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a.
Determine the equivalent units of production for the month of July using weighted average method and select the best answer from the given option.
a.
Answer to Problem 51P
Option (2) the equivalent units of production for the month of July using weighted average method formaterials is 870,000 and for conversion costs 814,000.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the
Compute the equivalent units of production for the month of July using weighted average method:
| Particulars | Materials | Conversion |
| Units transferred out | 790,000 | 790,000 |
| EU in ending inventory | ||
| Materials | 80,000(1) | |
| Conversion costs | 24,000(2) | |
| EU produced this period | 870,000 | 814,000 |
Working note 1:
Compute the ending inventory of materials:
Working note 2:
Compute the ending inventory for conversion costs:
(1)
720,000 for materials and 744,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 720,000 and 744,000 respectively
(2)
870,000 for materials and 814,000 for conversion costs is the correct option because these are the computed values of the same.
(3)
734,000 for materials and 720,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(4)
795,000 for materials and 734,000 for conversion costs is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
(5)
None of the above is the incorrect option because the computed values of materials and conversion costs are 870,000 and 814,000 respectively.
b.
Determine the equivalent units produced during November using weighted-average method and select the best answer from the given option
b.
Answer to Problem 51P
Option (2) the equivalent units produced during November using weighted-average method are 370,000 for prior department costs, 330,000 for materials and 356,000 for conversion costs.
Explanation of Solution
Weighted average cost method:
Weighted average cost method is the method to find out the equivalent units in the process costing. Under this method work done on all completed units taken as 100% whether these units are from beginning inventory or units introduced in the process. The work done on the ending inventory is calculated as per work done on it with respect to the completed units.
Compute the equivalent units produced during November using weighted-average method:
| Particulars | Prior department costs | Materials | Conversion costs |
| Units transferred out | 330,000(3) | 330,000 | 330,000 |
| EU in ending inventory | |||
| Prior department costs | 40,000 | ||
| Materials | 0 | ||
| Conversion costs | 26,000 (4) | ||
| EU produced this period | 370,000 | 330,000 | 356,000 |
Working note 3:
Compute the units transferred out:
Working note 4:
Compute the ending inventory conversion costs:
Justification for correct and incorrect answer:
(1)
Prior department costs 370,000, materials 330,000 and 304,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(2)
Prior department costs 370,000, materials 330,000 and 356,000 conversion costs equivalent units is the correct option as that are the computed values of the same.
(3)
Prior department costs 370,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(4)
Prior department costs 320,000, materials 330,000 and 345,000 conversion costs equivalent units is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
(5)
None of the above is the incorrect option as that are 370,000, 330,000 and 356,000 are the computed values of prior department costs, materials and conversion costs respectively.
c.
Determine the equivalent units for the conversion costs using FIFO method and select the best answer from the given option.
c.
Answer to Problem 51P
Option (4) the equivalent units for the conversion costs using FIFO method is 342,000.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units for the conversion costs using FIFO method:
| Particulars | Amount |
| Beginning inventory | 14,000(5) |
| Add: Started and completed | 300,000 (6) |
| Add: Ending inventory | 28,000 (7) |
| Total equivalent units done | 342,000 |
Working note 5:
Compute the beginning inventory to be accounted for:
Working note 6:
Compute the units started and completed:
Working note 7:
Compute the equivalent units in ending inventory:
Justification for correct and incorrect answer:
(1)
298,000 is the incorrect option as the value of computed conversion costs is 342,000
(2)
320,000 is the incorrect option as the value of computed conversion costs is 342,000
(3)
348,000 is the incorrect option as the value of computed conversion costs is 342,000
(4)
342,000 is the correct option as the value of computed conversion costs is 342,000
(5)
None of the above is the incorrect option as the value of computed conversion costs is 342,000
d.
Determine the equivalent units produced for the month of December using FIFO method and select the best answer from the given option.
d.
Answer to Problem 51P
Option (1) the equivalent units produced for the month of December using FIFO method are 172,000 for materials and 168,000 for conversion costs.
Explanation of Solution
First in and first out (FIFO) method:
Under this method cost of units sold and units lying as ending inventory is ascertained on the first in and first out basis. It means units entered in the store first would be sold out first.
Compute the equivalent units produced for the month of December using FIFO method:
| Particulars | Materials | Costs |
| Materials | 0(8) | |
| Conversion costs | 12,000(9) | |
| Started and completed | 140,000(10) | 140,000 |
| Ending inventory | ||
| Materials | 32,000(11) | |
| Conversion costs | 16,000 (12) | |
| Work done | 172,000 | 168,000 |
Working note 8:
Compute the beginning inventory for materials:
Working note 9:
Compute the beginning inventory for conversion costs:
Working note 10:
Compute the started and completed units during the period:
Working note 11:
Compute the ending inventory for materials:
Working note 12:
Compute the ending inventory for conversion costs:
Justification for correct and incorrect answer:
(1)
172,000 for materials and 168,000 for conversion costs is the correct option as those are the computed values of materials and conversion costs.
(2)
212,000 for materials and 204,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(3)
212,000 for materials and 200,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(4)
172,000 for materials and 172,000 for conversion costs is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
(5)
None of the above is the incorrect option as the computed values of materials and conversion costs are 172,000 and 168,000 respectively.
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Chapter 8 Solutions
FUNDAMENTAL'S OF COST ACCOUNTING LL
- ht = ences X On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash withdrawals by owner Consulting revenue Salaries expense Cash $ 8,450 Accounts receivable 16,950 Office supplies 4,080 Rent expense Land 46,020 Office equipment 18,860 Telephone expense Accounts payable 9,280 Owner investments 84,920 Miscellaneous expenses $ 2,930 16,950 4,420 7,900 860 680 Exercise 1-18 (Algo) Preparing an income statement LO P2 Using the above information prepare a December income statement for the business. ERNST CONSULTING Income Statement Revenues Rent expense Salaries expense Telephone expense Total revenues $ 4,420 7,900 860 $ SA Assets Cash 8,450 Accounts receivable 16,950 Office supplies 4,080 Land 46,020 Office equipment 18,860 navable 9,280 13,180 5 11 of 14 Next >arrow_forwardEquipment was acquired at the beginning of the year at a cost of $77,220. The equipment was depreciated using the straight-line method based upon an estimated useful life of 6 years and an estimated residual value of $7,560. P1 What was the depreciation expense for the first year? _______ P2 Assuming the equipment was sold at the end of the second year for $58,320, determine the gain or loss on sale of the equipment. $_______________ P3 Journalize the entry to record the sale. Refer to the Chart of Accounts for exact wording of account titles. 1. ____ Debit / Credit 2.____ Debit / Credit 3.____ Debit / Credit 4.____ Debit / Creditarrow_forwardUse the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash Accounts receivable Office supplies Land Office equipment Accounts payable Owner investments $ 8,450 Cash withdrawals by owner 16,950 4,080 Rent expense Consulting revenue Salaries expense 18,860 Telephone expense Miscellaneous expenses 46,020 9,280 84,920 $ 2,930 16,950 4,420 7,900 860 680 Check my work Exercise 1-21 (Algo) Preparing a statement of cash flows LO P2 Also assume the following: a. The owner's initial investment consists of $38,900 cash and $46,020 in land. b. The company's $18,860 equipment purchase is paid in cash. c. Cash paid to employees is $2,700. The accounts payable balance of $9,280 consists of the $4,080 office supplies…arrow_forward
- ht = ences X On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $84,920 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash withdrawals by owner Consulting revenue Salaries expense Cash $ 8,450 Accounts receivable 16,950 Office supplies 4,080 Rent expense Land 46,020 Office equipment 18,860 Telephone expense Accounts payable 9,280 Owner investments 84,920 Miscellaneous expenses $ 2,930 16,950 4,420 7,900 860 680 Exercise 1-18 (Algo) Preparing an income statement LO P2 Using the above information prepare a December income statement for the business. ERNST CONSULTING Income Statement Revenues Rent expense Salaries expense Telephone expense Total revenues $ 4,420 7,900 860 $ SA Assets Cash 8,450 Accounts receivable 16,950 Office supplies 4,080 Land 46,020 Office equipment 18,860 navable 9,280 13,180 5 11 of 14 Next >arrow_forwardAssets Current Assets Cash Credit card receivables Accounts receivable Marketable securities Food Inventories Prepaid expenses Total Current Assets Golden Bay Balance Sheet as at December 31 Year 2018 Year 2019 $ 18,500 9,807 $ 29,400 11,208 5,983 6,882 15,400 2,000 12,880 14,700 10 800 14 900 73370 79 090 Property Plant & Equipment Land Building Equipment Furnishings $ 60,500 828,400 114,900 75,730 (330,100) 16 600 766 030 839 400 $ 60,500 884,400 157,900 81,110 (422,000) 18 300 7 80 210 859 300 Net: Accumulated depreciation China, glass, silver, & linen Total Assets Liabilities & Stockholders' Equity Current Liabilities Accounts payable Accrued expenses payable Taxes payable Current mortgage payable Total Current assets $ 19,200 4,200 12,400 26 900 62 700 $16,500 5,000 20,900 26 000 68 400 Long-term liabilities Mortgage payable Total Liabilities $ $512 800 $486 400 575 500 $555 200 Stockholders' Equity Common stock ($5 par. 40,000 shares issued & OS) $200,000 Retained earnings…arrow_forwardMat lives in Barbados and is desirous of starting his own business from inheritances that his parents left him. He approached you for advice on the best type of business to register. Mr. Mat said he would love to gain benefits from any tax relief that is available that the government has to offer. Give advice to Mr. Mat whether it would be more beneficial to start a Company or an Individual Trading Business. outline for Mr. Mat why setting up either a company, or a trading as business is more advantageous over the other. cover matters like: Tax rates, Available tax reliefs and or tax credits Ease of operations of a company, as well as ease of operations of an individual trading business.arrow_forward
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