Chapter 8, Problem 6QAP

Maria Brucken visited her auto mechanic shop owned by M.Y. Kar to have repair work done on her 2021 Toyota Odyssey, specifically, her brakes needed repair. The work done on the car was performed by Ivan Fix a certified auto mechanic at Mr. Kar’s shop. Mr. Kar sets the prices on all repair work which is done at his shop. Additionally, Mr. Kar employs staff for sending out bills and collecting payments from clients. Mr. Fix collects a salary from Mr. Kar but generally does the repair work unsupervised by Mr. Kar. Additionally, Mr. Fix attends annual continuing training programs where he learns all of the newest methods and tools for repairing new cars which he then performs on the cars that he works on in Mr. Kar’s shop. Mr. Fix also schedules car repair appointments himself with returning clients at Mr. Kar’s facility. Mr. Kar has a policy within the shop that only he is allowed to set and communicate the costs for repair work to customers.  During the repairs of Ms. Brucken’s brakes,…

To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $260,000 and sold them for $370,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 2 percent of sales. During the year, she paid $4,020 cash to replace a defective tuner. Requireda. Prepare an income statement and statement of cash flows for Daun’s first year of operation. b. Based on the information given, what is Daun’s total warranties liability at the end of the accounting period?

You are asked to travel to Milwaukee to observe and verify the inventory of the Milwaukee branch of one of your clients. You arrive on Thursday, December 30, and find that the inventory procedures have just been started. You spot a railway car on the sidetrack at the unloading door and ask the warehouse superintendent, Buck Rogers, how he plans to inventory the contents of the car. He responds, “We are not going to include the contents in the inventory.” Later in the day, you ask the bookkeeper for the invoice on the carload and the related freight bill. The invoice lists the various items, prices, and extensions of the goods in the car. You note that the carload was shipped December 24 from Albuquerque, f.o.b. Albuquerque, and that the total invoice price of the goods in the car was $35,300. The freight bill called for a payment of $1,500. Terms were net 30 days. The bookkeeper affirms the fact that this invoice is to be held for recording in January. Instructions a.    Does your…

Ozzy Opticals is a full-service optical store providing eye exams and eyeglasses to customers. To maintain a wide selection of inventory frames, Ozzy purchases the eyeglasses from various manufacturers under different FOB terms. For each of the scenarios, determine which party is responsible for the inventory. a. What is the significance of shipping terms? b. $1,500 in eyeglass frames were shipped FOB shipping point to Ozzy Opticals but were damaged in transit during a hurricane. Who is responsible for the inventory? c. $1,900 in eyeglass frames were shipped FOB destination to Ozzy Opticals but were lost in transit. Who is responsible for the inventory?

To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $138,000 and sold them for $258,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 6 percent of sales. During the year, she paid $1,480 cash to replace a defective tuner.   Required a-1. Prepare an income statement for Deloch’s first year of operation. a-2. Prepare a statement of cash flows for Deloch’s first year of operation.

On July 29, 20Y1, Ever Green Company, a garden retailer, purchased $12,000 of seed, terms 2/10, n/30, from Fleck Seed Co.  Even though the discount period had expired, Mary Jasper subtracted the discount of $240 when she processed the documents for payment on August 13, 20Y1.   Is Mary committing an illegal act? Is Mary behaving in a professional manner? Mary Jasper is not behaving in a  Give reasons for your answers. What choices does Fleck Seed Co. have when it processes the receipt of $11,760 for payment of the invoice?

Aaron, a resident of Minnesota, has been a driver for Green Delivery Service for the past six years. For this purpose, he leases a truck from Green, and his compensation is based on a percentage of the income resulting from his pickup and delivery services. Green allows its drivers to choose their 10-hour shifts and does not exercise any control on how these services are carried out (e.g., the route to be taken or the order in which parcels are delivered or picked up). Under Green’s operating agreement with its drivers, Green can terminate the arrangement after 30 days’ notice. In practice, however, Green allows its truckers to quit immediately without giving advance notice. The agreement also identifies the drivers as independent contractors. Green maintains no health or retirement plans for its drivers, and each year it reports their income by issuing Forms 1099–MISC (and not Forms W–2). Green requires its drivers to maintain a commercial driver’s license and be in good standing with…

Lakeesha Barnett owns and operates a package mailing store in a college town. Her store, Send It Packing, helps customers wrap items and send them via UPS, FedEx, and the USPS. Send It Packing also rents mailboxes to customers by the month. In May, purchases of materials (stamps, cardboard boxes, tape, Styrofoam peanuts, bubble wrap, etc.) equaled 11,450; the beginning inventory of materials was 1,050, and the ending inventory of materials was 950. Payments for direct labor during the month totaled 25,570. Overhead incurred was 18,130 (including rent, utilities, and insurance, as well as payments of 14,050 to UPS and FedEx for the delivery services sold). Since Send It Packing is a franchise, Lakeesha owes a monthly franchise fee of 5 percent of sales. She spent 2,750 on advertising during the month. Other administrative costs (including accounting and legal services and a trip to Dallas for training) amounted to 3,650 for the month. Revenues for May were 102,100. Required: 1. What was the cost of materials used for packaging and mailing services during May? 2. What was the prime cost for May? 3. What was the conversion cost for May? 4. What was the total cost of services for May? 5. Prepare an income statement for May. 6. Of the overhead incurred, is any of it direct? Indirect? Explain.

Gwyn Tring, trading as Clickety Clocks, imports and resells clocks. He pays for the costs of delivering the clocks from his supplier in Switzerland to his shop in Wales. He resells the clocks to other traders throughout the country, paying the costs of carriage for the consignments from his business premises to his customers. On 1 July 20X5, he had clocks in inventory valued at $17,000. During the year to 30 June 20X6 he purchased more clocks at a cost of $75,000. Carriage inwards amounted to $2,000. Sales for the year were $162,100. Other expenses of the business amounted to $56,000 excluding carriage outwards which cost $2,500. Gwyn Tring took drawings of $20,000 from the business during the course of the year. The value of the goods in inventory at the year end was $15,400. Required Prepare the income statement of Clickety Clocks for the year ended 30 June 20X6.