Management Accounting

Price of the bond
Semi-annual interest: 4%*1000000=$40,000
Price= PV of the semi-annual activity payments (annuity) + PV of the principal
PV of hobby repayments (discount price 10%/2=5%) = $40,000*PVIFA5%,10
PV of interest= $40,000* {1-(1+0.05)^-10}/0.05
PV: $40000*7.7217=$308,868
PV of the principal= 1000000/PVIF
PV= $1,000,000/(1+0.05)^10=$613,913.25
Price of the bond= 613,913.25+308868=$922,781.25
Discount
Discount: $1,000,000-922,781.25=$77,218.75
details
debit
credit
cash
discount
Bonds payable
$922,781.25
$77,218.75
$1,000,000
Discount amortized: 77,218.75/10= $7,721.874
details
Debit
Cr
interest expense
discount amortized
cash
$47,721.88
$7,721.88
$40,000
payment
cash (4%)
payment cash (4%) interest expense(5%) discount amortized (straight line) carrying amount
0 - - - 922,781.25
1 40,000 47,721.88 7721.88 930,503.13
2 40,000 47721.88 7721.88 938,225.01
3 40000 47721.88 7721.88 945,946.89
4 40000 47721.88 7721.88 953,668.77

Loss on redemption= $1,040,000-953,668.77= $86,331.23
details Dr. Cr
bond payable
loss on redemption
cash $1,000,000
$86,331.23

$1,040,000

Minicase 2.
Jacoby Corporation
Cash flow statement for the year ended December 31, 2013
cash flows from operating activities $ $
Net Income 57000
Add back non-cash items
depreciation 36600
loss on sale of equipment 2100
Working capital changes
decrease in accounts receivable 16650
decrease in merchandise inventory 35700
decrease in prepaid expenses 2100
decrease in accounts payable -6000
short term loan payable 6000
cash flows generated from operating activities 150150

cash flows from investing activities
proceeds from sale of equipment 28050
purchase of equipment (38250)
cash flows used in investing activities (10200)

cash flows from financing activities
issue of common stock 33000
dividends paid (63000)
payment of loan (45000)
cash used in financing activities (75000)
change in cash and cash equivalents 64950
opening cash balance 71550
Ending cash balance 136500

required details debit credit
1 materials inventory
accounts payable 34,000

34,000
2 goods in process
materials inventory
manufacturing overhead 39,800
35,500
4,300

3 Goods in process
manufacturing overhead
wages expense 45,500
3600

49,100
4 goods in process
manufacturing overhead 136,500

136,500
Minicase 3.

5 finished goods
goods in process 64,500
64,500
6 cost of goods sold
finished goods 21,000
21,000
6. cash
sales 50,000
50,000

7. Balances in the accounts
Materials inventory
dr. cr balance
beginning balance 50,000 50,000
add purchases 34,000 84,000
less requisitions 35,500 48,500

Goods in process a/c
dr cr bal
beginning balance 50,000 200,000
materials inventory 35,500 235,500
manufacturing overhead 4300 239800
wages expense 45,500 285,300
manufacturing overhead 136,500 421,800
finished goods 64500 357,300

Finished goods
dr cr bal
beginning balance 325,000 325,000
goods in process 64,500 389,500
cost of goods sold 21000 368,500

Minicase 5. (FIFO method used)
March 2014, Department 1.
units to be accounted for units
beginning WIP 6,000
transferred in 22,000
units to be accounted for 28,000
transferred out from beg WIP 6,000
units both started and completed 15,000
units transferred out(completed) 21,000
ending inventory 7,000
units accounted for 28,000

Equivalent units
units direct materials conversion costs
units in beginning inventory 6,000 (6000*(1-0.4)=3,600 3,600
units started and completed 15,000 15,000 15,000
units in ending inventory 7,000 7,000*0.3=2,100 2,100
equivalent units 28,000 20,700 20,700

Cost per equivalent unit
total materials conversion
costs in beginning inventory 45000 45,000 0
added during month 634,000 220,000 414,000
costs to be accounted for 679,000 265,000 414,000
equivalent units 20,700 20,700
cost per equivalent unit 32.8 12.80 20

Department 2: March
units to be accounted for units
beginning WIP 5,000
transferred in 21,000
units to be accounted for 26,000
transferred out from beg WIP 5,000
units both started and completed 11,000
units transferred out(completed) 16,000
ending inventory 10,000
units accounted for 26,000

units direct materials conversion costs
units in beginning inventory 5,000 5000*(1-0.7)=1,500 1,500
units started and completed 11000 11,000 11,000
units in ending inventory 10,000 10000*0.5=5,000 5,000
equivalent units 26,000 17,500 17,500

total materials conversion
costs in beginning inventory 80000 80000 0
added during month 486,500 17500*12.8=224,000 262,500
costs to be accounted for 566,500 304,000 262,500
equivalent units 17,500 17,500
cost per equivalent unit 32.37 17.37 15

April 2014.
Department 1.
units to be accounted for units
beginning WIP 7,000
transferred in 20,000
units to be accounted for 27,000
transferred out from beg WIP 7,000
units both started and completed 10,000
units transferred out(completed) 17,000
ending inventory 10,000
units accounted for 27,000

units direct materials conversion costs
units in beginning inventory 7,000 7000*(1-0.3)=4,900 4,900
units started and completed 10,000 10000 10000
units in ending inventory 10000 10000*0.6=6,000 6,000
equivalent units 27,000 20,900 20,900

total materials conversion
costs in beginning inventory 128,000 12.8*10000=128,000 0
added during month 533,500 20000*11=220,000 313,500
costs to be accounted for 661,500 348,000 313,500
equivalent units 20,900 20,900
cost per equivalent unit 31.65 16.65 15

Department 2.
units to be accounted for units
beginning WIP 10,000
transferred in 17,000
units to be accounted for 27,000
transferred out from beg WIP 10,000
units both started and completed 12,000
units transferred out(completed) 22,000
ending inventory 5,000
units accounted for 27,000

units direct materials conversion costs
units in beginning inventory 10,000 10000*(1-0.5)=5,000 5,000
units started and completed 12,000 12,000 12,000
units in ending inventory 5,000 5,000*0.7=3,500 3,500
equivalent units 27,000 20,500 20,500

total materials conversion
costs in beginning inventory 173,700 17.37*10000=173,700 0
added during month 508,440 12000*17.37=208,440 12000*15=300,000
costs to be accounted for 682,140 382,140 300,000
equivalent units 20,500 20,500
cost per equivalent unit 31.65 18.64 14.64

Spectre Chemicals
Cost of production Report
March 2014
quantity schedule
beginning inventory 6000
transferred in 22,000
units accounted for 28,000
transferred out to Department 2 21,000
Department I closing inventory 7,000
Department 2: beginning inventory 5,000
transferred in from department 1 21,000
units accounted for 26,000
transferred to finished goods 16,000
closing inventory 10,000
cost schedule
cost of beginning raw materials 45,000
raw materials added to department 1 220,000
conversion costs 414,000
total cost transferred to department 2 679,000
transferred to finished goods (16000*32.37) 501,920
costs transferred out 177,080
total costs accounted for 679,000

Spectre Chemicals
Cost of production Report
April 2014
quantity schedule
beginning inventory 7,000
transferred in 20,000
units accounted for 27,000
transferred out to Department 2 17,000
Department I closing inventory 10,000
Department 2: beginning inventory 10,000
transferred in from department 1 17,000
units accounted for 27,000
transferred to finished goods 12,000
closing inventory 5,000
cost schedule
cost of beginning raw materials 128,000
raw materials added to department 1 220,000
conversion costs 313500
total cost transferred to department 2 661,500
transferred to finished goods (12000*31.65) 379,800
costs transferred out 281,700
total costs accounted for 661,500

Minicase 6.

1. Product contribution margin
1 40-30=10
2 30-20=10
3 14-8=6
WACM= (10*6/14) + (10*3/14)+(6*5/14)=$8.57
Break even in units= fixed cost/WACM
B/E: 200,000/8.57=23,337 units
Product 1. 6/14*23,337=10,002 units
Product 2. 3/14*23337=5001 units
Product 3. 5/14*23337=8335 units

Break even in sales
Product 1. 10002*40=$400,080
Product 2. 5001*30=$150,030
Product 3. 8335*14=$116,690
Total 666,800
2. The company uses the new material
Product CM
1. 40-20=20
2. 30-15=15
3. 14-8=6
WACM= (20*6+15*3+6*5)/14= $13.93
New fixed cost= 200,000+50,000=250,000
B/E: 250,000/13.93=17,947
Break even in units
Product 1. 6/14*17947=7,692 units
Product 2. 3/14*17947=3,846 units
Product 3. 5/14*17947=6,410 units
Break even in sales
Product 1. 7692*40=$307,680
Product 2. 3846*30=$115,380
Product 3. 6410*14=$89,740
Total $512,800

3 The analysis above shows the management that using the new material is the best alternative rather than continue using the current material. The use of the new material reduces the break-even points of all the three individual products meaning the company will require to make fewer sales to start making profit.