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1.

Vernon Corporation builds sailboats. On January 1, 2015, the company had the following account balances: $70,000 for both cash and common stock. Boat 25 was started on February 10 and finished on May 31. To build the boat, Vernon had incurred cash costs of $6,900 for labor and $3,950 for materials. During the same period, Vernon paid $8,230 cash for actual manufacturing overhead costs. The company expects to incur $162,000 of indirect overhead cost during 2015. The overhead is allocated to jobs based on direct labor cost. The expected total labor cost for the year is $135,000.

Vernon uses a just-in-time inventory management system. Consequently, it does not have raw materials inventory. Raw materials purchases are recorded directly in the Work in Process Inventory account.

Required:

a .

If Vernon desires to earn a

Use the horizontal financial statements model, to record Vernons business events. The first row shows beginning balances. (Enter any decreases to account balances with a minus sign. Do not round intermediate calculations and round final answers to the nearest whole dollar amount.)

Assets = equity

cash + work in process + finished goods+manufacturing overhead = common stock +retained earnings

revenue -expense =net income

70000+ = 70000

b.

If Vernon desires to earn a profit equal to 20 percent of cost, for what price should it sell the boat? (Do not round intermediate calculations.)

c.	If the boat is not sold by year-end, what amount would appear in the Work in Process Inventory and Finished Goods Inventory on the balance sheet for Boat 25? (Do not round intermediate calculations and round final answers to the nearest whole dollar amount.)

d.

Is the amount of inventory calculated in requirement c the actual or the estimated cost of the boat?

2. Weber Condos Corporation is a small company owned by James Ortiz. It leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs consist of interest and depreciation. The direct operating costs for each condo follow.

			Other Direct
	Direct Labor			Operating Costs
Condo 1	$	17,600		$	44,800
Condo 2		19,900			49,000
Condo 3		29,250			67,000
Total	$	66,750		$	160,800

Indirect operating expenses, which amounted to $48,240, are allocated to the condos in proportion to the amount of other direct operating costs incurred for each.

Required:

a.	Assuming that the amount of rent revenue from Condo 2 is $104,000, what amount of income did it earn? (Do not round intermediate calculations.)