ACC 206 Entire Course (Principles of Accounting II - entirecourse.com)

Ethical Issue 12-1
Note: This case is based on an actual situation.
Stan Sewell paid $50,000 for a franchise that entitled him to market software programs in the countries
of the European Union. Sewell intended to sell individual franchises for the major language groups of
Western Europe—German, French, English, Spanish, and Italian. Naturally, investors considering
buying a franchise from Sewell asked to see the financial statements of his business.
Believing the value of the franchise to be $500,000, Sewell sought to capitalize his own franchise at
$500,000. The law firm of St. Charles & LaDue helped Sewell form a corporation chartered to issue
500,000 shares of common stock with par value of $1 per share. Attorneys suggested the following
chain of transactions:
a. Sewell's cousin, Bob, borrows $500,000 from a bank and purchases the franchise from Sewell.
b. Sewell pays the corporation $500,000 to acquire all its stock.
c. The corporation buys the franchise from Cousin Bob.
d. Cousin Bob repays the $500,000 loan to the bank.
In the final analysis, Cousin Bob is debt-free and out of the picture. Sewell owns all the corporation's
stock, and the corporation owns the franchise. The corporation's balance sheet lists a franchise acquired
at a cost of $500,000. This balance sheet is Sewell's most valuable marketing tool.
Requirements
1. What is unethical about this situation?
2. Who can be harmed? How can they be harmed? What role does accounting play?

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P12-30A Issuing stock and preparing the stockholders’ equity section of the balance sheet [15–20
min]
Lincoln-Priest, Inc., was organized in 2011. At December 31, 2011, the Lincoln-Priest balance sheet
reported the following stockholders’ equity:
Requirements
1. During 2012, the company completed the following selected transactions. Journalize each
transaction. Explanations are not required.
a. Issued for cash 1,300 shares of preferred stock at par value.
b. Issued for cash 2,400 shares of common stock at a price of $5 per share.
c. Net income for the year was $74,000, and the company declared no dividends. Make the closing
entry for net income.
2. Prepare the stockholders’ equity section of the Lincoln-Priest balance sheet at December 31, 2012.
(15-20 min.) P 12-30A

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P12-32A Computing dividends on preferred and common stock [15–20 min]
Fashonista Skincare has 10,000 shares of 3%, $20 par value preferred stock and 90,000 shares of $2 par
common stock outstanding. During a three-year period, Fashionista declared and paid cash dividends as
follows: 2010, $3,000; 2011, $13,000; and 2012, $17,000.
Requirements
1. Compute the total dividends to preferred and to common for each of the three years if
a. preferred is noncumulative.
b. preferred is cumulative.
2. For requirement 1.b., journalize the declaration of the 2012 dividends on December 22, 2012, and
payment on January 14, 2013. Use separate Dividends payable accounts for preferred and common.
(15-20 min.) P 12-32A
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206-Week-1-P12-32A
P13-24A - Summerborn Manufacturing, Co - ACC206 - Principles of Accounting II - AU
P13-24A Journalizing stockholders’ equity transactions [20–25 min]

Summerborn Manufacturing, Co., completed the following transactions during 2012:
Requirement
1. Record the transactions in Summerborn's general journal.
(20-25 min.) P 13-24A
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206-Week-1-P13-24A
P13-25A - Lennox Health Foods - ACC206 - Principles of Accounting II - AU
P13-25A Journalizing dividend and treasury stock transactions, and preparing stockholders’
equity [10–30 min]
The balance sheet of Lennox Health Foods, at December 31, 2011, reported 120,000 shares of no-par
common stock authorized, with 25,000 shares issued and a Common stock balance of $190,000.
Retained earnings had a balance of $115,000. During 2012, the company completed the following
selected transactions:
Mar 15 Purchased 9,000 shares of treasury stock at $8 per share.
Apr 30 Distributed a 10% stock dividend on the outstanding shares of common stock.
The market value of common stock was $9 per share.

Dec 31 Earned net income of $110,000 during the year. Closed net income to Retained earnings.
Requirements
1. Record the transactions in the general journal. Explanations are not required.
2. Prepare the stockholders’ equity section of Lennox Health Foods’ balance sheet at December 31,
2012.
(10-30 min.) P 13-25A
206-Week-1-P13-25A
E14-13- Classifying cash flow statement - ACC206 - Principles of Accounting II – AU
E14-13 Classifying items on the indirect statement of cash flows [5–10 min]
The cash flow statement categorizes like transactions for optimal reporting.
Requirement
1. Identify each of the following transactions as one of the following:
• Operating activity (O)
• Investing activity (I)

• Financing activity (F)
• Noncash investing and financing activity (NIF)
• Transaction that is not reported on the statement of cash flows (N)
For each cash flow, indicate whether the item increases (+) or decreases (–) cash. The indirect method
is used to report cash flows from operating activities.
(5-10 min.) E 14-13
206-Week-2-E14-13
Week 2 DQ2 - Financial Statement Analysis - ACC206 - Principles of Accounting II - AU
Financial Statement Analysis. Discuss what high current ratios indicate and why are businesses with
extremely high current ratios (example: 25.0) at risk? Explain what a high accounts receivable turnover
indicates to a business?
206-Week-2-Financial-Statement-Analysis
Fraud Case 14-1- Frank Lou - ACC206 - Principles of Accounting II - AU
Fraud Case 14-1

Frank Lou had recently been promoted to construction manager at a development firm. He was
responsible for dealing with contractors who were bidding on a multi-million dollar excavation job for
the new high-rise. Times were tough, several contractors had gone under recently, and the ones left
standing were viciously competitive. That morning, four bids were sitting on Frank's desk. The
deadline was midnight, and the bids would be opened the next morning. The first bidder, Bo Freely,
was a tough but personable character that Frank had known for years. Frank had lunch with him today,
and after a few beers, Bo hinted that if Frank “inadvertently” mentioned the amount of the lowest bid,
he’d receive a “birthday card” with a gift of cash. After lunch, Frank carefully unsealed the bids and
noticed that another firm had underbid Bo's company by a small margin. Frank took Bo's bid envelope,
wrote the low bid amount in pencil on it, and carried it downstairs where Bo's son William was waiting.
Later that afternoon, a new bid came in from Bo's company. The next day, Bo's company got the job,
and Frank got a birthday card in his mailbox.
Requirements
1. Was Frank's company hurt in any way by this fraudulent action?
2. How could this action hurt Frank?
3. How can a business protect against this kind of fraud?
206-Week-2-Fraud-Case-14-1
P14-25A Preparing the statement of cash flows—indirect method [35–45 min]
Accountants for Johnson, Inc., have assembled the following data for the year ended December 31,
2012:
Requirement

1. Prepare Johnson's statement of cash flows using the indirect method. Include an accompanying
schedule of noncash investing and financing activities.
(35-45 min.) P 14-25A
206-Week-2-P14-25A
Week 3 – E16-17- Fido Grooming - ACC206 - Principles of Accounting II Tutorial - AU
E16-17 Calculating income and cost per unit for a service company [5–10 min]
Fido Grooming provides grooming services in the local community. In April, Kevin Oliver, the owner,
incurred the following operating costs to groom 650 dogs:
Wages $ 3,900
Grooming supplies expense 1,625
Building rent expense 1,300
Utilities 325
Depreciation on equipment 130
Fido Grooming earned $16,300 in revenues from grooming for the month of April.

Requirement
1. What is Fido's net operating income for April?
2. What is the cost to groom one dog?
(5-10 min.) E 16-17
206-Week-3-E-16-17
Week 3 – DQ1 - Ethical Issue 16-1 - ACC206 - Principles of Accounting II Tutorial - Ashford
University
Ethical Issue 16-1
Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small,
struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as
controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this
particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand.
The manufacturer's regional sales managers are each given a certain number of cars. Each sales
manager then decides how to divide the cars among the independently owned dealerships in the region.
Because of high demand for these cars, dealerships all want to receive as many cars as they can from
the regional sales manager.
Becky's former employer, Shamalay Automotive, receives only about 25 cars a month. Consequently,
Shamalay was not very profitable.
Becky is surprised to learn that her new employer, Mueller Imports, receives over 200 cars a month.

Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for
“miscellaneous services.” Franz Mueller, the owner of the dealership, personally approves payment of
these invoices, noting that each invoice is a “selling expense.” From casual conversations with a
salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer's regional
sales manager and other sales executives. Before talking to anyone about this, Becky decides to work
through her ethical dilemma.
Requirement
1. Put yourself in Becky's place.
a. What is the ethical issue?
b. What are your options?
c. What are the possible consequences?
d. What should you do?
Ethical Issue 16-1
206-Week-3-Ethical-Issue-16-1
Week 3 – P16-25A - Fido Treats - ACC206 - Principles of Accounting II Tutorial - AU
P16-25A Preparing cost of goods manufactured schedule and income statement for a
manufacturing company [30–45 min]

Charlie's Pets succeeded so well that Charlie decided to manufacture his own brand of chewing bone—
Fido Treats. At the end of December 2012, his accounting records showed the following:
Requirements
1. Prepare a schedule of cost of goods manufactured for Fido Treats for the year ended December 31,
2012.
2. Prepare an income statement for Fido Treats for the year ended December 31, 2012.
3. How does the format of the income statement for Fido Treats differ from the income statement of a
merchandiser?
4. Fido Treats manufactured 18,075 units of its product in 2012. Compute the company's unit product
cost for the year.
(30-45 min.) P 16-25A
206-Week-3-P-16-25A
Accounting, 9e

P19-24AAnalyzing CVP relationships
LO 2, 3, 4 [30-45 minutes]
Students please fill-in areas that are shaded
Student Name
Course Name
Student ID:
Date:
Kincaid Company sells flags with team logos. Kincaid has fixed costs of $583,200
per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.

Requirements
1.Use the income statement equation approach to compute the number of flags
Kincaid must sell each year to break even.
2.Use the contribution margin ratio CVP formula to compute the dollar sales

Kincaid needs to earn $33,000 in operating income for 2012. (Round the contribution
margin to two decimal places.)
3.Prepare Kincaid’s contribution margin income statement for the year ended
December 31, 2012, for sales of 72,000 flags. Cost of goods sold is 70% of variable
costs. Operating costs make up the rest of variable costs and all of fixed costs.
(Round your final answers to the nearest whole number.)
4.The company is considering an expansion that will increase fixed costs by 21%

and variable costs by $0.60 per flag. Compute the new breakeven point in units
and in dollars. Should Kincaid undertake the expansion? Give your reasoning.
Round your final answers to the nearest whole number.
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E19-19 Impact on breakeven point if sale price, variable costs, and fixed costs change [15 min]
Dependable Drivers Driving School charges $250 per student to prepare and administer written and
driving tests. Variable costs of $100 per student include trainers’ wages, study materials, and gasoline.
Annual fixed costs of $75,000 include the training facility and fleet of cars.
Requirements
1. For each of the following independent situations, calculate the contribution margin per unit and the
breakeven point in units by first referring to the original data provided:
a. Breakeven point with no change in information.
b. Decrease sales price to $220 per student.

c. Decrease variable costs to $50 per student.
d. Decrease fixed costs to $60,000.
2. Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution
margin per unit and the breakeven point in units.
(15 min.) E 19-19
P19-24A Analyzing CVP relationships [30–45 min]
Kincaid Company sells flags with team logos. Kincaid has fixed costs of $583,200 per year plus
variable costs of $4.80 per flag. Each flag sells for $12.00.
Requirements
1. Use the income statement equation approach to compute the number of flags Kincaid must sell each
year to break even.
2. Use the contribution margin ratio CVP formula to compute the dollar sales Kincaid needs to earn
$33,000 in operating income for 2012. (Round the contribution margin to two decimal places.)
3. Prepare Kincaid's contribution margin income statement for the year ended December 31, 2012, for
sales of 72,000 flags. Cost of goods sold is 70% of variable costs. Operating costs make up the rest of
variable costs and all of fixed costs. (Round your final answers to the nearest whole number.)
4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by
$0.60 per flag. Compute the new breakeven point in units and in dollars. Should Kincaid undertake the

expansion? Give your reasoning. Round your final answers to the nearest whole number.
(30-45 min.) P 19-24A
206-Week-4-E-19-19,P-19-24A
E22-19 Preparing a financial budget [25–30 min]
Consider the following June actual ending balances and July 31, 2012, budgeted amounts for
Oleans.com:
a. June 30 inventory balance, $17,750
b. July payments for inventory, $4,300
c. July payments of accounts payable and accrued liabilities, $8,200
d. June 30 accounts payable balance, $10,600
e. June 30 furniture and fixtures balance, $34,500; accumulated depreciation balance, $29,830
f. June 30 equity, $28,360
g. July depreciation expense, $900
h. Cost of goods sold, 50% of sales

i. Other July expenses, including income tax, total $6,000, paid in cash
j. June 30 cash balance, $11,400
k. July budgeted credit sales, $12,700
l. June 30 accounts receivable balance, $5,140
m. July cash receipts, $14,200
Requirement
Prepare a budgeted balance sheet.
P22-22A Preparing an operating budget [30 min]
Thumbtack's March 31, 2012, budgeted balance sheet follows:
The budget committee of Thumbtack Office Supply has assembled the following data.
a. Sales in April were $40,000. You forecast that monthly sales will increase 2% over April's sales in
May. June's sales will increase 4% over April's sales. July's sales will increase 20% over April's sales.
Collections are 80% in the month of sale and 20% in the month following sale.
b. Thumbtack maintains inventory of $11,000 plus 25% of the COGS budgeted for the following
month. COGS = 50% of sales revenue. Purchases are paid 30% in the month of purchase and 70% in
the month following the purchase.

c. Monthly salaries amount to $7,000. Sales commissions equal 5% of sales for that month. Salaries
and commissions are paid 30% in the month incurred and 70% in the following month.
d. Other monthly expenses are as follows:
Requirements
1. Prepare Thumbtack's sales budget for April and May, 2012. Round all amounts to the nearest $1.
2. Prepare Thumbtack's inventory, purchases, and cost of goods sold budget for April and May.
3. Prepare Thumbtack's operating expenses budget for April and May.
4. Prepare Thumbtack's budgeted income statement for April and May.
Note: We recommend you solve this and the related problems (P22-23A and P22-24A) using Excel
templates that you create.
(30 min.) P 22-22A
P23-28A Computing and journalizing standard cost variances [45 min]
Java manufactures coffee mugs that it sells to other companies for customizing with their own logos.
Java prepares flexible budgets and uses a standard cost system to control manufacturing costs. The
standard unit cost of a coffee mug is based on static budget volume of 60,200 coffee mugs per month:

Actual cost and production information for July 2012 follow:
a. Actual production and sales were 62,900 coffee mugs.
b. Actual direct materials usage was 10,000 lbs., at an actual price of $0.17 per lb.
c. Actual direct labor usage was 202,000 minutes at a total cost of $30,300.
d. Actual overhead cost was $10,000 variable and $30,500 fixed.
e. Marketing and administrative costs were $115,000.
Requirements
1. Compute the price and efficiency variances for direct materials and direct labor.
2. Journalize the usage of direct materials and the assignment of direct labor, including the related
variances.
3. For manufacturing overhead, compute the variable overhead spending and efficiency variances and
the fixed overhead spending and volume variances.
4. Journalize the actual manufacturing overhead and the applied manufacturing overhead. Journalize
the movement of all production from WIP. Journalize the closing of the manufacturing overhead
account.
5. Java intentionally hired more-skilled workers during July. How did this decision affect the cost
variances? Overall, was the decision wise?

(45 min.) P 23-28A
206-Week-5-E-22-19,22-22A,23-28A
Ethical Issue 22-1
(20 min.)
This case centers on the ethics of padding the budget—and whether the motivation for this action
(personal gain or operational efficiency) makes a difference.
1. What is the ethical issue?
2. What are my options?
3. What are the possible consequences?
4. What should I do?
Flexible Budgets and Standard Costs.

What are the benefits of standard costs and how do businesses set those standards?
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ACC 206 Week 5- Final Paper Cost Accounting
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Accounting, 9e
P22-22APreparing an operating budget
LO 3 [30 minutes]
Students please fill-in areas that are shaded
Student Name

Course Name
Student ID:
Date:
Thumbtack’s March 31, 2012, budgeted balance sheet follows:
THUMBTACK OFFICE SUPPLY
Budgeted balance Sheet
March 31, 2012
AssetsLiabilities

Current:
Current:
Cash
$18,000 Accounts payable
$12,500
Accounts receivable
12,000 Salary and commissions payable
1,400
Inventory
16,000 Total current liabilities
$13,900
Prepaid insurance
2,200
Total current assets
$48,200 Stockholders' Equity
Plant assets:
Common stock
$16,000
Equipment and fixtures

45000Retained earings
33,300
Less: Accmulated Depreciation
30,000 Total stockholders' equity
49,300
Total plant assets
15,000 Total liabilities and
Total assets
$63,200 stockholders' equity
$63,200
The budget committee of Thumbtack Office Supply has assembled the following data.
a.Sales in April were $40,000. You forecast that monthly sales will increase 2% over April’s sales in
May. June’s sales will increase 4% over April’s sales. July’s sales will increase 20% over April’s sales.

Collections are 80% in the month of sale and 20% in the month following sale.
b.Thumbtack maintains inventory of $11,000 plus 25% of the COGS budgeted for the following
month. COGS = 50% of sales revenue. Purchases are paid 30% in the month of purchase and 70%
in the month following the purchase.
c.Monthly salaries amount to $7,000. Sales commissions equal 5% of sales for that month. Salaries
and commissions are paid 30% in the month incurred and 70% in the following month.
d.Other monthly expenses are as follows:

Rent expense
$2,400 paid as accrued
Depreciation expense
$200
Insurance expense
$100, expiration of prepaid amount
Income tax
20% of operating income, paid as incurred

Requirements
1.Prepare Thumbtack’s sales budget for April and May, 2012. Round all amounts
to the nearest $1.
2.Prepare Thumbtack’s inventory, purchases, and cost of goods sold budget for
April and May.
3.Prepare Thumbtack’s operating expenses budget for April and May.
4.Prepare Thumbtack’s budgeted income statement for April and May.
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