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ACCOUNTING The Cincinnati power plant that services all manufacturing departments of Eastern Mountain Engineering has a budget for the coming year. This budget has been expressed in the following monthly terms: $$ \begin{matrix} \text{Manufacturing Department} & \text{Needed at Practical Capacity Production Level (Kilowatt-Hours)} & \text{Average Expected Monthly Usage (Kilowatt-Hours)}\\ \text{Loretta} & \text{13,000} & \text{10,000}\\ \text{Bentley} & \text{21,000} & \text{9,000}\\ \text{Melboum} & \text{14,000} & \text{10,000}\\ \text{Eastmoreland} & \text{32,000} & \text{11,000}\\ \text{Total} & \text{80,000} & \text{40,000}\\ \end{matrix} $$ The expected monthly costs for operating the power plant during the budget year are $20,000:$8,000 variable and $12,000 fixed. 1. Assume that a single cost pool is used for the power plant costs. What budgeted amounts will be allocated to each manufacturing department if (a) the rate is calculated based on practical capacity and costs are allocated based on practical capacity and (b) the rate is calculated based on expected monthly usage and costs are allocated based on expected monthly usage? 2. Assume the dual-rate method is used with separate cost pools for the variable and fixed costs. Variable costs are allocated on the basis of expected monthly usage. Fixed costs are allocated on the basis of practical capacity. What budgeted amounts will be allocated to each manufacturing department? Why might you prefer the dual-rate method? Verified answer
ACCOUNTING In May 2001, the Securities and Exchange Commission sued the former top executives at Sunbeam, charging the group with financial reporting fraud that allegedly cost investors billions in losses. Sunbeam Corporation is a recognized designer, manufacturer, and marketer of household and leisure products, including Coleman, Eastpak, First Alert, Grillmaster, Mixmaster, Mr. Coffee, Oster, Powermate, and Campingaz. In the mid-1990s, Sunbeam needed help: its profits had declined by over 80% percent, and in 1996, its stock price was down over 50% from its high. To the rescue: Albert Dunlap, also known as “Chainsaw Al” based on his reputation as a ruthless executive known for his ability to restructure and turn around troubled companies, largely by eliminating jobs. The strategy appeared to work. In 1997, Sunbeam’s revenues had risen by 18 percent. However, in April 1998, the brokerage firm of Paine Webber downgraded Sunbeam’s stock recommendation. Why the downgrade? Paine Webber had noticed unusually high accounts receivable, massive increases in sales of electric blankets in the third quarter 1997, which usually sell best in the fourth quarter, as well as unusually high sales of barbeque grills for the fourth quarter. Soon after, Sunbeam announced a first quarter loss of $44.6 million, and Sunbeam’s stock price fell 25 percent. It eventually came to light that Dunlap and Sunbeam had been using a “bill and hold” strategy with retail buyers. This involved selling products at large discounts to retailers before they normally would buy and then holding the products in third-party warehouses, with delivery at a later date. Many felt Sunbeam had deceived shareholders by artificially inflating earnings and the company’s stock price. A class-action lawsuit followed, alleging that Sunbeam and Dunlap violated federal securities laws, suggesting the motivation to inflate the earnings and stock price was to allow Sunbeam to complete hundreds of millions of dollars of debt financing in order to complete some ongoing mergers. Shareholders alleged damages when Sunbeam’s subsequent earnings decline caused a huge drop in the stock price. Required: 1. How might Sunbeam’s 1997 “bill and hold” strategy have contributed to artificially high earnings in 1997? 2. How would the strategy have led to the unusually high accounts receivable Paine Webber noticed? 3. How might Sunbeam’s 1997 “bill and hold” strategy have contributed to a 1998 earnings decline? 4. How does earnings management of this type affect earnings quality? Verified answer
ACCOUNTING Ronald Hicks owns and operates Wilderness Rentals. The following accounts are needed to journalize the month’s transactions. $$ \begin{matrix} \text{General Ledger} & \text{ }\\ \hline \text{101 Cash in Bank} & \text{301 Ronald Hicks, Capital}\\ \text{105 Accts. Rec. - Helen Katz} & \text{305 Ronald Hicks, Withdrawals}\\ \text{110 Accts. Rec. - Polk and Co.} & \text{310 Income Summary}\\ \text{120 Office Equipment} & \text{401 Equipment Rental Revenue}\\ \text{125 Camping Equipment} & \text{501 Advertising Expense}\\ \text{201 Accts. Pay. - Adventure} & \text{505 Maintenance Expense}\\ \text{Equipment Inc.} & \text{515 Rent Expense}\\ \text{203 Accts. Pay. - Digital Tech} & \text{520 Salaries Expense}\\ \text{Computers} & \text{525 Utilities Expense}\\ \text{205 Accts. Pay. - Greg Mollaro} & \text{ }\\ \end{matrix} $$ Record the following transactions on page 1 of the general journal in your working papers. For each transaction: 1. Enter the date. Use the current year. 2. Enter the name of the account debited. 3. Enter the amount of the debit. 4. Enter the name of the account credited. 5. Enter the amount of the credit. 6. Enter a source document reference. $$ \begin{array}{rl} \text{Date} & \text{Transactions}\\ \hline \text{Jan. 1} & \text{Wrote Check 310 for the part-time secretary's salary, $\$ 270 .$}\\ \text{3} & \text{Bought $\$ 2,000$ of camping equipment on account from Adventure Equipment Inc., Invoice 320.}\\ \text{5} & \text{Received $\$ 500$ from a client for equipment rental, Receipt $150 .$}\\ \text{7} & \text{Wrote Check 311 to pay the electricity bill of $\$ 110$.}\\ \text{11} & \text{Billed a client, Polk and Co., $\$ 1,700$ for rental equipment, Sales Invoice 262.}\\ \text{12} & \text{Ronald Hicks withdrew $\$ 800$ for personal use, Check $312 .$}\\ \text{14} & \text{Bought a $\$ 300$ scanner for the office computer from Digital Tech Computers, on account, Invoice 270.}\\ \text{16} & \text{Wrote Check 313 for $\$ 1,000$ as an installment payment toward the amount owed to Adventure Equipment Inc. }\\ \text{25} & \text{Received $\$ 1,700$ from Polk and Co. in payment on their account, Receipt $151 .$}\\ \text{30} & \text{Paid Digital Tech Computers $\$ 300$ for the amount owed, Check $314 .$}\\ \end{array} $$ Verified answer
ACCOUNTING Sandra's Purse Boutique has the following transactions related to its top-selling Gucci purse for the month of October. $$ \begin{matrix} \text{Date} & \text{Transactions} & \text{Units} & \text{Cost per Unit} & \text{Total Cost}\\ \hline \text{October 1} & \text{Beginning inventory} & \text{6} & \text{$\$ 900$} & \text{$\$ 5,400$}\\ \text{October 4} & \text{Sale} & \text{4} & \text{ } & \text{ }\\ \text{October 10} & \text{Purchase} & \text{5} & \text{910} & \text{4,550}\\ \text{October 13} & \text{Sale} & \text{3} & \text{ } & \text{ }\\ \text{October 20} & \text{Purchase} & \text{4} & \text{920} & \text{3,680}\\ \text{October 28} & \text{Sale} & \text{7} & \text{ } & \text{ }\\ \text{October 30} & \text{Purchase} & \text{7} & \text{930} & \underline{6,510}\\ \text{ } & \text{ } & \text{ } & \text{ } & \underline{\underline{\$ 20,140}}\\ \end{matrix} $$ 1. Calculate ending inventory and cost of goods sold at October 31, using the specific identification method. The October 4 sale consists of purses from beginning inventory, the October 13 sale consists of one purse from beginning inventory and two purses from the October 10 purchase, and the October 28 sale consists of three purses from the October 10 purchase and four purses from the October 20 purchase. 2. Using FIFO, calculate ending inventory and cost of goods sold at October 31. 3. Using LIFO, calculate ending inventory and cost of goods sold at October 31. 4. Using weighted-average cost, calculate ending inventory and cost of goods sold at October 31. Verified answer Recommended textbook solutions
Other Quizlet setsRelated questionsWhat are timeTime-based depreciation allocates the cost of the asset based on time. Each time-based depreciation method requires an adopted convention. The convention determines how the asset will be depreciated in the year the asset is acquired.
Which of the following is not a depreciation method?Answer: C) replacement method.
What are the 4 methods of depreciation?The four depreciation methods include straight-line, declining balance, sum-of-the-years' digits, and units of production.
Which method of depreciation assumes that depreciation is more a function of use rather than passage of time?Straight line method falls under this category. It is based on the assumption that depreciation is a variable charge rather than a fixed cost. Under this method, it is assumed that the value of an asset declines as a fimction of use rather than through the passage of time'°.
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Which depreciation method is not based on the passage of time?
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