Exercise 18-1 Financial information for Sinead Inc. is presented below. December 31, 2013 December 31, 2012 Current assets $123,920 $100,970 Plant assets (net) 394,340 328,550 Current liabilities 89,510 70,740 Long-term liabilities 129,370 87,560 Common stock, $1 par 166,530 116,400 Retained earnings 132,850 154,820 Prepare a schedule showing a horizontal analysis for 2013 using 2012 as the base year. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000). (20%). Round percentages to 1 decimal place, e.g. 12.3%.) SINEAD INC. Condensed Balance Sheets December 31 Increase or (Decrease) 2013 2012 Amount Percentage Assets Current Assets $123,920 $100,970 $  % Plant Assets (net) 394,340 328,550  %    Total assets $518,260 $429,520 $  % Liabilities Current Liabilities $89,510 $70,740 $  % Long-term Liabilities 129,370 87,560  % Total liabilities 218,880 158,300  % Stockholders' Equity Common Stock, $1 par 166,530 116,400  % Retained Earnings 132,850 154,820  %    Total stockholders' equity 299,380 271,220  %    Total liabilities and stockholders' equity $518,260 $429,520 $  % Exercise 18-2 Operating data for Krystal Corporation are presented below. 2013 2012 Net sales $747,550 $596,800 Cost of goods sold 466,890 393,490 Selling expenses 123,640 70,370 Administrative expenses 56,450 54,540 Income tax expense 30,120 25,260 Net income 70,450 53,140 Prepare a schedule showing a vertical analysis for 2013 and 2012. (Round all answers to 1 decimal place, e.g. 48.5%.) KRYSTAL CORPORATION Condensed Income Statements For the Years Ended December 31 2013 2012 Amount Percent Amount Percent Net sales $747,550  % $596,800  % Cost of goods sold 466,890  % 393,490  % Gross margin 280,660  % 203,310  % Selling expenses 123,640  % 70,370  % Administrative expenses 56,450  % 54,540  % Total operating expenses 180,090  % 124,910  % Income before income taxes 100,570  % 78,400  % Income taxes expense 30,120  % 25,260  % Net income $70,450  % $53,140  % Comparative statement data for Lionel Company and Barrymore Company, two competitors, appear below. All balance sheet data are as of December 31, 2013, and December 31, 2012. Lionel Company Barrymore Company 2013 2012 2013 2012 Net sales $1,576,018 $339,804 Cost of goods sold 1,008,289 240,939 Operating expenses 300,593 78,336 Interest expense 8,640 2,920 Income tax expense 54,924 6,370 Current assets 320,222 $314,105 83,452 $ 78,542 Plant assets (net) 519,420 498,249 139,245 125,702 Current liabilities 64,200 74,053 34,295 28,136 Long-term liabilities 107,950 90,407 28,915 25,879 Common stock, $10 par 496,000 496,000 120,000 120,000 Retained earnings 171,492 151,894 39,487 30,229 Warning Don't show me this message again for the assi ...

1. Exercise 18-1
Financial information for Sinead Inc. is presented below.
December 31, 2013
December 31, 2012
Current assets
$123,920
$100,970
Plant assets (net)
394,340
328,550
Current liabilities
89,510
70,740
Long-term liabilities
129,370
87,560
Common stock, $1 par
166,530

2. 116,400
Retained earnings
132,850
154,820
Prepare a schedule showing a horizontal analysis for 2013 using
2012 as the base year. (If amount and percentage are a decrease
show the numbers as negative, e.g. -55,000, -20% or (55,000).
(20%). Round percentages to 1 decimal place, e.g. 12.3%.)
SINEAD INC.
Condensed Balance Sheets
December 31
Increase or (Decrease)
2013
2012
Amount
Percentage
Assets

3. Current Assets
$123,920
$100,970
$
%
Plant Assets (net)
394,340
328,550
%
Total assets
$518,260
$429,520

4. $
%
Liabilities
Current Liabilities
$89,510
$70,740
$
%
Long-term Liabilities
129,370
87,560

5. %
Total liabilities
218,880
158,300
%
Stockholders' Equity
Common Stock, $1 par
166,530
116,400
%

6. Retained Earnings
132,850
154,820
%
Total stockholders' equity
299,380
271,220
%
Total liabilities and stockholders' equity
$518,260
$429,520
$
%

7. Exercise 18-2
Operating data for Krystal Corporation are presented below.
2013
2012
Net sales
$747,550
$596,800
Cost of goods sold
466,890
393,490
Selling expenses
123,640
70,370
Administrative expenses
56,450
54,540
Income tax expense
30,120
25,260
Net income

8. 70,450
53,140
Prepare a schedule showing a vertical analysis for 2013 and
2012. (Round all answers to 1 decimal place, e.g. 48.5%.)
KRYSTAL CORPORATION
Condensed Income Statements
For the Years Ended December 31
2013
2012
Amount
Percent
Amount
Percent
Net sales
$747,550
%
$596,800
%
Cost of goods sold
466,890
%
393,490

9. %
Gross margin
280,660
%
203,310
%
Selling expenses
123,640
%
70,370
%
Administrative expenses
56,450
%
54,540
%
Total operating expenses
180,090
%
124,910
%
Income before income taxes
100,570

10. %
78,400
%
Income taxes expense
30,120
%
25,260
%
Net income
$70,450
%
$53,140
%
Comparative statement data for Lionel Company and Barrymore
Company, two competitors, appear below. All balance sheet
data are as of December 31, 2013, and December 31, 2012.
Lionel Company
Barrymore Company
2013
2012

11. 2013
2012
Net sales
$1,576,018
$339,804
Cost of goods sold
1,008,289
240,939
Operating expenses
300,593
78,336
Interest expense
8,640

12. 2,920
Income tax expense
54,924
6,370
Current assets
320,222
$314,105
83,452
$ 78,542
Plant assets (net)
519,420
498,249
139,245
125,702
Current liabilities
64,200
74,053

13. 34,295
28,136
Long-term liabilities
107,950
90,407
28,915
25,879
Common stock, $10 par
496,000
496,000
120,000
120,000
Retained earnings
171,492
151,894
39,487
30,229
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14. (a)
Prepare a vertical analysis of the 2013 income statement data
for Lionel Company and Barrymore Company in columnar form.
(Round percentages to 1 decimal place, e.g. 12.1%.)
Condensed Income Statement
For the Year Ended December 31, 2013
Lionel Company
Barrymore Company
Dollars
Percent
Dollars
Percent
$
%

15. $
%
%
%
%
%
%
%
%
%

16. %
%
%
%
%
%
$
%

17. $
%
Problem 18-2A
The comparative statements of Larker Tool Company are
presented below.
LARKER TOOL COMPANY
Income Statement
For the Years Ended December 31
2013
2012
Net sales
$1,818,550
$1,747,770
Cost of goods sold
1,007,430
973,740
Gross profit
811,120
774,030

18. Selling and administrative expense
513,100
474,200
Income from operations
298,020
299,830
Other expenses and losses
Interest expense
18,080
14,010
Income before income taxes
279,940
285,820
Income tax expense
80,510
76,850
Net income
$ 199,430
$ 208,970

19. LARKER TOOL COMPANY
Balance Sheets
December 31
Assets
2013
2012
Current assets
Cash
$60,940
$64,870
Short-term investments
69,730
49,980
Accounts receivable (net)
117,930
102,100
Inventory
123,140
114,700
Total current assets
371,740

20. 331,650
Plant assets (net)
597,060
518,860
Total assets
$968,800
$850,510
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$160,110
$145,780
Income taxes payable
42,620
41,460
Total current liabilities
202,730

21. 187,240
Bonds payable
204,100
204,100
Total liabilities
406,830
391,340
Stockholders’ equity
Common stock ($5 par)
276,000
300,000
Retained earnings
285,970
159,170
Total stockholders’ equity
561,970
459,170
Total liabilities and stockholders’ equity
$968,800
$850,510

22. All sales were on account.
Compute the following ratios for 2013. (Weighted-average
common shares in 2013 were 55,700.) (Round Earnings per
share to 2 decimal places, e.g.1.65, and all others to 1 decimal
place, e.g. 6.8 or 6.8% .)
(a)
Earnings per share
$
(b)
Return on common stockholders’ equity
%
(c)
Return on assets
%
(d)
Current ratio
:1
(e)
Acid-test ratio

23. :1
(f)
Receivables turnover
times
(g)
Inventory turnover
times
(h)
Times interest earned
times
(i)
Asset turnover
times
(j)
Debt to total assets
%
Brief Exercise 19-1

24. Complete the following comparison table between managerial
and financial accounting.
Financial Accounting
Managerial Accounting
Primary users
Types of reports
Frequency of reports

25. Purpose of reports
Content of reports
Verification
Brief Exercise 19-2 (Essay)
The Sarbanes-Oxley Act of 2002 (SOX) has important
implications for the financial community.
Explain two implications of SOX.

26. Brief Exercise 19-3
Identify which of the following statements best describes the
functions of the management of an organization.
(a)
requires management to look ahead and to establish objectives.
A key objective of management is to add value to the business
(b)
involves coordinating the diverse activities and human
resources of a company to produce a smooth-running operation.
This function relates to the implementation of planned
objectives.
(c)

27. is the process of keeping the activities on track. Management
must determine whether goals are being met and what changes
are necessary when there are deviations.
Determine whether each of the following costs should be
classified as direct materials (DM), direct labor (DL), or
manufacturing overhead (MO).
(a)
Frames and tires used in manufacturing bicycles.
(b)
Wages paid to production workers.
(c)
Insurance on factory equipment and machinery.

28. (d)
Depreciation on factory equipment.
Problem 19-1A
Fabila Company specializes in manufacturing a unique model of
bicycle helmet. The model is well accepted by consumers, and
the company has enough orders to keep the factory production
at 11,350 helmets per month (80% of its full capacity). Fabila’s
monthly manufacturing cost and other expense data are as
follows.
Rent on factory equipment
$7,380
Insurance on factory building
1,720
Raw materials (plastics, polystyrene, etc.)
79,630
Utility costs for factory
500
Supplies for general office
100
Wages for assembly line workers
40,700
Depreciation on office equipment
860

29. Miscellaneous materials (glue, thread, etc.)
2,120
Factory manager’s salary
5,690
Property taxes on factory building
550
Advertising for helmets
14,610
Sales commissions
7,050
Depreciation on factory building
1,400
(a) Prepare an answer sheet.
Enter each cost item on your answer sheet, placing the dollar
amount under the appropriate headings. Total the dollar
amounts in each of the columns.
Product Costs
Cost Item
Direct Materials
Direct Labor
Manufacturing Overhead

30. Period Costs
Rent on factory equipment
$
$
$
$
Insurance on factory building
Raw materials
Utility costs for factory

31. Supplies for general office
Wages for assembly line workers
Depreciation on office equipment
Miscellaneous materials

32. Factory manager’s salary
Property taxes on factory building
Advertising for helmets
Sales commissions

33. Depreciation on factory building
$
$
$
$
(b) Compute the cost to produce one helmet. (Round answer to 2
decimal places, e.g. 1.25.)
The cost to produce one helmet
$
Brief Exercise 21-1
Mendez Manufacturing (a) purchases $45,200 of raw materials
on account, and (b) it incurs $51,060 of factory labor costs.
Journalize the two transactions on March 31 assuming the labor
costs are not paid until April. (Credit account titles are
automatically indented when amount is entered. Do not indent
manually.)

34. No.
Account Titles and Explanation
Debit
Credit
a.
b.
List Of Accounts
Close
Brief Exercise 21-1
Accounts Payable
Accounts Receivable
Cash
Cost of Goods Sold
Factory Labor
Factory Wages Payable
Finished Goods Inventory
Manufacturing Overhead
Raw Materials Inventory
Salaries and Wages Payable
Sales
Work in Process - Assembly
Work in Process - Blending

35. Work in Process - Canning
Work in Process - Cooking
Work in Process - Cutting
Work in Process - Finishing
Work in Process - Machining
Work in Process - Mixing
Work in Process - Packaging
Brief Exercise 21-2
Mendez Manufacturing (a) purchases $38,050 of raw materials
on account, (b) and it incurs $54,970 of factory labor costs.
Supporting records show that the Assembly Department used
$27,030 of raw materials and $26,450 of the factory labor, and
the Finishing Department used the remainder.
Journalize the assignment of the costs to the processing
departments on March 31. (Credit account titles are
automatically indented when amount is entered. Do not indent
manually.)
No.
Account Titles and Explanation
Debit
Credit
(a)
(b)

36. List Of Accounts
Close
Brief Exercise 21-2
Accounts Payable
Accounts Receivable
Cash
Cost of Goods Sold
Factory Labor
Factory Wages Payable
Finished Goods Inventory
Manufacturing Overhead
Raw Materials Inventory
Salaries and Wages Payable
Sales
Work in Process - Assembly
Work in Process - Blending
Work in Process - Canning
Work in Process - Cooking
Work in Process - Cutting
Work in Process - Finishing
Work in Process - Machining
Work in Process - Mixing
Work in Process - Packaging
Brief Exercise 21-3

37. Mendez Manufacturing (a) purchases $45,580 of raw materials
on account, (b) and it incurs $51,930 of factory labor costs.
Supporting records show that the Assembly Department used
$25,230 of raw materials and $25,880 of the factory labor, and
the Finishing Department used the remainder. Manufacturing
overhead is assigned to departments on the basis of 190% of
labor costs.
Journalize the assignment of overhead to the Assembly and
Finishing Departments. (Credit account titles are automatically
indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
List Of Accounts
Close
Brief Exercise 21-3
Accounts Payable
Accounts Receivable
Cash
Cost of Goods Sold
Factory Labor
Factory Wages Payable
Finished Goods Inventory
Manufacturing Overhead
Raw Materials Inventory
Salaries and Wages Payable

38. Sales
Work in Process - Assembly
Work in Process - Blending
Work in Process - Canning
Work in Process - Cooking
Work in Process - Cutting
Work in Process - Finishing
Work in Process - Machining
Work in Process - Mixing
Work in Process - Packaging
Brief Exercise 22-4
Moines Company accumulates the following data concerning a
mixed cost, using miles as the activity level.
Miles Driven
Total Cost
Miles Driven
Total Cost
January
8,940
$14,180
March
9,440
$16,018

39. February
7,710
13,250
April
9,140
14,460
Compute the variable and fixed cost elements using the high-
low method. (Round Variable cost to 2 decimal places, e.g.
$1.37)
Variable cost per mile
$
Fixed cost
$
Brief Exercise 22-5
Determine the missing amounts. (Round Contribution Margin
Ratio to 0 decimal places, e.g. 32%)
Unit Selling Price
Unit Variable Costs
Contribution Margin per Unit
Contribution Margin Ratio

40. 1.
$300
$198
$
%
2.
$300
$
$117
%
3.
$
$
$270
27
%
Brief Exercise 22-9
Sylvia Manufacturing Inc. had sales of $2,425,260 for the first
quarter of 2012. In making the sales, the company incurred the

41. following costs and expenses.
Variable
Fixed
Cost of goods sold
$763,520
$538,840
Selling expenses
90,570
56,950
Administrative expenses
83,020
63,050
Prepare a CVP income statement for the quarter ended March
31, 2012.
SYLVIA MANUFACTURING INC.
Income Statement
For the Quarter Ended March 31, 2012
$
$

42. $
Exercise 22-5
In the month of June, Bonita Beauty Salon gave 3,330 haircuts,
shampoos, and permanents at an average price of $30. During
the month, fixed costs were $18,600 and variable costs

43. were 60% of sales.
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(a)
Determine the contribution margin in dollars, per unit, and as a
ratio. (Round the contribution ratio to 0 decimal places, e.g.
27%)
Contribution Margin in Dollars
$
Contribution Margin Per Unit
$
Contribution Margin Ratio
%

44. Exercise 23-3
Ernst and Anderson, CPAs, are preparing their service revenue
(sales) budget for the coming year (2012). The practice is
divided into three departments: auditing, tax, and consulting.
Billable hours for each department, by quarter, are provided
below.
Department
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Auditing
2,030
1,580
2,060
2,290
Tax
2,950
2,370
2,190

45. 2,380
Consulting
1,610
1,610
1,610
1,610
Average hourly billing rates are: auditing $84, tax $88, and
consulting $101.
Prepare the service revenue (sales) budget for 2012 by listing
the departments and showing for each quarter and the year in
total, billable hours, billable rate, and total revenue.
ERNST AND ANDERSON, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Quarter 1
Quarter 2
Dept.
Billable Hours
Billable Rate
Total Rev.
Billable Hours
Billable Rate
Total Rev.
Auditing

46. $
$
$
$
Tax
Consulting
Totals
$
$

47. ERNST AND ANDERSON, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Dept.
Quarter 3
Quarter 4
Billable Hours
Billable Rate
Total Rev.
Billable Hours
Billable Rate
Total Rev.
Auditing
$
$
$
$
Tax
Consulting

48. Totals
$
$
ERNST AND ANDERSON, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2012
Year
Dept.
Billable Hours
Billable Rate
Total Rev.
Auditing
$
$
Tax
Consulting
Totals
$

49. Exercise 23-5
Paseo Industries has adopted the following production budget
for the first 4 months of 2013.
Month
Units
Month
Units
January
10,160
March
5,490
February
8,280
April
3,680
Each unit requires 5 pounds of raw materials costing $2 per
pound. On December 31, 2012, the ending raw materials
inventory was 9,310 pounds. Management wants to have a raw
materials inventory at the end of the month equal to 30% of
next month’s production requirements.
Prepare a direct materials purchases budget by month for the
first quarter.
PASEO INDUSTRIES

50. Direct Materials Purchases Budget
For the Quarter Ending March 31, 2013
January
February
March
:

51. :
$
$

52. $
$
$
$
Exercise 23-8
Tye Company is preparing its manufacturing overhead budget
for 2012. Relevant data consist of the following.
Units to be produced (by quarters):
11,200, 11,900, 16,900, 16,100.
Direct labor: Time is 1.4 hours per unit.
Variable overhead costs per direct labor hour: Indirect materials
$0.6; indirect labor $1.2; and maintenance $0.4.
Fixed overhead costs per quarter: Supervisory salaries $35,600;
depreciation $17,000; and maintenance $11,300.
Prepare the manufacturing overhead budget for the year,
showing quarterly data. (Round overhead rate to 2 decimal
places, e.g. $2.58)
TYE COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2012
Quarter

53. 1
2
3
4
Year
Variable costs:
$
$
$
$
$

54. Fixed costs:
$
$
$
$
$

55. Exercise 23-13
Blue Lagoon Corporation is projecting a cash balance of
$31,155 in its December 31, 2011, balance sheet. Blue Lagoon’s
schedule of expected collections from customers for the first
quarter of 2012 shows total collections of $179,582. The
schedule of expected payments for direct materials for the first
quarter of 2012 shows total payments of $40,707. Other
information gathered for the first quarter of 2012 is: sale of
equipment $3,867, direct labor $69,922, manufacturing
overhead $35,411, selling and administrative expenses
$45,196 and purchase of securities $12,292. Blue Lagoon wants
to maintain a balance of at least $24,984 cash at the end of each
quarter.
Prepare a cash budget for the first quarter.
BLUE LAGOON CORPORATION

56. Cash Budget
For the Quarter Ended March 31, 2012
$
Add:
Less:

57. $