Assume that Carmen's Cookies is preparing a budget for the month ending September 30. Management prepares the budget by starting with the actual results for April that are shown below. Then, management considers what the differences in costs will be between April and September. CARMEN'S COOKIES Retail Responsibility Center Actual Costs For the Month Ending April 30 Actual (April) Food Flour $ 1,600 Eggs 5,000 Chocolate 1,300 Nuts 2,000 Other 1,800 Total food $ 11,700 Labor Manager $ 3,000 Other 1,200 Total labor $ 4,200 Utilities 1,500 Rent 5,000 Total cookie costs $ 22,400 Number of cookies sold 25,000 Management expects cookie sales to be 15 percent greater in September than in April, and it expects all food costs (e.g., flour, eggs) to be 15 percent higher in September than in April because of the increase in cookie sales. Management expects “other” labor costs to be 28 percent higher in September than in April, partly because more labor will be required in September and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,000 in April to $3,300 in September. Utilities will be 3 percent higher in September than in April. Rent will be the same in September as in April. Now, fast forward to early October and assume the following actual results occurred in September: Required: a. Prepare a statement that compares the budgeted and actual costs. (Round your final answers to nearest whole dollar. Negative amounts should be indicated by a minus sign.)

November 29, 2014, 10:45 am

≫ Next: Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below: TOM’S TAX SERVICES Annual Income Statement Sales revenue $ 720,000 Costs Labor 477,000 Equipment lease 50,400 Rent 43,200 Supplies 32,400 Tom’s salary 75,000 Other costs 22,800 Total costs $ 700,800 Operating profit (loss) $ 19,200 If Tom gets the store’s business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client?

≪ Previous: Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below: TOM’S TAX SERVICES Annual Income Statement Sales revenue $ 738,000 Costs Labor 466,000 Equipment lease 50,300 Rent 42,900 Supplies 32,300 Tom’s salary 74,500 Other costs 20,900 Total costs $ 686,900 Operating profit (loss) $ 51,100 If Tom gets the store’s business, he will incur an additional $59,800 in labor costs. Tomalso estimates that he will have to increase equipment leases by about 5 percent, supplies by 10 percent, and other costs by 10 percent.

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Assume that Carmen's Cookies is preparing a budget for the month ending September 30. Management prepares the budget by starting with the actual results for April that are shown below. Then, management considers what the differences in costs will be between April and September.

CARMEN'S COOKIES Retail Responsibility Center Actual Costs For the Month Ending April 30
	Actual (April)
Food
Flour	$	1,600
Eggs		5,000
Chocolate		1,300
Nuts		2,000
Other		1,800
Total food	$	11,700
Labor
Manager	$	3,000
Other		1,200
Total labor	$	4,200
Utilities		1,500
Rent		5,000
Total cookie costs	$	22,400
Number of cookies sold		25,000

Management expects cookie sales to be 15 percent greater in September than in April, and it expects all food costs (e.g., flour, eggs) to be 15 percent higher in September than in April because of the increase in cookie sales. Management expects “other” labor costs to be 28 percent higher in September than in April, partly because more labor will be required in September and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,000 in April to $3,300 in September. Utilities will be 3 percent higher in September than in April. Rent will be the same in September as in April.

Now, fast forward to early October and assume the following actual results occurred in September:

Required:

a.	Prepare a statement that compares the budgeted and actual costs. (Round your final answers to nearest whole dollar. Negative amounts should be indicated by a minus sign.)

---

Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below: TOM’S TAX SERVICES Annual Income Statement Sales revenue $ 720,000 Costs Labor 477,000 Equipment lease 50,400 Rent 43,200 Supplies 32,400 Tom’s salary 75,000 Other costs 22,800 Total costs $ 700,800 Operating profit (loss) $ 19,200 If Tom gets the store’s business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client?

November 29, 2014, 10:47 am

≫ Next: The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 million shares outstanding.

≪ Previous: Assume that Carmen's Cookies is preparing a budget for the month ending September 30. Management prepares the budget by starting with the actual results for April that are shown below. Then, management considers what the differences in costs will be between April and September. CARMEN'S COOKIES Retail Responsibility Center Actual Costs For the Month Ending April 30 Actual (April) Food Flour $ 1,600 Eggs 5,000 Chocolate 1,300 Nuts 2,000 Other 1,800 Total food $ 11,700 Labor Manager $ 3,000 Other 1,200 Total labor $ 4,200 Utilities 1,500 Rent 5,000 Total cookie costs $ 22,400 Number of cookies sold 25,000 Management expects cookie sales to be 15 percent greater in September than in April, and it expects all food costs (e.g., flour, eggs) to be 15 percent higher in September than in April because of the increase in cookie sales. Management expects “other” labor costs to be 28 percent higher in September than in April, partly because more labor will be required in September and partly because employees will get a pay raise. The manager will get a pay raise that will increase the salary from $3,000 in April to $3,300 in September. Utilities will be 3 percent higher in September than in April. Rent will be the same in September as in April. Now, fast forward to early October and assume the following actual results occurred in September: Required: a. Prepare a statement that compares the budgeted and actual costs. (Round your final answers to nearest whole dollar. Negative amounts should be indicated by a minus sign.)

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Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below:

TOM’S TAX SERVICES Annual Income Statement
Sales revenue	$	720,000
Costs
Labor		477,000
Equipment lease		50,400
Rent		43,200
Supplies		32,400
Tom’s salary		75,000
Other costs		22,800
Total costs	$	700,800
Operating profit (loss)	$	19,200

If Tom gets the store’s business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent.

Required:

a.	What are the differential costs that would be incurred as a result of adding this new client?

The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 million shares outstanding.

September 26, 2014, 11:41 pm

≫ Next: The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Borkowski Corporation at December 31, 2012.

≪ Previous: Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below: TOM’S TAX SERVICES Annual Income Statement Sales revenue $ 720,000 Costs Labor 477,000 Equipment lease 50,400 Rent 43,200 Supplies 32,400 Tom’s salary 75,000 Other costs 22,800 Total costs $ 700,800 Operating profit (loss) $ 19,200 If Tom gets the store’s business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client?

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The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 million shares outstanding.

a.	What is the NAV of the fund? (Round your answer to 2 decimal places.)

NAV

$

b.	If the fund sells for $49 per share, what is its premium or discount as a percent of NAV? (Input the amount as a positive value. Round your answer to 2 decimal places.)

The fund sells at an % Discount from NAV.

Explanation:a.

NAV =	Market value of assets – Market value of liabilities
	Shares outstanding

=		$215,000,000 – $6,000,000	= $52.25
		4,000,000

b.

Premium (or discount) =		Price – NAV	=	$49 – $52.25	= –0.0622 = –6.22%
		NAV		$52.25

The fund sells at an 6.22% discount from NAV.

The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Borkowski Corporation at December 31, 2012.

December 26, 2014, 12:57 pm

≫ Next: On October 31, the stockholders’ equity section of Ennis Company consists of common stock $269,000 and retained earnings $879,800. Ennis is considering the following two courses of action: (1) declaring and distributing a 4% stock dividend on the 26,900, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $15 per share.

≪ Previous: The Closed Fund is a closed-end investment company with a portfolio currently worth $215 million. It has liabilities of $6 million and 4 million shares outstanding.

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The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Borkowski Corporation at December 31, 2012.

Common Stock ($6 stated value)		$2,068,200
Paid-in Capital in Excess of Par—Preferred Stock		276,400
Paid-in Capital in Excess of Stated Value—Common Stock		928,100
Preferred Stock (8%, $101 par, noncumulative)		525,200
Retained Earnings		1,053,200
Treasury Stock (10,400 common shares)		124,800

Prepare the stockholders’ equity section of the balance sheet at December 31, 2012.

BORKOWSKI CORPORATION Balance Sheet (Partial) December 31, 2012
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $101 par          value, noncumulative, 5,200          shares issued					$525,200
Common stock, no par, $6          stated value, 344,700          shares issued, and 334,300          shares outstanding					2,068,200
Total capital stock					2,593,400
Additional paid-in capital
Paid-in Capital In Excess of Par- Preferred Stock			$276,400
Paid-in Capital In Excess of Stated Value-Common Stock			928,100
Total additional paid-in capital					1,204,500
Total paid-in capital					3,797,900
Retained earnings					1,053,200
Total paid-in capital and retained earnings					4,851,100
Less: Treasury stock (10,400 common shares)					(124,800	)
Total stockholders’ equity					$4,726,300

On October 31, the stockholders’ equity section of Ennis Company consists of common stock $269,000 and retained earnings $879,800. Ennis is considering the following two courses of action: (1) declaring and distributing a 4% stock dividend on the 26,900, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $15 per share.

January 1, 2015, 1:34 pm

≫ Next: Jayleah Company reported retained earnings at December 31, 2011, of $313,580. Jayleah had 208,200 shares of common stock outstanding throughout 2012. The following transactions occurred during 2012.

≪ Previous: The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Borkowski Corporation at December 31, 2012.

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On October 31, the stockholders’ equity section of Ennis Company consists of common stock $269,000 and retained earnings $879,800. Ennis is considering the following two courses of action: (1) declaring and distributing a 4% stock dividend on the 26,900, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $15 per share.

Prepare a tabular summary of the effects of the alternative actions on the components of stockholders’ equity, outstanding shares, and par value per share.
 

Jayleah Company reported retained earnings at December 31, 2011, of $313,580. Jayleah had 208,200 shares of common stock outstanding throughout 2012. The following transactions occurred during 2012.

January 1, 2015, 1:39 pm

≫ Next: The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

≪ Previous: On October 31, the stockholders’ equity section of Ennis Company consists of common stock $269,000 and retained earnings $879,800. Ennis is considering the following two courses of action: (1) declaring and distributing a 4% stock dividend on the 26,900, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $15 per share.

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Jayleah Company reported retained earnings at December 31, 2011, of $313,580. Jayleah had 208,200 shares of common stock outstanding throughout 2012. The following transactions occurred during 2012.

1.		An error was discovered: in 2010, depreciation expense was recorded at $72,550, but the correct amount was $49,960.
2.		A cash dividend of $0.49 per share was declared and paid.
3.		A 10% stock dividend was declared and distributed when the market price per share was $17 per share.
4.		Net income was $286,100.

Prepare a retained earnings statement for 2012. (List items that increase retained earnings first.)
 
Working

Cash dividends	=	(208,200 x $0.49/sh)	=	$102,018
Stock dividends	=	(208,200 x 0.10 x $17/sh)	=	$353,940

The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

January 1, 2015, 2:07 pm

≫ Next: Presented below are two independent situations. 1. Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500. 2. On January 1, 2012, Wruck Inc. entered into an agreement to lease 20 computers from Braskich Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2012. The present value of the three rental payments is $74,606. Wruck considers this a capital lease. (a) Prepare the appropriate journal entry to be made by Emmaus Company for the first lease payment. (b) Prepare the journal entry to record the lease agreement on the books of Wruck Inc. on January 1, 2012.

≪ Previous: Jayleah Company reported retained earnings at December 31, 2011, of $313,580. Jayleah had 208,200 shares of common stock outstanding throughout 2012. The following transactions occurred during 2012.

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The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

Preferred Stock (15,100 shares issued)		$ 755,000
Common Stock (259,600 shares issued)		2,855,600
Paid-in Capital in Excess of Par—Preferred Stock		250,300
Paid-in Capital in Excess of Par—Common Stock		388,300
Common Stock Dividends Distributable		285,560
Retained Earnings		1,016,830

A review of the accounting records reveals the following.

1.		No errors have been made in recording 2012 transactions or in preparing the closing entry for net income.
2.		Preferred stock is $50 par, 6%, and cumulative; 15,100 shares have been outstanding since January 1, 2011.
3.		Authorized stock is 20,100 shares of preferred, 519,200 shares of common with a $11 par value.
4.		The January 1 balance in Retained Earnings was $1,186,900.
5.		On July 1, 18,700 shares of common stock were issued for cash at $16 per share.
6.		On September 1, the company discovered an understatement error of $90,500 in computing depreciation in 2011. The net of tax effect of $63,350 was properly debited directly to Retained Earnings.
7.		A cash dividend of $285,560 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2011.
8.		On December 31, a 10% common stock dividend was declared out of retained earnings on common stock when the market price per share was $16.
9.		Net income for the year was $594,200.
10.		On December 31, 2012, the directors authorized disclosure of a $202,900 restriction of retained earnings for plant expansion. (Use Note X.)

Prepare a stockholders’ equity section at December 31, 2012. (For preferred stock, common stock and treasury stock enter the account name only and do not provide the descriptive information provided in the question.)



Note X: Retained earnings is restricted for plant expansion, $202,900.

Explanation

(d)		Total cash dividend				$285,560
		Allocated to preferred stock
		Dividend in arrears—2011 [15,100 x ($50 x 6%)]		$45,300
		2012 dividend		45,300		90,600
		Remainder to common stock				$194,960

(e)		$594,200 – $45,300*	=	$2.20
		249,600

*15,100 x $50 x 6% = $45,300

Presented below are two independent situations. 1. Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500. 2. On January 1, 2012, Wruck Inc. entered into an agreement to lease 20 computers from Braskich Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2012. The present value of the three rental payments is $74,606. Wruck considers this a capital lease. (a) Prepare the appropriate journal entry to be made by Emmaus Company for the first lease payment. (b) Prepare the journal entry to record the lease agreement on the books of Wruck Inc. on January 1, 2012.

January 2, 2015, 12:35 pm

≫ Next: On July 1, 2012, Charisse Corporation issued $1,662,400 face value, 12%, 10-year bonds at $1,869,573. This price resulted in an effective-interest rate of 10% on the bonds. Charisse uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

≪ Previous: The post-closing trial balance of Violet Corporation at December 31, 2012, contains the following stockholders’ equity accounts.

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Presented below are two independent situations.

1.		Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500.
2.		On January 1, 2012, Wruck Inc. entered into an agreement to lease 20 computers from Braskich Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2012. The present value of the three rental payments is $74,606. Wruck considers this a capital lease.

(a)		Prepare the appropriate journal entry to be made by Emmaus Company for the first lease payment.
(b)		Prepare the journal entry to record the lease agreement on the books of Wruck Inc. on January 1, 2012.

---

On July 1, 2012, Charisse Corporation issued $1,662,400 face value, 12%, 10-year bonds at $1,869,573. This price resulted in an effective-interest rate of 10% on the bonds. Charisse uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

January 3, 2015, 6:24 am

≫ Next: In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

≪ Previous: Presented below are two independent situations. 1. Sunny Isles Car Rental leased a car to Emmaus Company for one year. Terms of the operating lease agreement call for monthly payments of $500. 2. On January 1, 2012, Wruck Inc. entered into an agreement to lease 20 computers from Braskich Electronics. The terms of the lease agreement require three annual rental payments of $30,000 (including 10% interest) beginning December 31, 2012. The present value of the three rental payments is $74,606. Wruck considers this a capital lease. (a) Prepare the appropriate journal entry to be made by Emmaus Company for the first lease payment. (b) Prepare the journal entry to record the lease agreement on the books of Wruck Inc. on January 1, 2012.

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On July 1, 2012, Charisse Corporation issued $1,662,400 face value, 12%, 10-year bonds at $1,869,573. This price resulted in an effective-interest rate of 10% on the bonds. Charisse uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

Prepare the journal entry to record the issuance of the bonds on July 1, 2012.






Prepare an amortization table through December 31, 2013 (3 interest periods) for this bond issue.

(c)		Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2012.
(d)		Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2013, assuming no accrual of interest on June 30.
(e)		Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2013.

In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

January 3, 2015, 12:37 pm

≫ Next: Floyd Corporation had the following transactions pertaining to debt investments.

≪ Previous: On July 1, 2012, Charisse Corporation issued $1,662,400 face value, 12%, 10-year bonds at $1,869,573. This price resulted in an effective-interest rate of 10% on the bonds. Charisse uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

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AP16-2A

In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

Feb. 1		Purchased 600 shares of Superior common stock for $31,800, plus brokerage fees of $420.
Mar. 1		Purchased 680 shares of Pawlik common stock for $17,000, plus brokerage fees of $330.
Apr. 1		Purchased 40 $1,200, 8% Venice bonds for $48,000, plus $1,200 brokerage fees. Interest is payable semiannually on April 1 and October 1.
July 1		Received a cash dividend of $0.58 per share on the Superior common stock.
Aug. 1		Sold 150 shares of Superior common stock at $63 per share less brokerage fees of $200.
Sept. 1		Received a $1 per share cash dividend on the Pawlik common stock.
Oct. 1		Received the semiannual interest on the Venice bonds.
Oct. 1		Sold the Venice bonds for $48,000 less $1,200 brokerage fees.

At December 31, the fair value of the Superior common stock was $55 per share. The fair value of the Pawlik common stock was $24 per share.

Journalize the transactions and post to the accounts Debt Investments and Stock Investments. (Use the T-account form.)




Prepare the adjusting entry at December 31, 2012, to report the investment securities at fair value. All securities are considered to be trading securities.

Explanation

Security	Cost	Fair Value
Superior common	$24,165	$24,750	(450 × $55)
Pawlik common	17,330	16,320	(680 × $24)
	$41,495	$41,070

Show the balance sheet presentation of investment securities at December 31, 2012. 




Identify the classification of each account for the income statement accounts.

Floyd Corporation had the following transactions pertaining to debt investments.

January 3, 2015, 1:02 pm

≫ Next: On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share. Prepare the journal entries to record the transactions described above.

≪ Previous: In January 2012, the management of Stefan Company concludes that it has sufficient cash to permit some short-term investments in debt and stock securities. During the year, the following transactions occurred.

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Floyd Corporation had the following transactions pertaining to debt investments.

Jan. 1		Purchased 70 Petal Co. 8%, $1,900 bonds for $133,000 cash plus brokerage fees of $860. Interest is payable semiannually on July 1 and January 1.
July 1		Received semiannual interest on Petal Co. bonds.
July 1		Sold 42 Petal Co. bonds for $90,440 less $500 brokerage fees.

(a)		Journalize the transactions.
(b)		Prepare the adjusting entry for the accrual of interest at December 31.

Explanation

(a)		Jan. 1		Cash	=	($133,000 + $860)	=	$133,860
		July 1		Cash	=	($133,000 x 8% x 1/2)	=	$5,320
		July 1		Cash	=	($90,440 – $500)	=	$89,940
				Debt Investments	=	($133,860 x 42/70)	=	$80,316
				Gain on Sale of Debt Investments	=	($89,940 – $80,316)	=	$9,624
(b)		Dec. 31		Interest Revenue	=	($53,200 x 8% x 1/2)	=	$2,128

On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share. Prepare the journal entries to record the transactions described above.

January 3, 2015, 1:04 pm

≫ Next: Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year. Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.

≪ Previous: Floyd Corporation had the following transactions pertaining to debt investments.

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On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share.

Prepare the journal entries to record the transactions described above.



Explanation

February 1		Cash	=	[(200 x $30) + $420]	=	$6,420
March 20		Cash	=	($1,160 – $31)	=	$1,129
		Stock Investments	=	($6,420 x 40/200)	=	$1,284
April 25		Cash	=	(160 x $2)	=	$320
June 15		Cash	=	($2,960 – $51)	=	$2,909
		Stock Investments	=	($6,420 x 80/200)	=	$2,568
July 28		Cash	=	(80 x $3)	=	$240

Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year. Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.

January 3, 2015, 1:06 pm

≫ Next: Zippydah Company has the following data at December 31, 2012. Securities Cost Fair Value Trading $119,010 $125,370 Available-for-sale 103,870 91,090 The available-for-sale securities are held as a long-term investment. (a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.

≪ Previous: On February 1, Minitori Company purchased 200 shares (2% ownership) of Becker Company common stock for $30 per share plus brokerage fees of $420. On March 20, Minitori Company sold 40 shares of Becker stock for $1,160, less a $31 brokerage fee. Minitori received a dividend of $2 per share on April 25. On June 15, Minitori sold 80 shares of Becker stock for $2,960, less a $51 brokerage fee. On July 28, Minitori received a dividend of $3 per share. Prepare the journal entries to record the transactions described above.

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Presented below are two independent situations.

1.		Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale.
2.		Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year.

Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.



Explanation

1.		Mar. 18		Cash	=	(297,300 x 15% x $14)	=	$624,330
		June 30		Dividend Revenue	=	($73,900 x 15%)	=	$11,085
		Dec. 31		Unrealized Gain or Loss—Equity	=	($713,520 – $624,330)	=	$89,190
2.		Jan. 1		Cash	=	(33,600 x 30% x $7)	=	$70,560
		June 15		Stock Investments	=	($28,800 x 30%)	=	$8,640
		Dec. 31		Revenue from Stock Investments	=	($82,000 x 30%)	=	$24,600

Zippydah Company has the following data at December 31, 2012. Securities Cost Fair Value Trading $119,010 $125,370 Available-for-sale 103,870 91,090 The available-for-sale securities are held as a long-term investment. (a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.

January 3, 2015, 1:10 pm

≫ Next: Solitaire Company’s fixed budget performance report for June follows. The $615,000 budgeted expenses include $578,100 variable expenses and $36,900 fixed expenses. Actual expenses include $48,900 fixed expenses.

≪ Previous: Presented below are two independent situations. 1. Chicory Cosmetics acquired 15% of the 297,300 shares of common stock of Racine Fashion at a total cost of $14 per share on March 18, 2012. On June 30, Racine declared and paid a $73,900 dividend. On December 31, Racine reported net income of $124,360 for the year. At December 31, the market price of Racine Fashion was $16 per share. The stock is classified as available-for-sale. 2. Frank, Inc., obtained significant influence over Nowak Corporation by buying 30% of Nowak’s 33,600 outstanding shares of common stock at a total cost of $7 per share on January 1, 2012. On June 15, Nowak declared and paid a cash dividend of $28,800. On December 31, Nowak reported a net income of $82,000 for the year. Prepare all the necessary journal entries for 2012 for (1) Chicory Cosmetics and (2) Frank, Inc.

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Zippydah Company has the following data at December 31, 2012.

Securities		Cost		Fair Value
Trading		$119,010		$125,370
Available-for-sale		103,870		91,090

The available-for-sale securities are held as a long-term investment.

(a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.



Explanation
(a) (1) Market Adjustment-Trading ($125,370 – $119,010) = $6,360

(a) (2) Unrealized Gain or Loss-Equity ($103,870 – $91,090) = $12,780

Solitaire Company’s fixed budget performance report for June follows. The $615,000 budgeted expenses include $578,100 variable expenses and $36,900 fixed expenses. Actual expenses include $48,900 fixed expenses.

February 9, 2015, 5:51 am

≫ Next: Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

≪ Previous: Zippydah Company has the following data at December 31, 2012. Securities Cost Fair Value Trading $119,010 $125,370 Available-for-sale 103,870 91,090 The available-for-sale securities are held as a long-term investment. (a) Prepare the adjusting entries to report 1. Trading securities at fair value and 2. Available-for-sale securities at fair value.

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Solitaire Company’s fixed budget performance report for June follows. The $615,000 budgeted expenses include $578,100 variable expenses and $36,900 fixed expenses. Actual expenses include $48,900 fixed expenses.

 

	Fixed Budget			Actual Results			Variances
Sales (in units)		8,200			10,600
Sales (in dollars)	$	820,000		$	1,060,000		$	240,000	F
Total expenses		615,000			738,000			123,000	U
Income from operations	$	205,000		$	322,000		$	117,000	F

Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately. (Do not round intermediate calculations.)   Explanation:   Supporting computations       Total fixed budget sales $ 820,000     Total fixed budget units ÷ 8,200       Budgeted selling price (per unit) $ 100     Flexible budget units × 10,600       Flexible budget sales $ 1,060,000       Total fixed budget variable expenses $ 578,100     Total units budgeted ÷ 8,200       Budgeted variable expenses (per unit) $ 70.50     Flexible budget units × 10,600       Flexible budget variable expenses $ 747,300       Total actual expenses $ 738,000     Less actual fixed expenses   48,900       Total actual variable expenses $ 689,100

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Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

February 9, 2015, 5:53 am

≫ Next: Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.

≪ Previous: Solitaire Company’s fixed budget performance report for June follows. The $615,000 budgeted expenses include $578,100 variable expenses and $36,900 fixed expenses. Actual expenses include $48,900 fixed expenses.

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Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

 

	Fixed Budget			Actual Results			Variances
Sales (in units)		8,000			6,900
Sales (in dollars)	$	640,000		$	607,200		$	32,800	U
Total expenses		587,000			551,000			36,000	F
Income from operations	$	53,000		$	56,200		$	3,200	U

 

Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately. (Do not round intermediate calculations.)

 

Explanation:

Supporting computations
Total fixed budget sales	$	640,000
Total units budgeted	÷	8,000
Budgeted selling price (per unit)	$	80
Flexible budget units	×	6,900
Flexible budget sales	$	552,000
Total fixed budget variable expenses	$	400,000
Total units budgeted	÷	8,000
Budgeted variable expenses (per unit)	$	50.00
Flexible budget units	×	6,900
Flexible budget variable expenses	$	345,000
Total actual expenses	$	551,000
Less actual fixed expenses		177,000
Total actual variable expenses	$	374,000

Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.

February 12, 2015, 3:17 am

≫ Next: On October 1, 2013, Adria Lopez launched a computer services company called Success Systems, which provides consulting services, computer system installations, and custom program development. Adria adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2013. The company’s initial chart of accounts follows.

≪ Previous: Bay City Company’s fixed budget performance report for July follows. The $587,000 budgeted expenses include $400,000 variable expenses and $187,000 fixed expenses. Actual expenses include $177,000 fixed expenses.

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Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.

  

a.	I. Lopez invests $68,000 cash and office equipment valued at $33,000 in the company.
b.	The company purchased a $304,000 building to use as an office. Biz paid $42,000 in cash and signed a note payable promising to pay the $262,000 balance over the next ten years.
c.	The company purchased office equipment for $5,900 cash.
d.	The company purchased $3,200 of office supplies and $1,200 of office equipment on credit.
e.	The company paid a local newspaper $980 cash for printing an announcement of the office’s opening.
f.	The company completed a financial plan for a client and billed that client $5,000 for the service.
g.	The company designed a financial plan for another client and immediately collected an $8,300 cash fee.
h.	Lopez withdrew $1,300 cash from the company for personal use.
i.	The company received $4,000 cash as partial payment from the client described in transaction f.
j.	The company made a partial payment of $600 cash on the equipment purchased in transaction d.
k.	The company paid $2,100 cash for the office secretary’s wages for this period.

  

Required:
2.	Enter the amount of each transaction on individual items of the accounting equation.

On October 1, 2013, Adria Lopez launched a computer services company called Success Systems, which provides consulting services, computer system installations, and custom program development. Adria adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2013. The company’s initial chart of accounts follows.

February 12, 2015, 8:46 am

≫ Next: Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $90 per unit. The company’s annual fixed costs are $432,000. (1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.

≪ Previous: Isabel Lopez started Biz Consulting, a new business, and completed the following transactions during its first year of operations.

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On October 1, 2013, Adria Lopez launched a computer services company called Success Systems, which provides consulting services, computer system installations, and custom program development. Adria adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2013. The company’s initial chart of accounts follows.

 

Account	No.		Account	No.
Cash	101		A. Lopez, Capital	301
Accounts Receivable	106		A. Lopez, Withdrawals	302
Computer Supplies	126		Computer Services Revenue	403
Prepaid Insurance	128		Wages Expense	623
Prepaid Rent	131		Advertising Expense	655
Office Equipment	163		Mileage Expense	676
Computer Equipment	167		Miscellaneous Expenses	677
Accounts Payable	201		Repairs Expense — Computer	684

 

Oct.	1	Adria Lopez invested $50,000 cash, a $26,000 computer system, and $8,000 of office equipment in the company.
	2	The company paid $3,260 cash for four months' rent. (Hint: Debit Prepaid Rent for $3,260.)
	3	The company purchased $1,360 of computer supplies on credit from Harris Office Products.
	5	The company paid $1,680 cash for one year's premium on a property and liability insurance policy. (Hint: Debit Prepaid Insurance for $1,680.)
	6	The company billed Easy Leasing $5,100 for services performed in installing a new Web server.
	8	The company paid $1,360 cash for the computer supplies purchased from Harris Office Products on October 3.
	10	The company hired Lyn Addie as a part-time assistant for $105 per day, as needed.
	12	The company billed Easy Leasing another $2,000 for services performed.
	15	The company received $5,100 cash from Easy Leasing as partial payment on its account.
	17	The company paid $760 cash to repair computer equipment that was damaged when moving it.
	20	The company paid $1,698 cash for advertisements published in the local newspaper.
	22	The company received $2,000 cash from Easy Leasing on its account.
	28	The company billed IFM Company $5,308 for services performed.
	31	The company paid $735 cash for Lyn Addie’s wages for seven days' work.
	31	Adria Lopez withdrew $3,200 cash from the company for personal use.
Nov.	1	The company reimbursed Adria Lopez in cash for business automobile mileage allowance (Lopez logged 1,000 miles at $0.31 per mile).
	2	The company received $4,733 cash from Liu Corporation for computer services performed.
	5	The company purchased computer supplies for $1,035 cash from Harris Office Products.
	8	The company billed Gomez Co. $6,568 for services performed.
	13	The company received notification from Alex's Engineering Co. that Business Solutions' bid of $4,350 for an upcoming project is accepted.
	18	The company received $2,408 cash from IFM Company as partial payment of the October 28 bill.
	22	The company donated $240 cash to the United Way in the company's name.
	24	The company completed work for Alex's Engineering Co. and sent it a bill for $4,350.
	25	The company sent another bill to IFM Company for the past-due amount of $2,900.
	28	The company reimbursed Adria Lopez in cash for business automobile mileage (1,200 miles at $0.31 per mile).
	30	The company paid $1,470 cash for Lyn Addie's wages for 14 days' work.
	30	Adria Lopez withdrew $1,600 cash from the company for personal use.

  

Required:
1.	Prepare journal entries to record each of the above transactions for Success Systems. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $90 per unit. The company’s annual fixed costs are $432,000. (1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.

February 13, 2015, 4:43 pm

≫ Next: Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company targets an annual after-tax income of $900,000. The company is subject to a 40% income tax rate. Assume that fixed costs remain at $954,000.

≪ Previous: On October 1, 2013, Adria Lopez launched a computer services company called Success Systems, which provides consulting services, computer system installations, and custom program development. Adria adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2013. The company’s initial chart of accounts follows.

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Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $90 per unit. The company’s annual fixed costs are $432,000.

 

(1)	Prepare a contribution margin income statement for Blanchard Company at the break-even point.

Explanation:(1) 

Sales: (14,400 × $120) = 1,728,000

Variable costs: (14,400 × $90) = 1,296,000

Contribution margin: (14,400 × $30) = 432,000

(2)

Sales (in dollars) to break even with increased fixed costs

		(Original fixed costs + Additional fixed costs)
Break-even	=
		Contribution margin ratio

 

=

($432,000 + $129,000) / 25% = $2,244,000

Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company targets an annual after-tax income of $900,000. The company is subject to a 40% income tax rate. Assume that fixed costs remain at $954,000.

February 13, 2015, 4:58 pm

≫ Next: Blanchard Company manufactures a single product that sells for $184 per unit and whose total variable costs are $138 per unit. The company’s annual fixed costs are $632,000. The sales manager predicts that annual sales of the company’s product will soon reach 40,200 units and its price will increase to $202 per unit. According to the production manager, the variable costs are expected to increase to $142 per unit but fixed costs will remain $632,000. The income tax rate is 30%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

≪ Previous: Blanchard Company manufactures a single product that sells for $120 per unit and whose total variable costs are $90 per unit. The company’s annual fixed costs are $432,000. (1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.

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Blanchard Company manufactures a single product that sells for $240 per unit and whose total variable costs are $180 per unit. The company targets an annual after-tax income of $900,000. The company is subject to a 40% income tax rate. Assume that fixed costs remain at $954,000.

(1) Compute the unit sales to earn the target after-tax net income.

Explanation:

Preliminary computations

Pretax income	= After-tax income / (1 – Tax rate)
	= $900,000 / (1 – 0.40)
	= $900,000 / 0.60
	= $1,500,000

Income taxes	= Pretax income × Tax rate
	= $1,500,000 × 0.40 = $600,000