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Sanford Company The Sanford Company had the following balance sheet as of December 31, 20×2. The…

Sanford Company The Sanford Company had the following balance sheet as of December 31, 20×2. The…

Sanford Company

The Sanford Company had the following balance sheet as of December 31, 20×2. The transactions for the first three months of 20×3 are also presented along with other information about specific accounts.

Sanford Company

Balance Sheet

December 31, 20×2

ASSETS

LIABILITIES

Cash

$ 57,000

Accounts Payable

$ 34,000

Marketable Securities

8,000

Wages Payable

11,500

Accounts Receivable

73,000

Taxes Payable

8,000

Uncollectible Accounts

-2,000

Short-Term Notes Payable

12,000

Inventory

84,000

Interest Payable

500

Supplies

9,000

Unearned Revenue

13,000

Prepaid Insurance

6,000

Total Current Assets

$235,000

Total Current Liabilities

$ 79,000

Land

$114,000

Long-Term Notes Payable

$ 20,000

Equipment

227,000

Bonds Payable

100,000

Accumulated Depreciation

-87,000

Mortgage Payable

320,000

Building

560,000

Total Long-Term Liabilities

$440,000

Accumulated Depreciation

-130,000

Intangible Assets

70,000

STOCKHOLDER EQUITY

Total Long-Term Assets

$754,000

Capital Stock

$100,000

Paid in Capital

250,000

Retained Earnings

120,000

Total Stockholders Equity

$470,000

Total Assets

$989,000

Total Liabilities & Equity

$989,000

Additional Information

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

Days

Current

30 to 60

60 to 90

Over 90

Percent of Balance

50%

30%

15%

5%

Percent Collectible

95%

90%

80%

60%

The company uses the gross method of recording all sales on accounts.

Marketable Securities

The interest rate earned on marketable securities is 6.0%.

Inventory

In 20×2, the company had used the gross method to record inventory purchases on account. As of January 1, 20×3, the company is using the net method to record inventory purchases on account.

Prepaid Insurance

A three-year insurance policy in the amount of $7,200 was purchased on July 1, 20×2.

Equipment

Equipment is depreciated at an average amount of $3,000 per month.

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

Intangible Assets

Intangible assets were initially valued at $80,000 and are being depreciated over 40 years at $2,000 per year.

Short-Term Notes Payable

The one-year short-term notes payable are due on March 1, 20×3. The interest rate is 5.0% which is payable at maturity.

Long-Term Notes Payable

The long-term notes payable are due in ten years. The interest rate on the notes is 4.5%.

Bonds Payable

The bonds payable mature in twenty years. The interest rate on the bonds is 4.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 20×3 mortgage payment on the 7.0%, 30- year mortgage.

Month

Payment

Interest

Principal

Balance

January

$3,500

$1,867

$1,633

$320,000

$318,367

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

Journal Entries

Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000

Jan 2 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300.

Jan 2 Sanford Company borrowed $24,000 on a short-term discounted 90 day, 3.0% noninterest-bearing note payable.

Jan 3 Sanford Company paid $18,000 in advance for the 6 month rental of a warehouse.

Jan 3 Equipment with a historical cost of $50,000 and an accumulated depreciation of $35,000 was traded for new similar equipment valued at $75,000. Sanford Company received $14,500 as a trade in for the old equipment, paid $7,500 and established a 4.5% long-term note payable for the balance due.

Jan 4 Equipment with a historical cost of $35,000 and an accumulated depreciation of $20,000 was traded for new dissimilar equipment valued at $60,000. The salvage value of the old equipment was $5,000 and the trade in value was $7,000. Sanford paid $4,000 for the equipment and established a 4.5% long-term note payable for the balance due.

Jan 5 Sanford Company declared a dividend of $2.00 per share payable on February 10, 20×3 to all shareholders of record on January 20, 20×3.

Jan 6 The amount in wages payable and taxes payable was paid in full.

Jan 8 Sanford Company paid a total of $18,000 on accounts payable and was able to take advantage of $1,500 in purchase discounts for early payment. The original inventory purchase was recorded at the full amount (gross method).

Jan 15 Cash sales for two weeks equaled $22,000. The cost of inventory sold equaled $12,000.

Jan 20 Supplies in the amount of $4,200 were purchased for cash.

Jan 21 A customer who owed $10,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%. The interest earned on the note will be paid at the maturity date of the note receivable.

Jan 29 The balance of $14,500 in accounts payable was paid.

Jan 30 The company purchased $45,000 of inventory on account with the terms 2/10, net 30. The company has decided to switch to the net method for all inventory purchases on account beginning in 20×3.

Jan 31 Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $13,000.

Jan 31 Sales on account for the month of January totaled $55,000 with the terms 2/10, net 30. The cost of inventory sold equaled $26,000.

Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $4,000 of the revenue was earned in January.

Jan 31 Collected cash of $48,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

Jan 31 Salary expenses in the amount of $14,000 and tax expenses in the amount of $8,000 were paid.

Jan 31 The utility bill of $2,500 was paid.

Jan 31 A bill in the amount of $3,600 for advertising expenses incurred during the month of January was received.

Jan 31 The monthly payment for January of the mortgage payable was made.

Feb 1 The Sanford Company made a new issue of 5,000 shares of common stock for cash. The market price of the stock was $40 per share.

Feb 2 A petty cash fund in the amount of $500 was established.

Feb 3 The Sanford Company bought back 1,000 shares of its own common stock for $40 per share.

Feb 8 The purchase of inventory on account on Jan 30th was paid in full.

Feb 10 Sanford Company sold the note receivable from Jan 21st to the bank, which discounted the note at 8.0%.

Feb 15 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Feb 20 The company purchases $20,000 of inventory on account with the terms 2/10, net 30.

Feb 27 The company paid an advertising bill for $5,600 which included the February advertising expense of $2,000 plus the balance due from January.

Feb 28 Cash sales for two weeks equaled $25,000. The cost of inventory sold equaled $14,000.

Feb 28 The monthly payment for February of the mortgage payable was made.

Feb 28 The company collected cash of $59,000 from the accounts receivable, plus there was a total sales discount of $1,100 for the payment of receivables within the ten day discount period.

Feb 28 Salary expenses in the amount of $21,000 and tax expenses in the amount of $9,000 were paid.

Feb 28 The utility bill of $2,100 was paid.

Feb 28 Sales on account for the month of February totaled $60,000 with the terms 2/10, net 30. The cost of inventory sold equaled $30,000.

Mar 1 The short-term note payable that was due on March 1st plus all appropriate interest was paid.

Mar 3 The amount of the petty cash fund was increased by $200.

Mar 10 Supplies in the amount of $2,700 were purchased for cash.

Mar 15 Cash sales for two weeks equaled $27,000. The cost of inventory sold equaled $15,000.

Mar 20 Sanford Company reissued 300 shares of its own stock for $42 per share.

Mar 21 The bank notified Sanford Company that the note receivable from January 21st had not been paid. The bank collected the amount of the note plus the interest due and a $20 protest fee from Sanford Company. Sanford Company charged the full amount of the note receivable plus related fees against the customer’s account receivable balance.

Mar 25 The company purchased $50,000 of inventory on account with the terms 2/10, net 30.

Mar 28 The purchase of inventory on account on Feb 20th was paid in full.

Mar 29 The petty cash fund had $150 in cash and receipts in total amounts for the following expense categories: entertainment$160, travel $170, postage $90, and supplies $115. The petty cash fund was replenished.

Mar 30 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $9,000 of the revenue was earned in March.

Mar 31 Sales on account for the month of March totaled $67,000 with the terms 2/10, net 30. The cost of inventory sold equaled $36,000.

Mar 31 Salary expenses in the amount of $16,000 and tax expenses in the amount of $7,000 were paid.

Mar 31 Collected cash of $70,000 from the accounts receivable, plus there was a total sales discount of $1,200 for the payment of receivables within the ten day discount period.

Mar 31 A warehouse building was acquired for $250,000. Closing costs on the acquisition equaled $7,000, and there were costs of $10,300 to get the building into an operational condition to be used by Sanford Company. Employee salaries specifically related to the building renovation were an additional $5,400. This salary expense was part of the normal monthly expenses and would have been incurred regardless of whether the employees worked on the warehouse or did other activities within the company. Sanford Company paid $100,000 in cash as a down payment with the balance due being added to the mortgage payable account.

Mar 31 The utility bill of $3,000 was paid.

Mar 31 Sanford Company repaid the 90 day discounted note payable from January 2nd in full.

Mar 31 The equipment depreciation entry for the three months of 20×3 was completed.

Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

Mar 31 The amortization of intangible assets for the three months of 20×3 was completed.

Mar 31 The bad debt expense based on the aging schedule for accounts receivable was determined for the three month period.

Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $8,400 and tax expenses equaled $2,800.

Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand.

Mar 31 A customer sent an advance payment of $10,000 for the use of special equipment in April and May.

Mar 31 The amount of rent expense for the warehouse for the first three months of 20×3 was recognized.

Mar 31 Sanford Company provided services to a customer in the amount of $3,000 during March but a bill has not been sent.

Mar 31 The amount of insurance expense for the first three months of 20×3 was recognized.

Mar 31 The amount of interest earned on marketable securities for the three months of 20×3 was recognized.

Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 20×3 was recognized.

Mar 31 The amount of interest expense for the bonds payable for the three months of 20×3 was recognized.

Mar 31 The monthly payment for March of the mortgage payable was made.

Required

1. Supply journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar.

2. Develop an income statement in good form for Sanford Company for the first three months of 20×3.

3. Develop a statement of retained earnings in good form as of March 31, 20×3 for Sanford Company

4. Develop a balance sheet in good form as of March 31, 20×3 for Sanford Company.


Sanford Company The Sanford Company had the following balance sheet as of December 31, 20×2. The…

Sanford Company

The Sanford Company had the following balance sheet as of December 31, 20×2. The transactions for the first three months of 20×3 are also presented along with other information about specific accounts.

Sanford Company

Balance Sheet

December 31, 20×2

ASSETS

LIABILITIES

Cash

$ 57,000

Accounts Payable

$ 34,000

Marketable Securities

8,000

Wages Payable

11,500

Accounts Receivable

73,000

Taxes Payable

8,000

Uncollectible Accounts

-2,000

Short-Term Notes Payable

12,000

Inventory

84,000

Interest Payable

500

Supplies

9,000

Unearned Revenue

13,000

Prepaid Insurance

6,000

Total Current Assets

$235,000

Total Current Liabilities

$ 79,000

Land

$114,000

Long-Term Notes Payable

$ 20,000

Equipment

227,000

Bonds Payable

100,000

Accumulated Depreciation

-87,000

Mortgage Payable

320,000

Building

560,000

Total Long-Term Liabilities

$440,000

Accumulated Depreciation

-130,000

Intangible Assets

70,000

STOCKHOLDER EQUITY

Total Long-Term Assets

$754,000

Capital Stock

$100,000

Paid in Capital

250,000

Retained Earnings

120,000

Total Stockholders Equity

$470,000

Total Assets

$989,000

Total Liabilities & Equity

$989,000

Additional Information

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

Days

Current

30 to 60

60 to 90

Over 90

Percent of Balance

50%

30%

15%

5%

Percent Collectible

95%

90%

80%

60%

The company uses the gross method of recording all sales on accounts.

Marketable Securities

The interest rate earned on marketable securities is 6.0%.

Inventory

In 20×2, the company had used the gross method to record inventory purchases on account. As of January 1, 20×3, the company is using the net method to record inventory purchases on account.

Prepaid Insurance

A three-year insurance policy in the amount of $7,200 was purchased on July 1, 20×2.

Equipment

Equipment is depreciated at an average amount of $3,000 per month.

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

Intangible Assets

Intangible assets were initially valued at $80,000 and are being depreciated over 40 years at $2,000 per year.

Short-Term Notes Payable

The one-year short-term notes payable are due on March 1, 20×3. The interest rate is 5.0% which is payable at maturity.

Long-Term Notes Payable

The long-term notes payable are due in ten years. The interest rate on the notes is 4.5%.

Bonds Payable

The bonds payable mature in twenty years. The interest rate on the bonds is 4.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 20×3 mortgage payment on the 7.0%, 30- year mortgage.

Month

Payment

Interest

Principal

Balance

January

$3,500

$1,867

$1,633

$320,000

$318,367

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

Journal Entries

Jan 1 Equipment with a historical cost of $10,000 and an accumulated depreciation of $3,000 was sold for $6,000

Jan 2 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300.

Jan 2 Sanford Company borrowed $24,000 on a short-term discounted 90 day, 3.0% noninterest-bearing note payable.

Jan 3 Sanford Company paid $18,000 in advance for the 6 month rental of a warehouse.

Jan 3 Equipment with a historical cost of $50,000 and an accumulated depreciation of $35,000 was traded for new similar equipment valued at $75,000. Sanford Company received $14,500 as a trade in for the old equipment, paid $7,500 and established a 4.5% long-term note payable for the balance due.

Jan 4 Equipment with a historical cost of $35,000 and an accumulated depreciation of $20,000 was traded for new dissimilar equipment valued at $60,000. The salvage value of the old equipment was $5,000 and the trade in value was $7,000. Sanford paid $4,000 for the equipment and established a 4.5% long-term note payable for the balance due.

Jan 5 Sanford Company declared a dividend of $2.00 per share payable on February 10, 20×3 to all shareholders of record on January 20, 20×3.

Jan 6 The amount in wages payable and taxes payable was paid in full.

Jan 8 Sanford Company paid a total of $18,000 on accounts payable and was able to take advantage of $1,500 in purchase discounts for early payment. The original inventory purchase was recorded at the full amount (gross method).

Jan 15 Cash sales for two weeks equaled $22,000. The cost of inventory sold equaled $12,000.

Jan 20 Supplies in the amount of $4,200 were purchased for cash.

Jan 21 A customer who owed $10,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%. The interest earned on the note will be paid at the maturity date of the note receivable.

Jan 29 The balance of $14,500 in accounts payable was paid.

Jan 30 The company purchased $45,000 of inventory on account with the terms 2/10, net 30. The company has decided to switch to the net method for all inventory purchases on account beginning in 20×3.

Jan 31 Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $13,000.

Jan 31 Sales on account for the month of January totaled $55,000 with the terms 2/10, net 30. The cost of inventory sold equaled $26,000.

Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $4,000 of the revenue was earned in January.

Jan 31 Collected cash of $48,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

Jan 31 Salary expenses in the amount of $14,000 and tax expenses in the amount of $8,000 were paid.

Jan 31 The utility bill of $2,500 was paid.

Jan 31 A bill in the amount of $3,600 for advertising expenses incurred during the month of January was received.

Jan 31 The monthly payment for January of the mortgage payable was made.

Feb 1 The Sanford Company made a new issue of 5,000 shares of common stock for cash. The market price of the stock was $40 per share.

Feb 2 A petty cash fund in the amount of $500 was established.

Feb 3 The Sanford Company bought back 1,000 shares of its own common stock for $40 per share.

Feb 8 The purchase of inventory on account on Jan 30th was paid in full.

Feb 10 Sanford Company sold the note receivable from Jan 21st to the bank, which discounted the note at 8.0%.

Feb 15 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Feb 20 The company purchases $20,000 of inventory on account with the terms 2/10, net 30.

Feb 27 The company paid an advertising bill for $5,600 which included the February advertising expense of $2,000 plus the balance due from January.

Feb 28 Cash sales for two weeks equaled $25,000. The cost of inventory sold equaled $14,000.

Feb 28 The monthly payment for February of the mortgage payable was made.

Feb 28 The company collected cash of $59,000 from the accounts receivable, plus there was a total sales discount of $1,100 for the payment of receivables within the ten day discount period.

Feb 28 Salary expenses in the amount of $21,000 and tax expenses in the amount of $9,000 were paid.

Feb 28 The utility bill of $2,100 was paid.

Feb 28 Sales on account for the month of February totaled $60,000 with the terms 2/10, net 30. The cost of inventory sold equaled $30,000.

Mar 1 The short-term note payable that was due on March 1st plus all appropriate interest was paid.

Mar 3 The amount of the petty cash fund was increased by $200.

Mar 10 Supplies in the amount of $2,700 were purchased for cash.

Mar 15 Cash sales for two weeks equaled $27,000. The cost of inventory sold equaled $15,000.

Mar 20 Sanford Company reissued 300 shares of its own stock for $42 per share.

Mar 21 The bank notified Sanford Company that the note receivable from January 21st had not been paid. The bank collected the amount of the note plus the interest due and a $20 protest fee from Sanford Company. Sanford Company charged the full amount of the note receivable plus related fees against the customer’s account receivable balance.

Mar 25 The company purchased $50,000 of inventory on account with the terms 2/10, net 30.

Mar 28 The purchase of inventory on account on Feb 20th was paid in full.

Mar 29 The petty cash fund had $150 in cash and receipts in total amounts for the following expense categories: entertainment$160, travel $170, postage $90, and supplies $115. The petty cash fund was replenished.

Mar 30 Cash sales for two weeks equaled $20,000. The cost of inventory sold equaled $11,000.

Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $9,000 of the revenue was earned in March.

Mar 31 Sales on account for the month of March totaled $67,000 with the terms 2/10, net 30. The cost of inventory sold equaled $36,000.

Mar 31 Salary expenses in the amount of $16,000 and tax expenses in the amount of $7,000 were paid.

Mar 31 Collected cash of $70,000 from the accounts receivable, plus there was a total sales discount of $1,200 for the payment of receivables within the ten day discount period.

Mar 31 A warehouse building was acquired for $250,000. Closing costs on the acquisition equaled $7,000, and there were costs of $10,300 to get the building into an operational condition to be used by Sanford Company. Employee salaries specifically related to the building renovation were an additional $5,400. This salary expense was part of the normal monthly expenses and would have been incurred regardless of whether the employees worked on the warehouse or did other activities within the company. Sanford Company paid $100,000 in cash as a down payment with the balance due being added to the mortgage payable account.

Mar 31 The utility bill of $3,000 was paid.

Mar 31 Sanford Company repaid the 90 day discounted note payable from January 2nd in full.

Mar 31 The equipment depreciation entry for the three months of 20×3 was completed.

Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

Mar 31 The amortization of intangible assets for the three months of 20×3 was completed.

Mar 31 The bad debt expense based on the aging schedule for accounts receivable was determined for the three month period.

Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $8,400 and tax expenses equaled $2,800.

Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand.

Mar 31 A customer sent an advance payment of $10,000 for the use of special equipment in April and May.

Mar 31 The amount of rent expense for the warehouse for the first three months of 20×3 was recognized.

Mar 31 Sanford Company provided services to a customer in the amount of $3,000 during March but a bill has not been sent.

Mar 31 The amount of insurance expense for the first three months of 20×3 was recognized.

Mar 31 The amount of interest earned on marketable securities for the three months of 20×3 was recognized.

Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 20×3 was recognized.

Mar 31 The amount of interest expense for the bonds payable for the three months of 20×3 was recognized.

Mar 31 The monthly payment for March of the mortgage payable was made.

Required

1. Supply journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar.

2. Develop an income statement in good form for Sanford Company for the first three months of 20×3.

3. Develop a statement of retained earnings in good form as of March 31, 20×3 for Sanford Company

4. Develop a balance sheet in good form as of March 31, 20×3 for Sanford Company.

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Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise…

Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise…

Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise Plant

manufactures and distributes two household cleaning and polishing compounds, standard and commercial,

under the Super Clean label. The forecasted operating results for the first six months of the current

year, when 100,000 cases of each compound are expected to be manufactured and sold, are presented in

the following statement.

SUPER CLEAN COMPOUNDS—BOISE PLANT

Forecasted Results of Operations

For the Six-Month Period Ending June 30

(in Thousands)

Standard Commercial Total

Sales ……………………………………………………………………………………. $2,000 $3,000 $5,000

Cost of goods sold ………………………………………………………………….. 1,600 1,900 3,500

Gross profit ……………………………………………………………………………. $ 400 $1,100 $1,500

Selling and administrative expenses:

Variable …………………………………………………………………………….. $ 400 $ 700 $1,100

Fixed* ……………………………………………………………………………….. 240 360 600

Total selling and administrative expenses …………………………………. $ 640 $1,060 $1,700

Income (loss) before taxes ………………………………………………………… $ (240) $ 40 $ (200)

*The fixed selling and administrative expenses are allocated between the two products on the basis of dollar sales volume.

The standard compound sold for $20 a case and the commercial compound sold for $30 a case

during the first six months of the year. The manufacturing costs, by case of product, are presented in the

schedule below. Each product is manufactured on a separate production line. Annual normal manufacturing

capacity is 200,000 cases of each product. However, the plant is capable of producing 250,000

cases of standard compound and 350,000 cases of commercial compound annually.

Cost per Case

Standard Commercial

Direct material ……………………………………………………………………………………….. $ 7.00 $ 8.00

Direct labor ……………………………………………………………………………………………. 4.00 4.00

Variable manufacturing overhead ……………………………………………………………….. 1.00 2.00

Fixed manufacturing overhead* ………………………………………………………………….. 4.00 5.00

Total manufacturing cost ………………………………………………………………………….. $16.00 $19.00

Variable selling and administrative costs ………………………………………………………. $ 4.00 $ 7.00

*Depreciation charges are 50 percent of the fi xed manufacturing overhead of each line.

The following schedule reflects the consensus of top management regarding the price-volume

alternatives for the Super Clean products for the last six months of the current year. These are essentially

the same alternatives management had during the first six months of the year.

Standard Compound Commercial Compound

Alternative Prices

(per case)

Sales Volume

(in cases)

Alternative Prices

(per case)

Sales Volume

(in cases)

$18 …………………………. 120,000 ………………………… $25 ……………………… 175,000

20 …………………………. 100,000 ………………………… 27 ……………………… 140,000

21 …………………………. 90,000 ………………………… 30 ……………………… 100,000

22 …………………………. 80,000 ………………………… 32 ……………………… 55,000

23 …………………………. 50,000 ………………………… 35 ……………………… 35,000

Gargantuan’s top management believes the loss for the first six months reflects a tight profit margin

caused by intense competition. Management also believes that many companies will leave this market

by next year and profit should improve.

Required:

1.What unit selling price should Gargantuan Industries select for each of the Super Clean

compounds for the remaining six months of the year? Support your selection with appropriate

calculations.

¦


Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise…

Gargantuan Industries is a multiproduct company with several manufacturing plants. The Boise Plant

manufactures and distributes two household cleaning and polishing compounds, standard and commercial,

under the Super Clean label. The forecasted operating results for the first six months of the current

year, when 100,000 cases of each compound are expected to be manufactured and sold, are presented in

the following statement.

SUPER CLEAN COMPOUNDS—BOISE PLANT

Forecasted Results of Operations

For the Six-Month Period Ending June 30

(in Thousands)

Standard Commercial Total

Sales ……………………………………………………………………………………. $2,000 $3,000 $5,000

Cost of goods sold ………………………………………………………………….. 1,600 1,900 3,500

Gross profit ……………………………………………………………………………. $ 400 $1,100 $1,500

Selling and administrative expenses:

Variable …………………………………………………………………………….. $ 400 $ 700 $1,100

Fixed* ……………………………………………………………………………….. 240 360 600

Total selling and administrative expenses …………………………………. $ 640 $1,060 $1,700

Income (loss) before taxes ………………………………………………………… $ (240) $ 40 $ (200)

*The fixed selling and administrative expenses are allocated between the two products on the basis of dollar sales volume.

The standard compound sold for $20 a case and the commercial compound sold for $30 a case

during the first six months of the year. The manufacturing costs, by case of product, are presented in the

schedule below. Each product is manufactured on a separate production line. Annual normal manufacturing

capacity is 200,000 cases of each product. However, the plant is capable of producing 250,000

cases of standard compound and 350,000 cases of commercial compound annually.

Cost per Case

Standard Commercial

Direct material ……………………………………………………………………………………….. $ 7.00 $ 8.00

Direct labor ……………………………………………………………………………………………. 4.00 4.00

Variable manufacturing overhead ……………………………………………………………….. 1.00 2.00

Fixed manufacturing overhead* ………………………………………………………………….. 4.00 5.00

Total manufacturing cost ………………………………………………………………………….. $16.00 $19.00

Variable selling and administrative costs ………………………………………………………. $ 4.00 $ 7.00

*Depreciation charges are 50 percent of the fi xed manufacturing overhead of each line.

The following schedule reflects the consensus of top management regarding the price-volume

alternatives for the Super Clean products for the last six months of the current year. These are essentially

the same alternatives management had during the first six months of the year.

Standard Compound Commercial Compound

Alternative Prices

(per case)

Sales Volume

(in cases)

Alternative Prices

(per case)

Sales Volume

(in cases)

$18 …………………………. 120,000 ………………………… $25 ……………………… 175,000

20 …………………………. 100,000 ………………………… 27 ……………………… 140,000

21 …………………………. 90,000 ………………………… 30 ……………………… 100,000

22 …………………………. 80,000 ………………………… 32 ……………………… 55,000

23 …………………………. 50,000 ………………………… 35 ……………………… 35,000

Gargantuan’s top management believes the loss for the first six months reflects a tight profit margin

caused by intense competition. Management also believes that many companies will leave this market

by next year and profit should improve.

Required:

1.What unit selling price should Gargantuan Industries select for each of the Super Clean

compounds for the remaining six months of the year? Support your selection with appropriate

calculations.

¦

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issue

issue

describe the impact on accounting analysis of cross-country variations in accounting measurement and disclosure practices.


issue

describe the impact on accounting analysis of cross-country variations in accounting measurement and disclosure practices.

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Inventory costs are increasing. Your company uses lifo and is having an unexpectedly good year….

Inventory costs are increasing. Your company uses lifo and is having an unexpectedly good year….

Inventory costs are increasing. Your company uses lifo and is having an unexpectedly good year. It’s near end, and you need to keep net income from increasing too much in order to save on income tax.


Inventory costs are increasing. Your company uses lifo and is having an unexpectedly good year….

Inventory costs are increasing. Your company uses lifo and is having an unexpectedly good year. It’s near end, and you need to keep net income from increasing too much in order to save on income tax.

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This is needed in excel: Your company prepares financial statements only once a year. In…

This is needed in excel: Your company prepares financial statements only once a year. In…

This is needed in excel:
Your company prepares financial statements only once a year. In accounting for uncollectible accounts it uses the allowance method.
For the most recent year give general journal entries for the following.
Beginning of the year balances:(No journal entries needed for beg. Balances)
Accounts Receivable 511,212
Allowance for uncollectible accounts 9,690
Uncollectible Accounts Expense –
1 Sales for the year were 1,662,000. 75% of sales are credit sales
2 Collection on credit sales for the year were 970,000
3 Wrote off 8300 of specific customer accounts
4a At year end estimate uncollectible accts to be 1.75% of credit sales
4b Instead of 4a, the company ages it receivables and estimated 7200 as uncollectible


This is needed in excel: Your company prepares financial statements only once a year. In…

This is needed in excel:
Your company prepares financial statements only once a year. In accounting for uncollectible accounts it uses the allowance method.
For the most recent year give general journal entries for the following.
Beginning of the year balances:(No journal entries needed for beg. Balances)
Accounts Receivable 511,212
Allowance for uncollectible accounts 9,690
Uncollectible Accounts Expense –
1 Sales for the year were 1,662,000. 75% of sales are credit sales
2 Collection on credit sales for the year were 970,000
3 Wrote off 8300 of specific customer accounts
4a At year end estimate uncollectible accts to be 1.75% of credit sales
4b Instead of 4a, the company ages it receivables and estimated 7200 as uncollectible

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Problem 3-8A Preparing closing entries, financial statements, and ratios LO A1, A2, P3, P4 The…

Problem 3-8A Preparing closing entries, financial statements, and ratios LO A1, A2, P3, P4 The…

Problem 3-8A Preparing closing entries, financial statements, and ratios LO A1, A2, P3, P4

The adjusted trial balance for Tybalt Construction as of December 31, 2015, follows.

TYBALT CONSTRUCTION
Adjusted Trial Balance
December 31, 2015
No. Account Title Debit Credit
101 Cash $ 9,000
104 Short-term investments 31,000
126 Supplies 8,900
128 Prepaid insurance 7,800
167 Equipment 48,000
168 Accumulated depreciation—Equipment $ 24,000
173 Building 190,000
174 Accumulated depreciation—Building 58,000
183 Land 63,000
201 Accounts payable 33,700
203 Interest payable 3,300
208 Rent payable 4,300
210 Wages payable 3,300
213 Property taxes payable 1,700
233 Unearned professional fees 8,300
251 Long-term notes payable 75,000
307 Common stock 7,000
318 Retained earnings 141,400
319 Dividends 17,000
401 Professional fees earned 113,000
406 Rent earned 26,000
407 Dividends earned 2,800
409 Interest earned 2,900
606 Depreciation expense—Building 15,000
612 Depreciation expense—Equipment 10,000
623 Wages expense 36,000
633 Interest expense 5,900
637 Insurance expense 10,800
640 Rent expense 14,200
652 Supplies expense 8,200
682
Postage expense 5,000
683 Property taxes expense 5,800
684 Repairs expense 9,700
688 Telephone expense 4,000
690 Utilities expense 5,400


Totals $ 504,700 $ 504,700





The December 31, 2014, credit balance of Retained Earnings account was $141,400. Tybalt Construction is required to make a $11,000 payment on its long-term notes payable during 2016.
Required:
1.1

Prepare the income statement for the calendar year 2015.

1.2

Prepare the statement of retained earnings for the calendar year 2015.

1.3

Prepare the classified balance sheet at December 31, 2015.

2. Prepare the necessary closing entries at December 31, 2015.
Closing entries (all dated December 31, 2015):

3.

Use the information in the financial statements to compute the following ratios:


Problem 3-8A Preparing closing entries, financial statements, and ratios LO A1, A2, P3, P4 The…

Problem 3-8A Preparing closing entries, financial statements, and ratios LO A1, A2, P3, P4

The adjusted trial balance for Tybalt Construction as of December 31, 2015, follows.

TYBALT CONSTRUCTION
Adjusted Trial Balance
December 31, 2015
No. Account Title Debit Credit
101 Cash $ 9,000
104 Short-term investments 31,000
126 Supplies 8,900
128 Prepaid insurance 7,800
167 Equipment 48,000
168 Accumulated depreciation—Equipment $ 24,000
173 Building 190,000
174 Accumulated depreciation—Building 58,000
183 Land 63,000
201 Accounts payable 33,700
203 Interest payable 3,300
208 Rent payable 4,300
210 Wages payable 3,300
213 Property taxes payable 1,700
233 Unearned professional fees 8,300
251 Long-term notes payable 75,000
307 Common stock 7,000
318 Retained earnings 141,400
319 Dividends 17,000
401 Professional fees earned 113,000
406 Rent earned 26,000
407 Dividends earned 2,800
409 Interest earned 2,900
606 Depreciation expense—Building 15,000
612 Depreciation expense—Equipment 10,000
623 Wages expense 36,000
633 Interest expense 5,900
637 Insurance expense 10,800
640 Rent expense 14,200
652 Supplies expense 8,200
682
Postage expense 5,000
683 Property taxes expense 5,800
684 Repairs expense 9,700
688 Telephone expense 4,000
690 Utilities expense 5,400


Totals $ 504,700 $ 504,700





The December 31, 2014, credit balance of Retained Earnings account was $141,400. Tybalt Construction is required to make a $11,000 payment on its long-term notes payable during 2016.
Required:
1.1

Prepare the income statement for the calendar year 2015.

1.2

Prepare the statement of retained earnings for the calendar year 2015.

1.3

Prepare the classified balance sheet at December 31, 2015.

2. Prepare the necessary closing entries at December 31, 2015.
Closing entries (all dated December 31, 2015):

3.

Use the information in the financial statements to compute the following ratios: