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Read thoroughly before bidding. All supporting documents and rubrics are attached. I check for plagiarism.Complete the seven Serial Problems presented in the textbook found in Chapters 13, 15, 17, 19, 21, 22, and 25. These problems are linked at the bottom of the page. You are encouraged to use the working papers to develop your answers. Serial questions included in the Option 1 SQ document.
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Option 1 Assignment Template
The serial problems are as follows:
SP 13 Adria Lopez created Success Systems on October 1, 2013. The company has been successful, and
Adria plans to expand her business. She believes that an additional $86,000 is needed and is
investigating three funding sources.
Option 1
Problem 1
a.
Adria’s sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since
Adria currently has about $129,000 invested in the business, Cicely’s investment will mean that
Adria will maintain about 60% ownership, and Cicely will have 40% ownership of Success
Systems.
b.
Adria’s uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder.
Marcello would purchase 860 shares of $100 par value, 7% preferred stock.
c.
Adria’s banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make
monthly payments of $1,000 per month for 10 years.
Required
1.
Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a),
(b), and (c).
2.
Evaluate the three proposals for expansion, providing the pros and cons of each option.
3.
Which option do you recommend Adria adopt? Explain.
SP 15 While reviewing the March 31, 2014, balance sheet of Success Systems, Adria Lopez notes that
the business has built a large cash balance of $77,845. Its most recent bank money market statement
shows that the funds are earning an annualized return of 0.75%. Adria Lopez decides to make several
investments with the desire to earn a higher return on the idle cash balance. Accordingly, in April 2014,
Success Systems makes the following investments in trading securities:
Option 1
Problem 2 On June 30, 2014, the per share market price (fair value) of the Johnson & Johnson shares is $55 and
the Starbucks shares is $19.
Required
1.
Prepare journal entries to record the April purchases of trading securities by Success Systems.
2.
On June 30, 2014, prepare the adjusting entry to record any necessary fair value adjustment to
its portfolio of trading securities.
SP 17 Use the following selected data from Success Systems’ income statement for the three months
ended March 31, 2014, and from its March 31, 2014, balance sheet to complete the requirements below:
Option 1
computer services revenue, $25,160; net sales (of goods), $18,693; total sales and revenue, $43,853;
Problem 3
cost of goods sold, $14,052; net income, $18,686; quick assets, $100,205; current assets, $105,209;
total assets, $129,909; current liabilities, $875; total liabilities, $875; and total equity, $129,034.
Required
1.
Compute the gross margin ratio (both with and without services revenue) and net profit margin
ratio (round the percent to one decimal).
2.
Compute the current ratio and acid-test ratio (round to one decimal).
3.
Compute the debt ratio and equity ratio (round the percent to one decimal).
4.
What percent of its assets are current? What percent are long term (round the percent to one
decimal)?
SP 19 The computer workstation furniture manufacturing that Adria Lopez started in January is
progressing well. As of the end of June, Success Systems’ job cost sheets show the following total costs
accumulated on three furniture jobs.
D
Job 6.02 was started in production in May, and these costs were assigned to it in May: direct materials,
$600; direct labor, $180; and overhead, $90. Jobs 6.03 and 6.04 were started in June. Overhead cost is
Option 1
applied with a predetermined rate based on direct labor costs. Jobs 6.02 and 6.03 are finished in June,
Problem 4
and Job 6.04 is expected to be finished in July. No raw materials are used indirectly in June. (Assume
this company’s predetermined overhead rate did not change over these months).
Required
1.
What is the cost of the raw materials used in June for each of the three jobs and in total?
2.
How much total direct labor cost is incurred in June?
3.
What predetermined overhead rate is used in June?
4.
How much cost is transferred to finished goods inventory in June?
Check (1) Total materials, $6,900
(3) 50%
SP C After reading an article about activity-based costing in a trade journal for the furniture industry,
Option 1 Adria Lopez wondered if it was time to critically analyze overhead costs at Success Systems. In a recent
Problem 5 month, Lopez found that setup costs, inspection costs, and utility costs made up most of its overhead.
Additional information about overhead follows.
Overhead has been applied to output at a rate of 50% of direct labor costs. The following data pertain to
Job 6.15.
Required
1.
What is the total cost of Job 6.15 if Success Systems applies overhead at 50% of direct labor
cost?
2.
What is the total cost of Job 6.15 if Success Systems uses activity-based costing?
3.
Which approach to assigning overhead gives a better representation of the costs incurred to
produce Job 6.15? Explain.
SP 22 Adria Lopez expects second quarter 2014 sales of her new line of computer furniture to be the
same as the first quarter’s sales (reported below) without any changes in strategy. Monthly sales
averaged 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500).
Option 1
Problem 6
D
Page 943
Adria Lopez believes that sales will increase each month for the next three months (April, 48 desks, 32
chairs; May, 52 desks, 35 chairs; June, 56 desks, 38 chairs) if selling prices are reduced to $1,150 for
desks and $450 for chairs, and advertising expenses are increased by 10% and remain at that level for
all three months. The products’ variable cost will remain at $750 for desks and $250 for chairs. The sales
staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at
$10,000 and other fixed expenses will remain at $6,000 per month.
Required
1.
Prepare budgeted income statements for each of the months of April, May, and June that show
the expected results from implementing the proposed changes. Use a three-column format,
with one column for each month.
2.
Use the budgeted income statements from part 1 to recommend whether Adria Lopez should
implement the proposed changes. Explain.
Check (1) Budgeted income (loss): April, $(660); May, $945
SP 25 Adria Lopez is considering the purchase of equipment for Success Systems that would allow the
company to add a new product to its computer furniture line. The equipment is expected to cost
$300,000 and to have a six-year life and no salvage value. It will be depreciated on a straight-line basis.
Success Systems expects to sell 100 units of the equipment’s product each year. The expected annual
income related to this equipment follows.
Option 1
Problem 7
D
Required
Compute the (1) payback period and (2) accounting rate of return for this equipment. (Record answers
as percents, rounded to one decimal.)
Your project will include both calculations and written explanations. All calculations must be formatted clearly,
showing formulas and using traditional design and layout. You are required to include written explanations for some
of your conclusions and to cite all sources that support those conclusions. All written responses—referenced sources
and written explanations—must be formatted in accordance with the CSU-Global Guide to Writing and
APA Requirements.
Although your project will include both narrative responses and calculations displayed in spreadsheet format, to
receive full credit for your work, be sure to submit only one document to the Week 8 Assignments page.
1
Running head: BUSINESS SOLUTIONS ACCOUNTING
ACT325 – Module 8
Portfolio Project Solutions
Option #1: Mini-Cases for Accounting
Problem 1 – Funding Business Expansion
1.1
Table 1
Entries for Three Funding Options
Prob. #
Account
Debit
Credit
1a
1b
1c
Note.
1.2:
1.3:
Problem 2 – Investments
2.1
Table 2
Journal Entries for Stock Acquisitions
Prob. #
2.1
Date
Account
Debit
Credit
2
BUSINESS SOLUTIONS ACCOUNTING
2.2
Table 3
Fair Value Adjustment Entry
Prob. #
Date
2.2
6/30/12
Account
Problem 3 – Analyzing the Financial Statements
3.1
Table 4
Margin Analyses
3.1
Gross Margin Ratio With Computer Service
Revenue
Gross Margin Ratio Without Computer
Service Revenue
Net Profit Margin Ratio
3.2:
Table 5
Liquidity and Efficiency Ratio Analyses
3.2
Current Ratio
Acid-Test Ratio
Debit
Credit
3
BUSINESS SOLUTIONS ACCOUNTING
3.3
Table 6
Solvency Ratio Analyses
3.3
Debt Ratio
Equity Ratio
3.4
Table 7
Margin Analyses
3.4
% Current Assets
% Long Term Assets
Problem 4 – Job Costs
Table 8
Accumulated Job Costs end of June 2012
May
Job 6.02
June Total
Job 6.03
June
Total
Job 6.04
June
Total
All Jobs Total
May June
Total
Direct
Materials
Direct
Labor
Overhead
Total Job
Cost
4.1: The cost of raw materials used in June for the three jobs combined is:_______
4.2
The total direct labor cost incurred in June was ___________
4.3
4
BUSINESS SOLUTIONS ACCOUNTING
The predetermined overhead rate used in June was ____. This was calculated
by:_____________
4.4: The cost transferred to finished goods inventory in June is _________
Problem 5 – Activity Based Costing
Table 9
Total Cost for Job 6.15
Job 6.15
Direct Materials
Direct Labor
Overhead ($3500 x 50%)
Total cost
Cost
Note. Total job costs for job 6.15 including _____rate of overhead applied to direct labor.
5.1
As equated in table 9 the cost of job 6.15 is _____ using a standard ___ overhead on direct
labor calculation.
Table 10
Business Solutions Rates Derived for Activity Based Costing
Activity
Setting up machine
Inspecting Components
Utilities
Cost
Driver
Rate
.
Table 11
Total Cost for Job 6.15 Calculated with Activity Based Costing
Job 6.15 -ABC
Cost
5
BUSINESS SOLUTIONS ACCOUNTING
Direct Materials
Direct Labor
Setting up machines (2 x 800)
Inspecting Components (400 x 1.5)
Utilities (600 x 2)
Total
5.2: As calculated in table 11, the total cost for job 6.15 using activity-based costing (ABC) is:
_______________
5.3:
Problem 6 – Budgeted Income Statement
6.1
Budgeted Income Statements for April, May and June
Business Solutions’
Budgeted Income Statement
For end of months:
APRIL
MAY
Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Sales Commission (10%)
Advertising Expense
Other Fixed Expenses
Total Expenses
Net Income
6.2:
Problem 7 – Capital Budgeting
Cash Flow Analysis for Proposed Equipment Investment
Business Solutions’
JUNE
6
BUSINESS SOLUTIONS ACCOUNTING
Cash Flow Analysis – Equipment Investment
Expected
Accrual Figures
Expected Net
Cash Flows
Annual Sales
Costs
Materials, labor and overhead (no depreciation)
Depreciation of new equipment
Selling and Administrative Expenses
Pretax Income
Income tax
Net Income
Annual Net Cash Flows
7.1
As computed in table 14 with the data from the cash flow analysis in table 13: the payback
period (PBP) for this equipment investment would be _____years.
The accounting rate of return (ARR) on this equipment investment would be _____%.
Payback Period and Accounting Rate of Return Calculations
PBP=
ARR=
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