ACCT 131 Chapter 1 Homework

A review of the accounting records of Rayford Manufacturing indicated that the company incurred the following payroll costs during the month of September.

1.Salary of the company president—$33,000.2.Salary of the vice president of manufacturing—$15,500.3.Salary of the chief financial officer—$19,700.4.Salary of the vice president of marketing—$14,800.5.Salaries of middle managers (department heads, production supervisors) in manufacturing

plant—$203,000.

6.Wages of production workers—$943,000.7.Salaries of administrative secretaries—$111,000.8.Salaries of engineers and other personnel responsible for maintaining production equipment— $176,000.9.Commissions paid to sales staff—$246,000.Required:a.

What amount of payroll cost would be classified as selling, general, and administrative expense? (Omit the "$" sign in your response.)

b.

Assuming that Rayford made 3,200 units of product and sold 2,880 of them during the month of September, determine the amount of payroll cost that would be included in cost of goods sold. (Omit the "$" sign in your response.)

Howle Manufacturing Company began operations on January 1. During the year, it started and completed 1,640 units of product. The company incurred the following costs.

1.Raw materials purchased and used—$3,240.2.Wages of production workers—$3,520.3.Salaries of administrative and sales personnel—$1,950.4.Depreciation on manufacturing equipment—$4,392.5.Depreciation on administrative equipment—$1,755.Howle sold 1,080 units of product.Required:a.

Determine the total product cost for the year.

b.

Determine the total cost of the ending inventory. (Do not round intermediate calculations. Omit the "$" sign in your response.)

c.

Determine the total of cost of goods sold. (Do not round intermediate calculations. Omit the "$" sign in your response.)

Each of the following events describes acquiring an asset that requires a year-end adjusting entry.1.

Paid $15,400 cash on January 1 to purchase computer equipment to be used for administrative purposes. The equipment had an estimated expected useful life of five years and a $1,900 salvage value.

2.

Paid $15,400 cash on January 1 to purchase manufacturing equipment. The equipment had an estimated expected useful life of four years and a $1,900 salvage value.

3.Paid $19,200 cash in advance on May 1 for a one-year rental contract on administrative offices.4.Paid $19,200 cash in advance on May 1 for a one-year rental contract on manufacturing facilities.5.

Paid $3,000 cash to purchase supplies to be used by the marketing department. At the end of the year, $490 of supplies was still on hand.

6.

Paid $3,000 cash to purchase supplies to be used in the manufacturing process. At the end of the year, $490 of supplies was still on hand.

Required:

How the adjusting entry affects the amount of net income shown on the year-end financial statements. Assume a December 31 annual closing date. The first event has been recorded as an example. Assume that any products that have been made have not been sold. (If there is no effect select "NA" from dropdown.)

During 2011, Gallo Manufacturing Company incurred $45,000,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in 2011. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $262 per unit. Packaging, shipping, and sales commissions are expected to be $60 per unit. Gallo expects to sell 1,000,000 batteries before new research renders the battery design technologically obsolete. During 2011, Gallo made 433,000 batteries and sold 409,000 of them.

Required:a.Identify the upstream and downstream costs.b.

Determine the amount of cost of goods sold and the ending inventory balance for the year 2011. (Omit the "$" sign in your response.)

c.

Determine the sales price assuming that Gallo desires to earn a profit margin that is equal to 25 percent of the total cost of developing, making, and distributing the batteries. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

d.

Prepare an income statement for 2011. Use the sales price developed in part c. (Amounts to be deducted and loss amounts should be indicated with minus sign. Do not round your intermediate calculations. Omit the "$" sign in your response.)

The CFO of the Rigney Microscope Corporation intentionally misclassified a downstream transportation expense in the amount of $64,687,500 as a product cost in an accounting period when the company made 11,500 microscopes and sold 7,400 microscopes. Rigney rewards its officers with bonuses that are based on net earnings.

 Required:a.

Indicate whether the elements on the financial statements (i.e., assets, liabilities, retained earnings, expense, and net income) would be overstated or understated as a result of the downstream transportation expense. Determine the amount of the overstatement or understatement for each element. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Jolly Manufacturing Company was started on January 1, 2011, when it acquired $14,000 cash by issuing common stock. Jolly immediately purchased office furniture and manufacturing equipment costing $9,100 and $34,300, respectively. The office furniture had a five-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of four years. The company paid $11,900 for salaries of administrative personnel and $15,000 for wages to production personnel. Finally, the company paid $13,780 for raw materials that were used to make inventory. All inventory was started and completed during the year. Jolly completed production on 4,800 units of product and sold 3,820 units at a price of $15 each in 2011. (Assume that all transactions are cash transactions.)

Required:a.

Determine the total product cost and the average cost per unit of the inventory produced in 2011. (Round your average cost per unit to 2 decimal places. Omit the "$" sign in your response.)

b.

Determine the amount of cost of goods sold that would appear on the 2011 income statement. (Do not round intermediate calculations. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

c.

Determine the amount of the ending inventory balance that would appear on the December 31, 2011, balance sheet. (Do not round intermediate calculations. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

d.

Determine the amount of net income that would appear on the 2011 income statement. (Omit the "$" sign in your response.)

e.

Determine the amount of retained earnings that would appear on the December 31, 2011, balance sheet.(Omit the "$" sign in your response.)

f.

Determine the amount of total assets that would appear on the December 31, 2011, balance sheet.(Omit the "$" sign in your response.)

The following transactions pertain to 2012, the first-year operations of Hall Company. All inventory was started and completed during 2012. Assume that all transactions are cash transactions.

1.Acquired $4,200 cash by issuing common stock.2.Paid $680 for materials used to produce inventory.3.Paid $1,860 to production workers.4.Paid $730 rental fee for production equipment.5.Paid $100 to administrative employees.6.Paid $117 rental fee for administrative office equipment.7.Produced 300 units of inventory of which 200 units were sold at a price of $13 each.Required:

Prepare an income statement and a balance sheet. (Be sure to list the assets and liabilities in order of their liquidity. Do not round intermediate calculations. Round your answers to the nearest dollar amount. Amounts to be deducted and loss amounts should be indicated with minus sign. Omit the "$" sign in your response.)