Chapter 7, Problem 27P

Rihanna Creative Agency started the year with total assets of $190,000 and total liabilities of $130,000. The revenues and the expenses for the year amounted to $160,000 and $140,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $70,000. Calculate Rihanna's net income for the year.

Redwood Supplies has a beginning receivables balance on July 1 of $1,840. Sales for July through October are $945, $1,230, $1,575, and $2,120, respectively. The accounts receivable period is 30 days. What is the amount of the September collections? Assume a year has 360 days.

Sprint Cycle Ltd. had a work-in-process inventory balance of $19,200 on July 1, representing Job No. 502. During July, $42,700 of direct materials were used for Job No. 502, and $31,600 of direct labor cost was incurred. Manufacturing overhead is allocated at 120% of direct labor cost. Actual manufacturing overhead costs incurred in July totaled $38,000. No new jobs were started in July. Job No. 502 was completed on July 30. Is manufacturing overhead overallocated or under- allocated for July, and by how much? a. $80 under-allocated b. $90 over-allocated c. $38 over-allocated d. $61 over-allocated