You are given the following information: Capital Stock, USD 80,000 (USD 80 par); Paid-In Capital in Excess of Par Value—Common, USD 200,000; and Retained Earnings, USD 400,000. Assuming only one class of stock, the book value per share is:

a. USD 680.

b. USD 280.

c. USD 80.

d. USD 400.

e. None of the above.

The market interest rate for Christian Charities is 8% on January 1, 2008. On that day, Christian Charities issued the following bonds. A. $500,000 7-year 7% bond B. $300,000 10-year 9% bond For both bonds, interest is paid semiannually on June 30 and December 31 each year up until maturity. Compounding is done semiannually.

Study 3

The Little Theatre is a nonprofit organization devoted to staging plays for children. The theatre has a very small full-time professional administrative staff. Through a special arrangement with the actors’ union, actors and directors rehearse without pay and are paid only for actual performances.

The costs from the current year’s planning budget appear below. The Little Theatre had tentatively planned to put on four different productions with a total of 50 performances. For example, one of the productions was Peter Rabbit, which had a six-week run with three performances on each weekend. The Little Theatre
Costs from the Planning Budget
For the Year Ended December 31 Budgeted number of productions 4 Budgeted number of performances 50 Actors’ and directors’ wages $ 110,000 Stagehands’ wages 21,000 Ticket booth personnel and ushers’ wages 12,000 Scenery, costumes, and props 32,800 Theatre hall rent 36,000 Printed programs 11,500 Publicity 10,000 Administrative expenses 46,000 Total $ 279,300

Some of the costs vary with the number of productions, some with the number of performances, and some are fixed and depend on neither the number of productions nor the number of performances. The costs of scenery, costumes, props, and publicity vary with the number of productions. It doesn’t make any difference how many times Peter Rabbit is performed, the cost of the scenery is the same. Likewise, the cost of publicizing a play with posters and radio commercials is the same whether there are 10, 20, or 30 performances of the play. On the other hand, the wages of the actors, directors, stagehands, ticket booth personnel, and ushers vary with the number of performances. The greater the number of performances, the higher the wage costs will be. Similarly, the costs of renting the hall and printing the programs will vary with the number of performances. Administrative expenses are more difficult to pin down, but the best estimate is that approximately 75% of the budgeted costs are fixed, 15% depend on the number of productions staged, and the remaining 10% depend on the number of performances.

After the beginning of the year, the board of directors of the theatre authorized expanding the theatre’s program to three productions and a total of 54 performances. Not surprisingly, actual costs were considerably higher than the costs from the planning budget. (Grants from donors and ticket sales were also correspondingly higher, but are not shown here.) Data concerning the actual costs appear below: The Little Theatre
Actual Costs
For the Year Ended December 31 Actual number of productions 3 Actual number of performances 54 Actors’ and directors’ wages $ 114,000 Stagehands’ wages 22,000 Ticket booth personnel and ushers’ wages 13,500 Scenery, costumes, and props 29,100 Theatre hall rent 40,600 Printed programs 11,950 Publicity 9,000 Administrative expenses 44,450 Total $ 284,600

  

Required:

1. Complete the flexible budget for The Little Theatre based on the actual activity of the year. The Little Theatre Flexible Budget For the Year Ended December 31 Actors’ and directors’ wages Stagehands’ wages Ticket booth personnel and ushers’ wages Scenery, costumes, and props Theatre hall rent Printed programs Publicity Administrative expenses Total $0

2. Complete the flexible budget performance report for the year that shows both activity variances and spending variances. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values.) The Little Theatre Flexible Budget Performance Report For the Year Ended December 31 Actual Results Spending Variances Flexible Budget Activity Variances Planning Budget Actors’ and directors’ wages $114,000 $110,000 Stagehands’ wages 22,000 21,000 Ticket booth personnel and ushers’ wages 13,500 12,000 Scenery, costumes, and props 29,100 32,800 Theatre hall rent 40,600 36,000 Printed programs 11,950 11,500 Publicity 9,000 10,000 Administrative expenses 44,450 46,000 Total $284,600 $0 $279,300

Allocation of Package Purchase Price and Depreciation Methods In and expansion move, Beam Company paid $2,280,000 for most of the property, plant, and equipment of a small manufacturing firm that was going out of business. Before agreeing to the price, Beam hired a consultant for $20,000 to appraise the assets. The appraised values were as follows:

Show transcribed image text Allocation of Package Purchase Price and Depreciation Methods In and expansion move, Beam Company paid $2,280,000 for most of the property, plant, and equipment of a small manufacturing firm that was going out of business. Before agreeing to the price, Beam hired a consultant for $20,000 to appraise the assets. The appraised values were as follows: $400,000 950,000 Equipment 1,000,000 150,000 Total $2,500,000 Land Building Trucks Beam issued two checks totaling $2,300,000 to acquire the assets and pay the consultant on April 1. Beam depreciated the assets using the straight-line method for the building and equipment, and the double-declining balance method for the trucks. Estimated useful lives and salvage values were as follows: Salvage Useful Life Value Building Equipment Trucks 15 years $86,000 9 years 70,000 5 years 13,000