Accounting Final

Ames Corporation repurchases 10,000 shares of its common stock for $12 per share. The shares were originally issued at an average price of $10 per share. Later it resells 6,000 of the shares for $15 per share and the remaining 4,000 shares for $17 per share. How much gain or loss should Ames report on its income statement as a result of these transactions?

$0

EKS2 decided to borrow $350,000 for a condo in downtown Salt Lake. The terms of the loan were: 15 years, 3.8% interest (fixed rate). The monthly payment (fixed) is $2,554.What amount of the second payment would be interest expense? Round your answer to the dollar.

$1,104 First payment: Interest = $350,000 x 3.8% x 1/12 = $1,108 Principal = $2,554 - $1,108 = $1,446 Second payment: Interest = ($350,000 - $1446) x 3.8% x 1/12 = $1,104

Cia Inc. has the following amounts listed before reconciling the overhead variance: Estimated overhead $310,000 Applied overhead 250,000 Actual overhead 275,000 Cost of goods sold 1,525,000 Assuming that any overhead variance is immaterial, calculate the adjusted Cost of Goods Sold after adjusting for the overhead variance.

$1,550,000

Frozone Inc. sells its supersuits for $75. In addition, it has a variable cost ratio of 75% and total fixed costs of $25,000. What is the break-even point in sales dollars for Frozone Inc.?

$100,000

Swoop, Inc., has the following: Selling price per unit = $125 Variable cost per unit = $75 Total fixed costs = $460,000 How many units does Swoop need to sell to break even?

$125 - 75 = $50 Contribution Margin $460,000 / $50 = 9,200 units to break even

Swoop, Inc., has the following: Selling price per unit = $125 Variable cost per unit = $75 Total fixed costs = $460,000 What does sales revenue need to be to break even?

$125 - 75 = $50 Contribution Margin $50 / $125 = .40 Contribution margin ratio $460,000 / .40 = $1,150,000 in sales revenue to break even

Swoop, Inc., has the following: Selling price per unit = $125 Variable cost per unit = $75 Total fixed costs = $460,000 What does sales revenue need to be if Swoop, Inc., wants to make $300,000 in profit?

$125 - 75 = $50 Contribution Margin $50 / $125 = .40 Contribution margin ratio ($460,000 + $300,000) / .40 = $1,900,000 in sales revenue to break even

Refer to the information from question 8. What is the predetermined overhead rate?

$16.00 per machine hour

In April, Eccles, Inc., purchased materials costing $23,500 and incurred direct labor of $32,300. Manufacturing overhead totaled $18,500 for the month. Information on inventories was as follows: April 1 - Raw Materials = $18,000, Work in Process = $23,500, Finished Goods = $31,100 April 30 - Raw Materials = $23,000, Work in Process = $19,000, Finished Goods = $28,400 What was the cost of direct materials used in April?

$18,000 + $23,500 - 23,000 = $18,500

Utes.com's board has approved that it issue equity to raise funds to expand operations. Ute's can issue 18,000 shares of common stock on January 1, 2022. The common stock has a par value of .01 and a market value of $5. What amount will Utes record as Common Stock on January 1, 2022?

$180

Whitter Company plans to sell 1,000 mowers at $400 each in the coming year. Product costs include: Direct Materials per mower = $ 180 Direct labor per mower = 100 Variable factory overhead per mower = 25 Total fixed factory overhead = 15,000 Variable selling expense is a commission of $20 per mower; fixed selling and administrative expense totals $30,000. Calculate the total variable expense per unit.

$180 + $100 + $25 + $20 = $325

On December 31, 2020, Ally Company had 10,000 shares of $1 par value common stock outstanding. On April 15, 2021, the company repurchased 2,500 shares of its outstanding common stock for $25 per share. On July 31st, the company sold 800 of the treasury shares purchased on April 15th for $28 per share. By what amount will the company reduce Treasury Stock on July 31st?

$20,000 (800 x $25)

Lil' Bits restaurant had cost of goods sold of $191,600 for the year ended December 31, 2019. The finished goods inventory on January 1, 2019 was $53,200 and the finished goods inventory on December 31, 2019 was $78,500. What was the amount of cost of goods manufactured for the year?

$216,900

In April, Eccles, Inc., purchased materials costing $23,500 and incurred direct labor of $32,300. Manufacturing overhead totaled $18,500 for the month. Information on inventories was as follows: April 1 - Raw Materials = $18,000, Work in Process = $23,500, Finished Goods = $31,100 April 30 - Raw Materials = $23,000, Work in Process = $19,000, Finished Goods = $28,400 What was the cost of goods manufactured/completed in April?

$23,500 + 18,500 + 32,300 + 18,500 - 19,000 = $73,800

For the month of December (thru Dec 31st), Marci B's employees had worked & earned wages of $240,000. MB will pay her employees $200,000 on Dec 24th and the remaining $40,000 will be paid on January 7th. What amount will MB record as Wage Expense for the month of December?

$240,000

Minnie's Haberdashery sells the best beverages west of the Mississippi. Their contribution margin ratio is 46% and its fixed monthly expenses are $121,500. If the company's sales for a month are $867,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.

$277,320

Big Kahuna Burger sells tasty burgers. They provided the following data: Sales = $910,000 Variable costs =$475,000 Fixed costs = $139,200 Expected production and sales in units = 60,000 What is the break-even point in sales dollars?

$290,000

PJ's is the hottest breakfast spot in the Mountain West. PJ's has decided to issue equity in order to raise some capital so that he can expand into the Southern region of the country (he wants to sell grits, etc..). He has received approval by his board of directors to issue 10,000,000 shares of the company's common stock. On the date of issuance, he issues 10,000,000 shares with a par value of $0.25 for $30 each. What amount will PJ's classify as Additional Paid-In Capital?

$297,500,000 = 10,000,000 x ($30 - $0.25)

In April, Eccles, Inc., purchased materials costing $23,500 and incurred direct labor of $32,300. Manufacturing overhead totaled $18,500 for the month. Information on inventories was as follows: April 1 - Raw Materials = $18,000, Work in Process = $23,500, Finished Goods = $31,100 April 30 - Raw Materials = $23,000, Work in Process = $19,000, Finished Goods = $28,400 What was the cost of goods sold in April?

$31,100 + 73,800 - 28,400 = $76,500

Whittier Company sells mowers at $400 each. Variable cost per unit is $325 and total fixed cost is $45,000. Calculate the number of units that Whittier must sell to earn operating income of $37,500.

$37,500 + 45,000 / 75 = 1,100

Zeal Inc. incurred direct materials cost of $23,700 and labor costs of $35,400 during the month of November when 2,800 units were produced. Assume the company does not have beginning or ending work-in-process inventory. If the company's conversion cost per unit was $28, how much overhead cost did they incur during November?

$43,000 ($28 x 2,800) - $35,400

In 2019, Lee Electronics, a franchise of electronics stores located in small towns throughout the United States, sold 450 32-inch televisions for $575 each. The televisions carry an attached 3-year warranty for repairs. Lee Electronics estimates that repair costs will average 2% of the total selling price. How much is recorded in the Warranty Liability account as a result of selling the televisions during 2019, assuming no warranty service has yet been performed?

$575/unit * 450 units * 0.02 = $5,175 estimated warranty liability

Whirly Dirly Enterprises produces plumbuses and had materials inventory on August 1 of $13,700. The materials inventory at August 31 was $53,000 and the cost of direct materials used in production was $28,200. What was the cost of materials purchased during the month? Correct!

$67,500

Brand Landscaping offers a promotion where a customer's lawn will be mowed 20 times if the customer pays $700 in advance. How would Brand's mowing of 1 lawn, 1 time be recorded.

$700/20 times = $35/1 time Decrease unearned revenue by 35$, increase revenue by 35$

Impa Inc. applies overhead based upon machine hours. At the beginning of 2018, Impa estimated overhead to be $400,000, machine hours to be 25,000, and direct labor hours to be 40,000. During April, Impa has 3,000 direct labor hours and 4,500 machine hours. What is the amount of overhead applied for April?

$72,000

Andover Inc. had a gross profit for the month of March totaling $56,000. They sold 6,000 units during the month at a sales price of $23 per unit. What was the amount of cost of goods sold for the month?

$82,000

How is the cash ratio calculated?

(Cash + Marketable Securities)/Current Liabilities

Earnings per share ( also referred to as EPS) =

(Net Income - Preferred Dividends)/ Average Common Shares Outstanding

Return on common equity (also referred to as ROE) =

(Net Income - Preferred Dividends)/ Average Common Stockholders' Equity

Sales Dollars to Earn Target Income =

(Total Fixed Cost + Target Income) / Contribution Margin Ratio

An analysis of past maintenance costs indicates that maintenance cost is an average of $0.20 per machine-hour at an activity level of 10,000 machine-hours and $0.25 per machine-hour at an activity level of 8,000 machine-hours. Assuming that this activity is within the relevant range, what is the total expected maintenance cost if the activity level is 8,700 machine-hours?

-10,000 X .20 = $2,000 -8,000 x .25 = $2,000• -Maintenance costs are steady at $2,000 over this relevant range. -Expected to $2,000 for production of 8,700 units.

A Contingent Liability is recognized on the financial statements if:

-The event on which it is contingent is probable -A reasonable estimate of the loss can be made

Unearned Revenue

-The liability created by receiving revenue in advance -Also known as Deferred Revenue

Axle Corporation's balance sheet showed the following amounts: total assets, $225,000, current liabilities, $45,000; total liabilities, $80,000. The debt to equity ratio is:

0.55.

Whittier Company plans to sell 1,000 mowers at $400 each in the coming year. Variable cost per unit is $325. Total fixed cost is $45,000. 1. Calculate the variable cost ratio 2. Calculate the contribution margin ratio using unit figures

1. $325 / 400 = 0.8125, or 81.25% 2. $400 - 324 = 75

Whittier Company sells mowers at $400 each. Variable cost per unit is $325, and total fixed cost is $45,000. 1. Calculate the contribution margin ratio 2. Calculate the sales that Whittier must make to earn an operating income of $37,500

1. $400 - 325 / 400 = 0.1875 2. $37,500 + 45,000 / 0.1875 = $440,000

Whittier Company plans to sell 1,000 mowers at $400 each in the coming year. Total variable expense per unit is $325. Total fixed expense is $45,000. 1. Calculate the contribution margin ratio 2. Calculate the sales revenue that Whittier must make to break even by using the break‐even point in sales equation.

1. $400 - 325 = 75 2. $75 / 400 = 0.1875, or 18.75%

FINAL: Fly Company manufactures fishing rods. The following information was provided by their accountant: May 1: Raw materials inventory = 40,000 Work in progress inventory = 21,000 Finished goods inventory = 23,200 May 31: Raw materials inventory = 19,800 Work in progress inventory = 32,500 Finished goods inventory = 22,100 During May, the direct labor cost was $43,500, raw material purchases were $64,000, and the total overhead cost was $108,750. The company also reported sales of $402,300 and selling and administrative expenses of $165,980. 1. What was the cost of materials used in production during the month of May? 2. What were the total manufacturing costs in May? 3. What was the cost of goods manufactured during May? 4. What was the cost of goods sold during May? 5. What was the company's operating income for May?

1. $84,200 ($40,000 + $64,000 - $19,800) 2. $236,450 ($84,200 + $43,500 + $108,750) 3. $224,950 ($21,000 + $236,450 - $32,500) 4. $226,050 ($23,200 + $224,950 - $22,100) 5. $9,820 ($402,300 - $226,050 - $165,980)

Argus Company's predetermined overhead rate was 0.50 or 50% of direct labor cost. By the end of the year, actual data are: Overhead = $375,400 Direct Labor Cost = 750,000 Cost of Goods Sold is = $632,000 (before any adjustment) Calculate the overhead variance for the year. Dispose of the overhead variance by adjusting Cost of Goods Sold.

1. 0.50 x $750,000 = 375,000 Actual Overhead - Applied Overhead = 375,400 - 375000 = 400 2. 632,000 + 400 = 632,400

Common Short-Term Liability Accounts

1. Accounts Payable 2. Wages Payable 3. Utilities Payable 4. Rent Payable 5. Warranties Payable

Renchen Company, which manufactures steel tubing and casing for automobile production, borrowed $500,000 on January 1 to finance the purchase of a new piece of machinery with new heating technology. The terms of Renchen's note dictate that it is a 4-month, 9%, interest-bearing note. 1. Record the borrowing transaction. 2. Record the repayment transaction.

1. Assets increase by 500,000, liabilities increase by 500,000 2. Cash decrease by 515,000, notes payable decrease by 500,000, interest expense decrease by 15,000 ($500,000 * 0.09 * 4/12)

What type of costs are the following? 1. Direct materials 2. Direct Labor 3. Salary of the production supervisor 4. Insurance for the factory equipment 5. Rent of the factory equipment

1. Variable cost 2. Variable cost 3. Fixed Cost 4. Fixed Cost 5. Fixed cost

Willow Corporation's balance sheet showed the following amounts: current liabilities, $5,000; bonds payable, $1,500; lease obligations, $2,300. Total stockholders' equity was $6,000. The debt to equity ratio is

1.47 (=(5,000+1,500+2,300)/6,000)

Jackson Corporation's balance sheet showed the following amounts: current liabilities, $2,800; bonds payable, $6,000; lease obligations, $2,000. Total stockholder's equity was $7,200. The debt to equity ratio is:

1.50.

Fixed expenses are $100,000. Sales price is $20 per unit, variable expenses are $13 per unit. Calculate BE in units.

100,000 / 7 (20-13) = 14,286

McKean Corporation authorized 500,000 shares of common stock in its articles of incorporation. On May 1, 2019, 100,000 shares were sold to the company's founders. However, on October 15, 2019, McKean repurchased 20,000 shares to settle a dispute among the founders. At this date, how many shares were issued and outstanding, respectively?

100,000 and 80,000

Sales price is $30, variable expenses total $15, and fixed expenses are $150,000. What are the BE units needed?

150,000 / 15 = 10,000units

Variable expenses are $44 per unit and the selling price per unit is $61. Calculate the contribution margin ratio.

17 / 61 = 0.2787

Process Costing

A costing method used when essentially homogeneous products are produced on a continuous basis

Which of the following is not an example of an accrued liability? -Accounts payable -Interest payable -Wages payable -Property taxes payable

Accounts Payable

Total Normal Product Costs =

Actual Direct Materials + Actual Direct Labor + Applied Overhead

Overhead Variance =

Actual Overhead - Applied Overhead

A normal job order costing system uses:

Actual costs for direct materials and direct labor; estimated costs for overhead.

Period costs are

All costs that aren't product costs.

Which of the following statements regarding accounting for leases is true? -If the lease term is one year or longer, a liability must be recognized. -Lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. -Leasing will likely remain popular because leases do not require a large initial outlay of cash. -All of these are correct.

All of these are correct.

Liabilities

Amounts owed to creditors

COGS =

COGM + Beg FG - End FG

Kellman Company purchases 110,000 shares of treasury stock for $8 per share on September 4, 2020. What is the appropriate journal entry to record the transaction?

Cash decreases by 880,000, treasury stock decreases by 880,000

Brand Landscaping offers a promotion where a customer's lawn will be mowed 20 times if the customer pays $700 in advance. How would the customer's prepayment be recorded?

Cash increase by $700, unearned revenue Increase by $700

Total capital stock =

Common stock + Preferred stock + Additional paid-in capital (Common stock) + Additional paid-in capital (Preferred stock)

ACCOUNT ANALYSIS: Sold the backpack job on credit at cost plus 50%

Cost of Goods Sold 2,320 increase Finished Goods (2,320) decrease Accounts Receivable 3,480 increase Sales Revenue 3,480 increase

ACCOUNT ANALYSIS: Closed underapplied overhead of $75 to Cost of Goods Sold

Cost of Goods Sold 75 increase Overhead Control (75) decrease

Fixed Costs

Costs that in total are consistent within the relevant range as the level of output increases or decreases

If the selling price per unit increases, the break-even point in units will

Decrease

When the board of directors approves a dividend be paid to its shareholders in 30 days, the company should:

Decrease retained earnings and increase dividends payable.

Conversion Cost =

Direct Labor + Manufacturing Overhead

Prime Cost =

Direct Materials + Direct Labor

Total variable expense per unit =

Direct Materials + Direct Labor + Variable Overhead + Variable Selling Expense

Conversion cost is the sum of:

Direct labor cost and overhead cost

Predetermined Overhead Rate =

Estimated Annual Overhead / Estimated Annual Activity Level

Departmental Overhead Rates =

Estimated Departmental Overhead / Estimated Departmental Activity Level

Accrued Liabilities

Expenses that have been incurred but have not been paid at the end of the accounting period

ACCOUNT ANALYSIS: Complete the backpack job of $2,320 and transferred it to Finished Goods.

Finished Goods 2,320 increase Work in Process (2,320) decrease

Total Fixed Expense =

Fixed Factory Overhead + Fixed Selling and Administrative Expense

Warranties

Guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner

Which of the following statements regarding the new accounting rules, which take effect in 2019, for leases is false? -If the lease term is one year or longer, a liability must be recognized. -If the lease term is less than one year, an asset must be recognized. -The new lease accounting rules will result in more assets and liabilities being recognized on the balance sheet. -Leasing will likely remain popular under the new lease accounting rules because leases do not require a large initial outlay of cash.

If the lease term is less than one year, an asset must be recognized.

The unit cost:

Is the total product cost divided by the number of units produced

What is the typical cost system used by companies that make unique or special-order products, such as customized publications, built-in cabinets, or made-to-order jewelry?

Job order costing

Assets =

Liabilities + Equity

When a company declares a cash dividend, which of the following is true? Assets are decreased. Assets are increased. Stockholders' equity is increased. Liabilities are increased.

Liabilities are increased

Current Liabilities

Liabilities due within a short time, usually within a year

Contigent Liabilities

Liabilities that may arise from past transactions if certain events occur in the future.

The provision of accounting information for internal users is known as

Managerial accounting

Which of the following is true? -No journal entries or footnotes are necessary if the probability of a contingent liability is remote. -A contingent liability should always be recorded in the footnotes to the financial statements. -A contingent liability should always be recorded within the financial statements. -A company can choose to record a contingent liability either within its financial statements or in the footnotes to the financial statements.

No journal entries or footnotes are necessary if the probability of a contingent liability is remote.

Outstanding stock represents the:

Number of shares that are currently held by stockholders.

Applied Overhead =

Predetermined Overhead Rate x Actual Activity Level

Unit Contribution Margin =

Price - Unit Variable Cost

Brad's Drink produced 90,000 units of beverages in March. They incurred $45,000 of direct materials cost, and $14,000 of overhead costs. If per‐unit prime costs were $1.08, how much were direct labor costs incurred during March?

Prime Cost = 90,000 units * $1.08 = $97,200 - 45,000 = $52,200

Direct materials are a(n):

Product cost

Brad's Drink makes carbonated beverages and had materials inventory on March 1 of $50,000. The materials inventory on March 31 was $35,000. The cost of materials used in production was $45,000. Calculate the cost of materials purchased in March.

RM Purchased = 35,000 + 45,000 - 50,000 = $30,000

Which of the following are included in manufacturing overhead? 1. Direct materials 2. Direct Labor 3. Sales commissions 4. Salary of the production supervisor 5. Insurance for the factory equipment 6. Advertising expense 7. Rent of the factory equipment

Salary of the production supervisor, Insurance for the factory equipment, & Rent of the factory equipment

Total Contribution Margin =

Sales - Total Variable Cost

Note

The formal agreement when a company borrows from a bank

As a result of a stock split,

The par value of the stock is changed in reverse proportion as the stock split.

Conversion Cost

The sum of direct labor cost and manufacturing overhead cost

Prime Cost

The sum of direct materials and direct labor cost

If the contribution margin ratio increases

The variable cost ratio decreases

One major component of equity is retained earnings. What does retained earnings represent in the equity sections of the balance sheet?

This represents the cumulative profits (minus losses), minus dividends paid to shareholders, that have been kept in the company

Materials in the raw materials account do not become direct materials

Until they are withdrawn from inventory for use in production.

Sales =

Variable expenses + Fixed expenses + Profits

When should a contingent liability be recognized?

When a reasonable estimation can be made and when the contingent liability is probable

ACCOUNT ANALYSIS: Requisitioned material costing $1,500 for use in production.

Work in Process 1,500 increase Raw Materials (1,500) decrease

ACCOUNT ANALYSIS: Recognized direct labor costing $1,530 (that is, it was not paid in cash but was shown as a liability in the wages payable account)

Work in Process 1,530 increase Wages Payable 1,530 increase

ACCOUNT ANALYSIS: Applied overhead to production at the rate of $4 per direct labor hour. A total of 85 direct labor hours were worked.

Work in Process 340 increase Overhead Control (340) decrease

Managerial Accounting

accounting used to provide information and analyses to managers inside the organization to assist them in decision making

Direct costs

are those costs that can be easily and accurately traced to a cost object.

Liabilities are recognized in exchange for

borrowing money, services, goods

The payment of accounts payable results in a(n):

decrease in both liabilities and assets.

Which of the following is not a component of stockholder's equity? retained earnings net income loss on sale of equipment dividends payable

dividends payable

Cost‐volume‐profit (CVP) analysis

estimates how changes in costs (both variable and fixed), sales volume, and price affect a company's profit

Retained Earnings (RE)

he amount of all the earnings of the firm (Net Income and Net Loss) since its beginning that have not been distributed to the stockholders (dividends)

On October 1st, a company borrowed $60,000 from Eighth National Bank on a 1-year, 7% note. If the company's fiscal year ends on December 31st, a year-end adjusting entry is required to increase:

interest payable by $1,050.

A landlord records the collection of a tenant's security deposit as a(n):

liability.

Long-term debt

obligations that extend beyond one year

Long-term debt generally includes:

obligations that extend beyond one year.

A committed fixed cost

often involves a long-term contract

Dividends

payments to a company's shareholders from earnings

If output increases

per-unit fixed costs will decrease.

Warranty expense is

recorded in the period of sale

Value Chain

set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support services to customers

Cost of Goods Manufactured

the total product cost of goods completed during the current period and transferred to finished goods inventory

Debt to Total Assets =

total liabilities/total assets

If output increases by 50% and is still within the relevant range

total variable costs will increase by 50%

Installment Debt

type of loan repaid with equal payments over a specific period of time

Ganon Co. applies overhead based on machine hours. They have an applied overhead of $80,000 and actual overhead of $75,000 for the month of October. In October, the total number of direct labor hours was 2,000 and the total number of machine hours was 9,000. Overhead for the year was estimated to be $700,000. How many machine hours were estimated for the year?

$78,750

Byway Inc. reports the cost of goods manufactured during August as $790,000. Direct materials added to production equaled $400,000, direct labor costs were $80,000, and manufacturing overhead cost was $320,000. If ending work-in-process inventory was $90,000, what was the cost of beginning work-in-process inventory?

$80,000 ($790,000 - $400,000 - $80,000 - $320,000 + $90,000)

On July 23rd, 2020, Mary Lee's Zombie Killers (MLZK) was awarded a contract (and paid) $1,000,000 to eradicate the city of Salt Lake of the 250,000 zombies currently enjoying the city. As of December 31st, MLZK had eliminated 15,000 zombies. What amount would MLZK still classify as a liability from this contract (on December 31st)?

$940,000 = ($1,000,000/250,000) x (250,000 - 15,000)

Ruskin Company had utilities cost of $95,000 at an output level of 30,000 units. The utilities cost was a mixed cost and the fixed portion was $50,000. What would the estimate of total utilities cost be at an output level of 40,000 units?

$95,000 = (Variable Rate x 30,000) + $50,000 Variable Rate = $1.50 Total Cost = ($1.50 x 40,000) + $50,000 Total Cost = $110,000

EWO Landscaping offers a promotion where a customer's lawn will be mowed 20 times if the customer pays $700 in advance. As of December 31, 2021, EWO has provided 6 lawn cuttings to the customer. What amount will EWO report as a liability related to this contract on December 31, 2021?

($700 / 20 * (20 - 6)) = $490

Wind Co. sells its product for $15 per unit. Fixed expenses are $150,000 and variable expenses are $7 per unit. How many units must Wind sell in order to generate profit of $60,000?

(150,000 + 60,000) / 8 = 26,250 units

Lempka Corp. produces and sells a single product. SP per unit = $190.00 Variable expenses per unit = 91.20 Fixed expenses = $ 395,200 The unit sales to attain the company's monthly target profit of $17,000 is closest to?

(395,200 + 17,000) / 98.8 [190-91.2] = 4,173 units

On May 1, 2021, Utes.com borrowed $5,000,000 from Big Bank. Utes is required to pay annual interest payments at 4%. The full principal and final interest payment are on April 30, 2025. What amount should Utes report as interest expense for 2021?

(5,000,000 * .04 * 8/12 = $133,333)

Kellman Company purchases 110,000 shares of treasury stock for $8 per share on September 4, 2020. 1. How will this transaction affect stockholders' equity? 2. How will this transaction affect net income?

1. Decrease total stockholders' equity by $880,000 (110,00 x 8$) 2. The net income is not affected by treasury stock transactions because transactions that affect the income statement are reserved for the ones involving non-owners

Gatsby, Inc. owed $500,000 on account for inventory purchased on November 1, 2020. The company's fiscal year ends on December 31. Gatsby was unable to pay the amount owed by February 1, 2021 due date because of financial difficulties experienced in early 2021. On February 1, 2021, it signed a $500,000, 10% interest-bearing note. This note was repaid with interest on September 1, 2021. What should Gatsby do in its financial statements on February 1, 2021?

increase notes payable and decrease accounts payable.

Legal capital

the amount of capital, required by the state, that must remain invested in the business.

Contributed Capital (CC)

the amount owners have invested in the corporation

Contribution margin

the difference between sales and variable expense

Cost Behavior

the general term for describing whether and how a cost changes when the level of output changes

Relevant Range

the normal range of output where cost relationships are valid

Utes.com's board has approved that it issue equity to raise funds to expand operations. Ute's can issue 18,000 shares of common stock on January 1, 2022. The common stock has a par value of .01 and a market value of $5. What amount will Utes record as APIC - Common Stock on January 1, 2022?

18,000 * (5 - .01) = $89,820]

Jurassic Park sells only one product, plastic dinosaurs, at a regular price of $30.00 per unit. Variable expenses are 75% of sales and fixed expenses are $18,000. Management has decided to decrease the selling price to $27.80 in hopes of increasing its volume of sales. What is the contribution margin ratio when the selling price is reduced to $27.80 per unit?

19%

Accounts Payable

Amounts to be paid in the future for goods or services already acquired

Swoop, Inc. has total assets of $3,050,000, total debt of $1,750,000, and equity of $1,300,000 resulting in a debt-to-equity ratio of 1.35. What does this ratio say about Swoop's funding structure?

For every dollar raised in equity, Swoop has borrowed $1.35

One major component of equity is contributed capital. What does contributed represent in the equity sections of the balance sheet?

This represents the value of what the owners put into the company when they bought their ownership interest in the company

CM Ratio =

Total CM/Total Sales

Contribution Margin Ratio =

Total Contribution Margin / Sales or Unit Contribution Margin / Price

Number of Units to Earn Target Income =

Total Fixed Cost + Target Income / Contribution Margin per Unit

Break‐Even Sales =

Total Fixed Expenses / Contribution Margin Ratio

Variable Cost Ratio =

Total Variable Cost / Sales or Unit Variable Cost / Price

Total Cost =

Total Variable Costs + Total Fixed Costs

Stahl Company was incorporated as a new business on January 1, 2019. The company is authorized to issue 600,000 shares of $2 par value common stock and 80,000 shares of 6%, $20 par value, cumulative preferred stock. On January 1, 2019, the company issued 75,000 shares of common stock for $15 per share and 5,000 shares of preferred stock for $25 per share. Net income for the year ended December 31, 2019, was $500,000. What is the amount of Stahl's total contributed capital at December 31, 2019?

Total capital stock = $15/share * 75,000 shares + $25/share * 5,000 shares = $1,125,000+$125,000 = $1,250,000

When a company declares a 3-for-1 stock split, the number of outstanding shares:

Triples

T/F? Current liabilities are amounts that the entity owes to creditors that will be paid (settled) within the next 12 months.

True

T/F? Debt with creditors is categorized between current and long-term liabilities based on when the payment will be made to the creditor.

True

Link Inc. manufactures magical swords. The following data pertains to Job 1534: Direct materials placed into production $83,000 Direct labor hours 150 hours Direct labor rate per hour $28 Machine hours 190 hours Link Inc. uses a plantwide overhead rate based on direct labor hours. At the beginning of 2018, annual overhead was budgeted at $4,777,500. Machine hours were estimated to be 30,000 and labor hours were estimated to be 65,000 for the year. What is the overhead cost assigned to Job 1534?

$11,025

Refer to the information from question 8. If the actual overhead for April is $83,750, what is the overhead variance and is it overapplied or underapplied?

$11,750 underapplied

Starry Corp. borrowed $45,000 from a bank on July 31, 2019 at 8% interest. The interest and principal are due on July 31, 2020. What amount of interest expense will the company record on July 31, 2020 related to this note?

$2,100 = ($45,000 x 8% x 7/12)

Blips & Chitz Arcade manufactured 16,000 units of game simulators during the month of April. They incurred direct materials costs of $188,000 and overhead cost of $39,000. If their per-unit prime cost was $28.00 per unit, how much direct labor cost did they incur during April?

$260,000

Big Ed's sells burgers for $2,100 - probably why they went out of business. The following cost formula relates to last year's operations: Y= $180,000 + $1,200 X If Big Ed's sold 500 burgers last year, what was its gross margin last year?

$270,000

Gatsby, Inc. owed $500,000 on account for inventory purchased on November 1, 2020. The company's fiscal year ends on December 31. Gatsby was unable to pay the amount owed by February 1, 2021 due date because of financial difficulties experienced in early 2021. On February 1, 2021, it signed a $500,000, 10% interest-bearing note. This note was repaid with interest on September 1, 2021. How much interest should Gasby recognize on September 1, 2021?

29,167

Near Inc. reports an operating income of $7,800 when they have sales of $98,800. If the company's total fixed costs are $26,780, what is the company's contribution margin ratio?

35% ($26,780 + $7,800)/$98,800

During August 2021, Swoop, Inc. had cost of goods manufactured of $98,950, direct materials used of $62,500, direct labor cost of $37,750, and manufacturing overhead of $23,300. Work in process at August 1 was 42,450. What was the cost of work in process on August 31?

42,450+62,500+37,750+23,300-98,950 = 67,050

North sells a single product. Selling price is $50 per unit. Variable expenses are 20% of sales. If the Company's fixed expenses are 75,000. What is BE in Sales dollars?

75,000 / 0.80 = $ 93,750

For the month of June, Swoop, Inc.'s employees had earned wages totaling $750,000. Swoop will pay its employees for June in two payments. On June 20th , it will pay a payroll of $400,000. On July 7th , it will pay the remaining June payroll. How much should Swoop report as wages payable on June 30?

750,000 - 400,000 = $350,000

Preferred Stock

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

Bond

A specific type of note that requires the issuing entity (the firm borrowing money) to pay the face value

Retained earnings functions to: -Tracks the company's cumulative net income and losses, and dividends paid or declared. -Is decreased by dividends to shareholders. -Is increased by the company's net income. -Is decreased by the company's losses. -All of these are correct.

All of these are correct.

Job-costing may only be used by: A. Service companies. B. Merchandising companies. C. Manufacturing companies. D. All of these may use job-costing.

All of these may use job-costing.

When is the predetermined overhead rate calculated?

At the beginning of the year or period!

RM Used =

Beg RM + Purchases - End RM

Which of the following is not a current liability? -Accounts payable -Unearned revenue -Sales taxes payable -Bonds payable due in 5 years

Bonds payable due in 5 years

Actual Costing

In an actual cost system, only actual costs of direct materials, direct labor, and overhead are used to determine unit cost

During September 2020, Ruth's Chris Steakhouse sold $2.3 million in gift cards. Ruth's should adjust its financial statements by doing the following:

Increase its cash and increase its liability for unearned revenue to record the sale of gift cards.

Dusty Corporation began business on January 1, 2020. The corporate charter authorizes issuance of 100,000 shares of .01 par value common stock and 10,000 shares of $1 par value, 10% cumulative preferred stock. On July 1, 2020, Dusty issued 30,000 shares of common stock in exchange for three years of rent on a retail location. The cash rental price is $4,200 per month and the rental period begins July 1. How should Dusty adjust its financial statement for the issuance of the shares on July 1?

Increase prepaid rent by $151,200, increase common stock by $300, and increase additional paid-in capital by $150,900.

A variable cost in total:

Increases as output increases and decreases as output decreases

Utes.com's wants to pay a dividend to its investors? On March 15, 2021, the board of directors approves a cash dividend of $0.50 per share. On March 18, 2021, the company publicly announces that it is going to pay this dividend to shareholders on record as of March 31, 2021. The dividend will be paid on April 15, 2021. On which date will Utes.com reduce retained earnings and increase dividends payable for these dividends?

March 18

Direct Materials

Materials that become an integral part of a finished product and whose costs can be conveniently traced to it.

RS Inc. is a mining company (specializing in mining silver). RS wants to pay dividends to their investors and on November 1st asks the board of directors for permission to do so (which they agree to). On November 15th RS publicly announces that the company is going to pay their investors $1 per share as a dividend to investors as of December 3rd. The dividends will be paid to shareholders on December 23rd. On which date will RS Inc. reduce Equity for these dividends?

November 15th.

Hansen Legal offices are open Monday through Friday, and Hansen pays employees salaries of $35,000 every other Friday. During the current year December 31 falls on a Wednesday, and the next payday is January 7. Given this information, determine the adjusting journal entry that Hansen must make on December 31 as well as the journal entry to record the payment of the payroll on January 7.

On December 31st, increase wages payable by $10,500 and decrease wages expense by 10,500. On January 7th, decrease cash by 35,000, decrease wages payable by 10,500, decrease wages expense by 24,500 (35,000 * [3days/10days])

On July 18, Sexton Industries purchased 1,000 surround sound speakers to sell in its stores. The speakers cost $50 each. On September 1, Sexton paid its supplier for the speakers. Sexton should adjust its financial statements as follows:

On July 18, Sexton should increase inventory and increase accounts payable to record the receipt of the speakers and then decrease cash and decrease accounts payable to record the payment made to its supplier.

At the beginning of the year, Zelda Inc. estimates overhead will be $470,000. If the actual overhead for the year is $430,000 and the applied overhead for the year is $455,000, what is the journal entry needed to reconcile the overhead variance? Assume that the overhead variance is immaterial.

Overhead Control increases $25,000, Cost of Goods Sold decreases $25,000

COGM =

RM Used + DL + MO + Beg WIP - End WIP

ACCOUNT ANALYSIS: Purchased raw materials costing $2,500 on account

Raw Materials 2,500 increase Accounts Payable 2,500 increase

Dark Thunder offers 1-year warranties to its' customers on products that it sells in case there is a defect in the manufacturing process. When Dark Thunder sales the product, it should adjust its financial statement as follows:

Record an expense in the income statement and a liability in the balance sheet for the anticipated amount of future claims customers may make on the sale recorded in the current period.

Per-unit variable costs

Remain constant within the relevant range

Profits =

Sales - Variable expenses -Fixed expenses

NORMAL COSTING

Solves the problems associated with actual costing. It determines unit cost by adding actual direct materials, actual direct labor, and estimated overhead.

Shipping expense is $9,000 for 8,000 pounds shipped and $11,250 for 11,000 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 9,000 pounds, its expected shipping expense is closest to:

Step 1: High Point: 11,000 units, $11,250 Low Point: 8,000 units, $9,000 Step 2: Variable Rate = ($11,250 - $9,000) / (11,000 - 8,000) = $0.75 Step 3: Fixed Cost = $11,250 - ($0.75 x 11,000) = $3,000 Step 4: Total Cost = $3,000 + (0.75 x Output) Step 5: Total Cost = $3,000 + (0.75 x 9,000) = $9,750

Sales Dollars =

Target Income + Total Fixed Cost / Contribution Margin Ratio

Common Stock

Term used to describe the total amount paid in by stockholders for the shares they purchase.

Which of the following is the best an example of a direct material? a) Cleaning supplies used in the manufacturing facility b) Screws used to build a cellphone c) The camera used in manufacture of a cellphone d) Soldering flux used to manufacture a motherboard

The camera used in manufacture of a cellphone

When a company purchases treasury stock, which of the following statements is true? -Dividends continue to be paid on the treasury stock. -It is no longer considered to be issued. -The cost of the treasury stock reduces stockholders' equity. -Treasury stock is considered to be an asset because cash is paid for the stock.

The cost of treasury stock reduces stockholders' equity

Period Costs

The costs of production are assets that are carried in inventories until the goods are sold. There are other costs of running a company that are not carried in inventory

Variable costs

The costs that in total vary in direct proportion to changes in output within the relevant range

Cost Driver

a causal factor that measures the output of the activity that leads (or causes) costs to change

Job-Order Costing

a costing system used in situations where many different products, jobs, or services are produced each period

ABC bank loans $250,000 to Yossarian to purchase a new home. Yossarian will repay the note in equal monthly payments over a period of 30 years. The interest rate is 12%. If the monthly payment is $2,571.53, how much of the first payment is interest expense and how much is principal repayment?

a. 2,500 = 250,000 x 0.12 x 1/12 b. 71.53 = 2,571.53 - 2,500

The break-even point is

where total revenues equal total costs.

Study final review questions 18-20 and 21-23 and 24-26 and 28-29 and 30-31

write this down to go back to after this quizlet, don't forget