Calculations Lopez created Success Systems
(This serial problent began in Chapter I and cont.in.nes throttgh most of the book. .ljFpret-ions chapter SEFHAL PROBLEM
segments were not completed, the serial problem can begin at this point. It is helpfitl, but not net’ess’:try. to Success svstemg
use the Working Papers that ntrt’ornpa.rty the hook.)
PI [21 [22
SP I 3 .-\dria Lopez created Success Systems on October l, 2013. The company has been successful, and
Adria plans to expand her business. She believes that an additional $86,000 is needed and is investigating
three funding sources.
a. Adria”s sister Cicely is willing to invest $36,000 in the business as a common shareholder. Since Adria
currently has about $129,000 invested in the business, Cicely”s investment will mean that Adria will
maintain about ownership, and Cicely will have 40% ownership of Success Systems.
b. Adria”s uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello
would purchase 860 shares of $ioo par value, 7% preferred stoclt.
c. Adria”s banker is willing to lend her $86,000 on a 7‘-ll:-, 10-year note payable. She would make monthly
payments of $1,000 per month for 10 years.
Required
‘I. Prepare the journal entry to reflect the initial $36,000 investment under each of the options (a), lb},
and (‘c’).
2. Evaluate the three proposals for expansion, providing the pros and cons of each option.
3. Which option do you recommend Adria adopt ‘F E-xplfllll.
accumulated on three furniture jobs.
job s.n2 job r..a3 job 5.0»!
Direct materials . . . . . . $l!.5oO $3.300 $2.7-“00
DirnctIabnr………… 800 L410 1010
Overhead-………..-. 400 No H150
Job 6.01 was started in production in May, and these costs were assigned to it in May: direct materials,
$600; direct labor. $130; and overhead, $90. Johs 6.03 and 6.04 were started in June. Overhead cost is
applied with a predetermined rate based on direct Inbor costs. Jobs 6.02 and 6.03 are finished in June, and
Job 6.04 is expected to be finished in July. No raw materials are used indirectly in June. {Assume this
company’s predetermined overhead rate did not change over these months 3.
Required
1. What is the cost of the raw materials used in June for each of the three johs and in total‘? Check it i~TotaI nnaterials-_. $63300
2. How much total direct labor cost is incurred in June‘?
3. What predetermined o‘-rerhead rate is used in June‘? ’23? 50%
4. How much cost is transferred to finished goods inwrerttory in June
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