Total overhead cost . . . . . . . . . . $174,000 Nova Company’s management wants to break down the maintenance cost into its variable and fixed cost elements. Required: 1. Estimate how much of the $246,000 of overhead cost in July was maintenance cost. (Hint: to do this, it may be helpful to first determine how much of the $246,000 consisted of utilities and supervisory salaries. Think about the behavior of variable and fixed costs!) 2. Using the high-low method, estimate a cost formula for maintenance. 3. Express the company’s total overhead cost in the linear equation form Y = a + bX. 4. What total overhead cost would you expect to be incurred at an operating activity level of 75,000 machine-hours? 5. Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Vari- able costs are $8 per unit, and fixed costs total $180,000 per year. Required: Answer the following independent questions: 1. What is the product’s CM ratio? 2. Use the CM ratio to determine the break-even point in sales dollars. 3. Due to an increase in demand, the company estimates that sales will increase by $75,000 dur- ing the next year. By how much should net operating income increase (or net loss decrease) assuming that fixed costs do not change? 4. Assume that the operating results for last year were: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variable expenses . . . . . . . . . . . . . . . . . . . Contribution margin . . . . . . . . . . . . . . . . . . Fixed expenses . . . . . . . . . . . . . . . . . . . . . Net operating income . . . . . . . . . . . . . . . . $400,000 160,000 240,000 180,000 $ 60,000 a. Compute the degree of operating leverage at the current level of sales. b. The president expects sales to increase by 20% next year. By what percentage should net operating income increase? 6. Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units. Required: 1. What is the present yearly net operating income or loss? 2. What is the present break-even point in units and in dollar sales? 3. Assuming that the marketing studies are correct, what is the maximum profit that the company can earn yearly? At how many units and at what selling price per unit would the company generate this profit? 4. What would be the break-even point in units and in sales dollars using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)? Why is this break-even point different from the break-even point you computed in (2) above? 7. The marketing department of Gaeber Industries has submitted the following sales forecast for the upcoming fiscal year: 1st Quarter Budgeted unit sales 8,000 2nd Quarter 7,000 3rd Quarter 4th Quarter 6,000 7,000 The company expects to start the first quarter with 1,600 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,700 units. In addition, the beginning raw materials inventory for the first quarter is budgeted to be 3,120 pounds and the beginning accounts payable for the first quarter is budgeted to be $14,820. Each unit requires 2 pounds of raw material that costs $4.00 per pound. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 3,140 pounds. Manage- ment plans to pay for 75% of raw material purchases in the quarter acquired and 25% in the follow- ing quarter. Required: 1. Prepare the company’s production budget for the upcoming fiscal year. 2. Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fiscal year. 8. The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account): Budgeted unit sales 1st Quarter 2nd Quarter 11,000 12,000 3rd Quarter 14,000 4th Quarter 13,000 The selling price of the company’s product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200. The company expects to start the first quarter with 1,650 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,850 units. Required: 1. Prepare the company’s sales budget and schedule of expected cash collections. 2. Prepare the company’s production budget for the upcoming fiscal year. 9. From the following information, prepare income statement and balance sheet for the year ended December 31, 2020. LOBAL CABLE Trial Balance December 31, 2020 Accounts title Opening stock Cash Accounts Receivable Supplies Equipment Accumulated Depreciation—Equipment Accounts Payable Purchase Mortgage Payable Unearned Rent Revenue Owner’s Capital Sales Revenue Prepaid insurance Salaries and Wages Expense Drawings Advertising Expense Miscellaneous Expense Depreciation Expense Debit 4,000 $24,10 0 3,200 1,800 30,600 Credit $2,050 2,100 25,000 40,000 1,500 16,190 35,450 2,400 3,300 1,500 600 290 500 $97,29 0 Other data: 1. Prepaid insurance is a 1-year policy starting May 1, 2020. 2. A count of supplies shows $750 of unused supplies on December 31. 3. Annual depreciation is $1,500 on equipment. 4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.) 5. Two-thirds of the unearned rent revenue has been earned. 6. Salaries of $750 are accrued and unpaid at December 31. $97,290 10. Based on the following trial balance and additional data, prepare income statement and balance sheet for 31st December, 2019 Mita bakery Trial balnce 31-12-19 Account title Cash Account receivable Supplies expense Account payable Furniture Land Equipment Wages Carriage out-ward Advertisement Opening stock Prepaid insurance Carriage in-ward Production related direct expense Office expense Sales Purchase Rent Salaries Show room expense Drawing Capital Ref. Total Additional information: 1. Closing stock tk.45,000 2. Depreciate furniture @ 5% and equipment @ 10% 3. Accrued wage tk.2,000 4. Supplies on hand tk.500 5. 1 months’ rent was accrued 6. Insurance was paid on 1-12-19 for 12 month 7. Bad debt tk.4000. Dr (tk.) 34,000 25,000 6,700 Cr (tk.) 65,000 60,000 60,500 87,000 5,000 3,400 5,100 65,000 24,000 2,400 4,500 6,700 207,000 56,000 11,000 32,000 4,300 5,850 226,450 498,45 0 498,450