PROBLEM
1:
The Drilon Delights Company has two
processing departments, Cooking and Packaging. Ingredients are placed into
production at the beginning of the process in Cooking, where they are formed
into various shapes. When finished, they are transferred into Packaging, where
the candy is placed into heart and tuxedo boxes and covered with foil. All
material added in Packaging is considered as one material for convenience.
Since the boxes contain a variety of candies, they are considered partially
complete until filled with the appropriate assortment. The following
information relates to the two departments for February 2012:
|
Cooking Department:
|
|
|
|
Beginning WIP (30% complete as to
conversion)
|
4,500
|
units
|
|
Units started this period
|
15,000
|
units
|
|
Ending WIP (60% complete as to conversion)
|
2,400
|
units
|
|
Packaging Department:
|
|
|
|
Beginning WIP (90% complete as to material,
80% complete as to conversion)
|
1,000
|
units
|
|
Units started during period
|
?
|
|
|
Ending WIP (80% complete as to material and
80% complete as to conversion)
|
500
|
units
|
a. Determine equivalent units of production for both departments
using the weighted average method.
b. Determine equivalent units of production for both departments
using the FIFO method.
ANS:
|
a.
|
Cooking Department
|
|
|
|
|
|
|
Materials
|
Conversion Costs
|
|
|
|
Transferred Out
|
17,100
|
17,100
|
|
|
|
Ending Work in Process
|
2,400
|
1,440
|
|
|
|
TOTAL EUP
|
19,500
|
18,540
|
|
|
|
Packaging Department
|
|
|
|
|
|
|
Transferred In
|
Materials.
|
Conversion
Costs
|
|
|
Transferred Out
|
17,600
|
17,600
|
17,600
|
|
|
Ending Work in Process
|
500
|
400
|
400
|
|
|
TOTAL EUP
|
18,100
|
18,000
|
18,000
|
|
b.
|
Cooking Department
|
|
|
|
|
|
|
Materials
|
ConversionCosts
|
|
|
|
Beginning Work in Process
|
0
|
3,150
|
|
|
|
Transferred from Cooking
|
12,600
|
12,600
|
|
|
|
Ending Work in Process
|
2,400
|
1,440
|
|
|
|
TOTAL EUP
|
15,000
|
17,190
|
|
|
|
Packaging Department
|
|
|
|
|
|
|
Transferred In
|
Materials
|
Conversion Costs
|
|
|
Beginning Work in Process
|
0
|
100
|
200
|
|
|
Transferred from Cooking
|
16,600
|
16,600
|
16,600
|
|
|
Ending Work in Process
|
500
|
400
|
400
|
|
|
TOTAL EUP
|
17,100
|
17,100
|
17,200
|
PROBLEM
2:
The
following costs were accumulated by Department 2 of Cayetano Company during
April:
|
|
Cost Transferred
from Dept. 1
|
Material
|
Conversion
Costs
|
Total
|
|
Beginning Inventory
|
P 17,050
|
0
|
P 5,450
|
P 22,500
|
|
Current Period Cost
|
184,000
|
P 34,000
|
104,000
|
322,000
|
|
|
P 201,050
|
P 34,000
|
P 109,450
|
P344,500
|
Production for April in Department 2 (in units):
|
WIP-April 1
|
2,000
60% complete
|
|
Complete period transferred
|
20,000
|
|
WIP-April 30
|
5,000
40% complete
|
Materials are not added in Department 2 until the very end of
processing Department 2.
Required: Compute the cost of units completed and the
value of ending WIP for:
|
a.
|
Weighted average inventory assumption
|
|
b.
|
FIFO inventory assumption
|
ANS:
|
a.
|
Weighted average inventory assumption
|
||||
|
|
Dept 1
|
MAT
|
CC
|
||
|
Complete
|
20,000
|
20,000
|
20,000
|
||
|
Eq-End WIP
|
5,000
|
0
|
2,000
|
||
|
EP-WA
|
25,000
|
20,000
|
22,000
|
||
|
Unit
|
P201,050 = P8.042
|
P34,000 = P1.70
|
P109,450 = P4.975
|
= P14.717
|
|
Cost
|
25,000
|
20,000
|
22,000
|
|
|
End WIP
|
Dept 1 = 5,000 x P8.042
|
= P40,210
|
|
|
CC = 2,000 units x P4.975
|
=
9,950
|
|
|
|
P50,160
|
COGM = P344,500 - P50,160 = P294,340
|
b.
|
FIFO inventory assumption
|
|||
|
|
Dept 1
|
MAT
|
CC
|
|
|
Complete
|
20,000
|
20,000
|
20,000
|
|
|
Eq-End WIP
|
5,000
|
0
|
2,000
|
|
|
- Eq-Begin
|
(2,000)
|
0
|
(1,200)
|
|
|
EP-FIFO
|
23,000
|
20,000
|
20,800
|
|
|
Unit
|
P184,000 = P8.00
|
P34,000 = P1.70
|
P104,000 = P5.00
|
= P14.70
|
|
Cost
|
23,000
|
20,000
|
20,800
|
|
|
End WIP
|
Dept 1 = 5,000 units x P8.00
|
= P40,000
|
|
|
CC = 2,000 units x P5.00
|
= 10,000
|
|
|
|
P50,000
|
COGM = P344,500 - P50,000 = P294,500
1. On July 1, 2002,
Occidental Corporation purchased merchandise on 30-day open account from a New
Zealand supplier at an invoice cost of 100,000 New Zealand dollars (NZ$). On
that date, spot exchange rates were: buying-NZ$1 = $0.777; selling-NZ$1 =
$0.7785. On July 31, 2002, Occidental acquired a draft for NZ$100,000 for
$77,600. In the journal entry to record the acquisition of the NZ$100,00 draft,
Occidental recognizes a foreign currency:
a) Transaction loss of $100
b) Transaction loss of $250
c) Transaction gain of $250
d) Transaction gain of $23,400
Correct
answer: C
Explanations:
a)
Buying
spot rate should not be the basis because the company is going to buy foreign
currency from the bank in payment for the purchases.
b)
Using
the selling rate, it is not a transaction loss because the company paid less
than what has been recognized and recorded at invoice date.
c)
$77,850
- $77,600 = $250 gain
d)
See
letter c explanation.
2. Watt Company, a
U.S. multinational enterprise, purchased goods from Kluger Company of Germany
on March 1, 2002, for 30,000 euros (C) when the selling spot rate was C1 =
$1.0895. Watt's fiscal year-end was March 31, 2002, when the selling spot rate
was C1 = $1.0845. Watt acquired C30,000 and paid the invoice on April 20, 2002,
when the selling spot rate was C1 = $1.0945. What amounts are displayed in
Watt's income statements as foreign currency transaction gains or losses for
the years ended March 31, 2002, and 2003? 2002 2003
a) $0 - $0
b) $0 - $150 loss
c) $150 loss - $0
d) $150 gain - $300 loss
Correct
answer: D
Explanations:
a) March 1,
2002-fiscal year end
At each balance sheet date that occurs between
the transaction date and the settlement date, recorded balances that are
denominated in a foreign currency are adjusted to reflect the closing exchanged
rate in effect at the date of the statement of financial position. Foreign
exchange (forex) gain or loss is recognize for the difference in the exchange
rate between the transaction date and the balance sheet date.
April 20, 2002- settlement date
At the settlement date, foreign
exchange (forex) gain or loss is recognized if the amount of local currency
paid upon conversion does not equal the carrying value of the related payable.
b) c) d)
2002
March 1 Purchases $32,685
Accounts
payable – FC $32,685
March 31 Accounts payable –FC $150
Forex gain $150
2002
April 20 Accounts payable –FC $32,535
Forex loss $300
Foreign
currency $32,835
3. The
current/noncurrent and monetary/nonmonetary methods of foreign currency
translation differ principally in the translation of:
a) Sales and cost of goods sold
b) Depreciation expense and cost of goods sold
c) Inventories and cost of goods sold
d) Amortization expense and cost of goods sold
Correct
answer: C
Explanations:
a) In the
current/noncurrent method as well as in
the monetary/nonmonetary method (temporal method) of foreign currency
translation, sales and cost of goods sold are translated at an average exchange
rate for the accounting period.
b) In the
current/noncurrent method as well as in
the monetary/nonmonetary method (temporal method) of foreign currency
translation, depreciation are translated at historical rates.
c) In the
current/noncurrent method of foreign
currency translation, inventories (all current assets) are translated at the
current exchange rate in effect on the balance sheet date while in the
monetary/nonmonetary method (temporal method) of foreign translation,
inventories (nonmonetary assets) are translated at appropriate historical
rates.
In the
current/noncurrent method of foreign currency
translation, cost of goods sold are translated at an average exchange rate for
the accounting while in the monetary/nonmonetary method (temporal method) of
foreign translation, cost of goods sold are translated at appropriate
historical rates.
d) In the current/noncurrent
method as well as in the
monetary/nonmonetary method (temporal method) of foreign currency translation,
amortization expense is translated at appropriate historical rates.
4. Delnora Company
owns a foreign subsidiary with 3,600,000 local currency units (LCU) of plant
assets before accumulated depreciation on December 31, 2002. Of this amount,
LCU2,400,000 were acquired in 2000, when the exchange rate was LCU1.6 to $1,
and LCU1,200,000 were acquired in 2001, when the exchange rate was LCU1.8 to
$1. The exchange rate in effect on December 31, 2002, was LCU2 to $1. The
weighted average of exchange rates that were in effect during 2002 was LCU1.92
to $1. Assuming that the plant assets are depreciated by the straight-line
method over a 10-year economic life with no residual value, how much
depreciation expense relating to the foreign subsidiary’s plant assets is
reported in Delnora’s income statement for 2002 if the U.S. dollar is the
functional currency of the subsidiary?
a) $180,000
b) $187,500
c) $200,000
d) $216,667
e) Some other amount
Correct
answer: D
Explanation:
In the remeasurement of the trial balance of a
foreign division or branch, or the financial statements of a foreign subsidiary
or other investee, to its U.S. dollar functional currency, the amounts in
foreign currency are multiplied by the appropriate exchange rate to obtain the
amounts in U.S. dollars.
LCU
240,000 depreciation expense - $150,000
LCU
120,000 depreciation expense - $66,667
5. Jemco, Inc., used
the current rate method for translating foreign currency amounts on December
31, 2002. On that date, Jemco had foreign subsidiaries with 1,500,000 local
currency units (LCU) in long-term receivables and LCU2,400,000 in long-term
debt. The exchange rate in effect when the specific transactions occurred
involving those foreign currency amounts was LCU2 to $1. The exchange rate in
effect on December 31, 2002, was LCU1.5 to $1. The translation of the foregoing
foreign currency amounts to U.S. dollars on December 31, 2002, results in
long-term receivables and long-term debt, respectively of:
a) $750,000 to $1,200,000
b) $750,000 to $1600,000
c) $1,000,000 to $1,200,000
d) $1,000,000 to $1,600,000
Correct
answer: D
Explanation:
In the translation of the trial balance of a
foreign division or branch, or the financial statements of a foreign subsidiary
or other investee, from a foreign functional currency to U.S. dollars, the
amounts in foreign currency are multiplied by the appropriate current exchange
rate to obtain the amounts in U.S. dollars.
LCU
1,500,000 - $1,000,000
LCU
2,400,000 - $A,600,000
