Posts

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

1.  An example of a cost object is:

 

a bicycle

an individual fast food franchise

the produce department of a grocery store

All of the above are correct.

 

2.  Cost behavior refers to:

 

how costs react to a change in the level of activity

whether a cost is incurred in a manufacturing, merchandising, or service company

classifying costs as either product or period costs

whether a particular expense has been ethically incurred

 

3.  Depreciation of plant facilities is classified as a(n):

 

direct material cost

direct labor cost

indirect manufacturing cost

general and administrative cost

 

4.  A manufacturing plant produces two product lines: football equipment and hockey equipment. An indirect cost for the hockey equipment line is the:

 

material used to make the hockey sticks

labor to bind the shaft to the blade of the hockey stick

shift supervisor for the hockey line

plant supervisor

 

5.  The cost of the cushions that are used to manufacture sofas is best described as a:

 

manufacturing overhead cost.

period cost.

variable cost.

conversion cost.

 

6.  Direct costs:

 

are incurred to benefit a particular accounting period.

are incurred due to a specific decision.

can be easily traced to a particular cost object.

are the variable costs of producing a product.

 

7.  Rotonga Manufacturing Company leases a vehicle that it uses to deliver its finished products to customers. Which of the following terms could be used to correctly describe the monthly lease payments made on the delivery vehicle?

a. Direct Cost   b. Fixed Cost

 

a. Yes, b. Yes

a. Yes, b. No

a. No, b. Yes

a. No, b. No

 

8.  Within the relevant range, as the number of units produced increases:

 

the variable cost per unit remains the same.

fixed costs in total remain the same.

variable costs increase in total.

all of these.

 

9.  An example of a fixed cost that would be considered a direct cost is:

 

a cost accountant’s salary when the cost object is a unit of product.

the rental cost of a warehouse to store a finished goods when the cost object is the Purchasing Department.

a production supervisor’s salary when the cost objective is the Production department.

Board of Director’s fees when the cost object is the Marketing Department.

 

10.  A sunk cost is:

 

a cost that is planned to be incurred in the near future.

irrelevant for decision making.

a cost connected with drilling for oil

affected by changes in the level of activity.

 

11.  Cobra Mining Company spent $200 million five years ago to develop underground mining and milling operations in a remote area of a western state. Metals prices have since declined precipitously and the company is considering abandoning the operation. The term that would best describe the $200 million expenditure when considering the abandonment decision is:

 

sunk cost.

variable cost.

differential cost.

opportunity cost.

 

12.  Haala Inc. is a merchandising company. Last month the company’s cost of goods sold was $68,000. The company’s beginning merchandise inventory was $11,000 and its ending merchandise inventory was $17,000. What was the total amount of the company’s merchandise purchases for the month?

 

$96,000

$62,000

$68,000

$74,000

 

13.  How much sunk cost is represented in the following list? Annual operating cost $80,000 Fixed operating costs other than depreciation $14,000 Resale value, if sold now $25,000 Original cost of current machine $68,000

 

$80,000

$14,000

$25,000

$68,000

 

14.  Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a mail order catalog operation. Large rectangular sheets of aluminum are purchased by Mendoza. These sheets are cut down into smaller squares and are then fed into a machine where they are trimmed down into a circular shape. These aluminum circles are then fed into a stamping machine where they are formed into plates and bowls. After production, the dishes are shipped to warehouses where they are packed and then shipped to customers. Which of the following terms could be used to correctly describe the cost of electricity used to run the stamping machine?

 

variable cost

indirect cost

manufacturing overhead cost

All of these

 

15.  At a sales volume of 20,000 units, Choice Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $132,000. To the nearest whole dollar, what should be the total sales commissions at a sales volume of 18,400 units? (Assume that this sales volume is within the relevant range.)

 

$126,720

$132,000

$121,440

$143,478

 

16.  At a sales volume of 38,000 units, Tirri Corporation’s property taxes (a cost that is fixed with respect to sales volume) total $733,400. To the nearest whole dollar, what should be the total property taxes at a sales volume of 37,200 units? (Assume that this sales volume is within the relevant range.)

 

$725,680

$733,400

$749,172

$717,960

 

17.  Leas Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 25,000 calls in a month, the costs of operating the helpline total $452,500. To the nearest whole cent, what should be the average cost of operating the helpline per call at a volume of 25,300 calls in a month? (Assume that this call volume is within the relevant range.)

 

$18.93

$18.00

$17.89

$18.10

 

18.  The following cost data pertain to the operations of Quinonez Department Store, Inc. for the month of September: Corporate headquarters building lease $77,000 Cosmetics Department sales commissios-Northridge Store $4,000 Corporate legal office salaries $59,000 Store manager’s salary-Northridge Store $11,000 Heating-Northridge Store $10,000 Cosmetics Department cost of sales-Northridge Store $37,000 Central warehouse lease cost $16,000 Store security-Northridge Store $12,000 Cosmetics Department manager’s salary-Northridge Store $4,000 The Northridge Store is just one of many stores owned and operated by the company. The Cosmetics Department is one of many departments at the Northridge Store. The central warehouse serves all of the company’s stores. What is the total amount of the costs listed above that are NOT direct costs of the Northridge Store?

 

$152,000

$33,000

$45,000

$77,000

 

19.  A trucking business is considering whether to give up its local delivery routes or to expand its long haul (over 100 miles) operations. In this decision, the lost income from the local delivery routes given up can best be described as a(n):

 

opportunity cost.

conversion cost.

sunk cost.

differential (incremental) cost

 

20.  Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched product M08Y. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 310 machine costing $545,000 or by a new model 240 machine costing $450,000. Management has decided to buy the model 240 machine. It has less capacity than the model 310 machine, but its capacity is sufficient to continue making product M08Y. Management also considered, but rejected, the alternative of dropping product M08Y and not replacing the old machine. If that were done, the $450,000 invested in the new machine could instead have been invested in a project that would have returned a total of $532,000. In making the decision to invest in the model 240 machine, the opportunity cost was:

 

$545,000

$450,000

$532,000

$527,000

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

23- A

Sales Mix; Break-Even Analysis; Margin of Safety

Island Novelties, Inc., of Palau makes two products. Hawaiian Fantasy and Tahitian Joy. Present revenue cost and sales data for the two products follow:

                                                                     Hawaiian                     Tahitian

Fantasy                            Joy

 

Selling price per unit………………………….$15                            $100

Variable expenses per unit…………………   ..$9                                $20

Number of unit sold annually ……………….20,000                          5,000

 

 

 

 

 

 

 

 

 

 

 

Fixed expense total $475,800 per year. The Republic of Palau uses the U.S. dollar as its currency.

 

Required

  1. Assuming the sales mix given above, do the following:
    1. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole.
    2. Compute the break-even point in dollar for the company as whole and the margin of safety in both dollars and percent.

 

  1. The company has developed a new product to called Samoan Delight. Assume that the company could sell 10,000 units at $45 each. The variable expense would be $36 each. The company’s fixed expenses would not change.
    1. Prepare another contributions format income statement, including sales of the Samoan Delight (sales of the other two products would not change).
    2. Compute the company’s new break-even point in dollar and the new margin of safety in both dollars and percent.

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below:

Alpha        Beta
Direct Materials             $30       $12
Direct labor                 $20          $15
Variable manufacturing overhead $7 $5
Traceable fixed manufacturing overhead $16   $18
Varaible selling expenses  $12        $8
Common Fixed Expenses $15        $10
Total cost per unit           $100      $68

The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars.

 

Required:

1. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line?

2. What is the company’s total amount of common fixed expenses?

3. Assume that Cane expects to produce and sell 80,000 Alphas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 10,000 additional Alphas for a price of $80 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?

4. Assume that Cane expects to produce 90,000 Betas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 5,000 additional Betas for a price of $39 per unit. If Cane accepts the customer’s offer, how much will its profits increase or decrease?

5. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. One of Cane’s sales representatives has found a new customer that is willing to buy 10,000 additional Alphas for a price of $80 per unit. If Cane accepts the customer’s offer, it will decrease Alpha sales to regular customers by 5,000 units. Should Cane accept this order?

6. Assume that Cane normally produces and sells 90,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

7. Assume that Cane normally produces and sells 40,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease?

8. Assume that Cane normally produces and sells 60,000 Betas and 80,000 Alphas per year. If Cane discontinues the Beta product line, its sales representatives could increase sales of Alpha by 15,000 unites. If Cane discontinues the Beta product line, how much would profits increase or decrease?

9. Assume that Cane expects to produce and sell 80.000 Alphas during the current year. A supplier has offered to manufacture and deliver 80,000 Alphas to Cane for a price of $80 per unit. If Cane buys 80,000 units from the supplier instead of making those units, how much will profits increase or decrease?

10. Assume that Cane expects to produce and sell 50.000 Alphas during the current year. A supplier has offered to manufacture and deliver 50,000 Alphas to Cane for a price of $80 per unit. If Cane buys 50,000 units from the supplier instead of making those units, how much will profits increase or decrease?

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

Problem 5

Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below:

 

Budgeted Actual 

Sales (15,000     pools)…………………………….. $240,000 $240,000

Less variable expenses:

Variable cost of goods     sold*………………. 57,900 74,210

Variable selling     expenses…………………. 18,000 18,000

Total variable     expense………………………….. 75,900 92,210

Contribution margin…………………………….     164,100 147,790

Less fixed expenses:

Manufacturing overhead……………………     66,000 66,000

Selling and     administrative…………………. 84,000 84,000

Total fixed expenses…………………………… 150,000 150,000

Net operating income…………………………..     $ 14,100 $(2,210)

_______ ———-

*Contains direct materials,     direct labor, and variable manufacturing overhead.

Janet Dunn, who has just been appointed general manager of the Westwood Plant, has been given instructions to “get things under control.” Upon reviewing the plant’s income statement, Ms. Dunn has concluded that the major problem lies in the variable cost of goods sold. She has been provided with the following standard cost per swimming pool:

 

Standard Quantity Standard Price     Standard

Of Hours or Rate Cost

Direct materials……………… 3.4     pounds $2.00 per pound $6.80

Direct labor………………….. 0.3 hour     $7.50 per pound 2.25

Variable manufacturing overhead     0.2 hour $3.00 per pound 0.60

Total standard cost…………….. $9.65

______

Based on machine-hours.

Ms. Dunn has determined that during June the plant produced 6,000 pools and incurred the following costs:

  1. Purchased 25,400 pounds of materials at a cost of $2.45      per pound.
  2. Used 20,200 pounds of materials in production.      (finished goods and work in process inventories are insignificant and can      be ignored.)
  3. Worked 2,400 direct labor-hours at a cost of $7.20
  4. Incurred variable manufacturing overhead cost totaling      $5,100 for the month. A total of 1,500 machine-hours was recorded.

It is the company’s policy to close all variances to cost of goods sold on a monthly basis.

Required

  1. Compute the following variance for June:
  2. Direct materials price and quantity variances.
  3. Direct labor rate and efficiently variances
  4. Variable overhead spending and efficiently variances
  5. Summarize the variances that you computed in (1) above      by showing the net overall favorable or unfavorable variance for the      month. What impact did this figure have on the company’s income statement?      Show computations.

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

Wayland Custom Woodworking is a firm that manufactures custom cabinets and woodwork for business and residential customers. Students will have the opportunity to establish payroll records and to complete a month of payroll information for Wayland.

Wayland Custom Woodworking is located at 1716 Nichol Street, Logan, Utah, 84321, phone number 435-555-9877. The owner is Mark Wayland. Wayland’s EIN is 91-7444533 and his Utah Employer Account Number is 999-9290-1. Wayland has determined it will pay their employees on a semimonthly basis.

Students will complete the payroll for the final quarter of 2015, and will file fourth quarter and annual tax reports on the appropriate dates. When writing out the dollar amount for each check, spell out all words and the cents are presented over 100, for example 50 cents would be 50/100.

 

Federal income tax should be computed using the percentage method tables in Appendix C. FUTA information is in the table below. The Utah state income tax rate and the SUTA (UI) rate are in the table below.

 

Rounding can create a challenge. For these exercises, the rate for the individuals is not rounded. So take their salary and divide by 2,080 (52 weeks at 40 hours per week) for full time, nonexempt employees. For example, Varden’s salary is $42,000 and is a nonexempt employee, so the calculation will be $42,000/2,080, which would give you $20.19231 per hour. Exempt employees salaries are divided by 24 (number of payrolls for semimonthly.) For example, Chinson’s salary is $24,000 and is a full time employee, so the calculation will be $24,000/24, which would give you $1,000. After this hourly rate is determined, than it can be applied to the number of hours worked. After the gross pay has been calculated, round this number to only two decimal points prior to calculating taxes or other withholdings.

 

For the completion of this project the following information can be located in Appendix C. Students will use the Percentage method for federal income tax and the tax tables have been provided for Utah. Both 401(k) and insurance are pretax for federal income tax and Utah income tax. Round calculations to get to final tax amounts and 401(k) contributions after calculating gross pay.

  Federal Withholding Allowance (less 401(k), Section 125) $166.70 per allowance claimed
  Semimonthly Federal Percentage Method Tax Table Appendix C, Page 270, Table #3
  Federal Unemployment Rate (Federal unemployment rate less Section 125 health insurance) 6.0% on the first $7,000 of wages
  State Withholding Rate (less 401(k), Section 125) See Utah Schedule 3
State Unemployment Rate (less Section 125) 2.6% on the first $31,300 of wages

 

 

Wayland Custom Woodworking
Balance Sheet
9/30/2015
Assets Liabilities & Equity
  Cash $ 1,125,000.00 Accounts Payable $ 112,490.00
  Supplies 27,240.00 Salaries and Wages Payable
  Office Equipment 87,250.00 Federal Unemployment Tax Payable
  Inventory 123,000.00 Social Security Tax Payable
  Vehicle 25,000.00 Medicare Tax Payable
  Accumulated Depreciation, Vehicle State Unemployment Tax Payable
  Building 164,000.00 Employee Federal Income Tax Payable
  Accumulated Depreciation, Building Employee State Income Tax Payable
  Land 35,750.00 401(k) Contributions Payable

 

 

 Employee Medical Premiums Payable
  Total Assets 1,587,240.00 Notes Payable 244,750.00

 

 

 Utilities Payable
Total Liabilities 337,240.00
Owners’ Equity 1,250,000.00
Retained Earnings
Total Equity

 

1,250,000.00

 

 
Total Liabilities and Equity 1,587,240.00

 

 

 

 

October 1:

Wayland Custom Woodworking (WCW) pays its employees according to their job classification. The following employees comprise Wayland’s staff:

 

  Employee Number Name and Address Payroll information
  00-Chins Anthony Chinson
530 Sylvann Avenue
Logan, UT 84321
435-555-1212
Job title: Account Executive		 Married, 1 withholding allowance
Exempt
$24,000/year + commission
Start Date: 10/1/2015
SSN: 511-22-3333
  00-Wayla Mark Wayland
1570 Lovett Street
Logan, UT 84321
435-555-1110
Job title: President/Owner		 Married, 5 withholding allowances
Exempt
$75,000/year
Start Date: 10/1/2015
SSN: 505-33-1775
  01-Peppi Sylvia Peppinico
291 Antioch Road
Logan, UT 84321
435-555-2244
Job title: Craftsman		 Married, 7 withholding allowances
Exempt
$43,500/year
Start Date: 10/1/2015
SSN: 047-55-9951
  01-Varde Stevon Varden
333 Justin Drive
Logan, UT 84321
435-555-9981
Job title: Craftsman		 Married, 2 withholding allowances
Nonexempt
$42,000/year
Start Date: 10/1/2015
SSN: 022-66-1131
  02-Hisso Leonard Hissop
531 5th Street
Logan, UT 84321
435-555-5858
Job title: Purchasing/Shipping		 Single, 4 withholding allowance
Nonexempt
$49,500/year
Start Date: 10/1/2015
SSN: 311-22-6698

 

Voluntary deductions for each employee are as follows:

Name Deduction
  Chinson Insurance: $50/paycheck
401(k): 3% of gross pay
  Wayland Insurance: $75/paycheck
401(k): 6% of gross pay
  Peppinico Insurance: $75/paycheck
401(k): $50 per paycheck
  Varden Insurance: $50/paycheck
401(k): 4% of gross pay
  Hissop Insurance: $75/paycheck
401(k): 3% of gross pay
  Student Insurance: $50/paycheck
401(k): 3% of gross pay

 

The departments are as follows:

Department 00: Sales and Administration

Department 01: Factory workers

Department 02: Delivery and Customer service

1. You have been hired as of October 1 as the new accounting clerk. Your name is Student F. Success and your employee number is 00-STUDE. Your Utah drivers license is 887743 expiring in 7/2018 and social security number is 555-55-5555, and you are non-exempt and paid at a rate of $36,000 per year. Using the information provided, complete the W-4 and the I-9 to start your employee file. Complete as if Single with 1 withholding, you decide to contribute 3% to 401(k) and health insurance is $50 per pay period.

2. Complete the headers of the Employees’ Earnings Records for all company employees. Enter the YTD earnings for each employee.

rev: 03_30_2016_QC_CS-46759, 07_09_2016_QC_CS-52845, 07_13_2016_QC_CS-52845

 1.
value:
21.42 points
Required information

December 15 is the end of the first pay period for the month of December. Employee pay will be disbursed on December 18. Any time worked in excess of 80 hours is considered overtime. Remember that the employees are paid on a semi-monthly basis. Compute the employee gross pay.

 

Compute the Net Pay for each employee using the payroll register. Once you have computed the net pay, complete the paycheck for each employee (assume that all employees are paid by check). Date the checks 12/18/1X (current year).
Complete the General Journal entries as follows:
3-Dec   Journalize remittance of 401(k) and health insurance premiums deducted in November. (Refer to the general ledger for account balances.)
3-Dec   Journalize remittance of monthly payroll taxes for November. (Refer to the general ledger for account balances.)
3-Dec   Journalize payment of payroll to employees for November 30 payroll. (Refer to the general ledger for account balances.)

15-Dec Journalize employee pay including the issuance of paychecks (Use one entry for all checks)
15-Dec Journalize employer payroll tax for the December 15 pay date
18-Dec Journalize payment of payroll to employees

Update the Employee Earnings records for the period’s pay and the new YTD amount.

-NOTE 1: Do not round intermediate calculations and round hourly rate to 5 decimal places & remaining answers to 2 decimal places. If no entry is required for a transaction/event, select “No journal entry required” in the first account field.

-NOTE 2: When writing out the net amount of an employee’s check, be sure to write it in the correct format (e.g. Three Hundred Ninety-nine and 75/100 Dollars). Be sure to capitalize the letters as shown. Enter all dates in mm/dd/yy format where year is entered as 1X.

rev: 03_30_2016_QC_CS-46759, 04_25_2016_QC_CS-49952, 07_09_2016_QC_CS-52845

References
eBook & Resources
WorksheetLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 2.
value:
21.42 points
Required information

December 31 is the end of the final pay period for the month of December. Employee pay will be dispersed on January 3. The company pays for the day before and the day of Christmas, and if the holiday is on a weekend, the company pays for the Friday before. Christmas fell on a Tuesday, so employees will be paid for both the Monday and Tuesday as holiday pay. (Employees worked extra hours on Saturday during the week of 12/23-12/29. Remember, holidays and vacations do not incur overtime if the employee does not work more than 8 hours in a day.) Compute the employee gross pay.

Compute the Net Pay for each employee using the payroll register. Once you have computed the net pay, complete the paycheck for each employee (assume that all employees are paid by check). Date the checks 1/3/1X (next year).

 

Complete the General Journal entries as follows:

31-Dec  Journalize employee pay including the issuance of paychecks (use one entry for all checks)
31-Dec  Journalize employer payroll tax for the December 31 pay date
03-Jan   Journalize remittance of 401(k) and health insurance premiums deducted
03-Jan   Journalize remittance of monthly payroll taxes
03-Jan   Journalize payment of payroll to employees

Update the Employee Earnings records for the period’s pay and the new YTD amount.

-NOTE 1: Do not round intermediate calculations and round hourly rate to 5 decimal places & remaining answers to 2 decimal places. If no entry is required for a transaction/event, select “No journal entry required” in the first account field.

-NOTE 2: When writing out the net amount of an employee’s check, be sure to write it in the correct format (e.g. Three Hundred Ninety-nine and 75/100 Dollars). Be sure to capitalize the letters as shown. Enter all dates in mm/dd/yy format where year is entered as 1X.

 

rev: 03_30_2016_QC_CS-46759, 07_09_2016_QC_CS-52845, 07_13_2016_QC_CS-52845

References
eBook & Resources
WorksheetLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 3.
value:
21.42 points
Required information

Complete the Employee Earning Record and YTD amount for the semimonthly pay.

 

-(NOTE): Do not round intermediate calculations and round your final answers to 2 decimal places.

 

rev: 03_30_2016_QC_CS-46759, 04_04_2016_QC_CS-46759, 07_09_2016_QC_CS-52845

References
eBook & Resources
WorksheetLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 4.
value:
21.42 points
Required information

Post all journal entries to the General Ledger accounts for the fourth quarter.

 

-(NOTE): Do not round intermediate calculations and round your final answers to 2 decimal places. Enter the transactions in order they were journalized.

 

 

rev: 03_30_2016_QC_CS-46759, 04_04_2016_QC_CS-46759, 07_09_2016_QC_CS-52845

References
eBook & Resources
WorksheetLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 5.
value:
21.42 points
Required information

Complete Form 941 for the remittance of quarterly federal taxes.

 

-THE FORMS BELOW ARE INTERACTIVE PRESENTATIONS OF OFFICIAL TAX FORMS, BUT ARE NOT OFFICIAL FORMS THEMSELVES.  DO NOT USE THESE FORMS FOR ANY OTHER PURPOSE BESIDES EDUCATIONAL.

 

-(NOTE 2): Instructions on format can be found on certain cells within the forms. Do not round intermediate calculations and round your final answers to 2 decimal places.

 

rev: 03_30_2016_QC_CS-46759, 07_09_2016_QC_CS-52845

References
eBook & Resources
Tax FormLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 6.
value:
21.42 points
Required information

Complete Form 940 for Wayland Custom Woodworking.

 

-THE FORMS BELOW ARE INTERACTIVE PRESENTATIONS OF OFFICIAL TAX FORMS, BUT ARE NOT OFFICIAL FORMS THEMSELVES. DO NOT USE THESE FORMS FOR ANY OTHER PURPOSE BESIDES EDUCATIONAL.

 

-(NOTE 1): Instructions on format can be found on certain cells within the forms. Do not round intermediate calculations and round your final answers to 2 decimal places.

 

 

rev: 03_30_2016_QC_CS-46759, 07_09_2016_QC_CS-52845

References
eBook & Resources
Tax FormLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

 7.
value:
21.48 points
Required information

Complete forms for the remittance of quarterly state taxes.

 

-THE FORMS BELOW ARE INTERACTIVE PRESENTATIONS OF OFFICIAL TAX FORMS, BUT ARE NOT OFFICIAL FORMS THEMSELVES. DO NOT USE THESE FORMS FOR ANY OTHER PURPOSE BESIDES EDUCATIONAL.

 

-(NOTE 1): Instructions on format can be found on certain cells within the forms. Do not round intermediate calculations and round your final answers to 2 decimal places.

 

 

rev: 03_30_2016_QC_CS-46759, 04_21_2016_QC_CS-49489, 07_13_2016_QC_CS-52845

References
eBook & Resources
Tax FormLearning Objective: 04-02 Determine Federal Income Tax Withholding AmountsLearning Objective: 05-05 Relate Labor Expenses to Company Profitability
Difficulty: 2 MediumLearning Objective: 04-03 Compute Social Security and Medicare Tax WithholdingLearning Objective: 05-06 Complete Benefit Analysis as a Function of Payroll
Learning Objective: 01-06 Differentiate between Exempt and Nonexempt WorkersLearning Objective: 04-04 Apply State and Local Income TaxesLearning Objective: 06-01 Create a Payroll Register
Learning Objective: 02-02 Prepare Required Employee DocumentationLearning Objective: 04-05 Explain Post-Tax DeductionsLearning Objective: 06-02 Transfer Payroll Data to the Employees’ Earnings Records
Learning Objective: 03-01 Analyze Minimum Wage Pay for Nonexempt WorkersLearning Objective: 04-06 Analyze Employee Net PayLearning Objective: 06-03 Describe Financial Accounting Concepts
Learning Objective: 03-02 Compute Gross Pay for Different Pay BasesLearning Objective: 04-07 Discuss Employee Pay MethodsLearning Objective: 06-04 Complete Payroll-Related General Journal Entries
Learning Objective: 03-03 Calculate Pay Based on Hours and Fractions of HoursLearning Objective: 05-01 List Employer-Paid and Employee-Paid ObligationsLearning Objective: 06-05 Generate Payroll-Related General Ledger Entries
Learning Objective: 03-04 Apply Combination Pay MethodsLearning Objective: 05-02 Discuss Reporting Periods and Requirements for Employer Tax DepositsLearning Objective: 06-06 Describe Payroll Effects on the Accounting System
Learning Objective: 03-05 Explain Special Pay SituationsLearning Objective: 05-03 Prepare Mid-Year and Year-End Employer Tax Reporting and DepositsLearning Objective: 06-07 Explain Payroll Entries in Accounting Reports
Learning Objective: 04-01 Identify Pre-Tax DeductionsLearning Objective: 05-04 Describe Payroll Within the Context of Business Expenses

Check my work

©2016 McGraw-Hill Education. All rights reserved.

Accounting

/in /by

Accounting

ORDER A PLAGIARISM FREE PAPER NOW

QUESTION 1

Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials):

 

     
Selling expenses $ 210,000
Purchases of raw materials $ 266,000
Direct labor   ?
Administrative expenses $ 159,000
Manufacturing overhead applied to work in process $ 372,000
Actual manufacturing overhead cost $ 357,000
 

 

Inventory balances at the beginning and end of the year were as follows:

 

  Beginning of Year End of Year
Raw materials $ 52,000   $ 38,000  
Work in process   ?   $ 23,000  
Finished goods $ 35,000     ?  
 

 

The total manufacturing costs for the year were $675,000; the cost of goods available for sale totaled $725,000; the unadjusted cost of goods sold totaled $664,000; and the net operating income was $30,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold.

Required:

Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (Hint: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of goods manufactured.)

 

 

 

QUESTION 2

 

Osborn Manufacturing uses a predetermined overhead rate of $19.20 per direct labor-hour. This predetermined rate was based on a cost formula that estimates $249,600 of total manufacturing overhead for an estimated activity level of 13,000 direct labor-hours.

The company actually incurred $247,000 of manufacturing overhead and 12,500 direct labor-hours during the period.

Required:

1. Determine the amount of underapplied or overapplied manufacturing overhead for the period.

2. Assume that the company’s underapplied or overapplied overhead is closed to Cost of Goods Sold. Would the journal entry to dispose of the underapplied or overapplied overhead increase or decrease the company’s gross margin? By how much?

QUESTION 3

The following cost data relate to the manufacturing activities of Chang Company during the just completed year:

 

     
Manufacturing overhead costs incurred:    
Indirect materials $ 16,700
Indirect labor   147,000
Property taxes, factory   9,700
Utilities, factory   87,000
Depreciation, factory   273,900
Insurance, factory   11,700
Total actual manufacturing overhead costs incurred $ 546,000
Other costs incurred:    
Purchases of raw materials (both direct and indirect) $ 417,000
Direct labor cost $ 77,000
Inventories:    
Raw materials, beginning $ 21,700
Raw materials, ending $ 31,700
Work in process, beginning $ 41,700
Work in process, ending $ 71,700
 

The company uses a predetermined overhead rate of $26 per machine-hour to apply overhead cost to jobs. A total of 21,400 machine-hours was used during the year.

Required:

1. Compute the amount of underapplied or overapplied overhead cost for the year.

2. Prepare a schedule of cost of goods manufactured for the year.

 

QUESTION 4

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,275,000 in manufacturing overhead cost at an activity level of 570,000 machine-hours.

The company spent the entire month of January working on a large order for 12,400 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

 

a. Raw materials purchased on account, $321,000.

b. Raw materials used in production, $261,000 (80% direct materials and 20% indirect materials).

c. Labor cost accrued in the factory, $162,000 (one-third direct labor and two-thirds indirect labor).

d. Depreciation recorded on factory equipment, $62,500.

e. Other manufacturing overhead costs incurred on account, $85,600.

f. Manufacturing overhead cost was applied to production on the basis of 40,870 machine-hours actually worked during the month.

g. The completed job for 12,400 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

Required:

1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment].

2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.

3. Prepare a journal entry for item (g) above.

4. If 10,900 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February?

 

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

1) Big Sky Mining Company must install $1.5 million of new machinery in its Nevada mine. It can obtain a bank loan for 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply:

1. The machinery falls into the MACRS 3-year class.

2. Under either the lease or the purchase, Big Sky must pay for insurance, property taxes, and maintenance.

3. The firm’s tax rate is 40%.

4. The loan would have an interest rate of 15%.

5. The lease terms call for $400,000 payments at the end of each of the next 4 years.

6. Big Sky Mining has no use for the machine beyond the expiration of the lease, and the machine has an estimated residual value of $250,000 at the end of the 4th year.

What is the NAL (Net Advantage of Leasing) of the lease?

You would have cash flows for owning and leasing in years 1-4. You should also have tax on residual value in year 4 in cost of owning.

NPV LEASE ANALYSIS

Year = 0 1 2 3 4

Cost of Owning

After-tax loan payments ($135,000)($135,000) ($135,000) ($1,635,000)

Maintenance Cost

Tax savings from main.

Tax savings from depr. $198,000 $270,000 $90,000 $42,000

Residual value $250,000

Tax on residual value

Net cash flow $0 $63,000 $135,000 ($45,000) ($1,443,000)

PV ownership cost @ 9% $ (885,580.87)

Cost of Leasing

Lease payment(AT) ($240,000) ($240,000) ($240,000) ($240,000)

Net cash flow $0 ($240,000) ($240,000) ($240,000) ($240,000)

PV of leasing @ 6.5% $ (777,532.77)

Cost Comparison

PV ownership cost @ 9% $ (885,580.87)

PV of leasing @9% $ (777,532.77)

Net Advantage to Leasing $ 108,048.10

2) Net advantage to leasing problem (NAL).

ABC Industries is negotiating a lease on a new piece of equipment which would cost $100,000 if purchased. The equipment falls into the MACRS 3-year class, and it would be used for three years and then sold, because ABC plans to move to a new facility at that time. It is estimated that the equipment could be sold for $30,000 after three years of use. A maintenance contract on the equipment would cost $3,000 per year, payable at the beginning of each of the three years of usage. Conversely, ABC could lease the equipment for three years for a lease payment of $29,000 per year, payable at the beginning of each year. The lease would also include maintenance. ABC is in the 20 percent tax bracket, and it could obtain a three-year simple interest loan to purchase the equipment at a before tax cost of 10 percent. Should ABC lease or buy?

NPV LEASE ANALYSIS

Year = 0 1 2 3

Cost of Owning

After-tax loan payments ($8,000) ($8,000) ($108,000)

Maintenance Cost (after tax) ($2,400) ($2,400) ($2,400) $0

Depreciation $33,000 $45,000 $15,000

Tax savings from depr. $6,600 $9,000 $3,000

Residual value $30,000

Tax on residual value ($4,600)

Net cash flow ($2,400) ($3,800) ($1,400) ($79,600)

PV ownership cost @ 8% $ (70,307.84)

Cost of Leasing

Lease payment $29,000 $29,000 $29,000 $0

Tax savings from leas($5,800) ($5,800) ($5,800) $0

Net cash flow $23,200 $23,200 $23,200 $0

PV of leasing @ 8% $ 64,571.74

Cost Comparison

PV ownership cost @ 8% $ (70,307.84)

PV of leasing @ 8% $ 64,571.74

Net Advantage to Leasing $ (5,736.10)

Accounting

/in /by

Accounting

ORDER A PLAGIARISM FREE PAPER NOW

 

17-9 U.S.M’s actuary determined that 2013 service cost is $60,000. Both the expected and actual rate of return on plan assets is 9%. The interest (discount) rate is 5%. U.S.M contributed $120,000 to the pension fund at the end of 2013, and retirees were paid $44,000 from plan assets.

Determine the following amounts at the end of 2013:

1) Pension Expense

2) Projected benefit obligation

3) Plan assets

4) Net pension asset or net pension liability

5) Prepare journal entries to record the pension expense, funding of plan assets, and retiree benefit payments.

Is USM’s pension plan underfunded or overfunded? Explain.

 

17-14 The funded status of Hilton Paneling Inc.’s defined benefit pension plan and the balances in prior service cost and the net gain- pensions, are given below.

 

($ in 000’s)

2013 Beg Balances 2013 Ending Balances

Projected benefit obligation $2,300 $2,501

Plan assets 2,400 2,591

Funded Status 100 90

Prior service cost – AOCI 325 300

Net Gain – AOCI 330 300

Retirees were paid $270,000 and the employee contribution to the pension fund was $245,000 at the end of 2013. The expected rate of return on plan assets was 10%, and the actuary’s discount rate is 7%. There were no changes in actuarial estimates and assumptions regarding the PBO.

Determine the following amounts:

1 Actual return on plan assets

2 Loss or Gain on plan assets

3 Service cost

4 Pension expense

 

Briefly explain how Hilton would have accounted for changes to actuarial estimates and assumptions regarding its PBO, if any changes in estimates and/or assumptions had been made.

 

 

 

CMA Questions 1 and 2

Briefly explain choices.

 

1) The projected benefit obligations (PBO) is best described as the

a) Present value of benefits accrued to date based on future salary levels

b) Present value of benefits accrued to date based on current salary levels

c) Increase in retroactive benefits at the date of the amendment of the plan

d) Amount of the adjustment necessary to reflect the difference between actual and estimated actuarial returns

 

 

 

2) On November 30, the Board of Directors of Baldwin Corp amended its pension plan giving retroactive benefits to its employees. The information below is provided at November 30.

 

Accumulated benefit obligation (ABO) $825,000

Projected benefit obligation (PBO) 900,000

Plan assets (fair value) 307,000

Market related asset value 301,150

Prior service cost 190,000

Average remaining service life of employees 10 years

Useful life of pension goodwill 20 years

 

Using the straight line method of amortization, the amount of prior service cost charged to expense during the year ended November 30 is:

a) $9,500

b) $19,000

c) $30,250

d) $190,000

Accounting

/in /by

Accounting

ORDER A PLAGIARISM FREE PAPER NOW

 

In early December 20X2, Nick Riley called Tom Fasbee to tell him that, in addition to meeting several other criteria, Aguamaint’s loan covenants required annual financial statements be submitted to the bank. Regina Sontag at Midwest Regional Bank had reminded Nick that the statements must be reviewed by a CPA and that the review and related report should be comparable to what Lake & Lock had done last year. In addition, the bank requested comparative financial statements, including notes that provide the fair value of all financial instruments and information on major customers. Nick wanted to know if Lake & Lock would do the work again. Tom said his firm would be delighted to do it. Nick then requested that Tom send out the same person. He indicated that Aguamaint’s people knew you and had confidence in your ability. Tom indicated that Nick’s staffing request would be “no problem.”

 

You, of course, were happy to be called on again. You made arrangements with Jerry Loos to obtain financial statements as early as possible in 20X3. You received Aguamaint’s 20X2 financial statements on Wednesday, January 13. A preliminary review revealed the large crew truck investment made earlier in the year. You decided that a quick stop at Linda Durkee’s office would be appropriate. Linda represented Lake & Lock on Aguamaint’s tax work. You asked Linda how the crew trucks would be depreciated for tax purposes. She indicated that they would be depreciated using the 5-year half year convention Modified Accelerated Cost Recovery System (MACRS) schedule. She also reminded you that the Shop Equipment purchased last year is being depreciated using the 7-year half year convention MACRS schedule. She also noted that she understood that all items classified as property, plant, and equipment are depreciated to the nearest full year for book purposes.

 

Linda had a number of questions for you on another client, so you completed your conversation over lunch. Before leaving, she reminded you that the MACRS depreciation schedules can be found on the IRS.gov website.

 

You planned to spend the afternoon reviewing Aguamaint’s preliminary financial statements in detail and get questions to Jerry by Thursday. Jerry then would prepare responses so that you could begin the review on the following Monday.

 

REQUIRED:

 

The journal entries and financial statements prepared by Jerry Loos are attached. The crew truck cost schedule you recommended Jerry prepare is also included. You will find that it is not at all clear how Jerry calculated the numbers on the schedule.

 

Review the client’s data and prepare a list of additional information items needed from Jerry. Be sure to include any necessary questions to get the information needed to reconcile each truck schedule number, and to add any needed items. Be as specific as possible and phrase your requests in the form of questions as they normally would be asked of a client. Be sure to provide a written reason that you are asking each question and also provide a reference to the FASB codification where appropriate.

 

Jerry assured you that the bank account has been reconciled and that outstanding checks account for the only reconciling items. He also indicated that all vendor invoices reflecting business through December 31, 20X2 have been booked.

 

 

 

 

 

 

 

 

 

 

AGUAMAINT, INC.

JOURNAL ENTRIES

 DECEMBER 31, 20X2 (cont.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Solution to the Crew Trucks Cost Schedule

 

YOUR QUESTIONS AND CLIENT RESPONSES

 

1. Who planned the truck modification work? How was it supervised? Was it someone on payroll or do you have an invoice for this work?

 

The specifications were drawn by Nick Riley, which took him only about 10 hours. The actual work was supervised by Ray Ballard, who spent about 20 hours on this task. We just calculated the amounts on an average hourly rate based on their salaries.

 

2. We noticed shop labor on your schedule of truck additions. Was this work done by your employees, and if so, did they work only on the trucks during that month and a half period, or was there other business-related work going on in the shop at the same time? If they worked on other jobs besides the retooling of the trucks, we need to know what cost driver you used to allocate the rent and utilities. We also need to make sure the $7,200 in labor costs did not include work on jobs other than the truck modifications. Also, how many hours did they work on the trucks?

 

All the work on the trucks was completed by Aguamaint’s crew. They worked on the trucks and other jobs in the shop during that time, and the entire $7,200 was incurred on the retooling job. Total shop labor for the same period amounted to $17,475. That ratio was the basis of my allocation of rent and utilities. The crew worked 300 hours on the trucks.

 

3. How much was the total rent and utilities for the month and a half that you worked on the trucks?

 

Shop rent and utilities expense for the one and one-half months totaled $5,656.

4. We did not see any interest expense accrued for 20X2. Shouldn’t we expense the interest due on the note as of year-end?

 

I didn’t record the interest because I didn’t have to make a payment until this year.

 

5. Speaking of interest, we believe that you can capitalize some interest cost to the trucks since the retooling qualifies as a self-constructed asset. As long as the investment was substantial and an extended period of time was spent preparing the property for use, GAAP allows this. We think you meet this criteria, but we need to know when you purchased the various items used to modify the trucks to be able to complete our calculation.

 

All materials were on hand or purchased by February 1 so they would be available as needed.

 

6. Do you anticipate any collection problems on accounts receivable? Your ending balance has increased by over 77 percent. Is an allowance required at year-end?

 

We think it is all collectible. The last payment received on the $13,000 monthly contract executed on 3/1 was received at the end of October, for work done in September. Nick says we just will not renew the contract if the balance is not paid by March 1, so I am not going to worry about it until then. We are confident it will be paid. We have a $12,000 amount due from another client, but they told us the check is in the mail, so that is not a problem either. Everything else is on time.

 

7. We remember at the end of last year that you had not booked the supplies inventory on hand as an asset. Were these supplies inventoried at year-end this year? How were their values calculated?

 

Shop supplies were inventoried on December 31 and their costs were computed from the latest invoices. I made an adjusting entry for this similar to the one you had me make last year.

 

8. We noticed that wages payable decreased quite a bit from last year, despite having one more day in the pay period to accrue and the fact that your operations increased this year. Is there a reason for this decrease and could you make the time cards available to us?

 

Things went well for us this year and due to a very mild December, we ended up being ahead of schedule in completing our maintenance work for the month. As a result, we were able to close down over the holiday and give our crew several days off. Unfortunately, it was unpaid time, but they were still happy to have the break. In addition, we did not have to pay any overtime at the end of December this year. I have the time cards if you need them.

 

9. From our calculations, it appears that you are depreciating the original cost of the trucks over a six-year period, using straight-line and with no salvage value. Is that correct? Also, we did not see any depreciation taken on the additions to the trucks. We will need to adjust for that using the same method you used for the trucks.

 

Yes, the trucks are depreciated over six years to the nearest full year. Salvage value is expected to be zero. I guess I was so busy getting that truck schedule done that I forgot to take the additional depreciation. Would the capitalized interest affect that depreciation amount? Can you take care of that for me please?

 

10. What are the requirements set out by the covenants on the bank loan?

 

There are a few ratios that we need to calculate. They want our current ratio to be at least 1.5 and they want our long-term liabilities to equity ratio to be under 1.2. Dividends may not be distributed unless earnings exceed five times interest. Loans may not be made either to Mr. Ballard or to Mr. Riley. Salary increases for Mr. Ballard and Mr. Riley must be approved by the bank. We are in compliance with all of those things. In fact our current ratio is about 3.5.

 

11. It looks like the short-term portion of the truck note needs to be reclassified. What do you think?

 

I didn’t reclassify the short-term principal portion due in 20X3. I didn’t think I needed it on the financial statements because I have a loan amortization schedule from the bank that helps me keep track of how the payments are allocated to principal and interest.

 

12. Could we get a list all maintenance contracts and their terms please? We need this information as a basis for disclosing any major customers.

 

Here it is…we have got some new contracts that we collect in advance now, so that has really helped us bump up our revenue.

 

 

 

 

13. We noticed that the cost of leasing trucks has decreased to $24,600 for this year. Is this because you purchased the two new trucks? We also noticed that the lease payment on your new building is $39,000, which is much higher than you paid for your location last year. We are assuming you entered into a long-term lease when you moved, so we need some additional information from you to help us determine if this is an operating or a finance lease. How long is the lease? Will you own the building when the lease ends? Can you provide us with the fair value of the building and also the interest rate used to determine the annual payments? We also need to know the useful life of the building.

 

We no longer lease the trucks since we purchased and retooled the new ones. That $24,600 was incurred to rent trucks at the $150/day rate until we got the new trucks retooled.

 

I agree that the $39,000 is a little high, but that’s the agreement that Nick and Ray negotiated. They settled on a 5.25% interest rate and a 10 year lease term. We only rent a little over half of the building, so will not own it at the end of the 10 years. I am pretty sure the building is worth well over a million dollars. It’s a relatively new building, so is not going to wear out anytime soon—certainly not within the next 50 years. We have a great location here, and the real estate prices just keep going up in this area. That is all the information I have. You can see that I recorded the lease payment correctly in the journal entries, and even allocated it between the shop and the office spaces. Why do you need all this detail? Do you want a copy of the lease?

 

14. We noticed the prepaid insurance balance has not changed from last year. Did you purchase any more insurance or did any of the terms of the policies change?

 

I forgot about adjusting that. We did not buy any more insurance and nothing has changed. That reminds me, we need to renew those policies next month.

 

15. Have you considered temporary differences in your income tax calculations for the year? It appears you may have a few of these.

 

I really don’t understand taxes very well. I just multiplied our income by a tax rate of 30%. I have no idea what you mean by temporary differences. What would cause those?

 

16. Are there any transactions or events that have occurred since year end 20X2 that we should disclose as subsequent events this year?

 

As a matter of fact, yes, there is one thing. We are implementing a retirement plan for all Aguamaint employees as of January 1, 20X3. I am very happy about this since it was not something I expected to happen.

 

11553SERVICE COSTS-DIRECT-FUEL 42,077

101CASH 42,077

To record purchase and payment of truck fuel.

12181VEHICLES 11,934

564SERVICE COSTS-INDIRECT-SUPPLIES 32,660

302ACCTS PAY-SUPPLIERS-OTHER COSTS 44,594

To record purchase of supplies, and to capitalize parts used for truck modifications.

13129SUPPLIES ON HAND 2,987

564SERVICE COSTS-INDIRECT-SUPPLIES 2,987

To adjust to ending supplies inventory count.

14552SERVICE COSTS-DIRECT-LEASE EXPENSE-TRUCKS 24,600

101CASH 24,600

To record rent payment for maintenance trucks.

15302ACCTS PAY-SUPPLIERS-OTHER COSTS 51,440

101CASH 51,440

To record payment on account.

1612/31/X2701TRUCK DEPRECIATION 34,667

182VEHICLES-ACCUMULATED DEPRECIATION 34,667

To record depreciation expense on trucks.

1712/31/X2704EQUIPMENT DEPRECIATION 6,100

172EQUIPMENT-ACCUMULATED DEPRECIATION 6,100

To record depreciation expense on shop equipment.

1812/31/X2710AMORTIZATION OF LICENSING COSTS 3,200

197LICENSE 3,200

To record amortization of licensing costs.

1912/31/X2821INCOME TAX EXPENSE 112,624

314INCOME TAX PAYABLE 112,624

To record income tax expense at statutory rate of 30%.

Totals3,904,987 3,904,987

Initial investment, Dealer 1208,000$

Additions:

Shop crew labor7,200

Materials11,934

Planning and supervision975

Shop rent allocation1,674

Shop utilities allocation657

Crew Truck Cost230,440$

AGUAMAINT, INC.

Crew Trucks Cost Schedule

20X2

Supporting Calculations:

Initial investment, Dealer 1208,000$

Additions:

Shop crew labor7,200 per client records

Materials11,934 per invoices

Planning and supervision975 $65,000/2,000 X 30

Shop rent allocation1,674 7,200/17,475 X 5,656 X 32,500/45,250

Shop utilities allocation657 7,200/17,475 X 5,656 X 12,750/45,250

Capitalize interest1,560 12,480/12 X 1.5

Total Crew Truck Cost232,000$

20X2

Note: Interest is calculated based on the assumption that the cost of all materials, labor, and overhead allocations were

incurred at the beginning of the retooling period since the work on the trucks only took one and a half months. In other

words, the benefit of calculating the weighted average expenditures is not cost effective.

AGUAMAINT, INC.

Crew Trucks Cost Schedule

OriginalTermBeginning A/RTotal CashMonths Earned# PaymentsEnding A/R

Contract #Contract TermMonthsPayment ArrangementBalanceReceivedin Current YearReceivedBalance

12/1/X1-1/31/X212End of Month Payment$12,000$132,0001211$24,000

$12,000

22/1/X1-1/31/X212End of Month Payment$14,000$168,0001212$14,000

$14,000

32/1/X1-1/31/X212End of Month Payment$13,000$156,0001212$13,000

$13,000

43/1/X1-2/28/X212End of Month Payment$9,000$108,0001212$9,000

$9,000

53/1/X1-2/28/X212End of Month Payment$13,000$130,0001210$39,000

$13,000

65/1/X1-4/30/X212End of Month Payment$8,600$103,2001212$8,600

$8,600

78/1/X1-7/31/X212End of Month Payment$10,000$120,0001212$10,000

$10,000

83/1/X2-2/28/X312Advance Payment$112,80010

$9,400

93/1/X2-2/28/X312Advance Payment$162,00010

$13,500

105/1/X2-4/30/X312End of Month Payment$77,00087$11,000

$11,000

1112/1/X2-11/30/X312End of Month Payment$010$12,500

$12,500

$79,600$1,269,000$141,100

AGUAMAINT, INC.

Contract List for 20X2

20X2

CURRENT ASSETS

Cash322,474$

Accounts receivable141,100

Supplies on hand 8,177

Prepaid insurance 2,649

Total Current Assets474,400

LONG-TERM ASSETS

Equipment 42,700

Accumulated depreciation-equipment(12,200)

Vehicles230,440

Accumulated depreciation-vehicles(34,667)

NOL tax benefit 3,832

NOL valuation allowance (1,341)

License 41,600

Total Long-Term Assets270,364

TOTAL ASSETS 744,764$

LIABILITIES

CURRENT LIABILITIES

Accounts payable 12,254$

Wages payable 9,380

Taxes payable112,624

Total Current Liabilities134,258

LONG TERM LIABILITIES

Note payable208,000

STOCKHOLDERS’ EQUITY

Common stock150,000

Retained earnings252,506

Total Stockholders’ Equity402,506

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 744,764$

BALANCE SHEET

LIABILITIES AND STOCKHOLDERS’ EQUITY

AGUAMAINT, INC.

ASSETS

DECEMBER 31, 20X2

20X2

Service revenue1,330,500$

Cost of goods sold633,279

Gross profit697,221

Operating expenses

Selling and administrative277,840

Depreciation and amortization43,967

Total operating expenses321,807

Operating income before income taxes375,414

Income tax expense(112,624)

Net income262,790$

AGUAMAINT, INC.

STATEMENT OF INCOME

FOR THE YEARS ENDING DECEMBER 31,

J/E #DATEACCT #ACCOUNT NAME DEBITCREDIT

11/1/X2563SERVICE COSTS-INDIRECT-LEASE EXPENSE-SHOP BLDG 32,500

602SELLING & ADMIN-LEASE EXPENSE-OFFICE BLDG 6,500

101CASH 39,000

To record and allocate new building lease payment.

22/1/X2101CASH 208,000

401LONG-TERM DEBT-NOTES 208,000

To record issuance of long-term notes payable.

32/1/X2181VEHICLES 208,000

101CASH 208,000

To record purchase of two new trucks.

4101CASH 274,800

105ACCOUNTS RECEIVABLE 1,055,700

505SERVICE REVENUE FROM CONTRACTS WITH CUSTOMERS 1,330,500

To record revenue from maintenance contracts.

5101CASH 994,200

105ACCOUNTS RECEIVABLE 994,200

To record receipts on account.

6560SERVICE COSTS-DIRECT-CREW WAGES 347,010

305WAGES PAYABLE 15,050

101CASH 355,780

305WAGES PAYABLE 6,280

To record accrual and payment of crew wages.

7181VEHICLES 7,200

561SERVICE COSTS-INDIRECT-SHOP WAGES 147,000

101CASH 151,100

305WAGES PAYABLE 3,100

To record accrual and payment of shop wages, including wages capitalized to trucks.

8181VEHICLES 975

631SELLING & ADMINISTRATIVE-OTHER 7,250

611SELLING & ADMIN-OFFICERS SALARIES 129,025

612SELLING & ADMIN-OTHER SALARIES 52,000

609SELLING & ADMIN-PROFESSIONAL FEES 5,820

615SELLING & ADMIN-PAYROLL AND OTHER TAXES 58,695

607SELLING & ADMIN-SUPPLIES 16,000

101CASH 269,765

To record accrual and payment of S&A expenses, including salary capitalized to trucks.

9181VEHICLES 657

562SERVICE COSTS-INDIRECT-SHOP UTILITIES 12,093

601SELLING & ADMIN-UTILITIES 2,550

101CASH 15,300

To record accrual and payment of utilities, including amount capitalized to trucks.

10181VEHICLES 1,674

563SERVICE COSTS-INDIRECT-LEASE EXPENSE-SHOP BLDG 1,674

To capitalize part of shop rent to trucks.

AGUAMAINT, INC.

JOURNAL ENTRIES

DECEMBER 31, 20X2

ACCOUNTING

/in /by

ACCOUNTING

ORDER A PLAGIARISM FREE PAPER NOW

22.
A telemarketing company wants to find out if people are more likely to answer the phone between 8pm and 9pm than between 7pm and 8pm. Out of 96 calls between 7pm and 8pm, 72 were answered. Out of 105 calls between 8pm and 9pm, 90 were answered.

Using a one-sided hypothesis test with a 90% confidence level, which of the following statements do these data support?
Source
There is not sufficient evidence that the proportion of people who answer the phone between 8pm and 9pm is greater than the proportion who answer the phone between 7pm and 8pm.
People are more likely to answer the phone between 8pm and 9pm.
Telemarketers should not call at all during the evenings.
People are more likely to answer the phone between 7pm and 8pm.
23.
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variable “US Gross Domestic Product (GDP) in trillions of dollars.”

Which of the following is the lowest level at which the independent variable is significant?
Energy Consumption and GDP
Source
0.94
0.10
0.05
0.01

24.
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variable “US Gross Domestic Product (GDP) in trillions of dollars.”

The coefficient on the independent variable tells us that:
Energy Consumption and GDP
Source

For every additional trillion dollars of GDP, average energy consumption increased by 3,786 trillion BTUs.
For every additional dollar of GDP, average energy consumption increased by 3,786 trillion BTUs.
For every additional trillion dollars of GDP, average energy consumption increased by 3,786 BTUs.
For every additional trillion BTUs of energy consumption, average GDP increased by $3,786 trillion.
25.
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variable “US Gross Domestic Product (GDP) in trillions of dollars.”

Which of the following statements is true?
Energy Consumption and GDP
Source
The y-intercept of the regression line is 62,695 trillion BTUs.
The x-intercept of the regression line is $62,695 trillion.
In the event that a thermonuclear war completely halts all economic activity and the US GDP drops to zero, energy consumption will sink to 62,695 trillion BTUs.
None of the above.
26.
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variable “US Gross Domestic Product (GDP) in trillions of dollars.”

In a given year, if GDP is $7.4 trillion, expected energy consumption is:
Energy Consumption and GDP
Source
Around 90,711 trillion BTUs
Around 91,501 trillion BTUs
Around 28,016 trillion BTUs
Around 467,729 trillion BTUs.
27.
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variable “US Gross Domestic Product (GDP) in trillions of dollars.”

How much of the variation in energy consumption can be explained by variation in the gross domestic product?
Energy Consumption and GDP
Source
About 94%
About 97%
About 99.99%
Almost none of the variation in energy consumption can be explained by variation in GDP.
30
The regression analysis below relates US annual energy consumption in trillions of BTUs to the independent variables “US Gross Domestic Product (GDP) in trillions of dollars” and “average gas mileage of all passenger cars in miles per gallon (mpg).”

The coefficient for the independent variable “average car gas mileage (mpg),” -70.50, describes:
Energy Consumption, GDP, and Gas Mileage
Source
Answers
The relationship between energy consumption and average car gas mileage, controlling for GDP

The relationship between energy consumption and average car gas mileage, not controlling for GDP.

The relationship between average car gas mileage and GDP, controlling for energy consumption
The relationship between average car gas mileage and GDP, not controlling for energy consumption.
31.
The data table below tabulates a pizza parlor’s advertising expenditures and sales for 8 consecutive quarters. The marketing manager wants to know how much of an impact current advertising will have on sales two quarters from now.

When running a regression with the dependent variable “sales” and the independent variable “advertising lagged by two quarters,” how many data points can she use, given the available data?
Pizza Parlor Sales and Advertising
Source
Answers: 6, 7, 8 or 9

32.

In a regression analysis, a residual is defined as:
Source
Answers
The difference between the actual value and the predicted value of the dependent variable.
The difference between the actual value and the predicted value of the independent variable.
The proportion of the variation in the independent variable that remains unexplained by the variation in the dependent variable.
The proportion of the variation in the dependent variable that remains unexplained by the variation in the independent variable
33.
When comparing two regression analyses that have a different number of independent variables, which of the following should be used to compare the explanatory power of the two regressions?
Source
Answers
Adjusted R-squared.
R-squared.
The correlation coefficient (“Multiple R”).
None of the above
34
Amalgamated Fruits, Vegetables, and Legumes, an agricultural company, breeds the experimental fruit “kiwana.” The company is studying the effects of a new fertilizer on the number of kiwanas per bunch grown on kiwana trees. The regression analysis below relates the number of kiwanas per bunch to the independent dummy variable “fertilizer.”

Based on the regression, which of the following statements may be concluded?
Kiwana Growth and Fertilizer
Source

Answers
On average, the use of the new fertilizer increases the number of kiwanas per bunch by 5.25.
The independent dummy variable “fertilizer” is significant at the 0.01 level.
Variation in the independent dummy variable “fertilizer” explains around 53% of the variation in the number of kiwanas per bunch.
None of the above.
35.
In a regression analysis with multiple independent variables, multicollinearity can be caused by:
Source

Answers
A strong linear relationship between two or more independent variables.
A strong nonlinear relationship between the dependent variable and one or more independent variables.
A strong heteroskedastic relationship between the dependent variable and one or more independent variables.
None of the above.
36.
Market researcher Ally Nathan is studying the relationships among price, type (classical or steel string), and consumer demand for acoustic guitars. She wants to find the relationship between demand and price, controlling for type.

To determine this relationship, she should:
Source

Answers
Run a simple regression of the dependent variable demand on the independent variable price and observe the coefficient on price.
Run a simple regression of the dependent variable demand on the independent variable type and observe the coefficient on type.
Run a multiple regression of the dependent variable demand on the independent variables price and type and observe the coefficient on price.
Run a multiple regression of the dependent variable demand on the independent variables price and type and observe the coefficient on type.
37.
The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.

What is the probability that a randomly selected CD has a content error?
Source

Answers
1.00%
0.98%
0.02%
None of the above.

38.
The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.

What is the conditional probability that a CD has no content errors, given that has a labeling error?
Source

Answers
97.02%
1.98%
98.00%
None of the above
39.
The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.

Which of the following statements is true?
Source
Answers
The fact that a CD has a content error tells us nothing about whether it has a labeling error.
The events of a CD having a content error and a CD having a labeling error are statistically dependent.
The fact that a CD has a labeling error tells us something about whether it has a content error.
None of the above.
40.
The WH meat-packing company must decide whether or not to recall one week’s production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision.

The EMV of the cost of not issuing a recall is $80,000. Based on EMV, WH should not issue a recall. If WH chooses to recall, which of the following best describes the WH’s attitude towards this decision?
Source

Answers
Risk averse.
Risk neutral.
Risk seeking
Chicken.

41.
The WH meat-packing company must decide whether or not to recall one week’s production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision.

The EMV of the cost of not issuing a recall is $80,000. Based on EMV, WH should not issue a recall. An estimated value of a reputation loss is included in the outcome estimate of the lawsuit. If WH is implicated, the firm may face a reputation loss even if no lawsuit is filed. For what values of that reputation loss would issuing the recall be preferable, in terms of EMV?
Source

Answers
Higher than $500,000.
Lower than $500,000.
Lower than $44,444
None of the above.
42.
The WH meat-packing company must decide whether or not to recall one week’s production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision.

The EMV of the cost of not issuing a recall is $80,000. Based on EMV, the manager should not issue the recall. For what values of p = Prob[WH is implicated] is not recalling the kielbasa preferable to recalling the kielbasa, in terms of EMV?
Source

Answers
p < 15%
p > 15%
p < 85%
None of the above.
43.
The WH meat-packing company must decide whether or not to recall one week’s production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision.

The EMV of the cost of not issuing a recall is $80,000. Suppose there were a way to know for certain whether WH would be implicated or not. What would be the value of this perfect information?
Source

Answers
$68,000
$12,000
$80,000
None of the above.