Tamworth Truck manufactures

Question 1:

Tamworth Truck manufactures part YYY used in several of its truck models. 10,000 units are produced each year with production costs as follows:

Direct materials $ 45,000
Direct manufacturing labour 15,000
Variable support costs 35,000
Fixed support costs 25,000
Total costs $120,000

Tamworth Truck has the option of purchasing part YYY from an outside supplier at $11.20 per unit. If part YYY is outsourced, 40% of the fixed costs cannot be immediately converted to other uses (i.e. cannot be avoided).

a. Describe ‘avoidable’ costs. What amount of the YYY production costs is avoidable?

b. Should Tamworth Truck outsource YYY? Why or why not?

c. What other items should Tamworth Truck consider before outsourcing any of the parts it currently manufactures?



Question 2:

Tamworth Pet Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:



Product Number of Setups Number of Components Direct Labour Hours
Standard 3 30 650
Deluxe 7 50 150

Overhead Costs $20,000 $60,000



Required:

Assume a traditional costing system applies the $80,000 of overhead costs based on direct labour hours.

a. What is the total amount of overhead costs assigned to the standard model?

b. What is the total amount of overhead costs assigned to the deluxe model?

AND,

Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.

c. What is the total amount of overhead costs assigned to the standard model?

d. What is the total amount of overhead costs assigned to the deluxe model?

e. Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?



Question 3:

Tamworth Company has the following information:

Month Budgeted Sales
March $50,000
April 53,000
May 51,000
June 54,500
July 52,500

In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month's cost of sales.

Required:

Prepare a purchases budget for April through June (one column for each month), giving ‘total figures’ for the quarter in the forth column.



Question 4:

Tamworth Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfil a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers:

Direct materials $100
Direct labour 125
Variable manufacturing support 60
Fixed manufacturing support 75
Total manufacturing costs 360
mark-up (60%) 216
Targeted selling price $576

Tamworth Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit.

Required:

a. For Tamworth Cabinets, what is the minimum acceptable price of this one-time-only special order?

b. Other than price, what other items should Tamworth Cabinets consider before accepting this one-time-only special order?

c. How would the analysis differ if there was limited capacity?

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acc 497 problems

TAX STRATEGY PROBLEM

Pedro Bourbone is the founder and owner of a highly successful small business and, over the past several years, has accumulated a significant amount of personal wealth. His portfolio of stocks and bonds is worth nearly $5,000,000 and generates income from dividends and interest of nearly $250,000 per year. With his salary from the business and his dividends and interest, Pedro has taxable income of approximately $600,000 per year and is clearly in the top individual marginal tax bracket. Pedro is married and has three children, ages 16, 14, and 12. Neither his wife nor his children are employed and have no income. Pedro has come to you as his CPA to discuss ways to reduce his individual tax liability as well as to discuss the potential estate tax upon his death. You mention the possibility of making gifts each year to his children.

Explain how annual gifts to his children will reduce both his income during lifetime and his estate tax at death.

CASE STUDY PROBLEM
John Gemstone, a wealthy client, has recently been audited by the IRS. The agent has questioned the following deduction items on Mr. Gemstone’s tax return for the year under review:1-49 I:

• A $10,000 loss deduction on the rental of his beach cottage.

• A $20,000 charitable contribution deduction for the donation of a painting to a local art museum. The agent has questioned whether the painting is overvalued.

• A $15,000 loss deduction from the operation of a cattle breeding ranch. The agent is concerned that the ranch is not a legitimate business (i.e., is a hobby).

Your supervisor has requested that you represent Mr. Gemstone in his discussions with the IRS.


a. What additional questions should you ask Mr. Gemstone in an attempt to substantiate the deductibility of the above items?


b.  What tax research procedures might be applied to build the best possible case for your client?

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Jackson Inc

In this module, you were introduced to the income statement and profitability ratios.  In this assignment, you will use this information to create an income statement and then analyze it for profitability. Selected accounts for Jackson, Inc. are listed below along with their balances before closing the year of 12/31/12. Jackson, Inc. is a firm that manufactures wireless mouse systems for laptops.  Use this information to complete the required elements below.

Interest expense	$                  2,000
Sales revenue	297,000
Selling expenses	38,200
Administrative expenses	16,700
Cost of goods sold	162,300
Dividends1	12,200
Gain on sale of equipment	3,600
Loss from fire	7,500
Retained Earnings (1/1/12 balance)	335,000
Tax expense	22,800

¹Dividends were declared and paid to Jackson, Inc. stockholders
Required:

1. On a spreadsheet, prepare a multistep Income Statement for the year ending 12/31/12 with proper heading. See link below for sample income statement.  Near the bottom of your income statement should have a subtotal for Income before taxes and then subtract taxes to compute Net income. Net income should have a double underline.  
2. On the same spreadsheet, prepare a Statement of Retained Earnings for the year ending 12/31/12 with proper heading. See link below for sample statement of retained earnings. There are no adjustments to retained earnings and ending retained earnings should have a double underline. 
3. On the same spreadsheet, compute the gross profit margin, operating income margin, and net profit margin for 2012, showing the numerator and denominator for all ratios. Take ratios out to the nearest hundredth of a percentage (e.g., 33.33%).
4. On the same spreadsheet, write a paragraph analyzing each of the profitability ratios for Jackson, Inc. given the following information from previous years and competitors.

 http://www.blogger.com/blogger.g?blogID=3750572053304479346#editor/target=post;postID=6791078187333361169

	Gross profit margin	Operating income margin	Net profit margin
Jackson, 2011	47.22%	26.52%	17.75%
Jackson, 2010	48.87%	25.43%	17.03%
Competitor, 2012	43.22%	31.20%	21.14%

 
The following links provide sample formatting for income statements and statements of retained earnings.

• http://www.accountingcoach.com/online-accounting-course/04Xpg04.html#income-statement-multiple-step

• http://accountingexplained.com/financial/statements/retained-earnings-statement

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ACC 212 Final exam 2

1. (TCO 3) At the end of the period it is necessary to close all temporary accounts. (1) Explain why this process is required (10 points) and (2) provide an example of the closing of an expense account, Salary Expense in the form of a journal entry. (10 points) (Points : 20)

2. (TCO 2) As required to complete Course Project 1, one must follow the cycle that includes 10 steps to complete the accounting cycle. (1) Explain how the debit/credit rules are used when developing journal entries (10 points) and (2) provide an example of the application of the debit/credit rules in the form of a journal entry. (10 points)(Points : 20)

3. (TCO 5) Internal Control Procedures are required to safeguard company assets and to ensure ethical operation of the business. (1) Explain how limited access can satisfy the purpose of internal control (10 points) and (2) provide an example of how this control could be implemented. (10 points) (Points : 20)

4. (TCO 4) Inventory valuation methods determine the cost of goods sold and the inventory balance. (1) Explain how the First in First out (FIFO) method is applied (10 points) and (2) provide an example of the impact that this method of inventory valuation will have on Gross Profit. (10 points) (Points : 20)

5. (TCO 1) To evaluate the financial operation and health of a business ratio analysis is used. (1) Provide the formula for the Current Ratio and explain how it is computed (10 points) and (2) provide an example of how this ratio can be used in decision-making in business. (10 points) (Points : 20)

1. (TCO 6) BagODonuts Company bought a used delivery truck on January 1, 2010, for $19,200. The van was expected to remain in service 4 years (30,000 miles).  BagODonuts’ accountant estimated that the truck’s residual value would be $2,400 at the end of its useful life.  The truck traveled 8,000 miles the first year, 8,500 miles the second year, 5,500 miles the third year, and 8,000 miles in the fourth year.

1. Calculate depreciation expense for the truck for each year (2010-2013) using the:
a. Straight-line method.
b. Double-declining balance method.
c. Units of Production method.
 (For units-of-production and double-declining balance, round to the nearest two decimals after each step of the calculation.)
2. Which method best tracks the wear and tear on the van?
3. Which method would BagODonuts prefer to use for income tax purposes?  Explain in detail why BagODonuts prefers this method. (Points : 25)

2. (TCO 7) ABC Inc. was incorporated on 1/15/12. Their corporate charter authorized the following capital stock:  Preferred Stock: 7%, par value $100 per share, 100,000 shares.  Common Stock: $1 par value, 500,000 shares.

The following transactions occurred during the year:

1/19/12 – Issued 100,000 shares of common stock for $17 cash per share.
1/31/12 – Issued 3,000 shares of preferred stock for $115 cash per share.
11/1/12 – Repurchased 30,000 shares of common stock for $22 cash per share.
12/1/12 – Declared and paid a total dividend of $95,000.

Required:
1. Prepare the journal entry for each transaction listed above.
2. In your own words, explain the main differences between common and preferred stock.
(Points : 25)

3. (TCO 5) Fraud is an intentional misrepresentation of facts, made for the purpose of persuading another party to act in a way that causes injury or damage to that party.  In our readings and discussions we have seen several examples of fraud in business.  Using that experience (1) provide an example of a common fraudulent practice in business with an explanation of how the practice works and (2) name and describe each of the elements of the Fraud Triangle. 

4. (TCO 5) Internal Control Procedures are in place to protect the assets of every business as mentioned in the textbook and our discussions.  Of the seven internal control procedures, list five of these controls and describe how each procedure is implemented (Points : 25)

5. (TCO2) Below are the accounts of Super Pool Service, Inc. The accounts have normal balances on June 30, 2012. The accounts are listed in no particular order.

Account   Balance
Common stock  $5,100
Accounts payable  $4,400
Service revenue  $17,100
Land $28,800
Note payable  $9,500
Cash $5,200
Dividends  $6,100
Utilities expense  $2,100
Accounts receivable  $10,600
Delivery expense  $700
Retained earnings  $25,600
Salary expense  $8,200

Prepare the company’s trial balance as of June 30, 2012, listing accounts in proper sequence, as illustrated in the chapter. For example, Accounts Receivable comes before Land. List the expense with the largest balance first, the expense with the next largest balance second, and so on.

(Points : 25)

6.

(TCO4) Linda’s Lampshades started business on Jan. 1, 2001. They had the following inventory transactions:

Journals - Jan. 2001

Purchases

Supplier  Date Received Quantity  Unit Cost Amount

Donna  01/10/01 110  12.00  1320.00

Thomas  01/15/01 160  14.00    2240.00

Cindy  01/18/01 150  15.00  2250.00

Sales

Customer  Date shipped  Quantity   Sel. Price    Amount 

Norilene  01/16/01    200  25.00 5000.00

1. Calculate the ending inventory, using the perpetual inventory method:

A.  Using FIFO

B.  Using LIFO

C.  Using Average Cost

2. Prepare the following statement

Using

FIFO  LIFO    Average Cost

Sales

Cost of Sales
Gross Profit

(Points : 25)

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ACC 291 Final Exam Answerkey

1)Hahn Company uses the percentage of sales method for recording bad debts expense.

For the year, cash sales are $300,000 and credit sales are $1,200,000.

Management estimates that 1% is the sales percentage to use.

What adjusting entry will Hahn Company make to record the bad debts expense?

A. Bad Debts Expense ................ ................ $15,000

Allowances for Doubtful Accounts ................ ................ $15,000

B. Debit - Bad Debts Expense $12,000
Credit - Allowances for Doubtful Accounts $12,000

C. Bad Debts Expense ................ ................ $12,000 Accounts Receivable ................ ................ ................. $12,000

D. Bad Debts Expense ................ ................ $15,000 Accounts Receivable ................ ................ ................. $15,000


2) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful Accounts is $3,000 credit before adjustment, what is the amount of bad debts expense for that period?

A. $15,000 B. $12,000 C. $18,000 D $8,000


3) Intangible assets

A. should be reported under the heading Property, Plant, and Equipment B. should be reported as a separate classification on the balance sheet C. should be reported as Current Assets on the balance sheet D. are not reported on the balance sheet because they lack physical substance



4) Intangible assets are the rights and privileges that result from ownership of long-lived assets that

A. must be generated internally B. are depletable natural resources C. do not have physical substance D. have been exchanged at a gain



5) The book value of an asset is equal to the A. asset’s market value less its historic cost B. blue book value relied on by secondary markets C. replacement cost of the asset D. asset’s cost less accumulated depreciation



6) Gains on an exchange of plant assets that has commercial substance are A. deducted from the cost of the new asset acquired B. deferred C. not possible D. recognized immediately



7) Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as A. capital expenditures B. expense expenditures C. improvements D. revenue expenditures


8) Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as A. capital expenditures B. expense expenditures C. ordinary repairs D. revenue expenditures


9) When an interest-bearing note matures, the balance in the Notes Payable account is A. less than the total amount repaid by the borrower B. the difference between the maturity value of the note and the face value of the note C. equal to the total amount repaid by the owner D. greater than the total amount repaid by the owner



10) The interest charged on a $200,000 note payable, at a rate of 6%, on a 2-month note would be A. $12,000 B. $6,000 C. $3,000 D. $2,000

11) If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? A. $3,000,000 B. $90,000 C. $300,000 D. $210,000


12) Hilton Company issued a four-year interest-bearing note payable for $300,000 on January 1, 2011. Each January the company is required to pay $75,000 on the note. How will this note be reported on the December 31, 2012 balance sheet? A. Long-term debt, $300,000. B. Long-term debt, $225,000. C. Long-term debt, $150,000; Long-term debt due within one year, $75,000.

 D. Long-term debt, $225,000; Long-term debt due within one year, $75,000.


13) A corporation issued $600,000, 10%, 5-year bonds on January 1, 2011 for 648,666, which reflects an effective-interest rate of 8%. Interest is paid semiannually on January 1 and July 1. If the corporation uses the effective-interest method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1, 2011, is
A. $30,000 B. $24,000 C. $32,434 D. $25,946


14) When the effective-interest method of bond discount amortization is used
A. the applicable interest rate used to compute interest expense is the prevailing market interest rate on the date of each interest payment date
B. the carrying value of the bonds will decrease each period
C. interest expense will not be a constant dollar amount over the life of the bond
D. interest paid to bondholders will be a function of the effective-interest rate on the date the bonds were issued



15) If a corporation has only one class of stock, it is referred to as A. classless stock B. preferred stock C. solitary stock D. common stock


16) Capital stock to which the charter has assigned a value per share is called A. par value stock B. no-par value stock C. stated value stock D. assigned value stock



17) ABC, Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2011. What is the annual dividend on the preferred stock? A. $50 per share B. $5,000 in total C. $500 in total D. $.50 per share




18) Manner, Inc. has 5,000 shares of 5%, $100 par value, noncumulative preferred stock and 20,000 shares of $1 par value common stock outstanding at December 31, 2011. There were no dividends declared in 2010. The board of directors declares and pays a $45,000 dividend in 2011. What is the amount of dividends received by the common stockholders in 2011? A. $0 B. $25,000 C. $45,000 D. $20,000




19) When the selling price of treasury stock is greater than its cost, the company credits the difference to A. Gain on Sale of Treasury Stock B. Paid-in Capital from Treasury Stock C. Paid-in Capital in Excess of Par Value D. Treasury Stock


20) The purchase of treasury stock A. decreases common stock authorized B. decreases common stock issued C. decreases common stock outstanding D. has no effect on common stock outstanding



21) Marsh Company has other operating expenses of $240,000. There has been an increase in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were Marsh's cash payments for operating expenses?
A. $228,000
B. $232,000
C. $200,000
D. $280,000




22) Where would the event purchased land for cash appear, if at all, on the indirect statement of cash flows?
A. Operating activities section
B. Investing activities section
C. Financing activities section
D. Does not represent a cash flow



23) In performing a vertical analysis, the base for cost of goods sold is
A. total selling expenses
B. net sales
C. total revenues
D. total expenses


24) Blanco, Inc. has the following income statement (in millions):
BLANCO, INC.
Income Statement
For the Year Ended December 31, 2011
Net Sales .............................. $200
Cost of Goods Sold .............................. 120
Gross Profit .............................. 80
Operating Expenses .............................. 44
Net Income .............................. $ 36
Using vertical analysis, what percentage is assigned to Net Income?
A. 100%
B. 82%
C. 18%
D. 25%


25) Dawson Company issued 500 shares of no-par common stock for $4,500. Which of the following journal entries would be made if the stock has a stated value of $2 per share?
A.
Cash ........................................................... $4,500
Common Stock 4,500

B.
Cash .................................... $4,500
Common Stock 1,000
Paid-In Capital in Excess of Par 3,500

C.
Cash ...................... $4,500
Common Stock 1,000
Paid-In Capital in Excess of Stated Value 3,500

D.
Common Stock ........................................................... $4,500
Cash 4,500



26) Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock. This stock was sold later at a selling price of $6 per share. The entry to record the sale includes a
A. credit to Paid-In Capital from Treasury Stock for $9,000
B. credit to Retained Earnings for $9,000
C. debit to Pain-In Capital from Treasury Stock for $45,000
D. debit to Retained Earnings for $45,000


27) Which of the following is a fundamental factor in having an effective, ethical corporate culture?
A. Efficient oversight by the company’s Board of Directors
B. Workplace ethics
C. Code of conduct
D. Ethics management programs

28) Two individuals at a retail store work the same cash register. You evaluate this situation as
A. a violation of establishment of responsibility
B. a violation of segregation of duties
C. supporting the establishment of responsibility
D. supporting internal independent verification


29) The Sarbanes-Oxley Act imposed which new penalty for executives?
A. Fines
B. Suspension
C. Criminal prosecution for executives
D. Return of ill-gotten gains

30) The Sarbanes-Oxley Act requires that all publicly traded companies maintain a system of internal controls. Internal controls can be defined as a plan to
A. safeguard assets
B. monitor balance sheets
C. control liabilities
D. evaluate capital stock

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