The original Seven Essays, in a cool, new outfit ...
Call 412-567-OXEN [6936] Fax 412-567-6936 Email - [email protected]

All posts in General Questions

In the course of routine checking of all journal entries prior to preparing year end reports, Sally Yount discovered several strange entries. She recalled that the president s son Ken had come in to help out during an especially busy time and that he had recorded some journal entries. She was relieved that there were only a few of his entries, and even more relieved that he had included rather lengthy explanations. The entries Ken made were:

*Journal entries are attached. Please see the attached file for detail.
a. How should Ken have recorded each of the four events?
b. If the entry was not corrected, which financial statements (income statement or balance sheet) would be affected? What balances would be overstated or understated?

What considerations go into choosing a cost allocation plan?

What considerations go into choosing a cost allocation plan? Companies can choose among a few allocation methods. Do some methods make more sense in certain situations than others?

What are some applications of cost estimation? How would this method influence a company s business process?

What considerations go into deciding what is normal spoilage and abnormal spoilage?

1) For the ESCO test market job, what is the present value of CFL bulbs to the hotel over the 15 years life of the fixtures? (this is the maximum price the hotel should be willing to pay BES for the conversion job) What price should Gina charge BES for the CFL bulbs for the Copley Grand Hotel job? What price should Gina charge the Hotel for replacement bulbs?
2) What is the value to FLS in the first year from the Stardust Casino contract if FLS switched to CFL bulbs? Hint: Labor and equipment rental savings from longer bulb life. This is the maximum amount which FLS might pay to GINA for the 8,000 new CFL bulbs (5,000 18 watt bulbs and 3,000 9 watt bulbs). Of course, FLS would also know that the casino was achieving large savings which might be shared with FLS and GINA.
3) What is the average annual saving to the Stardust Casino, over the fifteen year life of the retrofitted fixtures, of switching to CFL bulbs? Assume the retrofit contractor earns a 40% gross margin and Gina s captive finance subsidiary will finance the retrofit with a 15 year installment loan at 12% interest.

On January 1, 2006, Solomon Company purchased the following two machines for use in its production process. Machine A: The cash price of this machine was $38,500. Related expenditures included: sales tax $2,200, shipping costs $175, insurance during shipping $75, installation and testing costs $50, and $90 of oil and lubricants to be used with the machinery during its first year of operation. Solomon estimates that the useful life of the machine is 4 years with a $5,000 salvage value remaining at the end of that time period. Machine B: The recorded cost of this machine was $100,000. Solomon estimates that the useful life of the machine is 4 years with a $8,000 salvage value remaining at the end of that time period.

(a) Prepare the following for Machine A.
(1) The journal entry to record its purchase on January 1, 2006.
(2) The journal entry to record annual depreciation at December 31, 2006, assuming the
straight line method of depreciation is used.
(b) Calculate the amount of depreciation expense that Solomon should record for machine B each year of its useful life under the following assumption.
(1) Solomon uses the straight line method of depreciation.
(2) Solomon uses the declining balance method.The rate used is twice the straight line rate.
(3) Solomon uses the units of activity method and estimates the useful life of the machine is 25,000 units. Actual usage is as follows: 2006, 6,500 units; 2007, 7,500 units; 2008, 6,000 units; 2009, 5,000 units.
(c) Which method used to calculate depreciation on machine B reports the lowest amount of depreciation expense in year 1 (2006)? The lowest amount in year 4 (2009)? The lowest total amount over the 4 year period?

1. Over the past several years, Helen Chang has been able to save regularly. As a result, today she has $14,188 in savings and investments. She wants to establish her own business in 5 years and fells she will need $50,000 to do so.

a. If Helen can earn 12% on her money, how much will her $14,188 be worth in about 5 years? Will Helen have the $50,000 she needs? If not, how much more will she need?

b. Given your answer to part a, how much will Helen have to save each year over the next 5 years to accumulate the additional money, assuming she can earn interest at a rate of 12%?

c. If Helen can afford to save only $2000 a year, given your answer to part a, will she have the $50,000 she needs to start her own business in 5 years?