Amy Monroe wants to create a fund today that will enable her to withdraw $33,740 per year for 8 years, with the first withdrawal to take place 5 years from today. (Use the tables below.)If the fund earns 11% interest, how much must Amy invest today?
(Learning Objective 3: Analyze gains or losses on equity-method investments) Without making journal entries, record the transactions of E8-15A directly in the McCloud account, Equity-method Investment. Assume that after all the noted transactions took place, McCloud sold its entire investment in Trumpp Software for cash of $2,370,000. How much is McCloud’s gain or loss on the sale of the investment?
Subscriptions
Horse Country Living publishes a monthly magazine for which a 12-month subscription costs
$30. All subscriptions require payment of the full $30 in advance. On August 1, 2008, the balance
in the Subscriptions Received in Advance account was $40,500. During the month of August, the
company sold 900 yearly subscriptions. After the adjusting entry at the end of August, the balance
in the Subscriptions Received in Advance account is $60,000.
Required
1. Prepare the journal entry to record the sale of the 900 yearly subscriptions during the month
of August.
2. Prepare the adjusting journal entry on August 31.
3. Assume that the accountant made the correct entry during August to record the sale of the 900
subscriptions but forgot to make the adjusting entry on August 31. Would net income for
August be overstated or understated? Explain your answer.
The Gilster CompanyThe Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls,Minnesota, uses a job order costing system for its batch production processes. The St. Fallsplant has two departments through which most jobs pass. Plantwide overhead, which includesthe plant manager’s salary, accounting personnel, cafeteria, and human resources, is budgetedat $200,000. During the past year, actual plantwide overhead was $190,000. Each department’soverheadconsists primarily of depreciation and other machine-related expenses.
Selectedbudgetedand actual data from the St. Fallsplant for the past year are as follows:
Impact of Transactions Involving Bonds on Statement of Cash Flows
In the following list, identify each item as operating (O), investing (I), financing (F), or not separately
reported on the statement of cash flows (N).
Comparing Two Companies in the Same Industry: General Mills and Kellogg’s
Refer to the financial information for General Mills and Kellogg’s reproduced at the back of the
book for the information needed to answer the following questions.
Required
1. Compute each company’s working capital at the end of the two most recent years. Also, for
each company, compute the change in working capital during the most recent year.
2. Compute each company’s current ratio at the end of the two most recent years. Compute the
percentage change in the ratio during the most recent year.
3. How do the two companies differ in terms of the accounts that made up their current assets
at the end of the most recent year? What is the largest current asset each company reports on
the balance sheet at the end of the most recent year?
4. On the basis of your answers to (2) and (3), comment on each company’s liquidity
The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:1ActivityBudgeted Activity CostActivity Base2Production control$237,000.00Number of production runs3Materials handling270,000.00Number of moves4Total$507,000.00The activity-base usage quantities and units produced for the two products follow:Number ofNumber ofDirect Labor Hours—Direct Labor Hours—UnitsProduction RunsMovesCuttingFinishingProducedSnowboards4305,0004,0002,0006,000Skis702,5002,0004,0006,000Total5007,5006,0006,00012,000Required:1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively.* **2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1).* **Complete the Activity Tables for snowboards and skis.3. Determine theactivity rates, assuming that the indirect labor is associated with activities rather than with the production departments.*4. Determine the total and per-unit cost assigned to each product underactivity-based costing.*5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods.* If required, round your answers to two decimal places.** Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.XAmount DescriptionsAmount DescriptionsCutting DepartmentFinishing DepartmentProduction ControlMaterials HandlingSetupsSkisSnowboardsXFactory Overhead Rates1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. If required, round your answers to two decimal places. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.1DepartmentProduction Department Rate2per direct labor hour3per direct labor hourXFactory Overhead Costs2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). If required, round your answers to two decimal places. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.1ProductTotal Factory OverheadFactory Overhead Per Unit23XActivity Table – SnowboardsComplete the Activity Tables for snowboards and skis.3. Determine theactivity rates, assuming that the indirect labor is associated with activities rather than with the production departments.*4. Determine the total and per-unit cost assigned to each product under activity-based costing.** If required, round your answers to two decimal places.SnowboardsActivityActivity-ActivityActivityUsageXRate=CostProduction control Materials handling Cutting Department Finishing Department Total÷ Number of units÷Activity cost per unitXActivity Table – SkisComplete the Activity Table for skis.3. Determine theactivity rates, assuming that the indirect labor is associated with activities rather than with the production departments.*4. Determine the total and per-unit cost assigned to each product under activity-based costing.** If required, round your answers to two decimal places.SkisActivityActivity-ActivityActivityUsageXRate=CostProduction control Materials handling Cutting Department Finishing Department Total÷ Number of units÷Activity cost per unitXFinal Question5. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. Check all that apply.The activity-based method separately accounts for the production control and materials handling activity costs, decreasing cost distortion.Snowboards have fewer production control and number of moves than do skis, so skis have higher activity costs per unit.The activity-based overhead allocation reveals that snowboards are more costly on a per-unit basis than are the skis.The multiple production department factory overhead rate method distorts the unit costs.
(Learning Objective 2: Issue bonds payable (discount), and record interest payments and the related bond amortization using the effective-interest method) Colorado Sports Ltd. is authorized to issue $5,000,000 of 4%, 10-year bonds payable. On December 31, 2014, when the market interest rate is 4.5%, the company issues $3,200,000 of the bonds. Colorado Sports amortizes bond discount by the effective-interest method. The semiannual interest dates are June 30 and December 31.
Journal Entries
Prepare the journal entry to record each of the following independent transactions. (Use the
number of the transaction in lieu of a date for identification purposes.)
1. Services provided on account of $1,530
2. Purchases of supplies on account for $1,365
3. Services provided for cash of $750
4. Purchase of equipment for cash of $4,240
5. Issuance of a promissory note for $2,500
6. Collections on account for $890
7. Sale of capital stock in exchange for a parcel of land; the land is appraised at $50,000
8. Payment of $4,000 in salaries and wages
9. Payment of open account in the amount of $500
Inventory Turnover for Wal-Mart and Target
The following information was summarized from the 2007 annual report of Wal-Mart Stores,
Inc.:
The following information was summarized from the 2006 annual report of Target Corporation:
Required
1. Calculate the inventory turnover ratios for Wal-Mart for the year ending January 31, 2007, and
Target for the year ending February 3, 2007.
2. Which company appears to be performing better? What other information should you consider to determine how these companies are performing in this regard?
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