Use the same Word document that you used to record your Part I responses (one page in length), and add your responses for the Part II questions (1–5), which should be one page in length.

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Home >Business & Finance homework help >Management homework help >Use the same Word document that you used to record your Part I responses (one page in length), and add your responses for the Part II questions (1–5), which should be one page in length.

Continuing Case 9-37

Cookie Creations

(Note: This is a continuation of the Cookie Creations case from Chapters 1 through 8.)

CC9 One of Natalie's friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie's fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice.

Go to WileyPLUS for complete case details and instructions.

Ethics Case

EC9 The controller of Diaz Co. believes that the yearly allowance for doubtful accounts for Diaz Co. should be 2% of accounts receivable balance at the end of the year. The president of Diaz Co., nervous that the owners might expect the company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a lower growth rate, will be a more sustainable rate for Diaz Co.

Instructions

a. Who are the stakeholders in this case?

b. Does the president's request pose an ethical dilemma for the controller?

c. Should the controller be concerned with Diaz Co.'s growth rate? Explain your answer.

Comprehensive Accounting Cycle Review

ACR9 Winter Company's balance sheet at December 31, 2019, is presented below.

Winter Company Balance Sheet December 31, 2019
Cash	$13,100	Accounts payable	$ 8,750
Accounts receivable	19,780	Owner's capital	32,730
Allowance for doubtful accounts	(800)		$41,480
Inventory	9,400
	$41,480

During January 2020, the following transactions occurred. Winter uses the perpetual inventory method.

Jan. 1	Winter accepted a 4-month, 8% note from Merando Company in payment of Merando's $1,200 account.
3	Winter wrote off as uncollectible the accounts of Inwood Corporation ($450) and Goza Company ($280).
8	Winter purchased $17,200 of inventory on account.
11	Winter sold for $28,000 on account inventory that cost $19,600.
15	Winter sold inventory that cost $700 to Mark Lauber for $1,000. Lauber charged this amount on his Visa First Bank card. The service fee charged Winter by First Bank is 3%.
17	Winter collected $22,900 from customers on account.
21	Winter paid $14,300 on accounts payable.
24	Winter received payment in full ($280) from Goza Company on the account written off on January 3.
27	Winter purchased supplies for $1,400 cash.
31	Winter paid other operating expenses, $3,718.

Adjustment data:

· 1. Interest is recorded for the month on the note from January 1.

· 2. Bad debts are expected to be 6% of the January 31, 2020, accounts receivable.

· 3. A count of supplies on January 31, 2020, reveals that $560 remains unused.

Instructions

(You may want to set up T-accounts to determine ending balances.)

a. Prepare journal entries for the transactions listed above and adjusting entries. (Include entries for cost of goods sold using the perpetual system.)

b. Prepare an adjusted trial balance at January 31, 2020.

Totals $74,765

c. Prepare an income statement and an owner's equity statement for the month ending January 31, 2020, and a classified balance sheet as of January 31, 2020.

Tot. assets $47,473

Ethics Case 10-42

EC10 Turner Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Robert Griffin, instructs his controller, Alexis Landrum, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding equipment, purchased for $3.5 million in January 2020, was originally estimated to have a useful life of 8 years and a salvage value of $300,000. Depreciation has been recorded for 2 years on that basis. Robert wants the estimated life changed to 12 years total, and the straight-line method continued. Alexis is hesitant to make the change, believing it is unethical to increase net income in this manner. Robert says, “Hey, the life is only an estimate, and I've heard that our competition uses a 12-year life on their production equipment.”

Instructions

a. Who are the stakeholders in this situation?

b. Is the change in asset life unethical, or is it simply a good business practice by an astute president?

c. What is the effect of Robert Griffin's proposed change on income before taxes in the year of change?

Comprehensive Accounting Cycle Review

ACR10 Hassellhouf Company's trial balance at December 31, 2020, is as follows. All 2020 transactions have been recorded except for the items described following the trial balance.

	Debit	Credit
Cash	$ 28,000
Accounts Receivable	36,800
Notes Receivable	10,000
Interest Receivable	–0–
Inventory	36,200
Prepaid Insurance	3,600
Land	20,000
Buildings	150,000
Equipment	60,000
Patents	9,000
Allowance for Doubtful Accounts		$ 500
Accumulated Depreciation—Buildings		50,000
Accumulated Depreciation—Equipment		24,000
Accounts Payable		27,300
Salaries and Wages Payable		–0–
Unearned Rent Revenue		6,000
Notes Payable (due in 2021)		11,000
Interest Payable		–0–
Notes Payable (due after 2021)		30,000
Owner's Capital		113,600
Owner's Drawings	12,000
Sales Revenue		905,000
Interest Revenue		–0–
Rent Revenue		–0–
Gain on Disposal of Plant Assets		–0–
Bad Debt Expense	–0–
Cost of Goods Sold	630,000
Depreciation Expense	–0–
Insurance Expense	–0–
Interest Expense	–0–
Other Operating Expenses	61,800
Amortization Expense	–0–
Salaries and Wages Expense	110,000
Total	$1,167,400	$1,167,400

Unrecorded transactions:

· 1. On May 1, 2020, Hassellhouf purchased equipment for $21,200 plus sales taxes of $1,600 (all paid in cash).

· 2. On July 1, 2020, Hassellhouf sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2020, was $1,800; 2020 depreciation prior to the sale of the equipment was $450.

· 3. On December 31, 2020, Hassellhouf sold on account $9,000 of inventory that cost $6,300.

· 4. Hassellhouf estimates that uncollectible accounts receivable at year-end is $3,500.

· 5. The note receivable is a one-year, 8% note dated April 1, 2020. No interest has been recorded.

· 6. The balance in prepaid insurance represents payment of a $3,600 6-month premium on September 1, 2020.

· 7. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000.

· 8. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost.

· 9. The equipment purchased on May 1, 2020, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800.

· 10. The patent was acquired on January 1, 2020, and has a useful life of 10 years from that date.

· 11. Unpaid salaries and wages at December 31, 2020, total $5,200.

· 12. The unearned rent revenue of $6,000 was received on December 1, 2020, for 3 months' rent.

· 13. Both the short-term and long-term notes payable are dated January 1, 2020, and carry a 9% interest rate. All interest is payable in the next 12 months.

Instructions

a. Prepare journal entries for the transactions listed above.

b. Prepare an updated December 31, 2020, trial balance.

Totals $1,205,040

c. Prepare a 2020 income statement and an owner's equity statement.

d. Prepare a December 31, 2020, classified balance sheet.

Total assets $259,200